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 An agreement enforceable by law is contract. (Section 2 (h) of Indian Contract Act)

 Contract means a written undertaking for execution of works or supply of materials or for the
performance of any service connected therewith duly accepted and registered by the competent
 The contract invariably follows a proposal from one party and its acceptance by the other
 In absence of any of the above elements of a contract it becomes void, i.e., without a legal effect
or voidable
 An agreement not enforceable by law is said to be void

Contractors and their qualifications

 Contractors mean Private individuals, Partnership firm, Public or Private Limited concerns who
have made such an undertaking for the execution of works, supply of materials, or for services
 They should have an engineering organization to deal with works entrusted to them
 They must possess valid licenses in the respective fields
 Expected to have the machinery and equipment required for the job
 the professional ability to understand and implement the contractual obligations and subsidiary
instructions given by the engineer-in-charge of the department
 their financial resources
 their capacity to control labour, particularly by way of regular payment of fair wages and
observance of Labour Regulations
 their zeal for maintaining reputation and integrity

Essentials of Contracts

• That the contract shall be made by parties competent to contract

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

Contract Documents

• A typical contract may include the following documents

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


Types of Contract

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

• A) Traditional contracts 10. Target contract

1. Item rate contract 11. Measured contract or Schedule contract
2. Percentage rate contract 12. Negotiated contract
3. Lump-sum contract 13. Rate contract
4. Labour contract
5. Materials supply contract B) Non-Traditional contracts
6. Piece work agreement 1. Turn-key or combined Engineering
7. Cost plus percentage rate contract and Construction contracts
8. Cost plus fixed fee contract 2. Concession contracts (BOOT
9. Cost plus sliding or fluctuating-fee scale projects)

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

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

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

Detailing complexity of work:

 Schedule of work, Bill of quantities

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

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

Types of contracts:  Maximum price contracts

 Incentive contracts
 Lump sum contracts  Design and build contracts
 Measurable – Item rate contracts  EPC turn key contracts
 Cost plus percentage contracts  Partnering
 Cost plus fixed fee contracts


Traditional lump sum:

 Client appoints architect, contracts builder

 Architect as project team leader for design management, documentation and appointment of
 Open, selective or negotiated tendering, schedule of quantities or cost plus
 In a lump sum contract, the owner has essentially assigned all the risk to the contractor, who in
turn can be expected to ask for a higher markup in order to take care of unforeseen
contingencies. Beside the fixed lump sum price, other commitments are often made by the
contractor in the form of submittals such as a specific schedule, the management reporting
system or a quality control program. If the actual cost of the project is underestimated, the
underestimated cost will reduce the contractor's profit by that amount. An overestimate has an
opposite effect, but may reduce the chance of being a low bidder for the project.

Traditional lump sum:

Advantages: Disadvantages:

 Client involvement in design process  Significant risk with client

limited  Ignores benefits of integration of
 Standard forms are time tested for contractor‟s expertise
disputes/ arbitration  Design and construction are end on
 Drawings/ specifications basis for  Due to time pressure errors/
tendering omissions possible
 Provision for variations, can be  Not suitable for large/ complex
controlled if designed properly initially projects
 Cost control through priced bill of  Precludes innovation, tendency to
quantities accept lowest bids

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:
 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
 Builder accepts major portion of risk  To change contractors in the event of
non performance difficult


Nontraditional – Turnkey:

 Builder is lead for project delivery

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

Nontraditional – BOT

 Builder is the lead for project delivery

 Client contracts builder for funding, site procurement , construction and operation of facility for a
contracted period of time
 Builder appoints SPV to deliver the project
 Selective in single/ two stage tender

Contract price strategies:

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

Public private partnerships:

 Private sector construction of infrastructure owned and operated by Government

 Private sector design and construction of infrastructure with maintenance obligation

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

Unit Price Contract

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


Cost Plus Fixed Percentage Contract

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

Cost Plus Fixed Fee Contract

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

Cost Plus Variable Percentage Contract

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

Target Estimate Contract

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

Guaranteed Maximum Cost Contract

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


Lesson 3:
Creating pool of appropriate agencies for procurement of consulting construction services, plant &
machinery, goods and services registration of contractors, suppliers and their prequalification criteria:

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

 Architectural consultants – Selection will be based on their capability to do the architectural

drawings and co-ordinate the work of all other consultants so as to meet the aspirations of the
employer and produce the structure to the desired standards and architectural features
commensurate with the type of construction. The organizational strength, similar works carried by
them in the past will give an indication. They must be conversant with latest materials.
 Structural consultants – Size, organization and their capability to carry out complex designs and
their previous credentials. They will be responsible for design, checking design at site and giving
structural safety certificate and carry out necessary tests

 MEP consultants – Responsible for design and site checking of mechanical, electrical and
plumbing works. They must be conversant with latest materials of their trades.
 Suppliers of equipment – The quality quantity variety of equipment held by the supplier and
operating and maintenance support provided by them are important indicators for selection.
 Material suppliers – Companies capable of supplying various construction materials fittings and
fixtures with valid registration and ITCC.

 Contractors: The contractor will be graded according to the category of work to which he was
registered with an organization, financial classification of the work. The contractor‟s experience on
similar works, financial standing and technical capabilities.
 Subcontractors: These agencies will be selected by the main contractor for independent trades or
sometimes by the owner for specialist works.

 Landscape consultants: They are selected to give advice for creating greenery, planting trees and
shrubs to create ecological balance.
 Quantity surveyors: This organization shall be responsible for preparing tenders, specifications,
BOQ, and to deal contractual matters.
 Financial consultants: To deal with cost planning, cost control and to render advice on financial

Lesson 4: Office Engineering

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

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

 Collection of site data and Investigations

 Design philosophy, availability of design expertise locally/abroad, identifying suitable agencies
by prebid meetings
 Identifying architectural, structural aspects and fixing the agencies
 Identifying the type of contract suitable for the project, with reference to designing and
contracting organization held by the owner, technological capability to handle the complexity of
the project, expected period of completion
 Specifying the qualitative requirements of civil engineering, MEP contractors


 Selecting suitable contractors after pre-bid meetings, verifying their credentials by visiting the
works executed by them, checking financial, technical and organizational capabilities and
equipment held by them.
 Identifying suitable construction management system (i.e.) project management system,
construction management system

Nontraditional – Construction management:

 Architect & construction manager facilitate design process. Client has direct contract with
 Contract price – Costs + Fee
 No detailed documents at tender stage

Advantages: Disadvantages:

 Promotes team approach  Higher degree of risk with client due to

 Builder part of design team direct contracts with subcontractors
 Client gains financial benefit of  Continuous involvement of client
contractor‟s buying/negotiating power  Less incentive for competitive bids
 Time saving through fast track
 Builder‟s costs reimbursed

Nontraditional – Project management:

 Client appoints project manager who is professionally & commercially competent

 Client contracts directly with all consultants, builder. PM responsible for performance
 PM appoints and manages design process
 Selective or negotiated tendering
 Bill of quantities or cost plus for contract price

Advantages: Disadvantages:

 Single point responsibility with PM  Can lead to lengthy expensive litigation

 Client can focus on his business
 Suitable for large/ complicated projects

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

1. Project Strategy 2. Prequalification documents

 Procurement method  Tender notice/ Letter of invitation

 Form of tendering  Information about prequalification procedure
 Time schedules  Project information
 Prequalification information


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

1. Invitation to prequalify 5. Issue of tender documents:

 Advertisement in press/ Important  Issue tender documents to tenderers

magazines who are selected for issue
 Employer and Engineer
 Outline of project ( Scope, location, 6. Visit to site by tenderers:
programme, source of finance)
 Date of issue/ receipt  Arrange date and time for site visit
 Instructions for prequalification  Employer or engineer to accompany the
 Minimum requirements for site visits
 Submission date for contractor‟s 7. Tender queries/ Correspondence/
prequalification data tenderer’s conference

 Replies/ send minutes of meetings
2. Issue and submission of prequalification
documents: 8. Addenda/ Amendments to tender
 Organization and structure
 Experience in the intended type of work  Issue addenda/ amendments in time and
 Resources (Managerial, technical, labor, allow sufficient time for submission of
plant & equipment) tenders
 Financial statements
 Current contract commitments 9. Submission and receipt of tenders:
 Litigation History
 Record date and time of receipt of
3. Analysis of prequalification applications: tenders
 Acknowledge receipt or return unopened
 Company/ Joint venture structure tenders received late
 Experience
 Resources 10. Opening of tenders-Tender opening by
 Financial capabilities public or restricted opening:
 General suitability
 Selection of tenderers  Announce and record the names of
 Prepare list of tenderers tenderers and prices
 Announce and record names of
4. Preparation of tender documents: tenderers disqualified due to late or non
arrival of tender
 Letter of invitation to tender
 Instructions to tenderers 11. Scrutiny and evaluation of tenders:
 Conditions of contract
 Form of tender and appendices  Assess tenders in accordance with
 Drawings evaluation criteria
 Bill of quantities  Raise further points requiring clarification
 Schedule of additional information  Prepare comparative statement of
 Information data tenders
 Complete evaluation
 Check with funding agency
 Reject non conforming tenders
 Advise tenderers concerned


12. Acceptance and preparation of contract document:

 Decide on contract award, if necessary after pre-award discussions

 Issue letter of acceptance
 Obtain performance security
 Preparation of contract documents and signing
 Notify unsuccessful tenderers and return of tender security / earnest money

Tendering procedure for private organizations:

 Preparation of project brief through consultants, site investigations, soil investigation, getting
approvals of Municipal Authorities, environmental clearance, zoning clearances
 Appointment of architectural consultants
 Appointment of structural consultants
 Appointment of MEP consultants
 Appointment of project management consultants
 Appointment of quantity surveyors and financial consultants
 Identifying suitable contractors
 Obtaining quotations, negotiations and selecting lowest quotation or nomination of suitable

Lesson 7: Tendering documents for LCB, NCB:

 Local competitive bidding is the process of calling for bids within the country where the locally
available expertise is considered adequate
 Till early 1990 various organizations were using their own formats. In 1992 CPWD constituted a
committee to review existing documents. Various ministries of central Govt., State depts.,
industry associations and NICMAR participated.
 The committee submitted the revised draft in 1995 which was approved by Govt.
 Construction industry development council (CIDC) was formed in 1996. Govt. of India appointed
a committee under the chairmanship of secretary Ministry of Statistics and programme
implementation to suggest common format for contracts after considering the latest edition of
FIDIC and in consultation with CIDC and other
 Departments. A common document containing conditions under the name of MOSPI was
submitted by the committee which was approved in 2002. This document was prepared based on
conditions of contract for construction, FIDC. And certain modifications were made to suit Indian
conditions. Various departments and construction companies are presently following this format
for LCB.

