UNIT 4 |1

HINDUSTAN COLLEGE OF SCIENCE AND TECHNOLOGY

DEPARTMENT OF CIVIL ENGINEERING

NOTES OF
CONSTRUCTION TECHNOLOGY & MANAGMENT UNIT 4

SUBMITTED TO Mr.V.K GUPTA

(Deptt.of Civil ,HCST)

SUBMITTED BY:FINAL YEAR GROUP 4 (CIVIL A)

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GROUP MEMBERS
SERIAL NO ROLL NUMBER NAME OF THE STUDENT

1 2 3 4 5 6 7 8 9 10 11 12

0806400049 0806400050 0806400051 0806400052 0806400056 0806400057 0806400058 0806400059 0806400060 0806400061 0806400062

DIVYA GUPTA FARHAN ALI GAJENDRA KUMAR GAURAV LAMBA JITENRA SINGH KULDEEP KUMAR KUMUD KUMAR MANOJ AGRAWAL MAYANK BANSAL MOHIT GUPTA MUDIT PRATAP SINGH 0806400063 MUNESH KUMAR

UNIT 4 |3 TOPICS PAGE NUMBER

LEGAL ASPECTS OF CONTRACTION

LAWS RELATED TO CONTRACTS

LAND ACQUISATION

LABOUR SAFETY & WELFARE

CONTRACT

12

TENDERS PROCESS OF TENDERING

16 17

EVALUATION OF TENDER

18

CONTRACT NEGOTIATION & AWARD

20

SETTLEMENTS OF DISPUTES

22

ARBITRATION

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LEGAL ASPECTS OF CONTRACTION

A Construction project must fit into the legal frame work governing the property. These include governmental regulation on the use of property and obligation that are created in the process of construction. A construction project is a complex net of contracts and the other legal obligation each of which must be carefully considered. A contract is a exchange set of obligations between two or more parties, so it must be designed to ensure that each side is capable of performing the obligation set out. Following are the main essential requirement of a valid contract so that it may be legally binding on both the parties.
(A) Legally Complement parties:-

(i) As per Indian contract act, the partys entering into contract should be legally competent. (ii) One who is the age of majority and is of sowed mind can make the contract. (iii) Subordinate authority who has not been directed or authorised cannot involved in any contract.

(B)

Free Consent of parties:-

(i)It means concurring of two minds in respect of the same opinion, purpose or understanding as regards the course to be pressured. (ii) Contract is said to be free when - It is not caused under any influence. - It is not caused by mistake. - It is not caused by misrepresentation. - It is not caused by fraud.

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(C)

A lawful subject matter

Contract become invalid in the following cases:- When the proposed contract violates some law. - When it is contrary to the rule of common law. -When it is forbidden by the public policy. Also, any person cannot escape from the responsibility by simply saying that he entered into the contract unknowingly.
(D) Proper and valid consideration:-

(i) Legally, valid consideration is termed as the act or a promise to do something in return of the money or promise or grant of some interests by other party. (ii) The consideration may not be adequate or a full return of the promise ,but it must be component ,real and should not be illegal ,ambiguous, impossible or uncertain.
(E) parties:Meaning full contract in writing and signed by both

(i) Meaning of agreement should be certain or capable of being made certain. (ii) According to the law the contract must be signed by the authorised person of both the parties. (iii) In case of public bodies, an official duty authorised for this purpose signs the contract ,fixing the seal of the public body on the agreement.

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LAND ACQUISITION

A project may require temporary and permanent acquisition of lands. 1) Permanent land:Permanent is the land to be acquired throughout the expected life of the project alone the pipeline route and the facility sites such as pump stations, metering stations , block valve station , anode ground beds ,power line pylons etc. 2) Temporary land:all areas which are needed in addition to the permanently acquire land in order to carry out the construction and installisitation of the pipeline system and associated facilities are acquired on temporary basis . This includes contraction camp, storage yards and other auxiliary areas needed for the location of equipment and materials. The constitutional framework:Acquisition and requisition of property falls in the concurrent list, which means that both the centre and the state govt. Can make laws on the matter. There is no. of local and specific laws which provide for acquisition of land under then but the main law that deals with acquisition in "The Land Acquisition Act, 1894" Land can be acquires either by state or the centre govt. for the purpose listed under state and centre list respectively unless the central govt. delegates the task to the state govt. under art cal 258(1) of constitution. Article 31(2) categorically states that a land can be acquired by the state only for the public purpose. In every case land acquisition must take place in a manner that fully protects the interests in a manner that fully protects the interests of land owner and also of those whose livelihood depend on the land being acquired

