Contract Management Book

TENDERS & CONTRACTS AND
CONTRACTS MANAGEMENT
Tenders & Contracts & Contract Management
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Chapter 1
Fundamentals of Contract
INTRODUCTION
The word contract is derived from the latin word Contractus which means drawn together.
In construction major work is done through contract. Every time a contractor makes an offer to do
a construction work and every time the offer is accepted, a contract is formed. It determines the
obligations of the parties in their dealing with each other.
The parties to the contract are bound to each other for a certain period of time by a
unique and exclusive relationship which they have created for their mutual benefit.
This unique relationship called Privity of Contract gives them obligations which they
agree to accept so that they both may benefit.
This contractual relationship persists until the contract is discharged or terminated, i.e., until it is
performed or terminated because of impossibility, by mutual agreement, by bankruptcy or by
breach of contract.
An agreement without any obligation does not develop any contractual relationship. The court shall
not enforce an agreement which violates the provisions of law, or which is against the established
public policy which has adverse effects on the morale of the society as a whole.
A person cannot escape from the responsibility by simply stating that he entered the contract
unknowingly. It is the duty of the contractor to study the legality of the subject matter before
entering into a contract.
HISTORY OF CONTRACT IN INDIA
Introduction to law ,indian legal system
Law Anterior to Contract Act : (Introduction of English Law to India) The characters of the 18th
century which established the courts of justice for the three presidency towns of Calcutta, Madras
and Mumbai, introduced in their jurisdictions English Common Law and Statute Law. The
application of English law to the natives of India within the jurisdiction of the Supreme Court led to
many inconveniences. This is due to the fact that laws are created to stabilize a society. Each
society has a particular culture. So, to preserve the culture, laws are formulated accordingly. If the
laws of a culture are implied on another culture it will create chaos.
To obviate this, the statute of 1781 empowered the court at Calcutta (the then Supreme Court)
and statute of 1797 empowered the courts of Madras and Bombay (the then recorders court) to
determine all actions and suits against the inhabitants of the said towns, provided that their
succession and inheritance to lands, rents, goods and all matters of contract and dealing between
parties should be determined in case of Muslims, by the law and usages of Muslims and in case of
Hindus by the laws and usages of Hindus, and where only one of the parties should be a Muslim or
Hindu, by the laws and usages of the defendant.
This continued till the formation of the Indian Contract Act.
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THE INDIAN CONTRACT ACT : ACT IX OF 1872.

Section 1 :
Preamble : It is expedient to define and amend certain parts of the law relating to contracts, i.e.,
Law of religions.
Title : This act may be called as Indian Contract Act 1872.
Extent and Commencement : It extends to the whole of India except the state of Jammu and
Kashmir, and it shall come in force from September 1st, 1872.
Section 2 :
Following terms used in ICA 1872 which need to be understood :Interpretation Clause : In this act the following words and expressions are used in the
following senses, unless a contrary intention appears from the context.
Proposal : 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 to other such act or abstinence, he is said to
make a proposal.
Promise : When person to whom the proposal is made signifies his assent thereto, the proposal
is said to be accepted. A proposal when accepted become a promise.
Promiser and Promisee : The person making the proposal is called the Promiser and the
person accepting the proposal is called the Promisee.
Consideration : When at the desire of the promiser the promisee or any other person has done
or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing
something, such act or abstinence or promise is called consideration for the promise.
Agreement : Every promise and every set of promises, forming the consideration for each other
is an agreement.
Promises which form the consideration or part of the consideration for each other are called
reciprocal promises.
An agreement not enforceable by law is said to be void.
An agreement enforceable by law is a contract.
An agreement which is enforceable by law at the option of one or more parties there to, but not at
the option of the other or others is a voidable contract.
A contract which ceases to be enforceable by law becomes void.
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There must be an offer or a proposal which the person accepting has had an opportunity of
considering and which when he accepts he knows will form a binding contract. In other words, the
proposer and the acceptor must agree upon the same thing, in the same sense. Unless this is
done, do not constitute a contract. This rule is essential in order to avoid inconvenience in
business, and leave no doubts in the minds of either party on the matter.
EVERY CONTRACT IS AN AGREEMENT BUT EVERY AGREEMENT IS NOT A CONTRACT
Consideration, in legal sense, is defined as an act or promise to do something by one party in
return of an act or promise by the other party. It may consist of paying definite amount or giving
interests . etc.
In all engineering contracts consideration is in the form of an amount of money and it is clearly
mentioned in the contract.
As per ICA, it may be executory (future), executed (past) or present and all types of considerations
are included in the law.
Impossible promises or acts are not entertained by law because of the absence of a valid
consideration. Section 25 of ICA provides for an exception to the general rule that agreement
without consideration is void.
i)
ii)
iii)
iv)
The contract must be made in writing.

