SPECIFICATION,

QUANTITY AND
COSTING OF BUILDINGS
MODULE -5
A contract: is a voluntary arrangement between two or more parties that is enforceable by law
as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of
the civil law tradition. Contract law concerns the rights and duties that arise from agreements.

A contract arises when the parties agree that there is an agreement. Formation of a contract
generally requires an offer, acceptance, consideration, and a mutual intent to be bound. Each
party to a contract must have capacity to enter the agreement. Minors, intoxicated persons,
and those under a mental affliction may have insufficient capacity to enter a contract. Some
types of contracts may require formalities, such as a memorialization in writing.

The essential elements of a valid contract are:

1. Proper Offer and Proper Acceptance. In order to create a valid contract, there must be a
'lawful offer' by one party and 'lawful acceptance' of the same by the other party.

Section 2 (a) of the Contract Act defines Offer as – ‘when one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, he is said to make an offer'.

Section 2 (b) of the Contract Act states that, ‘when the person to whom the offer is made
signifies his assent there to, the offer is said to be accepted.

2. Intention to Create Legal Relationship. In case, there is no such intention on the part of
parties, there is no contract. Agreements of social or domestic nature do not contemplate legal
relations.

3.Lawful Consideration. At the desire of promise, promisee or any other person has done or
abstain from doing or does abstain from doing such act or promises is known as consideration.

According to Blackstone "Consideration is recompense given by the party contracting to

another."

In other words of Pollock, "Consideration is the price for which the promise of the another is
brought."
Consideration is known as quid pro-quo or something in return.

It may be cash, kind, act or abstinence and may be in past, present or future.

It should be unlawful, immoral and against the public policy.

4. Competent of parties. The parties to an agreement must be competent. If either of the

parties does not have the ability to contract, the contract is not valid.
According to the following persons are incompetent to contract.
(a) Minor: A person less than age of 18 is minor.

(b) Unsound mind person: Any person who is unable to understand the term and condition of

contract at the time of its formation is unsound mind.

(c) persons disqualified by law to which they are subject.

5. Free Consent. 'Consent' means the parties must have agreed upon the same thing in the
same sense.

According to Section 14, Consent is said to be free when it is not caused by-
(1) Coercion

(2) Undue influence

(3) Fraud
(4) Mis-representation

(5) Mistake.
An agreement should be made by the free consent of the parties.

6. Lawful Object. The object of an agreement must be valid. Object has nothing to do with
consideration. It means the purpose or design of the contract.

Thus, when one hires a house for use as a gambling house, the object of the contract is to run a
gambling house.
The Object is said to be unlawful if-
(a) it is forbidden by law;
(b) it is of such nature that if permitted it would defeat the provision of any law;
(c) it is fraudulent;
(d) it involves an injury to the person or property of any other;
(e) the court regards it as immoral or opposed to public policy.

7. Certainty of Meaning. According to Section 29,"Agreement the meaning of which is not

Certain or capable of being made certain are void.“

For e.g. : A agree to sell to B a 100 tonne of oil, there is nothing to show what kind of oil
intended, the agreement is void due to the absence of certainty.

But if A is dealer of coconut oil only agree to sell B,100 tonne of oil, the nature of A’s trade is
sufficient to show the kind of oil, and this will be a valid contract.

8. Possibility of Performance. Condition for a contract should be capable for performance .If
the act is impossible in itself, physically or legally, if cannot be enforced at law.
For example:

If A and B makes an agreement that if B encloses a space with the help of two straight lines
then A will pay him Rs. 1000 otherwise B will be liable for paying Rs. 500 to A.

RESULT: This is an impossible work. Two straight lines can not enclose a space , hence contract
is not valid.

9. Not Declared to be void or Illegal. The agreement though satisfying all the conditions for a
valid contract must not have been expressly declared void by any law in force in the country.

Agreements mentioned in Section 24 to 30 of the Act have been expressly declared to be void.

For example agreements in restraint of trade, marriage, legal proceedings etc.

That is : If A is not willing to marry with B, law can not enforce him/her.