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LAWS RELATED TO CONTRACTS

The Law of Contracts is the basis of business law because the bulk of transactions of the people engaged in trade, commerce and industry is based on contracts. In India, the Law of Contracts is contained in theIndian Contract Act,1872. The Act lays down the general principles relating to formation, performance and enforceability of contracts and the rules relating to certain special types of contracts like, Indemnity and Guarantee; Bailment and Pledge, and Agency. The Partnership Act; the Sale of Goods Act; the Negotiable Instruments Act; the Companies Act, though technically belonging to the Law of Contracts, have been covered by separate enactments. However, the general principles of the Contract Law are the basis for all such contracts as well. The principal features of the Law of Contract are:

The parties to the contract make the law for themselves. The Act is not exhaustive since it does not take into its purview all the relevant legislations. It does not override customs or usages. The Law of Contracts is not the whole law of agreements.

As per the Indian Contract Act,1872, a "contract" is an agreement enforceable by law. The agreements not enforceable by law are not contracts. An "agreement" means 'a promise or a set of promises' forming consideration for each other. And a promise arises when a proposal is accepted. By implication, an agreement is an accepted proposal. In other words, an agreement consists of an 'offer' and its 'acceptance'. An "offer" is the starting point in the process of making an agreement. Every agreement begins with one party making an offer to sell something or to provide a service, etc. When one person who desires to create a legal obligation, communicates to another his willingness to do or not to do a thing, with a view to obtaining the consent of that other person towards such an act or abstinence, the person is said to be making a proposal or offer. An agreement emerges from the acceptance of the offer. "Acceptance" is thus, the second stage of completing a contract. An acceptance is the act of manifestation by the offeree of his assent to the terms of the offer. It signifies the offeree's willingness to be bound by the terms of the proposal communicated to him. To be valid an acceptance must correspond exactly with the terms of the offer, it must be unconditional and absolute and it must be communicated to the

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offer or. An "agreement" is a contract if 'it is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is not expressly declared to be void'. The contract must be definite and its purpose should be to create a legal relationship. The parties to a contract must have the legal capacity to make it. According to the Contract Act, " Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of a sound mind, and is not disqualified from contracting by any law to which he is subject". Thus, minors; persons of unsound mind and Persons disqualified from contracting by any law are incompetent to contract.

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LABOUR SAFETY & WELFARE

1. )Payment of Wages Act This act was introduced to regulate the payment of wages, imposition of fines, etc. The term wages includes all remuneration including all allowances, bonus, notice pay, etc ,but does not include house rent, water and electricity charges, travel allowances, medical allowances, pension, gratuity etc. According to this act, wages are to be paid promptly on a monthly basis and if any person is terminated from services, his wages should be settled within 2 days of the termination. This act is applicable to employees having a salary less than Rs.1600 p.m. 2. )Minimum Wages Act This act prevents the exploitation of the unorganised labour in the construction industry by the employers .According to this act, provision is made for the statutory fixation of a minimum rate of wages in the establishment. Wages to construction workers in India is paid either in time rate basis or piece rate basis. According to this Act, different minimum rates can be fixed depending on the class of work, type of personnel employed- adults, children or apprentice and depending on the location of work. 3. Factories Act Under this act, the healthy, safety, welfare, working hours, annual leave, accidents and any penalties are take in care of Regarding health, arrangements for proper cleanliness of the premises, disposal of waste, ventilation and comfortable working temperature are to be maintained. In many Gulf countries, where large Indian workers are employed at many construction sites, the work has to be stopped when the temperature exceeds 40oC. This is according to their labour laws. Adequate water supply and sanitary arrangements are to be made. First aid equipment and ambulances, canteens, rest sheds, proper washing areas, are to be provided. Normally, the working hours are restricted to 8hours/day with a lunch break of hr. and a total of not more than 48 hours/weak. If the worker is engaged on holidays,

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compensation leave is to be given. Over time wages are at twice the ordinary rate of wages. Women mazdoor should be employed only from 6a.m. to 7p.m. In case of accident, proper compensation is to be paid as per the provision. If the workers indulge in violations of the provisions of this Act, penalties are also prescribed.