It must be registered according to the law of registration of documents.
It must be between parties standing in near relation to each other.
It should proceed out of natural love and affection between the parties.
These principles are based on the principles of equity.

Trade Usage (TU): It is possible for trade customs or trade usage to form a part of the terms of
contract, although not expressly incorporated in the written or the oral agreements of the parties.
Where the contract is silent about a particular item or fact, the court may be guided by the
prevailing practice or custom of trade in the locality w.r.t. particular item of trade. Following are
the requirements to be satisfied by a trade usage to be made acceptable to the court.
i)
Certainty : TU must be certain. It must be with the same degree of certainty as any
other contractual term. The issue of certainty is the issue of law.
ii)
Lawful :
The TU must not be contrary to law. A TU giving conduct or behavior which
is illegal would not be entertained by law.
iii)
Reasonable : The TU must be reasonable in the eyes of law, i.e., it must be fair and
proper and such that a right minded and honest person would adopt. A trade usage which
is of general convenience to all the parties engaged in a trade will not be usually regarded
as unreasonable.
iv)
Well-Known :
TU must be notorious, i.e., to say so well known in the trade that any
person who make the contract knows it. The proof of notoriety is a matter of evidence.
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Offer and Invitation to Offer :

The word Proposal is synonymous in English with Offer. But the language of these definitions
confine proposal to an offer to be bound by promise. Before the parties enter into a contract,
preliminary negotiations usually take place between them. A party may ask for some information
or supply some information and invite the other party to make an offer is the intention of the party
who is supplying the information. The test for differentiating an offer from an invitation is that does the person who is making the statement intend to be bound by it as soon as it is accepted or
does he intend to do some further act before he becomes bound by it the former amounts to a
proposal or an offer. As for e.g.:- Invitation of Tender (NIT), invitation by a company to invest in
shares, Auction sales.
In such a case, the inviter retains the rights to some other Act (to accept/reject, to allot/not allot
shares, refuse to sell, withdraw or postpone the auction sale.
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ASSIGNMENT 1
1.
Explain the following terms with examples:a.

Privity of Contract
b.
Consideration
c.
Trade usage
d.
Offer and invitation to offer.
2.
Explain how the contracts were governed before I.C.A. 1872 came into existence.
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Chapter 2
Various Parts of Contracts
A contract contains the following parts :1)
2)
3)
4)
5)
Evaluation of contract documents
Agreement : It controls the legal aspects of the contract.

Conditions : General and special; it controls the method of operation of the contract.
Specifications: Control quality of materials and workmanship of items of work and generally
reflects the class of the building.
B.O.Q. and
Drawings :
B.O.Q. and drawings control quantities of items of work and financial
aspects of work.
These parts are complementary to each other and they all go together as one. If the contract says
that a stipulated order of superiority is indicated, then in the event of a dispute, the designer
decides which part of the contract governs.
I. The Agreement :
It is a brief of the project and appears to consist mostly of
statements of facts. It is the most important part both in law and in fact. It contains 1)
The names of the contracting parties.
2)
A description of the work and the address (sometimes not more than a title).
3)
A list of contract documents as above.
4)
The name of the designer.
5)
The contract sum or amount.
6)
The procedure of payment.
7)
The contract time or period of completion or specific date.
8)
The signature of the contracting party and the witnesses.
The agreement is the heart of the contract and anything wrong with the heart jeopardizes life. The
statements made in the agreements are of vital importance as they go to the root of the contract
and the law says that anything which goes to the root is vital.
II.
General Conditions :
Definition
Clauses which relate to the work as a whole are written in a separate contract document and are
known as general conditions of the contract.
need of contract document

Object
The main objective of framing the conditions is to avoid dispute between the parties concerned
and thus to keep them away from the court of law.
Importance
These are framed in the legal phraseology and in the case of complicated contracts, the lawyers
are entrusted to frame them. Thus, they carry more weight and any breach of contract will lead to
serious legal formalities.
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III.
Regularities
1)
No. of Clauses :
There is no definite rule regarding the number of clauses to be
included in each type of contract. It mainly depends upon the character of work. Clauses
which are suitable for one work may not be suitable for the other works. The person
framing the conditions must make a careful study of the work before framing the
conditions of the contract.
2)
Relation with the technical provisions : (Specifications)