Lesson 8: Tendering documents for ICB

 This form is meant for International competitive bidding by inviting tenders from global
players in addition to local firms.
 World bank and other multinational funding agencies who finance large infrastructure or
developmental projects, insist on world bank standard forms which were based on FIDIC
formats with certain modifications.
 In world bank and other international institution funded projects where foreign currency
payments are involved ICB conditions need to be followed..
 Mode of payments in foreign currency, repatriation of earnings deployment of foreign personnel
their fees taxes import of capital goods and duties applicable shall be necessary.
 ICB was made applicable for works costing above Rs.20 crores


 For world bank aided projects ICB is mandatory
 The SDB (standard bidding document) was indigenized by Govt. of India in consultation with
world bank
 ICB form also caters for clauses for dispute resolution based on New York / Geneva convention
which is now incorporated in Arbitration and conciliation 1996 in respect .of international awards

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

Traditional contracts:

1. Identification of specific elements of 4. To provide necessary drawings,

the project materials and instructions in time
2. Giving possession of entire site within 5. Non Interference in contractor‟s work
the specified time, and arranging and extending co-operation for the
necessary permissions from statutory contractor to progress work
bodies 6. Appointment of engineer and staff
3. Making necessary financial 7. Making payments in time
arrangements 8. Giving extension of time
9. Employer‟s claims by giving notice
Obligations and rights of contractor:

1. Inspection of site and interpretation of data permanent to satisfy employer‟s

and assessing all risks requirements
2. Depositing performance security, 17. Contractor shall be responsible for
insurance adequacy and safety of site operations,
3. Furnishing programme for completion and all methods of construction
4. Commence and progress work as per 18. The contractor shall institute a quality
programme to complete work with assurance system to demonstrate
diligence compliance with the requirements of
5. Appointment of project management team contract and employer is entitled to audit
6. Selection of resourceful sub contractors any aspect of the system
7. Planning and control 19. Details of all procedures and compliance
8. Quality assurance documents shall be submitted for
9. Employment of equipment as required information before each design and
10. Labour welfare execution stage is commenced.
11. Submission of information, alerts and 20. The employer shall make available to the
notices contractor for information, prior to base
12. Claim payment for work done date, all relevant data on subsurface and
13. Extra claims hydrological conditions at site including
14. Remedy all defects during defect liability environmental aspects and other data in
period possession of employer.
15. Design, execute and complete work as per 21. The contractor shall be deemed to have
contract obtained all necessary information as to
16. Provides the plant and contractor‟s risks, contingencies and other
documents, contractor‟s personnel, goods circumstances which may influence or
and services whether temporary or affect the works


Lesson 11: Registration of contractors, gradation and similar procedures:
Registration is the process of obtaining the credentials of the contractor and maintaining the lists of
such contractors. Registration could be category wise viz.Buildings, roads, water supply, electrification,
air-conditioning etc. based on certain criteria. The registration is also done monetary limit wise.

Lesson 11: Registration criteria:

 Constitution, legal status, partners
 Immovable, movable properties and bank deposits
 Turnover during last five years, balance sheets
 Valid ITCC
 Performance from previous employers
 Major equipment held
 Qualifications and experience of key personnel
 Information regarding litigations
 List of works carried out in time
 Engineers proposed to be employed and technical capability of the firm
 Whether proprietorship or partnership firm

Lesson 12: Procurement of tender documents, pre-bid conferences and site investigation:
 Open tendering – Public works: Advertisement in press calling tenders
 Restricted or selective tendering – Public works: Calling for expression of interest, pre-
qualification and issue of tender forms to pre-qualified firms
 Negotiated tendering – Public/Private works: An authority may call one or two service providers
and negotiate with the terms of contract
 Competitive dialogue – Private works: This a variant of negotiated tendering. An authority may
pursue a process of dialogue with selected tenderers through successive rounds of negotiation.
Clarifications are sought during dialogue on scope but not on prices.
 Two envelope system – For specialist works: One envelope containing technical and pre-
qualification criteria and the second envelope containing the quotation
 Issue of tender notice based on the type of tendering selected
 Application for issue of tender forms after assessing suitability as laid down in tender notice
 Issue of tender forms to eligible bidders

Site visit and pre-bid meetings:

 The bidders are invariably advised to visit the site, acquaint with conditions of site, working
conditions and study the data given in the tender and its implications before quoting. No
misunderstanding in this regard will be accepted after the tender is submitted.
 Tender forms specify date, time and place of opening of tenders
 Prebid meetings are arranged by the employer for all intending bidders in all large size and
complex projects. The employer clarifies any ambiguities, doubts on scope, specifications,
drawings, designs, contract clauses included in the tender and raised by the bidders. Necessary
amendments to tender documents will be issued where considered necessary. A summary of
points may be forwarded to all concerned.


Lesson 13: Study of contract conditions, bank guarantees and performance bonds:
 The bidder is required to study the schedules, general & special conditions, technical
specifications, bill of quantities and drawings to understand the scope of work to decide whether
the bidder can execute the work and the risks and difficulties likely to be encountered by him.
 The bidder is required to study the stipulations on performance bonds and bank guarantees that
need to be submitted by the bidder and their financial and their implications like lock in period,
interest and the effect on other on going works.

 The bidder is required to study the need for deploying equipment and its availability
 The bidder need to study the availability of material, labour and extra establishment needed
 The bidder needs to examine the cash flows required and they can be arranged.

Lesson 14: Amendments, correspondence, opening of tenders:

 The bidder needs to make necessary correspondence with the employer on any ambiguous
points that requires clarification even after pre-bid meetings
 Any amendments issued by the employer need to be studied carefully for their financial and
other implications and amend his quotation accordingly.
 Missing an amendment may cost the contractor heavily. Normally the employer numbers the
amendments serially and non receipt of any amendment can be taken up immediately with the
employer. All the amendments will form part of the tender.
Opening tenders:
 Tender boxes meant for receiving tenders will be sealed at the appointed time by officers
nominated (Normally 2) . Late tenders will not be allowed to be put into the tender box.
 Tenders will be opened at the appointed time in the presence of bidders present
 Signature of bidders present will be obtained
 Opening officers will open the tenders and read out the amounts quoted by each bidder and
initial on quoted pages
 Corrections, overwriting will be initialed
 Rates written in words will take precedence over figures.
 The opening officers will make comparative statement of tenders and hand over to the contract
section for further disposal. Blank tenders will be noted as such. They will not check extensions
or totals.

Lesson 15: Contract administration and project diary, creating project record:
Following documents are maintained at site:
 Copy of contract document
 Project diary showing resources employed, nature of work carried out, weather conditions,
materials brought
 Programme of work – CPM, Bar charts
 Materials register
 Equipment register
 Checks carried out at site
 Pour cards, Batch plant, transit mixer record
 Important stages passed
 Register of tests
 Register of reinforcement
 Measurement books
 Samples register
 Cement register
 Site order book
 Progress reports
 Register of variations
 Interim bills
 Correspondence files
 Safety hazard warnings, SOP
 Construction photographs
 Labour welfare and first aid arrangements
 Security aspects

Lesson 16: Planning at head office of contractor and preparing for execution:
 Deciding organization at site
 Planning site office, workshop, transport, water, electricity and communications, office furniture
and equipment
 Planning security fence and personnel
 Planning labour camp
 Planning surveying equipment
 Planning for storage of stores, steel yard, Concrete handling arrangements like cranes, hoists
 Obtaining work order for commencement
 Obtaining copy of agreement, drawings
 Obtaining necessary licenses for labour, insurance
 Mobilizing construction equipment
 Submitting performance security
 Making programme for completion of work and allocating resources
 Prepare cash flow charts

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

 Appoint project manager with appropriate technical and managerial skills. The project manager
should have executed similar projects earlier
 He should be capable of coordinating with employer, consultants, site engineers and other staff
 He will have to organize all activities at site and guide in resolving bottlenecks to achieve
desired rate of progress
 The project manager shall obtain either mobilization advance or arrange for finance through his
head office
 Arrange all material, labour resources and arrange for construction equipment
 Arrange RMC/ site mix concrete
 Arrange for labour camp, their accommodation, water, bathing and toilet facilities, canteen and
other welfare measures
 Arrange fabrication yard, security and safety measures
 Identify site and arrange for mark out to commence work
 Arrange site lighting
 Supplying instructions to carry out work
 Obtaining drawings and specifications
 Prepare master programme, monthly, weekly and daily programmes and their implementation.
Arrange adequate resources and equipment
 Prepare progress reports
 Carry out investigations, quality checks, tests and maintenance of records
 Prepare running bills and pursue for payment