10. Legal Formalities. An oral Contract is a perfectly valid contract, expect in those cases where
writing, registration etc. is required by some statute.

In India writing is required in cases of sale, mortgage, lease and gift of immovable property,
negotiable instruments; memorandum and articles of association of a company, etc.

Registration is required in cases of documents coming within the scope of section 17 of the
Registration Act.

All the elements mentioned above must be in order to make a valid contract. If any one of them
is absent the agreement does not become a contract.

Contract Document:

Title page: It contains the names of work, contractor, Contract agreement number, Totaled
estimated cost and earnest money.

Index page: Contains the description of agreement with reference to page.

Tender Notes: It gives brief description of work, name of work, estimated cost, date and time

for receiving the tender amount of the earnest money and security, time of completion etc

Tender

form: which gives information regarding bill of quantities, rate per unit, total cost of

Work, time for completion, BMD and penalty clauses.

Schedule of issues of materials: The schedule gives the list of materials to be issued by the

Department, giving rates of each items and there place of issue.

Specification: The detail specification is furnished.

What does 'Tender' mean

To tender is to invite bids for a project, or to accept a formal offer such as a takeover bid.
Tender usually refers to the process whereby governments and financial institutions invite bids
for large projects that must be submitted within a finite deadline. The term also refers to the
process whereby shareholders submit their shares or securities in response to a takeover offer.
Tender: It is an offer in writing to execute some specified works or to supply materials at certain
rates, within a fixed time, under certain conditions of contract and agreement between the
contractor and the department.

Measurement book: Measurement Book is a measure of work done of contracts. The

measurement book maintains the accounts of work. The Measurement Book is a most
important record. It is the basis of all accounts of quantities of work done and it must contain
such a complete record of facts as to be conclusive evidence in court of law.

MUSTER ROLL : Muster Roll is used for keeping a complete record of attendance, payment
made ,unpaid wages and work done by daily labor engaged on the execution of works. It is the
basic records of payment made to daily labor. After the payment is made , the Muster Roll is
kept as a Voucher. It is very important record and strictly in accordance with the rules.
Muster Roll consists of the following three parts....................

a) Part-1(Nominal Roll)
b) Part-2(Register of Arrears of wages due to worked people)

c) Part-3(Details of measurement of work done by labor)

a) Part -1 (Nominal Roll)

In this part of the Muster Roll full information about the labor employed is recorded and daily
attendance of the labor is marked. The labor should be grouped according to different
categories ( such as mason, carpenters etc.) Name of the person employed and his father's
name is also recorded in the relevant columns. The daily attendance are signed by the person
who marks them.
b) Part -2 (Register of arrears of wages due to Worked People)

This part of muster group is used for keeping a record of all unpaid wages. Particulars of all
wages which remain unpaid for a period of three months should be brought to the notice of the
executive engineers whose orders are necessary before they can be paid off.
c) Part -3 (Details of measurement of work done by labor)

The quantity of work done by labor engaged on the Muster Roll is entered in the measurement
book. Full particulars of the work done and the reference to pages and nos of the measurement
book are recorded in the part-3 of the Muster Roll. If the nature of work is such that it can not
be measured to that effect is recorded in the Muster Roll -" Work not susceptible of
measurement ".

Bill: Bill is the account of work done or supply of materials made and includes the particulars
and quantities of work done or material supplied and amount due. Reference to the agreement
number, order number are also given in the bill.

Running Account Bill – Form A: This form is used for advance payment without any
measurement. It may be used for running bill payment for advance for unmeasured work only
or combination of unmeasured work and measured work or if ‘on account’ payment is to be
made but an advance payment already made for the same work is outstanding.
Running Account Bill – Form C: This form is used for contracts both for works executed on
piece work system and for suppliers received. This form is widely used specially for medium
sized works executed through K2 contract or split up works or projects entrusted on
nomination to a number of contractors.

Interim and final checking and certification of works on site based on the BOQ and terms of
contracts.