4. Contract Labour(Regulation and Abolition) Act, (1970amended 1986)

This Act came into force with the aim of regulating the employment of construction labour in certain establishments and providing for abolition of contract labour under certain circumstances. This act contains the provisions for improving the condition of contract labour. This Act should get themselves registered and obtain certificates of registration The welfare and health provisions to be provided to the contract labour-rest rooms, proper ventilation, lighting, water supply and sanitary facilities. First aid facilities and washing are all contained in this act. Payment of wages to each worker is to be made within the prescribed period. 5. Labour Welfare Fund Act, 1965 This Act provides for the constitution of a fund for the financing of activities to promote the welfare of labour. Establishment of State Labour Welfare Board, appointment of welfare commissioner and inspectors are all envisaged in this Act. The accumulations in the fund come from: all fines realised from employees, unpaid wages to workers including gratuity and bonus, grants and loans towards the fund, and any voluntary donations. The amount in this fund is spent for welfare of the workers such as: Creating community and social education centres, games and sports, tours and excursions, recreation and entertainment, developing home industries for women and unemployed labour.

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6. Workmens compensation Act, (1923,amended-1984) This Act is for providing social security to the workers. Compensation is to be paid to the workers in case of accidents sustained during the course of employment and the amount is decided upon its seriousness. The dependents are eligible to receive the compensation. This act is applicable to all persons employed in construction, maintenance, repairs or demolition work under this act, financial relief is given in the following cases:(i) (ii) (iii) (iv) In case of death On account of occupational diseases For permanent/partial disablement Half-monthly payments for temporary disablement

7. The trade Union Act, 1926. Trade Union is an association of persons formed mainly for the purpose of regulating the relations between employers and employees. A minimum of 7 workers can join together and form a trade union. The union has to get itself registered with the Registrar of trade union. The relevant details such as the name, address, the objectives of forming the union and the subscription rate are all to be specified before registration. Normally, the objectives of a trade union are(i) Evolving a wage formula for the workers linking the cost of living and the existing standards of living.

Improving the working condition of the workers by limiting the working hours, providing leave facilities, education and other welfare facilities; getting adequate bonus, protecting the workers against improper treatment, providing security of employment and getting justice in case of imposed punishment

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CONTRACTS
A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing, though contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific performance of the contract or an injunction. Both of these remedies award the party at loss the "benefit of the bargain" or expectation damages, which are greater than mere reliance damages, as in promissory estoppel. The parties may be natural persons or juristic persons

TYPES OF CONTRACT

1. 2. 3. 4. 5. 6. 7.

Item Rate Contract Percentage Rate Contract Lump sum contract Labour contract Materials supply conract Cost plus percentage rate contract Cost plus fixed fee contract

1) Item Rate Contract:

Merits:

This method ensures a very detailed analysis of cost and payment to the contractor and also is based upon detailed measurements of each item actually done, so this method is more scientific. Changes in drawings and quantities of individual item can be made as per requirements within agreed limits. There is no urgency of providing detailed drawings at the time of awarding the contract. It can be prepared later on. A contractor is asked to write down the rate of individual item in figures and words both so it is not easy to form a cartel during the submission of tender.

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Demerits:

Comparative statement of item rate tenders are more elaborate and comprehensive and intelligent scrutiny is required. A contractor may quote some items rates in words excluding paise intentionally in order to tamper in rates. Additional staff is required to take detailed measurements of work. The scope of saving with use of inferior quality materials may prompt the contractor to do so.

2) Percentage Rate Contractor: Merits:

The ranking amongst the contractors is easily known just on the opening of the tenders. As there is no provision to quote contractors own rate for an individual item, benefit due to increased quantity with a beneficial rate cannot be availed by contractor.
Demerits:

A contractor is required to write down only the percentage above or at the time of submission of tender. There may be difficulty to divide the work at equal amount among the contractors.

3)Lump sum Contract: Merits:

As the total cost of the work known beforehand the owner can arrange the fund in time. Detailed measurements of the work done are not required except in respect of additions and alterations.

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Due to competition among the contractors, the contractors tries to take the work up even at the less profit, resulting in low cost of the work.
Demerits:

The owner aims to get maximum work out of money he spends whereas the contractor tries to get maximum profit out of money he receives this causes conflict in interests. It is very essential the work must be defined accurately, specifications must be fully specified and the site conditions must be fully explained otherwise disputes can arise later on.

4)Labour Contract: Merits:

The materials stored by the department are thus utilized. The work done through labour contract is of superior quality as better quality materials are arranged by the owner. The overall cost of construction may be less, as no profit is paid on the cost of materials. This system is very convenient for private building construction.
Demerits:

The owner and the department will have to remain vigilant and watchful over the materials used, the contractor may overlook the material wastage involved. A area storage area is required to store the various kinds of materials.