Lesson 18: Selecting and appointing subcontractors on suitable terms, interaction with
consultants and clients:
Sub contractors / Nominated subcontractors:
 Decide the number of trade items to be subcontracted
 Decide about suitable subcontractors based on their previous performance, quality
consciousness, timely completion and resourcefulness and time constraints as per contract
 Obtaining quotations on the same terms of main contract
 Payment terms, Financial soundness
 Capability to employ skilled labour
 Capability to employ equipment
 Knowledge of standards, procedures, methods of execution
 Capability to study the drawings and understanding specifications
 Organizing capacity and to cope with urgency of work
 Capability to obtain permits, approvals, licenses from various authorities
 Adherence to labour laws
 Safety arrangements
 Agreement with subcontractor
 Withdrawal by subcontractor

Interaction with with consultants and clients:

 The project manager must be capable of interacting with architects, Structural consultants very
 The services must be interwoven with other civil works at appropriate stages of planning and
construction, so that no important service left behind requiring modifications, breakages and
additional works
 The interaction is generally involves obtaining necessary drawings/ designs in time, obtaining
clarifications, amendments based on site data/ investigations, impracticable provisions,
nonconformity to standards, non availability of materials, mismatch of services
 Study of drawings and specifications at information drawing stage, good for construction stage
and pointing out
 Obtaining list of drawings at the beginning of construction
 Keep the client informed of interaction with consultants, and obtain his views, approvals and
communicate back to consultants
 Keep record of interaction through minutes of meeting


Lesson 19: Submission of reports, bills and follow up for payment:
 Daily progress report showing status of work, manpower and equipment at site, weather, visitors
to site, important stages of work completed, material brought on site
 Concrete pour record
 Steel fabrication/erection report
 Problems encountered at site and how resolved/ still pending
 Hold up of work with reasons and suggested action
 Test information
 Photos showing progress at various stages
 Weekly/monthly physical and financial progress
 Variations
 Correspondence with contractor/ consultants
 Submission of interim bills
 Submission of reconciliation of materials
 Supporting details
 Submissions of joint measurement record
 Submission of vouchers
 Clarifying any doubts in the bill
 Monitoring the movement of bill Obtaining payment

Lesson 20: Contract close out, defects notification period, role of gradation agencies like
ICRA and different methods of grading:
Contract completion and close out:
 Giving notice of completion to client
 Joint inspection
 Completion certificate from client
 Preparation of list of defects to be rectified
Defect notification period/ Defect liability period:
 Intimation of defects by employer
 Attending for rectification of defects
 Informing client of completion of rectification
 Requesting for performance certificate on satisfactory completion of defect liability period
 Release of security performance guarantee
Grading by ICRA and other grading agencies:
 ICRA is an associate of Moody rating agency
 The rating grades based on timely completion without cost overruns, quality
 Financial capability of the company


Definitions of Liquidated damages
Liquidated damages (also referred to as liquidated and ascertained damages) are damages whose
amount the parties designate during the formation of a contract for the injured party to collect as
compensation upon a specific breach (e.g., late performance).

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

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

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

3 .The Engineer (Duties and Authority)

 The employer shall appoint Engineer who shall carry out duties assigned to him in the contract
 Whenever the Engineer exercises a specified authority for which employer‟s approval is
required the employer is deemed to have issued the approval
 The engineer shall have no authority to amend the contract
 The engineer shall have no authority to relieve either party of their duties
 Any approval, check, certificate, consent, examination, inspection, instruction, notice, proposal,
request, test or similar act by the engineer shall nor relieve the contractor from any of his
responsibilities he has under the contract
3.3 Instructions of the engineer:
 The instructions shall be given in writing
 If the engineer gives oral instruction, receives written confirmation from the contractor within two
working days and does not reply by issuing written rejection within two working days after
receiving the confirmation the confirmation constitutes written instruction of the engineer
3.5 Determinations:
 The engineer shall consult with each party in an endeavour to reach an agreement or
determination in a particular issue after issuing necessary notices. If agreement is not achieved
he shall make a fair determination in accordance with contract



1. English language to be used.

The contract documents shall be drawn-up in English language.
The contract shall be governed by all relevant Indian Acts as applicable only within the jurisdiction
of the High Court at Calcutta, India, including the following Act
Applicability of laws on the contract.
1.The Indian Contract Act, 1872.
The Major Port Trust Act, 1963.
The Workmen‟s Compensation Act, 1923.
The Minimum Wages Act, 1948.
The Contract Labour (Regulation & Abolition) Act,1970.
The Dock Workers‟ Act, 1948.
The Indian Arbitration Act (1940) (in the case of a definite Arbitration Agreement only).

2. Contractor to Execute Contract Agreement.

After acceptance of his Tender/Offer and when called upon to do so by the Engineer or his
representative, the Contractor shall, at his own expense, enter into and execute a Contract
Agreement to be prepared by him in the form annexed hereto. Until such Contract Agreement is
executed, the other documents referred to in the definition of the term “Contract” here-in-before,
shall collectively be the Contract.

3. Interpretation of Contract documents - Engineers’ Power

Several documents farming the contract are to be taken as mutually explanatory of one another.
Should there be any discrepancy, ambiguity, omission or error in the various contract documents,
the Engineer shall have the power to correct the same and his decision shall be final and binding on
the parties to the Contract.

4. All Drawings are Trustees property

Two copies of the Drawings referred to in the General and Special Conditions of Contract and in
the Bill of Quantities, shall be furnished by the Engineer to the Contractors free of cost for his use
on the work, but these shall remain the property of the Trustees and hence, the Contractor shall
return them to the Engineer or his Representative on completion of the work, if not torn or mutilated
on being regularly used at site.

5. Contractor to prepare working/ progress drawings.

The Contractor shall prove and make at his own expense any working or progress drawings
required by him or necessary for the proper execution of the works and shall, when required,
furnish copies of the same free of cost to the Engineer for his information and/or approval, without
meaning thereby the shifting of Contractor‟s responsibility on the Engineer in any way whatsoever.

6. Contractor cannot sub-let the work.

The Contractor shall not directly or indirectly transfer, assign or sublet the Contract or any part
thereof without the written permission of the Engineer. Even if such permission be granted, the
Contractor shall remain responsible (a) for the acts, defaults and neglect of any sub-contractor, his


agents, servants or workmen as fully as if these were the acts, defaults or neglects of the
Contractor himself or his agents, servants or workmen, and (b) for his full and entire responsibility
of the contract and for active superintendence of the works by him despite being sublet. provided
always that the provision of labourers on a “piece rate” basis shall not be deemed to be sub letting
under this clause.

7. Contractors’ price is inclusive of all costs.

Unless otherwise specified, the Contractor shall be deemed to have included in his Tender/Offer all
his cost for supplying and providing all constructional plant, temporary work, materials both for
temporary and permanent works, labour including supervision thereof, transporting to and from the
site and in and about the work, including loading, unloading, fencing, watching, lighting, payment of
fees, taxes and duties to the appropriate authorities and other things of every kind required for the
construction, erection, completion and maintenance of the work.

8. Contractor is responsible for all construction process, except for correctness of design and
specification formulated by the Engineer.
The Contractor shall be solely responsible for the adequacy, stability and safety of all site
operations and methods of construction, even if any prior approval thereto has been taken from the
Engineer or his Representative. The Contractor shall not be responsible for the correctness of the
design or specification of the Temporary and Permanent works formulated by the Engineer; but the
contractor shall be fully responsible for the correct implementation thereof, as also for any design
and specification prepared/proposed/used by the Contractor.

9. Contractor to submit his programme of work.

Whenever required by the Engineer or his Representative, the Contractor shall submit to him the
details of his (a) programme for execution of the work, (b) proposed procedure and methods of
work, (c) proposed deployment of plant, equipment, labour, materials and temporary works. The
submission to and/or any approval by the Engineer or his Representative to any such programme
or particulars, shall not relieve the Contractor of any of his obligations under the contract. If for any
reason the contractor be unable to adhere to his earlier programme, he shall submit his revised
programme for completion of work within the stipulated time whenever asked to do so.

10. Contractor to supervise the works.

Necessary and adequate supervision shall be provided by the Contractor during execution of the
works and as long thereafter as the Engineer or his Representative shall consider necessary during
the maintenance period. The Contractor or his competent and authorised agent or representative
shall be constantly at site and instructions given to him by the Engineer or his Representative in
writing shall be binding upon the Contractor subject to limitation in clause 2.5 hereof. The
Contractor shall inform the Engineer or his Representative in writing about such
representative/agent of him at site. Contractor to deploy qualified men and Engineer‟s power to

11. Contractor’s men.

The Contractor shall employ in execution of the Contract only qualified, careful and experienced
persons and the Engineer shall be at liberty to direct the Contractor to stop deployment of any of his
staff, workmen or official at site and the Contractor shall within 48 hours comply with such


instruction without any demur, whenever the Engineer shall feel that the deployment of the person
concerned will not be conducive to the proper and timely completion of the work.

12. Contractor is responsible for line, level and setting out etc.
The Contractor shall be responsible for the true and proper setting-out of the works in relation to
reference points/lines/levels given by the Engineer in writing. The checking of any setting-out or of
any alignment or level by the Engineer or his Representative shall not in any way relieve the
contractor of his responsibility for the correctness thereof and he shall fully provide, protect and
preserve all stakes, templates, bench marks, sight rails, pegs, level marks, profile marks and other
things used in setting-out the works.