There is no sharp
distinction between the technical provisions. Few clauses may fit in either group and it is
the engineers who decide whether a particular clause is to be inserted in the technical
provisions or in the general provisions.
3)
Use : Technical provisions are used at any stage of work but clauses in the general
conditions may not be used at all during the contract period. This is due to the fact that the
situation for which it was framed may not have arisen during the contract period.
Conditions generally related to :1)

2)
3)
4)
5)
6)
7)
8)
9)
Documents : BOQ, drawings, IS, Notices, etc.

General Obligations of Contractor : Access to the work acts, byelaws, regulations, tensing,
insurances, setting outs, etc.
Relating to Labour and Personnel : Accidents, Contractors representative, first aid, rates
and wages, laws, etc/
Relating to assignments and sub-letting, sub-contracting, etc.
Regarding Execution of Works :
Alterations, extra items, damages, defective work,
materials, protection, safety services, etc.
Relating to mmts. and payments : Method of mmts., payment to sub-contractors.
Relating to default and non-completion, bonus, etc. Bonus clause is very complex and
needs separate discussion.
Relating to settlement of disputes.
Special Conditions : Equipments nominated supplier, environmental awareness, etc.
The general conditions of the contract are, as the name implies, those terms and conditions which
have such a general nature that they apply to the work as a whole. They are important because
they are agreed to as requisites to do the work, i.e. they must be carried out if the contract is to
be performed and completed as a whole.
If the conditions of the contract are obscure (not prominent) or of lesser requirements, they
should be placed elsewhere in the contract because they are not the true terms and conditions
e.g. properly heated or A/c site office or serving chilled ice cream.
Is there a breach of contract? No! For a contract to be breached, something important must
happen, or not happen and it is not likely that owner could sue the contractor for breach of
contract in these cases.
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A breach of contract is defined as failure without legal reasons to comply with the terms of
contract. When a contract is breached, the party not guilty of breach is relieved by law from his
duties arising out of the contract, and he may seek remedy for the breach of law.
The law provides for two common remedies for breach of contract :
1) Damages to be paid in money to the hurt party by the party in breach of contract or
2) Specific performance of the contract by a court order.
The second remedy is difficult to apply because the breach is due to some kind of inability in the
first place and who would want a contractor doing a construction job under a court order?
If a construction contract is breached because of lack of money, damages may be difficult to
collect. This is one reason for a performance bond in which a surety guarantees contractors
performance. If a breach of contract is from the owners side, contractors usual remedy for such a
breach is to place a lien (mortgage) on the property the construction work and land on which it
stands.
A lien is a statutory legal claim registered against real property or work done and materials
supplied to the property.
Documents for contract are not the same as tender (bidding) documents. Documents for tendering
are bidding documents and others are contract documents. To distinguish clearly between them,
we must know their uses and functions for which they are intended.
The critical point is the time when a contract is made.
Prior to this event, documents cannot be called contract documents, they are called bidding
documents which may or may not lead to a contract, as an owner is not bound to accept any of
the bids he receives.
Tender documents are Notice of tender (Invitation), Instruction to bidders, Bid form (blank),
Agreement (blank), General Conditions, Special Conditions, Specifications, BOQ and Drawings, Bid
bond (EMD), Performance bond (blank), Addenda, Modifications.
B.O.Q. (Bill of Quantity) :
1)
2)
3)
4)
5)
6)
7)
Title of the project, title of sections, name and address of the Architect or Engineer
(Designer).
Description of items, IS references.
Rates and amount of each item against the description.
Quantities are provisional; increase, decrease or omission will have no extra claims for
damages on these grounds.
BOQ should be completely filled (alternate items also) in ink.
No alterations to be made in BOQ unless authorized by the designer of the project.
Rate column should be filled in both words and numerals. In case of discrepancy, words
shall prevail.
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8)
9)
10)
11)
In case of error in the amount column, the rate shall be firm and amount shall be
amended.
All errors in totaling and C.F. shall be corrected.
Method of measurements shall be of IS 1200 or SP-27.
Any errors in description, quantities or omissions of items shall not vitiate this contract
but shall be corrected.
IV.
The study of specifications is dealt in Chapter Nos. 6, 7 and 8.
V.
Drawings :
The following types of drawings are prepared in the whole project life cycle :1)
2)
3)
4)
5)
Preliminary drawings : These drawings help in preparing approximate estimate of the

