A

Micro Project Report

On

“Prepare a report on mode of Payment to the contractor

and its necessity”
Submitted in the partial fulfillment for the

DIPLOMA IN CIVIL ENGINEERING

Of Maharashtra State Board of Technical Education
Government of Maharashtra,Mumbai
2021-22

-Submitted by-

Mr. Deep S. Mandokar

Third Year Civil Engineering

-Under the guidance of-

Prof. M. B. Thakare
Lecturer in Civil Engineering Department
 Government Polytechnic, Arvi
Department of Civil Engineering

Certificate
This is to Certify That Students Whose Name Mention Below of Sixth Semester
Diploma in Civil Engineering Has Satisfactorily Completed the Micro Project
Entitled “Prepare a report on mode of Payment to the contractor and its
necessity”. In “Contracts and Accounts”. For the Academic Year 2021-2022 As
Prescribed in MSBTE Curriculum.

Roll No. Name Enrollment No.

37. Deep S. Mandokar 1901320124

Subject Teacher Head of The Department Principal

Department of civil Engineering,

Government Polytechnic, Arvi
2021-2022
 Declaration

I undersigned hereby declare that the micro project

entitled Analysis Report of “Prepare a report on mode of
Payment to the contractor and its necessity” contents of my own
literature “Contracts and Accounts”.
I further declare that contents of this report are
properly cited and well acknowledged. This present report in nit
submitted to any other examination of this or any other institute
for the award of any diploma.

Place: Arvi Signature

Date:
 Index

Sr. No. Contents Page No.

01 Introduction 01
02 Different Mode of Payment to Contract 02
03 Interim Payment 02
04 Advance Payment 03
05 First and Final Payment 04
06 Final Bill and Payment 04
07 Retention Money 05
08 Reduced Rate Payment 05
09 Bills Forms 06
10 E-Payment 07
11 Conclusion 08
12 References 08
Introduction: -

Payment to contractors for supply of material and works completed by them are done on the
basis of measurements recorded in the measurement books.
The payment to the contractor may be made finally by one payment or by number of payments
by running account bills during the progress of the work. For small works, the payment is made
by one payment only.
A payment is the trade of value from one party (such as a person or a company) to another for
goods, or services, or to fulfill a legal obligation.
All payment to the 'Contractor' for the completion of entire scope of work (including variations)
is known as contract payment. The engineer is the person named in the Contract Data (or any
other competent person appointed by the employer and notified to Contractor) who is
responsible for administrating and supervising the execution of the work. Such person may be
Engineer, Architect or any other technical person. In the absence of such appointment the
employer himself.
Employer is the party named in the Contract Data who employs the Contractor to carry out the
works. Measurement Book play a vital role because the payment to be given to the contractors
work or material supply are made on the basis of measurement entered in the measurement
book.
The detailed measurements are being taken by overseer and enters in the Measurement Book
when the work or material supply is sufficiently progressed or completed. After entering the
detailed measurements on obstruct of quantities is prepared and cost is calculated according to
the rates mentioned in the agreement. The payment for small works is made to the contractor by
one payments and number of payments are made by running account bills during the progress of
the work. When the work or supply is completed by contractor, then in such case, the payment
to the contractor can be made finally by one payment.
For each payment, 10%is deducted from the contractor ad a security deposit in case if the
contractor is not deposited the full amount of the security deposit.
Different Modes of Payment to The Contract: -

Interim Payment

• A partial payment given to the contractor monthly for work in progress under the terms of
contract is called as interim payment.

• Note that interim payment is not be considered as final acceptance of the lower work unto
that level.

• The department arranges for interim payment against the work completed by contractor.

• The engineer in charge will make arrangement of measurement of all works done by
contractor and if bills are not prepared, interim payment is necessary to be paid to the
contractor by the department.

• Powers are given to the engineer to hold the interim payment under special circumstances.

• Interim payment is an amount disbursed to contractor on running account payment advance

payment, secured advance payment, etc.

• Interim payments are necessary in the following situations:

1. Work is completed by contractor but not measured.
2. Work is measured but bills are not prepared.
3. The quantity of an item executed is very large and payment is required by contractor in
stages other than R.A. bill.
4. Amount of money is required by contractor against the material purchased by him and
lying with the department.
Advance Payment

• Such payments are made in case where work is done but not measured.

• Advance payment is made in special cases where work is sufficiently progressed, but
measurements cannot be taken for certain valid reasons. Assistant engineer has to give a
certificate mentioning about the value of work done.

• On strength of this certificate, 75% payment is made to the contractor.

• Officer signing the certificate should be the rank of assistant engineer, who is held
responsible for any over payment.

• The advance is adjusted through subsequent bill in which actual measurements have been
taken.

• In such cases, the actual measurements should be taken, at the earliest opportunity and in
no case second advance is paid without measurements.

• Sanctioning authority of advance payment is executive engineer.

Types of Advance Granted to Contractor:

1. Secured advance
2. Advance payment
3. Temporary advance
4. Mobilization advance
5. Petty advance
First and Final payment: -

• In case of small works of short duration, where the preparation of interim bills is not
necessary, the contractor is paid the whole of the tender sum in only on installment i.e. on
completion of work. P.W. Acct. Form No. 24 – First and Final, is used for making the
payment.

• This form is also used for making payments to suppliers, if the whole of the amount is to be
paid in one installment on receiving the goods. Bills of several contractors and suppliers can
be prepared on a single form, if the payments relate to the same head of account.