13. Contractor is responsible to protect the work.

From the commencement of the works till issue of the completion certificate in Form G.C. 1, vide
Clause 5.12 hereof, the contractor shall take full responsibility for the care thereof. Save for the
excepted risks, any damage, loss or injury to the work or any part thereof shall be made good by
the Contractor at his own cost as per instruction and to the satisfaction of the Engineer, failing
which the Engineer or his Representative my cause the same to be made good by any other
agency and the expenses incurred and certified by the Engineer, shall be recoverable from the
Contractor in whatever manner the Engineer shall deem proper.

14. Contractor is responsible for all damages to other structures/persons caused by him in
executing the work.
The Contractor shall at his own cost protect, support and take all precautions in regard to the
personnel or structure or services or properties belonging to the Trustees or not, which may be
interfered with or affected or disturbed or endangered and shall indemnify and keep indemnified the
Trustees against claim for injury, loss or damage caused by the Contractor in connection with the
execution and maintenance of the work to the aforesaid properties, structures and services and/or
to any person including the Contractor‟s workmen. Cost of Insurance Cover, if any, taken by the
Contractor shall not be reimbursed by the Trustees, unless otherwise stipulated in the Contract.

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

The Contractor shall immediately inform the Engineer‟s Representatives if any fossil coins, articles
of value or antiquity and structures and other remains or things of geological or archaeological
importance be discovered at site which shall remain the property of the Trustees and protect them
from being damaged by his workmen and arrange for disposal of them at the Trustees‟ expense as
per the instruction of the Engineer‟s Representative.

16. Contractor to indemnify the Trustees against all claims for loss, damage etc.
The Contractor shall be deemed to have indemnified the Trustees against all claims, demands,
actions and proceedings and all costs arising there from on account of
(a) Infringement of any patent right, design, trade-mark, or name or other protected right, in
connection with the works or temporary work,
(b) Payment of all royalties, rent, toll charges, local taxes, other payments or compensation, if
any, for getting all materials and equipment required for the work.
(c) Unauthorised obstruction or nuisance caused by the Contractor in respect of Public or
Private road, railway tracks, footpaths, crane tracks, waterways, quays and other properties
belonging to the Trustees or any other person.
(d) Damage/injury caused to any highway and bridge on account of the movement of
Contractor‟s plants and materials in connection with the work.
(e) Pollution of waterway and damage caused to river, lock, sea-wall or other structure
related to waterway, in transporting contractor‟s plants and materials.
(f) The Contractor‟s default in affording all reasonable facilities and accommodation as
per the direction of the Engineer or his Representative to the workmen of the Trustees and other
agencies employed by or with the permission and/or knowledge of the Trustees
on or near the site of work.

17. Dismantled materials Trustees’ property.

Debris and materials, if obtained by demolishing any property, building or structure in terms of the
Contract shall remain the property of the Trustees.

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

The Contractor‟s quoted rates shall be deemed to have been inclusive of the following:
(a) Keeping the site free of unnecessary obstruction and removal from site of , constructional
plant wreckage, rubbish, surplus earth or temporary works no longer required.
(b) Cleaning and removal from site all the surplus materials of every kind to leave the site clean
and tidy after completion of the work, without which payment against final bill may be liable
to be withheld.
(c) Precautionary measures to secure efficient protection of Docks, the River Hooghly and other
waterways against pollution of whatever nature during execution and maintenance of the works
and to prevent rubbish, refuse and other materials from being thrown info the water by the
Contractor‟s men or those of his agency.
(d) Making arrangements for deployment of all labourers and workers, local or otherwise including
payment for their wages, transport, accommodation, medical and all other statutory benefits and
entry permits, wherever necessary.

19. Notice to Contractor.

Every direction or notice to be given to the Contractor shall be deemed to have been duly served on
or received by the Contractor, if the same is posted or sent by hand to the address given in the
tender or to the Contractor‟s Site Office or in case of Trustee‟s enlisted Contractor to the address as
appearing in the Trustees‟ Register or to the Registered Office of the Contractor. The time
mentioned in these conditions for doing any act after direction or notice shall be reckoned from the
time of such posting or dispatch.

20. Contractor not to publish photograph or particulars of work

The Contractor and his subcontractor or their agents and men and any firm supplying , plant
materials, and equipment shall not publish or caused to be published any photographs or
description of the works without the prior authority of the Engineer in writing.

21. Contractor to provide facilities to outsiders.

The Contractor shall, at the Trustees‟ cost to be decided by the Engineer, render all reasonable
facilities and Co-operation as per direction of the Engineer or his representative to any other
Contractor engaged by the Trustees and their workmen, to the Trustees‟ own staff and to the men
of other Public Body, on or near the site of work and in default, the contractor shall be liable to the
Trustees for any delay or expense incurred by reason of such default.
22. Work to cause minimum possible hindrance to traffic movement.
The work has to be carried out by the Contractor causing the minimum of hindrance for any
maritime traffic or surface traffic.

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

All constructional plants, temporary works and materials when brought to the site by the contractor,
shall be deemed to be the property of the Trustees who will have a lien on the same until the
satisfactory completion of the work and shall only be removed from the site in part or in full with the
written permission of the Engineer or his Representative.

Performance security:
 The contractor shall deliver performance security within 28 days after receiving letter of
acceptance in the form, currency, amount specified and valid and enforceable until the
contractor has executed and completed the works and remedied all defects

A void contract is one that has no effect due to some fundamental defect. Generally no
property can pass under a void contract. Contracts contrary to public policy, for example, to
restrain another from pursuing their business, are usually void.
A voidable contract on the other hand, is a valid contract but the law gives one party an
option whether or not to proceed with the agreement. For instance, there may be
misrepresentation which allows the innocent party to make certain choices, thus a contract
declared voidable.

Void Versus Voidable Contracts

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


Contractors All Risk (CAR)

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

 Contractors All Risk policy insures damage to any contract works including construction
plant and equipment, third party property, surrounding property etc. The policy can be
extended to insure the maintenance period in addition to the actual construction period.
There are two kinds of Contractors All Risk policies, annual policies for contractors
handling many small to medium contracts of a similar nature and a single contract policy
for specific contracts.
 Covers all types of civil engineering projects
Contractors All Risk (CAR) policy is designed to cover all types of civil engineering
projects like buildings, dams, flyovers, etc.It is possible to record the interest of Principal,
Contractors and Subcontractors in the policy.

1. Scope of cover
This Policy broadly covers the risk of accidental physical loss or damage in respect of
the contract works, during the execution of a civil project. CAR insurance provides an „all
risk „cover. All perils are covered unless specifically excluded.
Cover incepts from the commencement of work or after unloading of first consignment at
project site, whichever is earlier and terminates on handing over of works to the principal
or expiry of policy, whichever is earlier.
2. Sum Insured
The Sum insured shall be the fully completed value of the contract works inclusive of all
materials, wages, freights, and custom duty and materials or items supplied by the
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.



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.

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.
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
D. Release of Liens and Certification that All Bills Have Been Paid : AIA Document G706A,
current edition, or similar company form acceptable to MSU completed in full or a sworn
statement and affidavit from the Contractor to the Owner stating that all bills for this job have
been paid and that the Owner is released from any and all claims and/or damages.
E. Contractor's Affidavit of Payment of Debts and Claims: AIA Document G706, current
edition, or similar company form acceptable to MSU completed in full.
F. Guarantee of Work : Sworn statement that all work is guaranteed against defects in materials
and workmanship for one (1) year from date of Owner's acceptance, except where specified for
longer periods.
1. Word the Guarantee as follows, or in a similar manner:
2. We hereby guarantee all work performed by us on the above captioned Project to be free
from defective materials and workmanship for a period of one (1) year or such longer period
of time as may be called for in the Contract Documents for such portions of the Work.


3. All guarantees and warranties shall be obtained in the Owner's name.
4. Within the Guaranty period, if repairs or changes are requested in connection with
guaranteed work which, in the opinion of the Owner, are rendered necessary as a result of
the use of materials, equipment or workmanship which are inferior, defective or not in
accordance with the terms of the Contract, the Contractor shall promptly, upon receipt of
notice from and without expense to the Owner, place in satisfactory condition building,
site, equipment or contents thereof. The Contractor shall make good any work, materials,
equipment or contents of said buildings or site which may be disturbed by fulfilling any such
5. If, after notice, the Contractor fails to proceed promptly to comply with the terms of the
Guaranty, the
6. Owner may have the defects corrected and the Contractor and his Sureties shall be liable for
all expense incurred.
7. All special guarantees applicable to definite parts of the work stipulated in the Project Manual
or other
8. documents forming part of the Contract shall be subject to the terms of this paragraph during
the first year of the life of such special guaranty.
G. Project Record Document : Furnish all other record documents as set forth in Section 01720
entitled Project Record Documents.

What Does International Competitive Bidding - ICB Mean?

In financing arrangements involving the World Bank, a bidding process that requires the borrower to
procure resources funded by its loan according to a number of specified conditions. ICB requires
World Bank borrowers to internationally advertise the required goods or services funded by their
loans, issue bids for advertisement in an acceptable international language and award contracts to
the lowest acceptable bids, subject to certain considerations for qualitative judgment.
The goal of imposing an international competitive bidding requirement on loans issued by the
World Bank is to promote fair and healthy competition for World Bank funded economic
opportunities. The borrowing country in such an arrangement maintains a certain degree of
freedom in selecting a winning bid for its projects, but it is expected that the lowest-priced,
competitive bid be selected.

Earnest Money

An earnest payment (sometimes called earnest money or simply earnest, or alternatively a

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

Q: What is “earnest money?”