project in the conceptive stage for feasibility studies.
Tender drawings : These drawings are prepared in the developing stage of the project.
These drawings help the contractors to bid for the project.
Contract drawings : These drawings are prepared after the contract is executed and
these drawings help contractor to build the project during the executive stage of the
project.
Workshop drawings : These are the detailed drawings basically prepared by a
contractor during the executing stage. These drawings help contractor to execute the
complex activities by his method statement. These drawings are to be approved by a
consultant or client before executing.
The Built drawings : All the variations of providing services designed during the actual
execution of the project are recorded in this form. These drawings help in the
maintenance of the project.
DISCUSSION ON BONUS CLAUSE :

Introduction of Bonus Clause in Contracts
In all civil engineering contracts, the contractor is subjected to liquidated damages and penalty
provision if he delays the work which results in loss to the owner.
There is an argument that it is natural and fair that the contractor be entitled to bonus if he
completes the work earlier than the scheduled date, as the owner can benefit from the early use of
the facility. Hence the bonus provision must be included in contracts.
The contractors and their associations are asking for a bonus clause. Even some enlightened and
progressive owners consider it fair to have bonus provision. Many committees set up by the
government have gone into the depth of this question and they have recommended the
acceptance of the principle of bonus.
There are some valid points which are usually raised by the owners, contractors and users.
Contracts are not full turnkey and are usually divided into many parts so even if the particular part
of the contract gets ready earlier it may not be useful and give returns to owners or users.
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Considering the present situation of resources, can any owner be confident of full-filling his
obligations as per the contract in a satisfactory manner and in time?
There are many other departments with whose co-operation, commitment and performance the
owner and contractor can complete on schedule. Can the owner expect such commitments from
these indirect participants under the present environment? With all good intensions there may be
some delays from the owners side and the date of completion may have to be extended. So, in
such cases will not the contractor expect the extended date to be considered for bonus? Can a
contractor be confident in his own capacity in terms of organization, resources and technology to
finish the work ahead of time?
Is the contractor prepared to accept that bonus is payable only on the basis of the contracted date
of completion and not revised due to extensions because of delay either on his side or on the
owners side?
With all the best planning there could be a delay on the contractors side and in such a case is he
prepared or resourceful enough to achieve completion as per the original schedule?
Similarly there may be a delay from the owners side in such a case where the contractor is getting
time extension, if prepared to put in extra resources and complete the work according to the
original schedule, is he entitled to bonus?
The user may consider that the contractor may scarifies quality to complete the work ahead of
time to get a bonus.
The user and owner also consider whether the bonus will create another point of dispute,
arbitration and court case?
The owner and user wonder whether they can make the bonus question absolute and not an
arbitrable item. What would happen if the scope of the work changes, quantities change and a
new time schedule is adopted? Will bonus be due on a revised time schedule?
There are many owners who consider bonus as a good incentive which makes both the
department and the contractors to plan works and contracts in a better manner, give a thought to
all possible problems and find out the possible solution in proper time.
The users consider that even if the contractor puts extra efforts and resources to complete work
according to original time schedule inspite of delays on his part on the part of the owner, the
benefits the contractor gets are considerable over and above the bonus. Contractor saves on his
OHs, his resources become free for other works, he gets a better image, the entire organization
becomes more dynamic, he gets immediate cash instead of going for arbitration or court and get a
devalued award amount after a considerable time.
What should be the bonus?
The question as to what could be the bonus quantum has also been taken up and discussed in
committees. Many views have been expressed.
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i)
ii)
iii)
iv)
v)
Same as liquidated damages.

Savings in supervision cost of owner.
Savings in interest charges on finance and investment by owner.
Savings in escalation amount of the extended periods on owners failures.
Early revenue gain or benefit on use of the constructed facility.
Conclusions and Recommendations

The introduction of a bonus clause is not new. It has been introduced and implemented in many
government and private contracts.
From all angles it is to be concluded that reward for early completion in terms of bonus will
definitely improve the construction sector performance and fairness will be introduced into the
contracts.
It is worthwhile introducing the Bonus Clause on critical works and where the scope of the work is
definite.
i)
ii)
iii)
iv)
v)
Bonus to be substantial to make the proposal attractive and acceptable.

