NICMAR - SODE

ASSIGNMENT
GRADUATE PROGRAMME IN CONSTRUCTION PROJECT MANAGEMENT (GPPM)
MODULE - 18

CONSTRUCTION CONTRACTS AND CONTRACTING

NCP 23

Prepared By Soumen Dhara ss Reg. No. 212-05-14-10584-2133

Assignment
1 2 3 4 Course No Course Title Assignment No Date of Dispatch NCP 23 Construction Contracts and Contracting One August 16, 2012

Last Date of Receipt of Assignment at 5 CODE Office August 25, 2012

ASSIGNMENT: Contract administration and monitoring is the most important area of construction
management. Contract administration process should start right from the day work is assigned to the company. Discuss any project contract currently in progress with your company and how administration and monitoring is being done. Draw the organization chart for this activity and explain all the functions carried out. Do you think the system is achieving results? Discuss

PROJECT NAME: CONSTRUCTION OF METRO RAILWAY STATIONs BETWEEN JOKA -MAJERHAT JMS 2 Package

SCOPE OF WORK: CONSTRUCTION OF BEHALA BAZAR, TARATALA AND MAJERHAT STATIONS INCLUDING All RELATED WORKS (ARCHITECTURE, ELECTRICAL & MECHANICAL (E&M), HVAC, FIRE DETECTION AND FIRE SUPPRESSION SYSTEM AND PUBLIC HEALTH ENGINEERING WORKS), IN JOKA-BBD Bag CORRIDOR OF KOLKATA METRO RAILWAY LINE. As per the BOQ. The work shall be executed as per C.P.W.D specification, Quality Plan, Technical specification attached to BOQ as per approved drawing and direction of Engineer In-charge. The site shall be handed over to M/s RVNL with complete package as described.

TYPE OF CONTRACT: Item Rate Contract - Also called a schedule contract, in this contract, the contractor undertakes the execution of work on an item rate basis. The amount to be received by the contractor depends upon the quantities of various items of work actually executed. The payment of the contractor is made on the basis of detailed measurements of different items of work actually done by him Suitability The item rate contract is most commonly used for all types of engineering works financed by public or government bodies. This type of contract is suitable for works which can be split in to various items and quantities under each item can be estimated with accuracy In this type contract, there is no need for detailed drawings at the time of allotting contract as in the case of lump sum contract. The detailed drawings can be prepared after the contract is awarded

Changes in drawings and quantities of individual items can be made as per requirement within agreed limits

The payment to the contractor is made on the actual work done by him at the agreed rates

Contract Data Sheet TIME SCHEDULE: The work shall be carried out and completed strictly by 23 .

All operations for the execution of the Works shall be carried out so as not to interfere unnecessarily with the convenience of the public or the access to public or private roads or footpaths or properties owned by the Employer or by any other person. The transportation of certain equipments and materials and launching may not be possible during the daytime and may have to be carried out within time schedule specified by traffic police/concerned authority. Defects Liability Period: 12 months from the date of taking over of whole of the Works and not any sub-section or part thereof. Communications: Electronic Transmission System NOT PERMITTED Time for access to Site: Starting from the Date of Commencement, 25% of the section will be handed over within 30 days. Balance work sites will be handed over in a phased manner depending on the mobilization and progress of the work. Performance Security: 10% (Ten percent) of the Contract Amount and in the same currency(ies) of the Contract Amount in the form of an unconditional Bank Guarantee for the stated amounts valid for a period of 28 days beyond the date of issue of Performance Certificate. Employers Materials: NIL Liquidated Damages for delay: 1. 0.005% of the Contract price per day of delay for the Key Dates other than the one relating to taking over on completion of the entire Works.

2. 0.05% of the Contract price per day of delay for the Key Date relating to taking over on the Completion of the entire Works. The maximum limit of Liquidated Damages for (a) and (b) combined shall be 10% of the Contract Price in the currencies and proportions in which the Contract Price is payable The liquidated damages imposed under (a) above shall be refunded if the contractor completes the entire works within the stipulated completion period or completion period extended without imposition of liquidated damages as the case may be. Sums recoverable from on account of delay caused by the Contractor: The total ceiling limit of is 15% of Contract Price including Liquidated Damages Bonus Clause: 1% of original Contract Price per month (part of the month to be excluded). Subjected to maximum of 5% Mobilisation Advance: 1. 10% of Contract Price in the currencies and proportions, payable in 2 equal instalments. This advance will be interest bearing @ 13.50% from the date of release of instalment for advance. 2. First Instalment within 21 (Twenty one) days from the date of receipt of guarantees acceptable to Employer subject to submission of Performance Guarantee(s). 3. 2nd instalment shall be payable on submission of proof of utilization of the 1st instalment for the Works and the Employer is satisfied that the utilization has been done in purposeful manner. 4. Each instalment shall be released against four (04) Bank Guarantees of equal values (totalling 110% of the instalment amount) in the applicable currencies and proportion Advance against Plant and Machinery: 1. New items : 80% of purchase price 2. Items valued at less than Rs. 1,00,000 per unit : Not to be considered 3. The total advance for Plant and Machinery shall be interest bearing @13.50% and limited to 5% of the Contract price and shall be paid against 12 acceptable Bank Guarantees of equal amount

Advance against Materials: Materials for which payment of advance will be considered are HT Strands, bearings, Steel and Cement.