Impact of delay in project on costing: FIVE CAUSES OF PROJECT DELAY AND COST OVERRUN,
AND THEIR MITIGATION MEASURES:
1. One major factor that has been identified as reasons for cost overrun in most projects is
design errors. It is important to note that proper representation of client’s requirement
and the blue print to achieving good technical input to project execution are usually
mapped out base on project designs. Thus a design with errors practically means wrong
 or insufficient representation of project deliverables. This will lead to wrong application
of techniques in achieving result, such that as the actual execution phase of the project
unfolds these design errors, attempt to correct it will lead to delay and cost overrun.
Another way design errors could lead to cost overrun and delay could be seen in the fact
that project estimations are done base on the produced designs, as such, having errors
in design in a form of omission or misrepresentation will mean that the estimation for
the project cost will also include these omissions, thereby leading to extra works,
change order etc., thus resulting in delay and cost overrun. Similarly, designs that are
done without extensive investigation of site could contain potential errors. This is
because such designs could lead to additional work, revision of scope of work, and
contract revision as the actual site conditions begins to float up at the construction
phase of the project. These will no doubt affect the overall project delivery time and
cost. Causes of design errors cited in most projects are inadequate field investigation,
error in design and specifications, plan errors, design changes etc. In controlling project
delay and cost overrun due to design errors, the basic thing to be considered is the
involvement of professional skills and application of competent tools throughout the
project. Achieving error free design entails good communication with the entire design
team and integrating a design process that is properly planned, giving enough time for
corrections, extensive investigation and reviews. Similarly, an effective project planning,
controlling and monitoring should be established to enhance project performance
throughout the project life cycle. Proper site investigation should be done to ensure that
all site conditions are noted in the design, and application of value management could
be use to obtain the best Cost effective design options.

2. Delay and cost overrun in project could be as a result of scope change. Scope is the term
that defines the entire deliverables that is expected at the end of a project. Therefore,
logically, it can be said that all project plans, estimation, schedule, quality and base lines
are usually designed base in the initial project scope. Thus, any change in the project
scope during execution will mean that the entire initial project plan will have to be
reviewed such that a reviewed budget, schedule and quality will have to be developed.
This means more time and resources will be needed as against the initial baseline. “With
each scope change, precious project resources are diverted to activities that were not
identified in the original project scope, leading to pressure on the project schedule and
budget”. Project scope change could be as a result of wrong initial scope definition,
inherent risk and uncertainties, sudden change of interest, project funding change, etc.
this could lead to change request which in turn could lead to change in project
deliverables, budget and/or even the entire project team. Poor scope change
management could lead to dispute that may require spending time and money on
arbitration and litigation for what the contractor or the client believes he is entitle to.
This will no doubt lead to delay and cost overrun of the project. To achieve a proper
control for scope change, it is important to first identify the fact that change is inevitable
 in project and could equally be beneficial to the entire project success. Thus the most
important thing to do is to integrate a proper change management plan such that a
proactive approach could be adopted involving the project stakeholders and
incorporating their needs throughout the project lifecycle. During the planning phase of
the project, it is important to identify the key success factor in conjunction with the
client and establish KPI in the form of milestone that will measure the success for of
attaining the project scope. Similarly, to avoid disputes, it is important to always seek
approval for changes from sponsor and communicate changes in a timely way. For
highly evolving change in project, the scope could be frozen so as to concentrate on the
expected deliverable.