The original dates of completion be the criteria irrespective of extension either due to
contractors or owners fault.
It may be in terms of amount per day with or without ceiling.
It may be worthwhile to introduce even stage wise bonus with proper safeguard for
final completion. This will make both owner and contractor to plan better and be alert.
To safeguard and avoid disputes by making bonus clause not arbitrable on any ground.
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ASSIGNMENT 2
1.
Differentiate between Tender and Contract documents.
2.
The general condition in Indian tenders is as under :

The information & data shown in the drawings & mentioned here in are furnished for
information only & govt. will not be responsible for accuracy thereof & / or for any
deductions, interpretations or conclusions drawn there from the contractors. Contractor
shall deemed to have visited the site, obtain all information & satisfied himself before
submitting the tender. Analyze critically the above condition.
3.
It was agreed in the contract that contractor shall never litigate for any claims which may
arise at a later stage. Will this condition prevent the contractor from going to court?
4.
A contractor sued an architect under the building contract for negligent measurements &
certifying for a much less sum then the balance due to the contractor. Can contractor
succeed in sueing & getting the due payment?
5.
In a contract of a multistoried building having basement for car parking, the total works
was handed over by the contractor to client after consultants approval. The specifications
did not show waterproofing to be done in the basement. The oxford dictionary meaning of
basement that is must be water proofed.
During defect liability period basement was flooded due to unprecedented rains & all cars
parked in the basement got damaged. Consultants recommended client to forfeit the
retention money of the contractor saying that which was a substantial amount. As a
contractor what will you argue?
6.
A contractor does not provide safe access to the engineer for checking the works & also he
does not serve engineer tea/coffee & snacks. If both are written conditions of contract is
there a breach of contract from contractor?
7.
Explain the characteristics of conditions of contract and BOQ (Bill of Quantity).
8.
Draft bonus clause acceptable by both (the client and contractor the parties) to contract.
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Chapter 3
Various Types of Contracts
TYPES OF CONTRUCTION CONTRACTS
Direct Cost
Indirect Cost
Overhead Costs
Items of Work
Profit
Costs incurred
for specific
items of work
The Work
At the Job
Operating
Costs that cant

be allocated to
specific items
Costs that cant

be allocated to
specific items
Difference
between all
costs & all
incomes
The Site
The Firm
The Motive
Cost
Fee
Stipulated Sum
Cost Analysis of a Project

(Source : Contracts and Specifications by Glen M. Hardy)
Probably the best and the most direct method to understand the reasons for different types of
contracts is to examine and analyze the costs of construction.
The costs of all construction projects can be divided into two major categories 1) Direct costs and
2) Indirect costs.
Direct costs arise out of the fact of doing construction work.
Indirect costs are those which arise out of the fact of being in the business, whether any work is
being done there or not.
Direct costs are of two types; items of work and job O.H. of items.
Indirect costs are also of two types; i) Operating O.H. Costs and (ii) Profit.
All the direct costs are called cost and all the indirect costs are called fees.
We arrive at one type of contract, costs + fee and if we add costs and fee we come to the second
type of contract i.e. Lump sum.
These two types of contracts represent two extreme poles of contractual and financial relationship.
Most of the contracts lay in between these two.
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The types of most common contracts are as follows :1)

2)
3)
4)
5)
1)
TYPES OF CONSTRUCTION CONTRACTS
Lump sum contract.