Final Bill and Payment: -

This means the last payment on running account made to a contractor on completion of work
and in full settlement of the account. The billon which final payment is made is known as “final
bill”.
The contractor shall submit the final bill within one month from the date of completion of work
along with the final certificate issued by the engineer.
Final certificate is a conclusive certificate and is issued to the contractor after the defect liability
period. The acceptance by the contractor of the final bill shall release the owner from all the
claims and liabilities to the contractor.

Points to be confirmed before making final bill:

1. The junior engineer should certify the satisfactory completion of work.
2. All measurement should be taken accurately.
3. The description of item is according to the contract schedule.
4. The quantities executed are according to the sanctioned plans and estimate.
5. Arithmetical calculations of measurement of quantities of item are verified.
Retention Money: -

• The department withholds about 10 to 15% of the monthly payments to the contractor to
have an additional hold on the contractor so that he will not be encouraged to abandon the
work when nearing completion.

• In the event of security amount being insufficient to cover the claims, then the engineer in
charge will withhold some amount as retention money till the claim is adjusted.

• The purpose of retention money is to:

(i) to rectify the defects,
(ii) any work left out can be executed by this amount,
(iii) to meet the damages, if any.

• This is not compulsory and arises very rarely. It has no relation with the tendered amount
but depends upon the claim against the contractor.

• Retention money does not carry any interest. This amount is refunded to contractor after the
defect liability period is over.

Reduced Rate Payment: -

• Sometimes, the contractor may fail to carry out the work strictly as per the specifications,
plans and drawings.

• But the engineer is of the view that the work is structurally sound, but finishing item is not
as per the specification or as per actual drawing.

• For example, item of painting to doors and windows consists of three coats of painting of a
particular brand but the contractor has used the paint of another brand of lower quality, then
this item will be paid at suitable reduced rate.
Bill Forms: -

Various standard forms of bills and vouchers used for payment according to the nature of the
works are given below. Usually, white forms are used for running bills and yellow forms are
used for final bills.
1. First and final bill form 24: This form is used for making payment to the contractor, both
for work and supplies, when a single payment is to be made on the completion of the whole
work or supply, as final payment.
2. Running account bill A, form 25 white: This form is used for advance payment without
any measurement for works only (not for supply). It may be used for running bill payment
for advance for unmeasured work only, for a combination of unmeasured work and
measured work, or if an on-account payment is to be made but an advance payment already
made for the same work is outstanding.
3. Running account bill B, form 26 white: This form is used for secured advance payment for
works only. This form is also used for running payment partly for secured advance and
partly for measured works, that is the combination of secured advance together with other
payments.
4. Running account bill C, form 27 white: This form is used for making on account payment
or running payment for measured works or supplies, i.e. for both works and supplies which
are measured. Payment of first running, second running etc. of measured works or supplies
are made on this form. It is not to be used of an advance or a secured advance payment is to
be made or if such advance is outstanding against the contractor.
5. Final bill B, form 26 yellow: This form is used for payment of final bill if recovery of
secured advance payment previously made, is to be made or adjusted. If the advance is
recovered previously, then the final bill will be prepared on final bill C, form 27 yellow.
6. Final bill C, form 27 yellow: The final payment when no advance is outstanding, and when
intermediate payments have been made, on this form.
7. Running account bill D, form 27 A: This form is used for making on-account or
intermediate payment to contractors on lumpsum contract.
8. Final bill, form 27 B: This form is used for making final payments to contractors on
lumpsum contracts.
9. Hand receipts, form 28: This form is a simple form of voucher, intended to be used for all
miscellaneous payments and advances for which no other form is suitable. Usually, petty
payments for purchases or for any other purposes are made on the Hand Receipt (H.R.).
• Bill: Bill is the account of work done, or of supply of materials made, and includes the
quantities of works done or materials supplied, their rates and amount due. It contains full
and clear particulars of the claim or amount due.

• Voucher: Voucher is a written document which is kept in record as a proof of payment. For
any payment, first a bill is prepared and payment is made on the bill, duly checked and
acknowledged by the payee, by signature on revenue stamp if required, and after the
payment is made, the bill becomes voucher which is kept in record.

• Refund of security money: Usually, 10% security money of the contractor is refunded after
six months from the date of satisfactory completion of the work or on the expiry of one rainy
season, and this payment is made on form 28 (H.R.). During this period of six months, the
contractor is responsible for any defects or mishaps in the work and he shall have to make
good all such defects and damages.

E-Payment: -

It’s an electronic transfer of money from a bank account, usually checking account without the
use of the paper check. E-cash is a form of an electronic payment system where a certain
amount of money is stored on a client’s device and made accessible for online transactions.
Conclusion: -

The reservation becomes effective when the prospective Client has returned to the owners a
signed copy of this agreement and the amount of the advanced payment for the rental and has
received back a copy of the contract signed by the owners.
Payment to contractors for supply of material and works completed by them are done on the
basis of measurements recorded in the measurement books.
The payment to the contractor may be made finally by one payment or by number of payments
by running account bills during the progress of the work. For small works, the payment is made
by one payment only.

Reference: -

1. www.wikipedia.com/contract/
2. www.lawinsider.com/contractandaccount/
3. Nirali Publication
4. https://amtrustfinancial.com/payment-method
5. https://ccelearn.csus.edu/ae/contract