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Contractual Procedures

Introduction Aim--- To provide understanding of post contract duties of a QS. Subjects--Post contract functions Post contract cost management method Post contract administration


Selection of a Contractor
 Open tender procedures- 1.through journal advertisement,
any builders can apply. 2.through journal advertisement, with limitation on grades can apply.

 Closed tender procedures Bidders selected through

expression of interest

 Pre selected contractor From the list of preferred builders,

based on skill reliability and proven competence

 Nominated specialist contractor- based on skill,reliabilty

and proven competence


Selection through bid evaluation
Responsiveness Bid value after scrutiny. Specific non compatible rates, if any. Cash flow proposed Capability Availability of capital for execution Programme of works proposed


Selection through bid evaluation

Furnishing requirements under Instruction to Bidders Bid bond Submission of Qualifying Information Submission of Programme of works Cost effective alternatives. Fault free bid values Any other special requirements


Bid value after scrutiny 1. Discrepancies
Figures and words-words govern Unit rate & line amount rate governs If obvious misplacement of decimal in the unit rate, line amount governs Final total amount corrected amount


Non Compatible rates  Very high rate during the initial stages High rates on individual items Low rates on individual items Cash flow proposed Very high cash low at the initial stage Uniform flow of cash


Technical Engineers & Technical staff depending on the value of contract Financial Work in hand , Bank facilities, Cash drawing power Human Resources Officers, Direct Laborers, sub contractors, balanced resource diagram


Technical Capability
 Small works[up to M7 grade],if owner is not a technical person,a technical officer/quantity surveyor is needed.  Small works [M6,M5 grade],if owner is not a technical person,a technical officer,a quantity surveyor and an Engineering consultant are needed.  Medium Works[M4, M3 grade],if owner is not a technical person,an Engineer,a technical person and a quantity surveyor are needed.  Major Works[M2,M1 grade],an Engineer,technical officers,quantity surveyors,land surveyor ,administrative officers are needed.

Monitoring Preliminary works related to Contract

Performance bond submission Insurance Policy submission Authentication for signing Agreement Letter of Award/Acceptance Signing of Agreement Guarantee for Advance Money Informing Parties concerned

Monitoring of programme of works

Acceptance of Programme submitted Request for weekly and/or monthly Programme  Daily records of performance High light of anticipated delays,if any. Identification of critical items Recording natural restrain to Programme

Monitoring the Quantities of Works

Schedule of Materials and Quantities needed. Programme of works with quantities Daily performance by quantities Anticipated increase /decrease of quantities Feed back to management On completion of items, checking quantities

Monitoring the price of materials

Schedule of price at the time of tendering Schedule of price quoted by the Contractor Obtaining quotation for materials monthly.quarterly. Obtaining price index from ICTAD. Anticipation of any price increase Data Base for future use.

Interpretation of Conditions of Contract

General Introduction on the Conditions of Contract. Contract data / Particular Conditions of Contract. Occasions for reference. Role of Parties concerned and their liabilities


Contract Administration
*Types of contract *Beginning of contract /contract administration *Issue of letter of award /letter of acceptance Signing of agreement *Action to be taken immediately after *Confirm performance bond &insurance coverage *Handing over of the site *Identification of procedure to be adopted during construction for effectiveness *Getting clearance from local authorities *Way leave *Supply of materials


*Routine duties *Ensure compliance with the conditions of contract *Inspect the quality of materials to be employed in the works *Keep records on site *Request the contractor to submit all the appropriate returns *Keep a close check on the progress of the work *Likely delays to encounter *Quantities of works completed *Quantities of works yet to be completed *Variations in cost/Quantities * Likely claims

*Compliance with the conditions of the contract *Variations &claims 1.0 Valuation methods a)Lump sum price on agreement b)Appropriate rates in the contract if cost of variation <25% and <1% of total contract price
C)Rates in

the contract as basis

d)Appropriate new rate 2.0 Early warning a)Any party to inform other as soon as a claim is identified b)Contractor s responsibility to minimize the No. of claims c)Limitation to contractor s claim for extension &additional payment

3.0 Right to claim a)As a result of employer s liabilities /Risks b)Change in works 4.0 Variations &claims procedure a)Submission within 28 days of the instruction or the event giving rise to the claim b)Supervising agency shall determine the value unless the contract specifies otherwise

*Contract price 1)Monthly statements a)Value of the works executed b)80% of materials & plant delivered at a reasonable time c)Price adjustment due to escalation 2)Valuation of the works a)Submitting each month, the value of the work executed less the cumulative amount certified previously b)Certification within 14days of the receipt of contractor s statement