5)Materials Supply Contract:

Merits:

Payment is very prompt, so the contractors try to take supply orders at less profit, resulting in low cost of materials. The owner/department has nothing to worry for any loss, breakage, etc.

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Demerits:

Constant control over quality of materials received.

6)Cost Plus Percentage rate contract:

Merits:

It is particularly suitable when work can not be executed by other types of contracts due to uncertainty and fluctuations in the market rates of labour and materials.

Demerits:

A proper control over purchase of maerials and of labouer shall have to be exercised by the dept.

7)Cot Plus Fixed fee contract: Merits:

Since the fixed covers the contractors overhead charges and profit the contractor will try to finish the work as early as possible, so the owner gets the advantage of early completion.

Demerits:

The cost of project is unnecessarily increased because of purchase of materials at higher prices and engaging costy labour in an attempt to reduce the project time.

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TENDERS
When ever a government agency or a firm wants certain works to be done, services to be rendered or any purchases to be made, they float tenders in order to gets the work done at competitive prices. The person who quotes the lo lowest price agreeing to the terms and conditions imposed on him, will have to sign an agreement stating that he will perform the said work as per requirement of the owner/client. Calling of tenders and entrusting the works based on these tenders, enables the owner/client to get the work done at least cost. Also, the selection of contractors can be made based on his experience and capacity. By this method of awarding works, personal interests, prejudices, preferences, partiality etc. can be avoided.

TYPES OF TENDERS
The different types of tenders are 1.

Open Tenders.

This type of tender invites the contractors to bid by open advertisement

in the Indian Trade Journals and other newspapers. 2.

Limited Tender. Single tender.

In this type, only a selected number of contractors are invited to

quote their rates for the supply of articles. 3. It means invitation to only one firm to render a service by quoting their

rates. If the client finds that the quoted rates are too high, then there may be negotiations prior to the agreement of the contract. 4.

Rate Contract.

This contract is normally used for supply of store items. It specifies the

supply at a fixed rate during the period of contract. The quantities are not mentioned in this type of contract and the contractor is bound to accept any order which would be placed before him.

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Tender Process
1). Tender process is determined: the organisation requesting the tender

will determine the type of tender that will be used, as well as what will be involved in the tender process. 2). Request for tender is prepared: the request for tender outlines what is required, the contractual requirements and how you should respond. 3). Tenders are invited: the value, complexity and business category determine how tenders are invited. 4.) Suppliers respond: you should first obtain all relevant documentation. Then: a. Attend any pre tender briefing sessions being conducted b. Clarify any uncertainties c. Plan your response d. Prepare your response e. Submit your response in the right format, on time and at the right location 5). Evaluation and selection: each tender will be checked for compliance, and if compliant, then evaluated against the criteria specified in the tender documentation. The tender that offers best value for money will win the business. 6.) Notification and debriefing: when a contract has been awarded, the successful tenderer will be advised in writing of the outcome. Unsuccessful tenderers are also advised and offered a debriefing interview. 7.) Contracts established and managed: generally a formal agreement will be required between the successful tenderer and the relevant agency.

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...........ELEMENTS OF TENDER PREPRATION..........

Proposal Element
1)Strategy and Messages

Characteristics of a Successful Proposal

The value proposition (and this could be based around pricing) is clear to the reader. Key tender messages are cohesive, consistent and compelling A clear understanding of the client needs is demonstrated. Offerings are matched to these needs and supported with strong and relevant proof.

2)Client Focus

3) Competitive Focus

Proposed benefits are framed in a competitive context. Key sections, like the cover letter and executive summary, are present and are used to highlight and reinforce the competitive position.

4) Compliance

Tenderer instructions and information requirements are strictly adhered to, especially compliance with format, content and sequencing of requested information. Information provided is directly relevant to that requested with the most important details presented first. Use of boilerplate material has been carefully scrutinised. Use of motherhood statements has been avoided The document portrays a professional image (consistent with the importance and nature of the opportunity)

5) Content

6) Packaging

U N I T 4 | 19 irrespective of whether the tender is conveyed in hard or soft copy format 7) Structure The document has a logical, consistent and compliant flow. Aids to document navigation are present (contents, tabs etc). Appendix materials and other supporting information are clearly identified and referenced. Documentation is client focussed and informative even down to header and footer design. The layout makes information a pleasure to read. The document includes good use of diagrams, tables and figures to illustrate key issues and concepts (a picture is worth a thousand words) The document is written in plain English, jargon is eliminated and persuasive writing techniques (like active voice, action captions and descriptive headings) are used