Recovery of Advances: Mobilization Advance and Plant and Machinery Advance Repayment rate of Advance Payment 1. 10% (Ten percent) of the amount of each payment if the advance taken is 5%. 2. 20% (Twenty percent) of the amount of each payment. If the advance taken is 10%. For plant and Machinery 1. 10% (Ten percent) of the amount of each payment. If advance taken is less, the rate of recovery shall be proportionate.

Minimum Amount of Interim Payment Certificates INR 1.0 Crore for first three months and for last three months of the Time of completion and INR 5.0 crore for rest of the period.

Percentage of Retention Money Total limit of retention money shall be 5% of the Contract Price, which shall be deducted @ 6% of the amount of each interim payment certificate till the limit of 5% is achieved. Alternatively the contractor may submit a Bank Guarantee for the entire amount of retention money at the time of execution of the agreement.

Insurance 1. Insurance for Works and Contractors Equipment 2. Insurance against Injury to person and damage to property ( Third Party ) 3. Insurance for workmen.

Quality Assurance: Unless otherwise stated in Special Conditions of Contract and/or Employers Requirement, the Contractor shall institute a quality assurance system to demonstrate compliance with the requirements of the Contract. Such system shall be in accordance with the details stated in the Contract. Compliance with the quality assurance system shall not relieve the Contractor of his duties, obligations or responsibilities Functional Organization A typical functional organization for a construction site management will consists of Site Engineer, who is obviously a specialist and hold his place in the organization because of the specialist functions of management he performs. On technical side he will be assisted by Junior Engineers who are also specialists. They control the departmental heads, the Foreman. There may be Masonry Foreman, Carpentry Foreman, Electrical Foreman, Plumbing Foreman and General Foreman. Each of these Foreman, is a specialists and controlled the skilled workman who will actually do the work. For example, under the Masonry Foreman, there may be eight skilled masons who are again specialist and can not be replaced by anybody but mason. Same is the case with other Foreman, except in the case of General Foreman, under whom there will be no skilled workman but only general unskilled labour who will not do any specialist job. A similar type of organization can be devised for Architect office. This office is headed by the head of the organization called probably as Chief Architect. There may be two Senior Architect working under the Chief Architect. These will control the work of four Junior Architects. These will be directly involved in the preparation of architectural drawings for which they may take the assistance of draughtsmen. Thus it can be seen that each person in the hierarchy of afunctional organization is specialists, whether he be a mason or carpenter or a Foreman or an Engineer. The size of the organization depends on the volume, complexity and the time periods of the various works being done. The construction team consists of owner, engineers/ architects and contractor. The team is formed to co-operatively plan, design and execute a particular project. The objective of the team is to execute the owner's project in the

best and most economical manner within the stipulated completion time. The owner forms the construction team to serve his interests through the services of both the contractor and engineers. The functions of the constituents of any construction team depend upon the scope and nature of the work

Site organisation: The organization for the construction firm has to be developed taking into account the general principles of organization and the special characteristics of the construction industry. The type of organization suitable for a small construction firm is simple line or line and staff type of organization. The engineer in charge at the exercises full authority and is responsible for the execution and progress of work. Under him are few section officers or foremen who get the work executed

After having decided the organizational structure in a construction company, the next step is to spell out the task, power and responsibility of all its functionaries. Telling an accountant that he is to look after the accounts work or telling the foreman that he is to super wise the daily wage workers at site is not enough. Specific job detailing that is what is to be done by whom, at what time and how it is to be done is the starting point of site organisation. Site organisation in simple terms, means how to organise the construction activity on site. A typical site organisation for a division, headed by an executive engineer is shown here

Organisational Structure & Responsibility and authority :

SAMPLE ORGANIZATION CHART

PROJECT SPECIFIC ORGANISATION CHART SHALL BE PREPARED IN LINE WITH CONTRACT AND TO BE MAINTAINED BY PLANNING

Role & Responsibility Department/ Position At Construction Site Project In-charge