3)Escalation in prices
a)Standard method b)ICTAD s formula method

4)Due to subsequent legislation

a)14 days prior to the latest date of of bids b)Additional or reduced cost c)Entitle for variation submission


1)Advance payment a)Within 14 days after the submission of unconditional guarantee b)20%of contract price(less provisional sum & Contingencies) c)Deducted from interim payments proportionate to the progress of works d)Repayment should be completed on the valve of works reaching 90%of the initial contract price 2)Interim payments a)Within 14 days of certification b)Certified amount less retention c)No deduction shall be made for retention after the total amount deducted reached the amount in the schedule d)Withhold payment until the submission of performance security

3)Payments at completion a)Submission of detail account /bill within 21 days after issuing of taking over Notice b)Within 42days,certification if it is correct c)If not, comments to be made within 14 days d)on resubmission, if it is unsatisfactory payment certificate shall be issued e)Employer to make payment within 28 days of the issue of certificate f)Contractor is entitled for any delayed payment

4)First half of Retention a)With 14 days after the issue of notice of taking over 5)Second half of Retention It shall be released within 14 days after a)Expiry of Defects Notification period b)Remedying of notified defects c).Completion of outstanding works d)On submission of a guarantee valid upto 28 days beyond the defects liability period

6)Final payment a)Within 42days of the completion of the defects liability period ,Contractor shall submit &final account b)Within 28 days, it shall be certified c)Any disagreement shall be specified with reasons in the certification d)Within 21 days of certification ,Employer shall make payment

INTERIM PAYMENTS *Payments shall be made monthly provided their value is not below the minimum sum named in the appendix *The minimum amount shall be 1 % of the average annual contract expenditure *Titles for valuation *Preliminary &Temporary works *Measured Works *Work by nominated sub-contractor *Insurances *Day works *Adjustment for fluctuations *Unfixed materials

*Assesment of preliminaries *Percentage Proportional to the value of measured works

*Percentage Proportional to the aggregate of measured work and nominated work completed to date *Percentage Proportional to number of works in progress *Each item shall be assessed separately on the basis of expenditure incurred

 It is 10% of the interim value with the limitation of 5% of the contract value  10%retention throughout the contract& release 5% with the final bill

Breach of contract (Forfeiture)

*Either client or contractor can breach the contract *If contractor breaches the contract ,employer
May claim damages Appointment of another contractor if default is substantial

*If the employer breaches the contract, contractor

May claim damages Express right to determine the contract[As per RIBA contract]

*Grounds for determination Abandonment of contract Failure ,without reasonable excuse to commence

the works or suspension for 14 days after getting

,pull down or replace work rejected after 14 days Not executing the work in accordance with the contract.

instructed to commence Failure to proceed with due diligence Failure to remove condemned materials

Sub letting any part of the contract without approval

*Procedure after determination *Ascertain the amount earned by the contractor

before expulsion alone or in conjunction with the Contractor *value of the work with unfixed materials at site *Constructional plant &Temporary works to be taken over *Hire value & sale value to be taken into account in the final reconciliation.

* Completion of works thereafter  Selection of new firm in a suitable manner

 New rates of payment agreed must be accepted by the ousted contractor without question  To expedite the works , prepare a schedule without quantities for major items  Alternatively ,on a cost plus basis  Half finished by day work methods  Nominated sub-contract Terms with the ousted contractor could be confined New terms shall be arrived at Impossible to obtain the services of another firm when proprietary systems are involved Additional cost ,I f any ,from new nominee it will be claimable from the employer

Frustration of contract
*Contract become impossible to perform by both parties *Events causing the impossibility *Flood *Earth quake *Action of state in introducing law that makes the performance illegal *War or its effect *Major provisions in frustration
 Money prepaid in expectation of performance should be returned  Party receiving benefit from partly executed work shall reimburse a sum not exceeding the value of the benefit

 Principal rules for payments:

Preliminary items should be paid for in full or in part All materials , reasonably ordered for the work must be paid Expenditure reasonably incurred in expectation of completing the whole of the works cost of making good any war damage Value of any increase in official labour rates and material costs due to the event of war Cost of removing plant from the site

 Payment of agreed damages when the completion is not within or extended contract period.  Appendix should record the amount to be paid.  It should be a reasonable pre estimate.  If not,it may be held by the courts of law to be a penalty.  If so,employer can only recover his actual cost & not the penalty.  Use of structure before the official completion would deprive of claiming liquidated damages  In the absence of clause, employer can still recover damages