3. Another major reason for cost overrun and delay in project is inappropriate and
inadequate procurement and faulty contractual management system. Contracts read
out virtually every aspect of a business correlation, including payment terms, pricing,
and service levels. Therefore a contract that has not highlighted the entire project
scenario may lead to dispute in the contract system. For instance, if the initial contract
does not completely specify every relevant aspect of the project work, this may lead to
long chains of negotiations, arbitration and/or mitigation due work change orders and
the quest for reviewed contractual agreement with new budgets and schedule. The
result will no doubt be a project delay and cost overrun. Similarly, ambiguous
contractual agreement with unclear clauses can be of potential dispute thus generating
delay and cost overrun in project. In the same vein, delay and cost overrun could be
inherent in terms of poor contractor selection and unethical behaviour, contract bid
amount, difference between the winning bid and second bid, difference between the
winning bid and the engineer’s estimate, etc. and since majority of projects are
executed by contractors, it is important to note that procurement process and contract
management is critical to the successful completion of projects. Thus poor selection of
contractors due to low bids, with no technical capability to handle the project will lead
to cost overruns, schedule delays, poor quality, and a final result that is not acceptable.
Also, a contract management system with clients that have a slow payment schedule
could lead to delay and cost overrun. To solve these problems, the needful and ethical
thing to do is to firstly identify the most qualified contractor via an ethical tender system
and draft out the most suitable contract type as applicable to the conditions of the
project and also explicitly define the terms and conditions that govern the contract in
clear clauses. These clauses should spell out the penalties associated to delays and cost
overruns and the party to bear risk associated to these events. Similarly all important
potential dispute contract clauses should stated in clear unambiguous terms. The use of
generic contract templates should be avoided and “careful consideration should be
done when forming the contract, about what might happen during its operation, this
will ensure that things are included in the contract documents that enable effective
contract management.
4. The complexity of project could also be a contributing factor to delay and cost overrun.
Complexity could be define in terms of the size of the project, most mega projects tend
to have relatively long implementation period when compared to small project. This
could be affected by inflation, change in material price and changes in exchange rates
such that the initial budget may need to be supplemented for the project to be
completed. The result could be cost overrun and long chains of negotiation which will
lead to delay. Similarly, projects with high degree of complexity usually result in complex
plans, schedules and estimations. Such that if care is not taken the tendency of omitting
certain aspect of the project plans and/or estimation could be prominent, thereby
leading to change orders. This could lead to delay and cost. Also, project complexity
could also be defined in term of the diversity of stakeholders with different interest and
long chain of communication channel with slow feedbacks. Therefore integrating their
interest could take a lot of time and resources which when overlooked could result in
conflicts and dispute, thus affecting the project in the context of delay and cost overrun.
To eliminate or reduce the effect of delay and cost overrun due to project complexity,
vigorous planning should be done, incorporating every important aspect of the project
scope, milestones, detailed WBS, delivery time, stakeholders, and methodology to be
used. “Managing complex projects needs experience, expertise and exposure”. Thus
Project needs its goals and scope to be defined, based on the client requirements. This
helps the project to be kept on track and ensures doing only the job that is intended. It
is therefore important to build a good team with project success interest at heart to
achieve this.

5. Finally, the post execution phase (closure) of a project contains potential factors that
can lead to delays and cost overrun. Being the very last part of the project life-cycle it is
often been ignored even by organizations, especially in multi-project environments.
Slow closeout could be seen as dragging the various handover activities course by
unresolved disputes linked with client acceptance, contracts and procurement, change
order issues not resolved, final change orders not issued, poor close out of final account,
poor documentation of project success and lessons learnt, slow client acceptance and
failing to close the work order can allow unexpected delay and stray charges to be made
to the project. For instance if project team is not decommissioned on time after the
project work has been completed, their exist a tendency of running an idle team that
may incur extra project expenses due to overhead and this may overrun the project
cost. Similarly, delay in payment of contractors and suppliers after project completion
could lead to dispute and delay in signing the certificate of final completion of the
project. Delay and cost overrun of slow closeout can be avoided when the project
closure phase is implemented as planned.
Completion: Ensure that the project is 100% completed to avoid disputes and delay in
payments.
Documentation: Detail documentation will ensure that future changes are made with little
extraordinary effort.
Project system closure: this includes closing the financial system ie all payments, work
termination, etc.
Project review: this can help in transfer of tangible knowledge of time and cost, know-how and
know-why.Disband project team members and complement achievement as soon as possible to
avoid cost overrun due to extra overhead.
Stakeholder satisfaction: provide all the necessary information required by stakeholders to
avoid conflicts and doubt. “This information can include a timeline showing the progress of the
project from the beginning until the end, the milestones that were met or missed, the problems
encountered and a brief financial presentation”.