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


Q: Who can hold earnest money?
A: Any person (or entity) agreeable to you and the seller, but usually a licensed real estate broker. As
a buyer, be aware that if you allow earnest money to be held and deposited by a seller or by a builder
or developer for use in construction, you risk that they will not be able to return it to you in the event the
transaction does not close (due to the seller‟s death, divorce, bankruptcy, judgment liens, receivership,
fraud, tax liens, title problems, etc.). Consequently, most buyers prefer to have real estate agents or at-
torneys hold the earnest money deposit. Since they are licensed by the state and required to deposit
the money in a trust or escrow account, this reduces the risk that the monies will be improperly used.

Tenders and contract Administration-progress and completion

Commencement of work
Contractor to commence work on receipt of notice from Engineer with in time given in the tender.
This may be in the form of work order
The Employer will give the contractor possession of site in accordance with the contract
Contractor to proceed as per the programme
Works shall be completed as per time stipulated in the contract
If the contract provides phase wise completion, works will be completed accordingly

Progress of works
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
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
Engineer will accordingly notify the contractor


Rejection of work
If engineer, on inspection, determines that any material or plant are defective he may reject
He will issue notice to contractor with reasons for rejection
Contractor to promptly make good the defect
In case of contractor‟s default , the Employer shall be entitled to pay other person to carry out the
same at the cost of contractor
Issue of stores
 Sch B- Issue of stores Issue of T&P
 Description of item  Sch C-issue of T&P
 Unit and rate  Description of item
 Place of issue  Place of issue
 Quantity as per actual requirements in  Working day charges includes
works  Capital cost, depreciation, maintenance,
 Unstamped receipt repair, crew, fuel, oil ,lubricants
 Recovery from bills  Idle day charges
 Surplus stores to be returned back  Includes items above except crew ,fuel,
 Recovery for nonreturn oil, lubricants

Contractor’s risks
 Care of works is contractor‟s responsibility from commencement date until the date of issue of
taking over certificate
 He has to provide watch and ward and has to take responsibility for risks and damages
 Any loss or damages due to any causes (other than excepted risks ) should be rectified by him
at his cost without any delay
 The risks excepted are called excepted risks
Excepted risks
 Excepted risks include
 War, hostilities, invasion, act of foreign enemies
 Rebellion, revolution, insurrection of military or usurped power
 Damage by aircraft
 Earthquake
 Riot commotion or disorder (by other than contractor‟s own employees)
 Any other causes specifically mentioned in the contract
Excepted risks- contractor’s responsibilities
 In the event of any such happening, contactor should immediately rectify the damages as
directed by Engineer
 The cost of rectifications shall be paid to him by the Employer
 The rates shall be fixed by Engineer as per the procedure laid down for variation orders
Taking over certificate/Completion certificate
 When the work is substantially completed and satisfactorily passed the tests, contractor may
give notice to this effect to the Engineer, with copy to Employer, with undertaking to complete
any outstanding work with expedition during Defect Liability Period.
 The Engineer ,with in 21days ,may issue taking over certificate to the contractor with copy to
Employer, if he is satisfied that the works are substantially completed.
 Alternatively, he may specify to the contractor the work yet to be completed before issue of
taking over certificate. He will also intimate the defects to be rectified
Defect Liability Period/Defect Notification Period
 Defects Liability Period is named in the Appendix to tender - normally one year
 Commences from date of Taking over Certificate
 All outstanding work and defect rectification shall be completed by contractor during this period
 Once such outstanding works are completed and defects rectified to the satisfaction of
Engineer, the work shall be considered as fully completed and the Performance Certificate is
issued by the Engineer
Cancellation of contract
 Diligence notice under the specific condition of contract pointing out the delays and instructing
him to improve progress
 Draw attention to the contract clause for Cancellation of contract for contractor‟s defaults
 Cancellation notice intimating contractor that balance works will be executed at his risk and cost
 The site including the material, plant and machinery will be taken over by Employer
 Inventory of works, materials, plant and machinery as on date of cancellation
 Contractor will be given opportunity to be present notifying the date and time
 Risk and cost contract- same terms and specifications
 Execution of risk and contract
 Charging extra cost to defaulting contractor and recovery
 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
 Construction contract is between two parties-Employer and Contactor
 Long duration of contract-various issues arise during construction
 Views of one party may not be acceptable to the other resulting in dispute
 Unresolved disputes may lead to claims/counter claims
 Disputes and claims-major impediments to smooth progress and timely completion of
construction projects leading to time and cost overruns.
Arbitration and conciliation act-1996-arbitration
 If settlement is not reached by conciliation, case is referred to arbitration
 The arbitral tribunal is appointed as per the provision of arbitration agreement
 The tribunal calls for statement of claims and pleadings in defence from the parties
 Hears both parties and makes the award on their claims
 The award is final and binding on both parties


Contract Administration-Payments

Conditions of contract
 The contract is binding on both parties
 While the Contractor is responsible for proper execution of work, the Employer is responsible for
timely payments
 The construction contract is of long duration; hence payments are made periodically as
 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
 This will be recovered from interim payments in installments
Machinery advance
 This is similar to mobilisation advance; may be limited to 5%
 This is paid based on the cost of machinery purchased, limited to the laid down percentage
 A bank guarantee for the amount is taken before payment
 This is also recovered in installments
 The BGB is released on recovery of advance
Provisional sum
 If detailed quantities are not available at tender stage for inclusion in BoQ, a lump sum amount
my be provided in the tender. The tenderer is asked to quote percentage on/off SSR rates. The
work, when ordered and executed, shall be paid at SSR rates duly adjusted by the percentage
quoted by the contractor
Prime cost sum
 For certain specialist works, where the work is to be done by specialized agencies, Prime cost
sum may be provided in the contract.
 Quotations will be obtained by Employer, the agency will be nominated and the amount payable
will be fixed.


 Work will be executed through the main contractor and payment will also be made through the
main contractor. The main contractor will be allowed certain percentage for getting the work
executed by the specialist

Variation orders
 Engineer , if he considers it necessary, can order variations consisting any of the following:
 Increase or decrease of quantities
 Omit any item of work
 Change the character or type
 Order any extra item
 Change of alignment, levels, dimensions
 Contractor shall not make any variation without instructions from Engineer
 Pricing at contract BQ rates if applicable
 If rates are directly not available, new rate shall be derived based on contract rates
 If this is also not possible, Engineer consults both Employer and Contractor. A suitable rate may
be agreed upon between Engineer and Contractor
 In the event of disagreement , the Engineer shall fix rate as is considered appropriate by him and
notify to contractor with copy to Employer
 Until such time the rates are agreed or fixed, provisional rates shall be fixed to facilitate on-
account payments
Variation limit
 There is a certain limit up to which variations can be ordered. This is called variation limit.
 The variation limit is normally 10% or 15% as is specified in the contract.
 The percentage is on the contract amount
 The excess over variation limit shall be paid at agreed rates .If there is no agreement, at the
rates determined by the Engineer .
Periodicity of running payment
 The periodicity of IPC is specified in the Conditions of Contract.
 This is normally not less than 30 days counted from the date of earlier IPC;
 May be later than 30 days if adequate value of work was not done during the period
 The contract may specify minimum value of work to be done during the period
 Work done only up to the date of submission of IPC is counted
 Work done beyond the date is counted in next IPC
Value of work for interim payments
 Running payment as specified to maintain cash flow and progress of work
 Subject to final adjustment at final bill stage
 Quantities executed as per measurement books during the period from date of last IPC up to the
date of submission of the current IPC
 Amount at contract rates
 Amount of variations ordered and executed priced at contract rates as available
 If contract rates are not available, pricing is done at special rates as fixed
 Total amount accordingly worked out
Adjustment for price variation
 If price variation clause is included in the contract, the amounts payable to the contractor shall
be adjusted for rises and falls in the cost of labour, goods and other inputs to the work as
determined by the formula prescribed in contract clause
 Adjustment (plus or minus) as per price variation formula is made to the value of work done
during the period to arrive at total value for running payment
 No such adjustment shall be made in respect special rates fixed on the basis of current market
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
 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
 Liquidated damages if recoverable and any other dues
 Statement of recoveries is attached to the IPC for verification
Preparing Interim payment bill
 Timely and correct payments are the life line for any construction contract
 While under payment will retard the progress of work, overpayment can result in serious cash
flow problems towards the end of the project.
 Hence, it is in the interest of both contractor and Employer to ensure correct payments
 The payments are made for the value of work done at contract rates as on date subject to
retention of retention money as stipulated
 Payment is also made for the materials collected at site after retaining 25%
 Adjustment for price variation is also included
Processing interim payments
 Recoveries of any dues from the contractor are accounted
 Deduction of earlier interim payments is made to arrive at net payable amount
 The contractor‟s Quantity Surveyor ensures that all the work done is included for payment and
the IPC prepared accordingly is submitted to Engineer
 He will coordinate with all concerned at each stage of processing of IPC to ensure smooth
passage and early payment
 After certification by Engineer with the assistance of his Quantity Surveyor ,the bill is sent for
audit check
 Passed amount is paid after deducting TDS
Final Statement and bill
 After issue of defect liability certificate, the contractor shall submit completion drawings
 The final bill will be submitted with the following:
1. value of complete work done
2. recoveries to be made
3. amount of running payments already made
4. all measurement books and other related documents
 Balance amount payable is claimed by the contractor
 The bill will be scrutinised by Quantity Surveyor of Engineer. After certification by Engineer and
audit check, the payment will be released
 Retention money will also be released
No claim certificate
 The contractor shall be entitled to be paid the final sum less the value of payments already
 The contractor shall submit a „No claim certificate‟ with the final bill
 The bill will be technically checked by Quantity Surveyor of the EE. After certification by
Engineer and audit check, the payment (including Retention money) will be released
 However, in case the contractor has got any claims, these are listed and attached with the final
bill along with supporting details
On account payment
 The claims submitted by the contractor, shall be examined by the EE/ Accepting officer and
where agreed, a variation order is issued and the amount included in the final bill for payment
 The payment of the bill will be made as „on account payment‟ and not as final settlement
 The disputed claims are referred to Conciliation and Arbitration as the case may be
Duties of Quantity Surveyor of contractor-1
 Quantity Surveyor of contractor is responsible for preparing IPC, submission, smooth progress
and quick payment
 Collecting all the details of approved work done during the period from site supervisors
 Measurement books are updated in coordination with Engineer‟s supervisors
 Obtain signatures of contractor‟s authorised representative after convincing that all
measurements are accounted for payment
 Ensure that the work done on variation orders is also accounted for