8) Page Design

9) Graphics

10) Writing Style

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Stages of awarding contract

The stage of awarding construction contract is dependent of the methods of delivery of the project. In the tradition way of delivery, contract documents are prepared after the completion of design. Generally designer helps the owner to prepare estimate of the project. If owner maintains an engineering department, an estimate is prepared by the engineering department. Specification of the items used for construction is very important from point of view of quality of design and quality of construction. Specification is generally prepared by the designers. During the design, designer may take owner advice in preparing specification of the items. The drawing and specification prepared by designer form the basis for the awarding contract. A tender notice is advertised in the news paper depending upon the type of work. It may be in nation newspaper or local news paper. In a large project, tenders are invited from person/company from any country called the global tendering . A typical tender notice is given in the table. Sometime this process is carried out in two stages. In the first stage the aim is to select the contractor who has good experience of executing the similar kind of job and have required technical competence. The process is called pre qualification. The contract documents are sold to these pre qualified contractors. Many a time designer himself identifying the competent contractor based on his experience. The contract document is bought by the contract or by paying some fees. Contractor prepares their offer and submit to the owner. The offer by contractor to the owner is called Tender and process is called submitting tender. Sometime owner ask to submit the tender in two separate documents. The first offer provides the specification of the item to be used. This is called technical bid . And price offer is given separate which is price-bid. After getting the tender, owner studies the tender documents, does comparatives studies and awards the contract to the lowest quoted contractor or who has given better technical deal. Sometimes contractor quotes the specifications which are higher or lower than the owner specifications. To get competitive bid, owner may provide this specification to other contractor and ask them to go for price bid. There is scope of using value engineering in this process also. Thus the complete process of awarding contract can be summarized as follows.

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1. 2. 3. 4. 5. 6. 7.

Preparation of contract document. Advertising the tender, tender notice. Submitting Tender by contractor. Study of the tender by owner Clarification regarding conditions or specifications Preparing comparative list Awarding contact

Disputes And Arbitration

During the performance of the contract, disputes may arise between the employer, engineer and contractor for various reasons of default in performance, progress payment, rates, time, etc. Negotiated amicable settlement is the endurable, quick solution, which requires mutual trust, cooperation, give and take policy, flexibility instead of rigidity of one's view, and vision for future relations. Unresolved disputes can conveniently be resolved through arbitration, which bears the stamps of law of natural justice, than resolution in court. Again, arbitration cannot succeed unless there is cooperation between contractor, client and arbitrator(s). Many times, when the award received is not palatable to either of the contesting parties, the unhappy party tries to drag on further in court to set aside the award. This defeats the very purpose of the arbitration process. The court does not set aside the award on flimsy ground or sits again for the judgment but on specific grounds. The court may even ask the arbitrator to review his award if any item is omitted. The responsibility imposed on the arbitrator is conduct the proceedings with prudence and diligence and not arbitrarily or whimsically and discharge his responsibilities in a cordial manner. The reasons for setting aside the award has been set out in Arbitration Act, 1940, which has since been modified in Arbitration & Conciliation Act 1996. As per the new Act, the award itself is considered as a decree and it need not be filed in the court. It is final and binding on both parties unless disputed by either party. The tendency to challenge the award should vanish, instead the aim should be to reach a negotiated, agreed, amicable and early settlement. It is hoped that better awareness and acceptance of this method fructifies in future.

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Why does disputes arise? 1. There are errors, ambiguities and omissions in the drawing and specification. Also, there is lack of proper coordination during construction. 2. Not complying with the intent of the contract or not adhering to the standards in the performance of work(Quality of conformance problem). 3. Incomplete, delayed, inaccurate response to the question by any of the party in the contract. 4. Unforeseen changes in sub surface conditions. 5. If site condition differs from those described in contract documents. 6. Extra work or changed work order 7. Not meeting schedule by the contractor. 8. Inadequate financial strength on the part of the owner, contractor or subcontractor.

Origin of Arbitration Resolution of disputes through arbitration is an accepted method from time immemorial. China, India and Italy are the first few countries that used this method. British India, from the 18 th century, had regulations on arbitration in Bengal, Bombay, Madras, etc. The first Indian Act of Arbitration was enacted in 1899; The next was the Arbitration Act 1940; The recent one is Arbitration and Conciliation Act of 1996. Arbitration Acts The arbitration Act, 1940 has been repealed under Section 85 of Arbitration and Conciliation Act 1996. Not withstanding such repeal, the provisions of the Arbitration Act 1940 still apply to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties, but the Arbitration Act 1996 applies to arbitral proceedings which commenced on or after the Act came into force.

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