Max. cost / Target contract.
Unit price / Item rate contract
Turnkey contracts.
Cost + Fee contracts.
Lump Sum Contract (stipulated sum, fixed price) :
In this contract type, the contractor stipulates (to make an expressed demand) the amount
of money for which he is prepared to do the work. He can do this by the information given
by the owner/designer in a correct and complete form. Information can be made available
through tender documents. In this type, the contractor carries a greater share of financial
risk as he knows the probable total extent of financial commitments. If no changes are
made, the final cost would be the original lump-sum offered This type of contract will be
useful only when it is possible to workout the exact quantities of limited items. e.g. sanitary
block for a school building, a compound wall, a small room for watchman etc. Some
miscellaneous items which cannot be usually carried out under any other form of contract
are given on L.S. basis. E.g. ornamental doors, demolition of existing structures, making an
opening in the existing slab or beams etc.
Contractors obligations in L.S. Contracts : In this type of contract, it is the primary
duty of the contractor to do the work as defined and required by the contract document,
within the time stated in the contract document (Agreement).
The contractors primary right is to be paid the contract amount, usually in installments, in
the agreed manner and at proper times.
The important characteristic of L.S. contract that affects the contractors duty is the legal
concept of a fixed sum for a completed job of work:. It is required by a contractor to
provide and install work that is reasonably inferable there from (the contract documents)
as being necessary to produce the intended results, i.e., in the absence of anything to the
contrary in L.S. contract, the contractor is required to provide and do everything necessary
to complete the work for the purpose for which it is designed.
As for examples, it means that even though the designers drawings for a two-storied
house did not show a staircase, and the specifications made no mention of it, the
contractor would be obliged to install a staircase so that the intended result a livable twostoried house was produced.
The works that are indispensably necessary to complete the whole work are included by
implication, if not specifically in the L.S. contract. If a construction contract is for the
building of a house and it says that the house is to be completed and ready for occupation
by April 1st 1990, this wording overrides any omissions. If the flooring is not specified, the
contractor may provide and install whatever flooring is reasonable for that class of the
house.
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In a L.S. contract, any specific risk can be isolated, described, precluded and provisions can
be made to pay the extra costs if a contingency arises, thus making it unnecessary for
bidders to allow for contingencies in their bids.
An owner or a designer acting on his behalf can remove practically all risk from himself in
L.S. contract by prescribing that contractor shall complete the work so that it will be
completed and ready for use by a certain date.
This is the ultimate performance specification the contractor will consider as many possible
risks as they can, calculate their effects and probabilities and make allowance for each risk
in their estimates and bids.
Is that what an owner would want? It is more sensible to limit contractors risks and
therefore his prices.
E.g. All in estimate and bid for excavating any material except for rock and water, which
require blasting or dewatering.
If blasting or dewatering is necessary, it will be at an extra cost to be added to the contract
sum or Allow for foundations down to the depths shown on drawings. If it is necessary to
go deeper, the extra cost will be paid for by addition to the contract sum.
2)
Unit Price or Item rate Contract :

In this type of contract the contractor quotes his rate per unit of each item of work. The
approx. quantities of all possible items of construction are worked out and put up in the
tender form.
This form of contract, is useful when the quality of the work is known but the exact
quantities of items of work is not known previously. Most of the public works are done
under this form of contract. They are also known as measured contracts.
1)
2)
3)
Advantages
Elasticity : The contract is elastic in nature
and it is possible to make reasonable
variations in the quantities of the tender
as the rates of these items are known.
Economical : As the payment is done on
a unit bases only, the amount of actual
work done by the contractor shall be paid
by the owner and thus it may prove
economical.
Absence of uncertainties : The contractor
is not worried regarding the uncertainties
in the plans and specifications as his rate
is on unit bases for a particular
specification, so he will quote fair rates.
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1)
2)
3)
Disadvantages
Conflicting Interests : Owner will be
interested in getting such items executed
by the contractor for which his prices are
less and contractor wants the opposite.
Classification of materials : Sometimes
classification of materials results into a
dispute. e.g. if earth is not available in the
earth work contractor may claim it as
loose rock.
Final costs : It is practically impossible to
know the exact final cost of the work in
advance. If the final cost exceeds
considerably from the estimate then the
owner may have financial difficulty which
may lead to the suspension of work.
4)
Starting of the work : The work can be

started as soon as a contractor is fixed
and it is not necessary to wait until the
final plans of the work are ready.
4)
Damages due to changes : If the plans