Organize & manage all resources and field activities to achieve an efficient and effective completion of the contract, within the agreed time and cost, whilst paying due regard to safety and meeting Quality requirements. Accountable for Quality / productivity improvements through process changes To sort out issues escalated by site MR on site process, QA/QC on product quality Roll out major programs / process changes Give feedback on monthly reports from site MR and planning engineer Preparation and implementation of Project Quality Plan, Liaison with Customer, Regional, Head Office and local authorities. Negotiation with S/c and suppliers for fixing rates. Improving Customer satisfaction including handling customer complaints

Resident / Construction Manager

Planning In-charge

Planning Engineer

Billing Engineer

Contracts Engineer

Section In- charge

Erection Engineer

ISD coordinator Surveyors

Civil supervisor

Prepare Daily, weekly and monthly schedule as per 3 months look-ahead program in consultation with planning engineer. Allocate the resource for activities as per the schedule Preparation and Implementation of Work procedures. Implementation of PQP Planning training requirements and arranging for training to site staff, Supervisors at site level. Integration of project schedules for all works & monitoring. Preparation of Accepted Cost Estimate and review through Job Cost Report at regular intervals. Contract review, process control and service requirement Coordinate with Region/ HQ for arranging required materials & resources in time. Synchronize the activities of all departments to achieve the planned cycle times/ overall schedule Arranging required information to Customers regarding project control & progress monitoring as per contract Arranging required information to Region/ HQ about project as per PMS & MPCS Preparation of MPCS schedules and ACE Monitor the progress & the cycle times for different activities of work highlight variances Preparation of Accepted Cost Estimate and review through Job Cost Report Preparing actual schedule of resources required based on achieved progress Reconciliation of materials & resources and other technical reports Raising of invoicing on Customers as per contract Preparation of work orders & amendments for sub contract works Monthly preparation of S/c bills Periodic reconciliation of Customers billing vs. S/C billing Periodic reconciliation of materials Thorough study & identification of contractual obligations of both parties Develop the list & timing of obligations Review & monitor the fulfilment Preparation for issue of notices Preparation of Customers correspondence Ensure the construction activity as per approved construction & work methods. Prepare survey plan Ensure conduct of Quality checks. Ensure completion of activities to meet the project time schedules Prepare construction method statements, flow charts, work methods Prepare the theoretical cycle time for the activities Conduct trials / mock up and fine tune methods/ cycle times Obtain approval for the methods Execute work as per approved method statements / work methods. Prepare schedule of materials / plant requirement. Maintenance of hardware & software Ensure timely rectification of any problems To establish control points as per survey plan. Responsible for day to day survey activities and maintain records, during respective shifts To carryout post construction survey and record as built status. Conduct calibration of any survey equipment as per plan with QC Engineer. Prepare construction method statements, work methods and obtain approval for the same for civil works Conduct trials / mock up. Execute work as per approved method statements / work methods. Prepare schedule of materials / plant requirement. Ensure conducting all activities to meet the cycle time requirement for Area A Front line supervision of the working labour to ensure strict conformance to methods, quality

Mechanical Engineer

Equipment & Erection Engineer

Piping Engineer

E&I Engineer

Electrical Engineer Instrumentation Engineer P&M in charge

& safety Prepare construction method statements, work methods and obtain approval for Mechanical works Conduct trials / mock up. Ensure execution of work as per approved method statements / work methods. Prepare schedule of materials / plant requirement. Prepare construction method statements, work methods and obtain approval for the same for equipment & erection works Conduct trials / mock up. Execute work as per approved method statements / work methods. Prepare schedule of materials / plant requirement. Supervision of the working labour to ensure strict conformance to methods, quality & safety Prepare construction method statements, work methods and obtain approval for the same for piping works Conduct trials / mock up. Execute work as per approved method statements / work methods. Prepare schedule of materials / plant requirement. Supervision of the working labour to ensure strict conformance to methods, quality & safety Prepare construction method statements, work methods and obtain approval for E&I works Conduct trials / mock up. Execute work as per approved method statements / work methods. Prepare schedule of materials / plant requirement. Supervision of the Electrical works activities to ensure strict conformance to methods, quality & safety Supervision of the Instrumentation works activities.

