4/4 Civil- SEM1

Project Planning &

Management
Civil Engineering Department.
 UNIT 4 – Contracts and Tenders
1. Contracts
 Essential Agreements of a contract
 Types of contracts
 Departmental Execution of works
2. Tenders
 Types of tenders
 Tender form
 Tender bidding procedure
 Arbitration
 EMD and SMD
 Reverse tendering
 E-procurement.
What is a contract?
 proposal
 promise
 agreement
 Contract

A contract is an agreement enforceable

by law.
Essential Requirements of a contract
1. Lawful subject Matter- prior approval, person
involvement
2. Legally competent parties – minors, drunkens,
lunatics
3. Valid consideration – money terms, writing, legal
4. Free consent – Mistake, misrepresentation,
coercoin
5. Provision of law with regard to form(writing)
If all the above are not satisfied, the contract
becomes voidable, void and unforceable.
Coercoin: It is something that is prohibited by Indian
contract Act.
Valid contract:
 It is a contract that there is no illegality
 It is a contract enforceable by law
 It is a contract without flaws.
Void contract:
 It is without legal effect
 It does not bind to either of the parties.
Voidable contract:
 It does not bind to one or other of the parties
and hence the contract can be avoided by injured
party.
Eg: Person X wants to lease his house to Person Y.
Person Y prepares the document stating that X is
selling the house to Y. Then the contract is void.
 Essentials of valid contract
1. There must be a proposal by one party
2. There must be acceptance of that proposal by another party
3. The acceptance must be communicated in same perceptible
form to the offerer
4. There must be free consent of the parties competent to
contract(the terms and conditions should be clear to both the
parties)
5. It must have a lawful object
6. It must not have been expressly declared to be void
7. Parties must be legally capable of entering into contract
8. There must be some consideration for the contract
9. Both the offer and acceptance must be absolute and
unconditional.
 Civil Engineering Construction
 illusion or dream – by owner
 picture on paper – by architect
 size and materials – by engineer
 Quality of materials and workmanship –
specification writer
 Terms and conditions of contract – by
lawyer
 Three dimensional structures – by
contractor
Departmental execution of work
1.Muster roll:
There are two parts in Muster roll form
Part 1: Nominal Roll
Part 2 : Quantity of works
2. Piece work Agreement(PWA)
3. Work Order
Note:
Muster roll is crucial in contracts.
PWA and work order are for very small works of less
cost. These are not essentially contracts.
 Types of Contracts

1. Item rate contract/Unit price

contract/Schedule contract
2. Lump-sum contract
3. Lump-sum & Schedule contract
4. Percentage rate contract
5. Labour contract
Note: There are so many other
contracts also.
 TENDER
 What is a tender?
 Types of tenders-
1. Open tender
2. Selected tender
3. Negotiated tender
Advertisement (Tender notice)
1.Title
2.Owner
3.Brief description of the work
4.Issue of tender form
5.Receiving of the tenders
6.Form of contract
7.Earnest money and security
money deposit
8.Plans and specifications.
 Tender Form
1.Price- Lumpsum price or unit
price
2.Earnest money deposit
3.Security money deposit
4.Time limit- the time period
5.Tender validity period(30 days to
150 days)
6.Miscellaneous- site, plans,
specifications, signatures.
 EMD and SMD