Duties of Quantity Surveyor of contractor-2
 Ensure that special rates, if any, are duly processed with supporting data and convince the
Engineer for fixing the rate
 In case of delay in fixing rates, payment may be claimed on provisional rates
 Obtain indices for price variation clause with supporting documents and submit to Engineer for
 Arrange and submit Bank Guarantee bonds for getting corresponding amounts released
 Pursue release of BGBs when due for release
Importance of payments
 The contractor shall submit monthly statement promptly to ensure timely payments of IPC
 Timely payments should be made to contractor to maintain cash flow of Contractor
 This will help in achieving smooth progress of work
 No over payment should be made to ensure that no cash flow problems occur towards end of
the project and safe guard Employer‟s interest against default of Contractor

Administration of contracts
 Introduction-Site documents-contract labour
Execution of works-contract administration
 Efficient execution of works is dependent on proper administration of contracts
 The administration of contracts is governed by the conditions of contract
 The conditions of contract include both General conditions and Special conditions
General conditions of contract
 The central, state government departments, public sector undertakings/big private organisations
etc. have published their own forms of General conditions which are used for their works.
 General conditions form is published as a book as this is applicable to all contracts of the
respective organisations and is to be used repetitively
 The basis for the conditions is The Indian Contract Act and other applicable laws of India
FIDIC and Domestic/Government forms-applicability
 FIDIC form
 Devised by a private international organization
 Used generally for international bidding.
 Recommended by funding agencies
 Domestic/Government form
 Approved by Government /organization (State, Central or Government Undertaking)
 Used for works of the said organisations
Supervision by departmental engineers
 The Government contract form provides for direct supervision by departmental engineers
without the need of any consultant/ Engineer
 Direct responsibility of supervision rests with Executive Engineer and Assistant Engineer and
they are vested with the requite powers under the General conditions of contract
 The EE controls the quality of work, monitors the progress, gives day to day site decisions
 The EE and AE are assisted by qualified supervisory staff
 Private organisations may have their own system of supervision


The contract operated through EE
 All correspondence between the contractor and the department is through the EE who will place
work order/ variation orders, issue notices etc.
 Any approvals required from higher authorities shall be obtained by EE
 Contractor‟s payments are also made by the EE after scrutiny and audit check
The Accepting Officer
 The contract is accepted after scrutiny by an Engineer officer on behalf of the Employer
(President of India in case central govt. departments)
 The Accepting officer may be Executive Engineer for smaller contracts, SE for medium value
contracts and Chief Engineer for large works.
 The financial limits for acceptance of are laid down by the government
 The work is to be sanctioned, funds allotted and technical sanction is to be given before
Powers of Accepting Officer
 The Accepting Officer shall be vested with the powers of granting extension of time, according
approval for variations, interpretation of contract, accepting, encashing and releasing Bank
Guarantee Bonds, cancellation as well as foreclosure of a contract, referring the disputes to
arbitration etc.
 These powers are distinctly laid down in the respective General conditions contract
Site documents
 The Assistant Engineer, called the Engineer-in-charge for the work, as well as the contractor will
have their site offices for day to day supervision and passing of works.
 They maintain site documents for effective supervision and as permanent record.
 These documents are duly signed by representatives of department as well as contractor.
Documents maintained by EIC
 Copy of contract agreement and drawings
 Time and progress chart
 Works dairy: Daily record of events indicating works being executed, labour and equipment
employed, weather, any special events
 Site order book: Record of site orders given by EIC regarding site activities and
 Progress reports (contd..
Site documents- stage passing
 Sample register with approved samples of materials duly labeled and signed by approving
 Stage passing register: Record of passing of each stage of construction
 Lab test records: Record of lab tests, results and approvals
Measurement books and level books
 The measurements/ levels are recorded in the respective books by the EIC in presence of
contractor‟s rep. and signed by both
 These books are issued by specified authority- MB numbers and page numbers duly marked
 The quantities of each item of work will be worked out which form the basis for payment
 The books are checked by audit authorities also while auditing bills for payment
 These are kept under safe custody
Contractor’s employment of labour
 Contractor shall employ required number of labour to maintain the progress and the quality of
 He shall be liable to for payment of all wages under the Payment of Wages Act,1936, Minimum
Wages Act,1948, Employer‟s Liability Act,1938, Workman‟s Compensation Act,1923 or any
other enactments
 Contractor shall not employ any person of less than 15 years of age
 Contractor shall arrange for all safety provisions
Sub contractor
 The contractor may appoint a sub-contractor for execution a certain portion of work and NOT
the whole of work
 He shall intimate such appointment to the Engineer who may give his concurrence
 Contractor is responsible for the work executed by sub-contractor and making payments to him
at the rates agreed to between them
 The Employer makes payments to the main contractor at contract rates and the main contractor
is accountable to him
Inspection of Labour Welfare Officer
 Labour Welfare Officer from Ministry of Labour shall inspect and report any irregularities in
observing Labour Regulations.
 The Employer shall watch enforcement of labour laws and compliance of observations made by
 Employer is authorised to make any recoveries towards payment of wages
 Minimum Wages are published by Labour Department and are revised every 6months
 The minimum wage is taken as index for variation of wages in the Price Variation clause
Enlistment/Registration of Contractors-classification
 The Government departments have continued work load and therefore need permanently
enlisted contractors whose capability and performance are known to the departments and under
periodical watch
 The magnitude of works also vary widely; may be as small as Rs.50000 and as large as 50
crores. To meet this varied requirement, the enlistment is done for various financial limits
 The A class contractor may be given tender for a 50 crore (and above) work; B class-up to 25
crore ;C class-10 crore; D class- 5 crore; E class-1 crore etc.
Enlisted contractors-categories
 Each class of contractors may have specialist categories such as (a) Complex structural works
(b) Air conditioning and refrigeration (c) Lifts and the like
 The performance of enlisted contractors is periodically reviewed. An enlisted contractor may be
upgraded, downgraded, suspended, removed or blacked listed based on reports on his
performance. All these decisions are widely circulated in the department
Enlisted contractors-Standing security deposit
 As the enlisted contractors work with the department on long term basis, they may give
Standing Security Deposit of an amount corresponding to their financial limit. With this, they
need not give EMD or SD for each individual work.
 This is a good facility as the contractor‟s money is not stuck in several deposits
 However, if the contract amount is more than the financial limit of contractor, he has to deposit
additional security deposit.


Tenders And Contract Procedure-Procurement Of Works
Tender notice
Press advertisement
Notice of tender
Name of work; location and scope
Estimated cost
Period of completion
Eligible class of contractors
Earnest money-Bid security
Security deposit-Performance security
Date of issue and receipt of tenders
Expression of interest/Application for tenders
Interested companies send applications with their credentials including:
 Constitution of the firm
 Resources and technical capability
 Past performance and ongoing works
 Documents supporting financial soundness
Prequalification of contractors
After scrutiny of documents submitted by various contractors and after satisfying with regard to their
capability to execute the particular work the Employer short lists some contractors for issuing tender
documents to them
The prequalified contractors submit their quoted tenders which includes technical and financial bids
Earnest money-security deposit
At the tender stage ,the tenderers are asked to submit earnest money with their bids to ensure that
the bids are bonafide
This may be in the form of demand draft or bank guarantee bond in favour of the Employer
After acceptance of offer of reasonable tender , the EMD of other tenderers is released
The successful tenderer/the Contractor may convert his EMD into security deposit
The security deposit is kept with the Employer to safeguard his interest against the Contractor
The scale of earnest money and security deposit is as laid down by the Employer in the Notice of
The security deposit is released on successful completion of work and expiry of defect liability
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
This will be recovered from interim payments in installments
Machinery advance
This is similar to mobilisation advance; may be limited to 5%
This is paid based on the cost of machinery purchased, limited to the laid down percentage


A bank guarantee for the amount is taken before payment
This is also recovered in installments
The BGB is released on recovery of advance
Tender documents
Tender documents are prepared which include the following:
a) Site plan with site data such as soil conditions, accessibility of site, quarries, layout indicating
existing waterways, power and water lines etc.,
b) Schedule of works/ Bill of Quantities with estimated cost, period of completion
c) Tender conditions- General and Special conditions
d) Tender specifications- General and particular Specifications
e) Detailed drawings
f) Any other relevant particulars
Issue of tenders
 Tenders are issued with all these documents to short listed contractors for submission of priced
 Bidders are advised to visit the site and acquaint themselves with all local conditions
 Bidders are required to be given adequate time for their study of tender documents thoroughly
and gather requisite data for pricing and submission of their offers
Quantities- cost estimate
 Taking off quantities: Scrutinising the working drawings, computing dimensions for each item
and entering in take off sheets in a methodical manner, along with description of the item
 Squaring the dimensions: adding and/or multiplying the recorded dimensions for the purpose of
obtaining cubic, superficial and lineal quantities as per the standard method of measurement
 Abstracting: collecting quantities of identical items, entering in abstract sheets in trade wise
sequence and working out quantities against each item
 Billing: Entering the description and quantities item wise and trade wise in the bill form from the
abstract sheets. There after entering unit of measurement and unit rate and working out the cost
Standard method of measurement
 Standardisation of method of measurement is considered desirable for satisfactory execution of
 This should lessen the likelihood of errors in estimates, bills of quantities and quoting rates and
help in avoiding disputes
 Widespread use of standard method of measurement facilitates the training of personnel in
contract management, reducing the need for working under ever changing methods
Indian standard method of measurement
 The Indian Standard for method of measurement of building works was prepared by Bureau of
Indian Standards in consultation with various construction organisations and institutions
 IS:1200 covers all building and civil works including water supply, sewer lines, road work and
airfield pavements. The provisions are flexible and can be modified for a particular project as
may be necessary
 Some departments have their own SSRs and rules for method of measurement similar to IS:
1200 which should be followed for works in their organisations
 Booking dimensions