Repairs & Maintenance supervisor Operations supervisor HSE Engineers / HSE officers (HSEO)

Ensure continuous availability of P&M at site. Ensure periodic preventive maintenance & timely breakdown repairs of all machinery & electrical equipment as per their inspection manuals. Ensure operation of P&M as per company norms Preventive maintenance Breakdown repairs; Reporting of required data related to repairs & maintenance Operation of P&M Reporting of required data related to operation Carry out HSE inspection of Work Area, Work Method, Men, Machine & Materials, P&M and other tools and tackles. Creating HSE awareness through Pep Talk. Co-ordinate in preparation of Group Risk Assessment. Conduct investigation of all near miss cases / LTI / Fatal / dangerous occurrences & recommend appropriate corrective measures. Convene HSE Committee meeting & minute the proceedings for circulation & follow-up action. Advice & coordinate for implementation of Work Permit Systems. Plan procurement of PPE & safety devices and inspect before use as per laid down norms. Report to RHSEM on all matters pertaining to status of HSE and promotional programme at site level. Facilitate screening of workmen and conduct HSE induction. Monitor administration of First Aid. Conduct Fire Drill, Procure, inspect and arrange to maintain Fire Extinguishers. Organise campaigns, competitions & other special emphasis programs to promote HSE in the workplace. Register Customer complaints and take corrective action. Apprise RHSEM on HSE related problems. Deploy Safety Steward suitably. Notify site personnel if non-conformance to HSE norms observed during site visits/site

 Safety steward

inspections. Recommend to Site In-charges, immediate discontinuance of work until rectification, of such situations warranting immediate action in view of imminent danger to life / property / environment. Decline acceptance of such PPE / safety equipment that do not conform to specified requirements and report to RHSEM on the deficiencies identified during receiving inspection. Monitor HSE practices, persuade to minimize non compliance Report incidents beyond control and unsafe occurrences to HSEO

Making Staff Work as a way of organization life: An understanding of staff authority lays the foundation for an organizational way of life. Where staff are involved, their responsibility is to develop and maintain a climate of favourable personal relations. Essentially, the task of staff is to make the responsible line managers "look good" and to help them do a better job. A staff person should not attempt to assume credit for an idea. Not only in this a sure way of alienating line team mates who do not like being shown up by a staff person, but operating managers who accept ideas actually bear responsibility for the implementation of the proposals Companies also employ the assistance of professional firms, such as consultants to provide advice to line managers A major reason for conflict in organizations is that people do not understand their assignment and those of their co-workers. No matter how well conceived an organization structure may be, people must understand it to make it work. Understanding is aided materially by the proper use of organization charts, accurate job descriptions, spelling out of authority and informational relationships, and introduction of specific goals for specific positions. Organizational conflict can be reduced by the use of organization charts and position descriptions. Organizing is improved by teaching its nature and by recognizing the informal organization and the grapevine. Moreover effective enterprises develop and nurture an appropriate organization culture

Arbitration: Arbitration means settlement of dispute between two parties involved; generally contractor and owner. This settlement generally not by court of law but by a few persons having complete knowledge of that work and deputed by parties involved these person or persons appointed to settle

the dispute is called "Arbitrator". Arbitrator gives decision on the basis of evidences available; enquiries made and his own skills and knowledge. His decision accepted by both the parties and also incorporated in the decree of the court if required i.e. if earlier decision is not accepted by either of the parties and if matter is referred to court of law. Arbitrator has to take such decision which must be correct and accepted by both the parties As such Arbitration is an expensive way of settling the dispute between owner and contractor. As far as possible matter is solved, at very first or second level only. In extreme cases matter is referred to court. The judiciary procedure and law takes very long hence people to avoid it The communication of proposals, the acceptance of proposals and the revocation of proposals and acceptance, respectively are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it. Communication is complete is as follows: 1. Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made 2. Communication of an acceptance is complete when it comes to the knowledge of the Proposer 3. Communication of a revocation is complete when it comes to the knowledge of the person against whom it is made

Acceptance by performing conditions or receiving consideration: Performance of the condition of the proposal, for the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void The consideration or object of an agreement is lawful, unless it is forbidden by law, Or, is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent or -the court regards it as immoral, or opposed to public policy.

-In each of the above cases, the consideration or object of agreement is said be unlawful. Every agreement of which the object or consideration is unlawful is void CONCLUSION: The well managed chain of responsibility and proper role clarity of individual, who are functioning in the organization, is lead to mitigate the confidence level of management. By well mapped structure time involved in decision making by the management it gets reduced. Role and responsibility given for identifying the project risk involvement & opportunities lies in the contract which lead management in a comfort zone. Identification of risk well in advance enable to minimize the cost. Where as opportunities brings organisation with some new claim of hidden item/ extra claim which add on the revenue. Hence by Contracts management organisation excel in the business growth.

Apart form the above all Contracts are required to be let in accordance with certain statutes. The performance of construction work is done pursuant to contractual agreement. Although there are numerous types of contracts, the contractor's obligation and initial concern is much more basic. With the proper understanding of the basic requirements for the formation of legal contract, the contractor will be better able to avoid pitfalls, lawsuits and liabilities. The essential contractual requirements are an offer, an acceptance of the offer and consideration

Bibliography : 1. A Guide to the Project Management Body of Knowledge. William R.Duncan 2. Construction contracts and contracting for Construction Industry Managers SODE, NICMAR.