Earnest Money deposit(EMD) : 1 to 2%

Purpose of EMD – For restriction
- For punishment.
Security Money deposit(SMD) :
2 ½ to 10 %, mostly 5%
Purpose of SMD – deposit for loans
- for punishment.
 Liquidated Damages
Time is the essence of contracts
In case if the contractor fails to finish the
work, the penalty has to be paid
Liquidated damages refer to honest and
genuine losses suffered
The amount can be decided by court of
law
It should be based on interest or profit
formula
Consideration should also be given for
strikes, floods and bad weather conditions.
 Mode of submission of tender
The tender shall be submitted in 4 envelopes marked 1, 2, 3
and 4.
Envelope 1:
It contains the EMD in the form indicated in the notice of
invitation to tender
Envelope 2:
(a) Covering letter to the tender
(b) any comments which the tenderer makes
(c) the solvency certificate from bank authorities
(d) the latest income tax clearance certificate
(e) List of works of similar nature carried by contractor
(f) Details of plant and machinery available with the
tenderer
(g) Details of technical staff employed by the tenderer
 (h) Complete details of the works in hand at
the time of submission of tender
(i) Details of registration with government or semi-
government authorities
(j) Details about the firm such as year of incorporation,
registration date, names of partners etc.
Envelope 3:
It contains the priced tender form with the
signature of the tenderer
Envelope 4:
(i) A large envelope consisting of all the above mentioned
envelopes
(ii) This should be properly sealed.

Note: Envelope 4 consists of the first three envelopes.

 Opening of Tenders
 Contractors are not generally present at the time of
opening tenders
 In case of tenders invited by public bodies, the presence
of contractors is inevitable
 Owners are present at the time of opening
 The outer envelope 4 is opened
 The envelope marked 1 is opened and checked for EMD,
if it is not satisfied, it is not returned
 The envelope 2 containing cover letter and other
documents are scrutinized by the architect and the owner
 The envelope 3 shall be opened on a separate date as
intimated to the tenderers who are present
 Finally senior authority will take decisions.
 Scrutiny of tenders
1. A list of tenders should be made with the details of
deposit cheques
2. It should be checked if each tender is duly signed and it
contains the address
3. It should be checked if the terms and conditions are
altered
4. The calculations showing the amount of each item
should be carefully checked
5. Totaling of the amounts from page to page should be
done carefully in order to arrive at the final cost of
construction
6. After all the tenders are scrutinized, a comparitive list
should be made. Lowest and highest cost tenders
Note: Before the tender is accepted, the following
are to be verified:
1) The financial stability of contractor
2) The intelligence, capacity to organize and credit
in market
3) Visit to previous works
4) General behaviour and temperament of the
contractor may be studied
5) The works in progress by the contractor should
be examined.

Note: For specialized projects like bank

buildings, the procedure may be exhaustive.
 Acceptance of tender
Usually the tender with the lowest
amount is accepted.
Following are considered to be the
modes of acceptance:
1) Conduct of the parties
2) Acceptance by telegram
3)Acceptance in writing
4)Absolute acceptance
Joint Sector Management (Joint Ventures)
 Government
 Private enterprise
 50:50 usually
 Cochin refineries, Madras fertilizers
 Chairman will be a Government nominee
and the director will be from private
enterprise
 Promotion of social objectives
 Acceleration of industrial growth
 Some limitations.
 ARBITRATION
Arbitration: It is the process of settlement .
Arbitrator acts as a judge.
One or more persons chosen by parties
themselves are called arbitrators.
 There is a definite need for arbitration in the
contracts.
Note:
Arbitrators are : (a) Sole arbitrator(One arbitrator)
(b) Joint arbitrator(Two arbitrators)
Umpire’s decision is final in case of Joint arbitrator.
 Arbitration Act 1940
 Arbitration agreement – A statement producing
differences to court of arbitration.

Qualifications of Arbitrator-
1. Expert knowledge
2. Impartial and unbiased
3. High integrity and unshakable faith in justice
4. Retired SE.

Note: A retired SE or CE will be appointed

as an arbitrator
Procedure of settlement of dispute in a civil
engineering contract by arbitration : clause 25

1. Appointment of arbitrator
2. Preparation and submission of a case for
Arbitration(claimant and respondent)
3. Hearing of the case
4. Issue of award
5. Filing of the award
6. Power of court to modify award
7. Power of court to remit award
8. Removal of arbitrators or umpires
9. Power of court to appoint an arbitrator or
umpire.
 E-procurement
The eprocurement System of India
enables the Tenderers to download
the Tender Schedule free of cost and
then submit the bids online through
this portal.

Eg:
https://tender.apeprocurement.gov.in/
login.html