Take off to abstracting


 After completion of take off, squaring the dimensions (adding and/ or multiplying) is done for
each item and entered in the relevant column
 It is to be cross checked to avoid errors
 The quantities are now ready for abstracting
 The purpose of billing is to prepare Bill of Quantities
 Bill are prepared trade wise
 Each bill commences with preambles
 Item no., description, unit, quantity are entered from the abstract
 When ever an entry is transferred from abstract sheet, the entry is ticked to ensure that no item
is left out
 Unit rates are worked out based on market analysis and inserted
 Amount worked out and inserted in the next column
 Page totals are carried to summary page where total cost is calculated
Analysis of prices-Market survey
Market survey has to be done to obtain data relating to all price sensitive factors such as
- availability of labour and prevailing rates,
- quarries and leads,
- market rates of local materials and manufactured items,
- arranging equipment & machinery and costs,
- taxes and duties,
- environment and safety provisions and costs etc.

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

A rate of an item consists of components of material, labour and equipment
Constants for these elements can be obtained from Standard data book or based on practical
Based on these constants and rates obtained during market survey, costs of these elements are
worked out and totaled
Over heads and profits on a percentage basis (may be 17.5% or more) are added to these total
to obtain the price for the item
Other factors affecting costs
Risk factors and insurance
Cost of technology
Cost of funds
Safety precautions
Compliance with environmental requirements
Level of competition
Present work load and extra capability etc.
Price forecasting and bidding
The prices are worked out based on market analysis and the other factors
Based on quantities and prices the amount to be quoted for the tender is decided.
While the Quantity Surveyor provides all the inputs, the management will take an overall view
and bid for the work based on their own assessment.
All the details are kept confidential

Receipt of tenders
The quoted tenders are to be dropped in tender box within the date and time fixed for receipt of
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 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
 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
 The party initiating conciliation shall send to the other party a written invitation to conciliate,
briefly describing the subject of dispute
 Conciliation proceedings shall commence when the other party accepts in writing the invitation
to conciliate
 If the other party rejects the invitation, there will be no conciliation proceedings
 If the party inviting the other party does not receive a reply within a specified time, the party may
elect it as rejection and intimate the other party
Appointment of conciliators
 Normally there will be one conciliator and the parties may agree on the name of sole conciliator
 For two conciliators, each party may appoint one conciliator
 For three conciliators, each party may appoint one conciliator. The two conciliators may appoint
the third conciliator
 Institutional assistance may be taken for obtaining appropriate names of conciliators
Submission of statements to conciliator
 Conciliator, on his appoint, request each party to submit their statement describing the general
nature of dispute, points at issue with supporting details/documents with copy to the other party
 He may request for any further details in the course of conciliation proceedings with copy to the
other party.
 With this, the conciliator will be fully acquainted with the intricacies of the dispute


Conciliator’s role-amicable settlement
 He shall be independent and imartial
 He is not bound by the Code of Civil Procedure,1908 (5 of 1908) or Indian Evidence Act,1872
(1of 1972)
 Conciliator shall assist parties in an independent and impartial manner in their attempt to reach
an amicable settlement of their dispute
Conciliator’s role-proceedings
 The conciliator shall be guided by the principles of objectivity, fairness and justice
 He conducts proceedings in an appropriate manner, hear oral statements
 Give consideration to
a) the rights and obligations of the parties
b) the usages of the trade concerned,
c) including any previous business practices between the parties
Conciliator’s role-proposal for settlement
 Conciliator may, at any stage of proceedings, make proposals for settlement of disputes
 Need not be in writing
 Need not be accompanied by a statement of reasons there for
 He may invite parties to meet him, communicate orally or in writing
 He may meet parties together or each of them separately
 Place of meeting to be decided in consultation with parties
Cooperation of parties
 The parties shall cooperate with conciliator in attending meetings and submitting evidence
 If any party requests that certain information given by him to be kept confidential, the conciliator
shall not reveal to the other party
 Parties may give suggestions for settlement of dispute
Settlement agreement
 When it appears to conciliator that there is possibility of settlement, he will formulate the terms
of possible settlement.
 Based on observations of the parties, he may reformulate the terms of settlement
 Finally, if the parties reach agreement on settlement of dispute, he may assist the parties in
drawing up a settlement agreement
 The agreement shall be signed by the parties as well as the conciliator
 The agreement shall be final and binding on the parties
 The conciliator shall authenticate and furnish copies to both parties
Status and effect of settlement agreement
 The settlement agreement shall have the same status and effect as if it is an arbitral award on
agreed terms on the substance of dispute
 Given by arbitral tribunal under Sec. 30
 The conciliator and parties keep confidential all matters relating to conciliation proceedings
 The settlement agreement shall also be kept confidential unless it is required to be disclosed for
purposes of implementation and enforcement
Termination of conciliation proceedings
 The conciliation agreement shall be terminated –
 a) by signing of a conciliation agreement
 b) by written declaration of conciliator when it is considered that further efforts on conciliation
are no longer justified
 c) by written declaration of parties to the conciliator terminating the proceedings
 d) by written declaration of a party to the other party with copy to the conciliator
Resort to arbitral or judicial proceedings
 During conciliation proceedings, the parties shall not initiate arbitral or judicial proceedings
unless a party considers it necessary to preserve his rights
Costs and deposits
 On termination of proceedings, the conciliator shall fix costs of conciliation and give notice to the
 The costs relate to the fees and expenses of conciliator and other expenses of conciliation
 The costs shall be equally borne by the parties unless other wise stated in the settlement
o The conciliator may ask parties to deposit certain amounts as an advance towards the
expected costs and settle the account on completion of proceedings. If the amounts are
not deposited, the conciliator may suspend proceedings

Role of conciliator in other proceedings

 The conciliator shall not act as arbitrator or as representative or counsel of a party in any arbitral
or judicial proceedings in respect of a dispute that is a subject matter of conciliation proceedings
 He shall not participate as a witness in the above proceedings
Admissibility of evidence in other proceedings
 The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings:
a) views expressed or suggestions made by the other party in respect of a possible settlement
b) admissions made by the other party in the course of conciliation proceedings
c) proposals made by the conciliator
d) the fact that the other party had indicated his willingness to accept a proposal for settlement
made by the conciliator



The 12 Standard Contract Clauses are the basic clauses which provide the structure for a contract
between two parties for carrying out specific activities in a desired manner. Whereas the Standard
General Conditions for domestic contracts as given in Part II of the document provide a complete
framework for preparation of the contract documents.


1-Eligibility and Pre- qualification (PQ)

A. Eligibility Criteria:
a. Experience on similar works executed during the last five years; and details like
monetary value, clients, proof of satisfactory completion ;
b. Registration, if any, with specified deptts/ organizations, class / type of registration ;
c. Documentary evidence of adequate financial standing.

B. Pre-qualification Information to be called for :

a. Constitution and legal status. Joint-venturing or other tie-ups for technology,
equipment, financial backing and / or project management;
b. Registration (class and type) with specified agencies and previous pre-
qualification(s) for similar projects.
c. Experience on similar work(s) during last 5 years with details including year wise monetary
value, clients, and proof of satisfactory completion of works.
d. Financial standing as certified by Bankers, Audited Profit & Loss A/c and Balance Sheet,
Annual turnover in last 5 years, access to adequate working capital.
e. Construction Equipment proposed to be deployed for the project and proof of its availability;
equipment proposed to be purchased or leased.
f. Key personnel available and proposed to be engaged for management and
supervision of the Project, their qualifications and experience.
g. Project planning and quality control procedures to be adopted.
h. Information regarding projects in hand, current litigation, orders regarding ex-
clusion/expulsion or black listing, if any.
2 -Earnest Money (EM)
A. For projects estimated to cost Rs. 25 crores and above, earnest money should be 1% of the
estimated cost; and maximum amount of earnest money should be Rs. 50 lakh.
B. For projects estimated to cost less than Rs. 25 crores also, the earnest money should be 1%
of the estimated cost . Maximum amount of earnest money may be stipulated at the discretion
of the owner .
C. Earnest money may be submitted in the form of irrecoverable Bank Guarantee with
Banks to be specified by the Owners. Certified cheques and Demand Drafts should also be
acceptable; Bank Guarantees submitted as Earnest Money shall be valid for 28 days beyond
the validity of the bid.
D. Earnest money of unsuccessful bidders should be refunded as promptly as possible, but not
later than 28 days after the expiry of the bid validity.

3- Security Deposit (SD)


A. Security Deposit shall consist of two parts;
a) Performance Guarantee to be submitted at award of work, and
b) Retention money to be recovered from Running Bills.
B. Performance Guarantee should be 5% of Contract amount and should be submitted as Bank
Guarantee, Government Securities, FDR or any other form of deposit stipulated by the
Owner,within 28 days of receipt of letter of acceptance.
C. Retention Money should be deducted at 5% from Running Bills. Total of Performance
Guarantee & Retention Money should not exceed 10% of Contract amount or lesser sum
indicated in the bid document.
D. 5% Performance Guarantee should be refunded within 14 days of the issue of the defect liability
Certificate (taking over Certificate with a list of defects). Retention money should be refunded after
issue of No. Defects Certificate. This balance amount can be substituted by “on demand” Bank

4 -Variations, Extra/ Substituted Items:

A. Variation permitted should be ± 25% in quantity of each individual item, and ± 10% of the total
contract price. Within 14 days of the date of instruction for executing varied work, extra work or
substitution, and before the commencement of such work, notice shall be given either
(a) by thecontractor to the owner of his intention to claim extra payment or a varied rate or
price, or
(b) by the owner to the contractor of his intention to vary a rate or price

B. If there is delay in the owner and the contractor coming to an agreement on the rate of an
extra item, provisional rates as proposed by the owner should be payable till such time as the
rates are finally determined.

5 -Payment of Running Bills:

A. Bills should be prepared and submitted by the Contractor. Joint measurements should be taken
continuously and need not be connected with billing stage. System of 4copies of measurements,
one each for Contractor, Client and Engineer, and signed by both Contractor and Client can be
B. 75% of bill amount should be paid within 14 days of submission of the bill. Balance amount of the
verified bill should be paid within 28 days of the submission of the bill.
C. For delay in payment beyond these periods specified in B) above, interest at a prespecified rate
suggested rate 12% p. a. should be paid.

6 -Payment of Final Bills

A. Contractor should submit final Bill within 60 days of issue of defects liability certificate. Client‟s
engineer should check the bill within 60 days after its receipt and return the bill to Contractor for
corrections, if any are needed. 50% of undisputed amount should be paid to the Contractor at the
stage of returning the bill.
B. The contractor should re-submit the bill, with corrections within 30 days of its return by the
Engineer. The re-submitted bill should be checked and paid within 60 days of its receipt.


7 -Advance Payment
A. Mobilisation Advance and Construction Equipment Advance should be given at 12% interest or
free of interest at the discretion of the owner and against Bank Guarantee for Mobilisation
Advance and against hypothecation of Construction Equipment to the Owner for Construction
Equipment Advance.
B. Mobilisation Advance should be given upto 10% of Contract price, payable in two equal
C. Construction Equipment Advance should be paid upto 5% of Contract price, limited to 90% of
assessed cost of machinery. For special cases, a higher advance for construction equipment upto
10% of contract price may be considered.
8 -Secured Advance:
75% of cost of materials brought to site for incorporation into works only should be paid as
Secured Advance. Materials which are of perishable nature should be adequately insured. In case,
advance is not payable against any particular items, they should be listed in the Contract

9 -Liquidated Damages and Incentives:

The owner, if not satisfied that the works can be completed by the contractor, and in the event of
failure on the part of the contractor to complete work within further extension of time allowed as
aforesaid, shall be entitled, without prejudice to any other right, or remedy available in that behalf,
to rescind the contract.
Ministries/Departments/Project Enterprises may adopt a suitable percent of the contract price as
liquidated damages and allowable time-limit depending upon the nature of turnkey contract.
Incentives or Bonus (Optional Clause)
For early completion of the contract before the stipulated date of completion of an incentive
amount at the rate of half per cent (½%) of the contract price per week of early completion, subject
to a maximum of five per cent (5%) of the contract price may be paid to the contractor.
10- Escalation
 All short duration contracts up to 24 months should be awarded on fixed price basis and are not
subject to any escalation what so ever. However, only statutory variation limited to duties and taxes
are considered for adjustment in contract price.
 For calculating escalation, base prices should be taken as on the date of opening of the Bids.
 Escalation Reimbursement should be calculated for to the extent of 85% of the escalation so
11 - Disputed Items and Arbitration
12 -Owner’s Risk and Compensation Events:
A. Owners Risks: The owner is responsible for the excepted risks, which are :-
a) War, hostilities, invasion, act of foreign enemies, rebellion, revolution, insurrection of military or
usurped power, or civil war;
b) Riot, commotion, disorder, unless solely restricted to employees of the Contractor or his
sub-contractors and arising from the conduct of the works;
c) Contamination by radio activity from any nuclear fuel, or from any nuclear waste
radioactive toxic explosive;
d) A cause due solely to the design of the Works, other than the Contractors design;
e) Pressure waves caused by aircraft or other aerial devices travelling at sonic or
supersonic speeds;


Standard General Conditions for Domestic Contracts consist of a complete framework for preparation
of contract documents which include Invitation for Bids (IFB) and its basic details, format for Standard
Bidding Document, General Conditions of Contract and Special Conditions of Contract including
Standard Contract Clauses, contract data, specifications of the project, supporting drawings, bill of
quantities and formats for securities etc. These documents have been arranged in the sequence of
their formulation and implementation as given in the contents of this document.

Comparison of SCB and LCB Bidding documents:

Scope of work:
In SCB and LCB they invites bids for the construction of works (as defined in these documents and
referred to as “the works”) detailed in the table given in IFB. The bidders may submit bids for any or
all of the works detailed in the table given in IFB.
The successful bidder will be expected to complete the works by the intended completion date
specified in the Contract data.
Source of funds: The government of India has received a loan/
from the International Bank for
The Employer has arranged the funds from Reconstruction and Development or the
.....(indicate the source) and will have sufficient International Development. Payments by the
funds in Indian currency for execution of the Bank will be made only at the request of the
works. Borrower and upon approval by the Bank in
accordance with the terms and conditions of
the financing agreement.
The Loan Agreement prohibits a withdrawal
from the loan account for the purpose of any
payment to persons or entities, or for any
import of goods, if such payment or import, to
the knowledge of the Bank, is prohibited by
decision of the United Nations Security

Eligible Bidders: Bidding is open to all bidders from eligible

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

Government-owned enterprises may only

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

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

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.

One bid per bidder. One bid per bidder.

Cost of Bidding:

The bidder shall bear all costs associated with

the preparation and submission of his Bid, and Same as SCB
the Employer will in no case be responsible and
liable for those costs.

Site visit :

The Bidder, at the Bidder‟s own responsibility

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

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


Clarification of the Bidding Documents

A prospective bidder requiring any clarification

of the bidding documents may notify the
employer in writing or by cable (hereinafter
“cable” includes telex and facsimile) at the
Employer‟s address indicated in the invitation to
bid. The Employer will respond to any request
for clarification which he received earlier than
15 days prior to the deadline for submission of
Same as SCB
Pre-bid meeting

The bidder or his official representative is invited

to attend a pre-bid meeting which will take
place (address of venue,time and date) is to
Non-attendance at the pre-bid meeting will not
be a cause for disqualification of a bidder.

Amendment of Bidding Documents Same as SCB

Before the deadline for submission of bids, the

Employer may modify the bidding documents by
using addenda.

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

and any other materials required to be

completed and submitted by bidders in accor- The bidder shall furnish information as
dance with these instructions. described in the form of Bid on commission
of guarantees if any paid or to be paid to
Format and Signing of Bid agents relating to this bid and to contract
execution if the bidder is awarded the
The Bidder shall prepare one original and one contract.
copy of the documents comprising the bid as
described in Clause 12 of these Instructions to
Bidders, bound with the volume containing the
Form of Bid, and clearly marked „ORIGINAL”
and „COPY” as appropriate. In the event of


discrepancy between them, the original shall

SUBMISSION OF BIDS Bidders submitting bids by mail or by hand,

shall enclose the original and each copy of
The Bid shall be submitted in two separate the Bid, including alternative bids, if
sealed envelopes duly marked Envelop 1 and permitted in accordance with ITB Clause 13,
Envelope 2. The Envelope 1 will contain in separate sealed envelopes, duly marking
Employer‟s Bid documents (other than priced the envelopes as “ORIGINAL” and “COPY.”
BOQ) which will be submitted under These envelopes containing the original and
formal forwarding letter in standard printed form the copies shall then be enclosed in one
addressed to the Employer interalia containing single envelope. The rest of the procedure
an undertaking that the Bid docs not contain shall be in accordance with ITB.
any amendment, modification or change of any
type whatsoever in the Bid documents and to
any amendment issued after pre-bid meeting.
The Envelope 2 will contain priced BOQ only
giving the unit price and amount against each
item with grand total at the end in figures and in
If all envelopes are not sealed and marked as
required, the Purchaser will assume no
responsibility for the misplacement or premature
opening of the bid.

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

BID OPENING AND EVALUATION: Process to be confidential information

relating to the examination clarification.
The bidders shall abide by the provisions of the

Evaluation and Comparison of Bids Same as SCB

The Employer will evaluate and compare only the
Bids determined to be responsive. In evaluating
the Bids, the Employer will determine for each
Bid the evaluated. Bid Price by adjusting the Bid
Price as follows:
(a) making any correction for errors
(b) making appropriate adjustments to
reflect discounts or other price
modifications offered.


The employer will award the contract as in
The Employer will award the Contract to the the case of SCB and it, pursuant to clause,
Bidder whose Bid has been determined to be this contract is being let along with other
responsive to the Bidding documents and who contract, the lowest evaluated bid price will
has offered the lowest evaluated Bid Price, be determined when evaluating this contracts
provided that such Bidder has been determined to be awarded concurrently, taking in to
to be eligible in accordance with the provisions account any discounts offered by the bidders
qualified in accordance with the provisions. for the award of more than one contract.
The Employer shall award the contract within 15
days of the opening of the priced bids.
The notification of award shall be according to
the provision of award.

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.”