and specifications of some items of work
are not ready, then demolition of some
done work shall have be done to
accommodate the subsequent changes in
the plan which will increase the cost.
(Source : Estimating and Specification by S. C. Rangwala)
3)
Cost plus Contracts :
In this form of contracts, the contractor agrees to complete the structure for a certain fee (for his
services). This form of contract becomes very useful when the quality as well as the quantity of
various items of construction are not known previously and in times of unsettled market conditions
when no contractor is coming forward to carryout the work on unit-price basis. Various methods
are used to adjust the fee of the contractor for his services in relation to the total cost of work.
1)
2)
3)
4)
5)
Cost + fixed % :- A fixed % of the total amount spent by the owner is given to the
contractor as his fees. This % usually varies between 15 to 10. E.g. if the total cost of
the work is Rs.800,000/-, contractors fees @ 10% = Rs.80,000/- shall be paid to the
contractor.
Cost + fixed sum :- In this arrangement, in addition to the total cost of material and
labour. the owner agrees to pay a definite amount to the contractor for his service.
Thus it determines the fixed amount instead of %.
Cost plus a fixed sum with a profit sharing clause :- This arrangement is
adopted to induce the contractor to bring down the cost of construction lower than its
estimated amount. The contractor is given a share in the amount thus saved, in
addition to his fixed sum as agreed. Usual % sharing in such cases ranges between
25% to 50%. E.g. estimated cost of work = 15,00,000/-, contractor completes this
work in Rs.12,00,000/-. If the contractors fixed sum for fees is 150,000/-. He shall be
paid 12,00,000 + 15,00,000 + .25 X 3,00,000.
Cost plus fixed sum with a bonus clause : This arrangement is adopted when the
work is to be completed urgently. A target date is fixed for the completion of work and
if the contractor is able to manage early completion of work, he is paid a certain
amount per each day of early completion in addition to his normal fixed sum. Likewise a
penalty clause is also adopted for late completion.
Cost-plus variable % :- In this arrangement the contractor is paid on a variable %
base to the cost of the work done. A sliding scale in relation to the cost of the work is
prepared for contractors %. The % increases with the decrease in the actual cost from
the estimated amount and it decreases with the increase in the actual cost from the
estimated amount. E.g. estimated cost of work is Rs.12,00,000/- and contractors % is
10% at this amount the variable % scale can be as below :Actual Cost
Contractors %
13,00,000
12,80,000
12,40,000
12,00,000
11,80,000
11,60,000
11,50,000
6%
7%
9%
10%
11%
12%
13%
-16-
Amount to be paid to
contractors
78,000/89,600/1,11,600/1,20,000/1,29,800/1,39,200/1,49,500/-
Thus the contractor gets more amount if he is able to bring down the actual cost lower than
the estimated amount. Consequently, an incentive is provided to the contractors to complete
the work in time and cost.
Advantages of Cost-plus contract :i)
No conflicting interest : The contractor is guaranteed for a certain fixed profit even in
unstable market he will normally act in the best interest of the client. Owner is also fee
to spend on the work as much as he likes.
ii)
Extra work : Dispute arising due to extra works is totally eliminated since there are no
extra items.
iii)
Early completion of the work : The decisions can be taken earlier so it reduces the time
of completion.
iv)
Early starting of the work : The work under this contract can be started even before the
final plans and specifications of work are ready.
Disadvantages :
i)
Final cost : Final cost cannot be predicted.
ii)
Inferior work : The work of inferior quality is demolished and replaced at the owners
cost. Also the changes after construction of an element cause extra money to the
owner.
iii)
Illegal for public bodies : For public bodies as the owners, it becomes illegal in normal
circumstances.
iv)
Checking of the contractors amount.
v)
More supervision is needed.
4)
Turnkey (All-in-one Package Deal) Contracts :

Here the owner gives his requirements in a broad outline to contractors together with the
site data. The contractors then submit their own design and construction offer along with
the conditions. This type of contract is useful in specialized contracting works such as
thermal power plants, nuclear power plant, oil refineries, important bridges,. etc.
Labour Contract : Sometimes the owner is in a position to purchase the required
material himself, so he invites tenders for the labour work only. It is absolutely necessary
to state that these rates include use of contractors plants and equipments, all necessary
false work, contractors supervision and contractors profit. Overall responsibility of the
work belongs to the contractor. The owner has to see that the required material is available
as and when required. He should also see that wastage or pilferage of materials is
minimum.
S.O.R. Contract :
Here the tender contains only the description of all possible items of
construction. Tender simply fill their prices for each item or the contractor quotes his rates
in the tender by higher or lower % to the SOR rates.
Negotiated Contract :
Here there is no open competition and the owner carries out
negotiations with selected contractors. It cannot be used in public works due to the
absence of open competition. However, in emergency or when the time of completion is a
major consideration it can be given by the PWD through special laws.
-17-
ASSIGNMENT 3
1.
Mention the types of the contract you will suggest for the works listed below. Give reasons
for your suggestions.
(a)
A school building with 16 class rooms.
(b)
Decoration of a shop.
(c)
A prestressed concrete bridge.
(d)
A building with architectural requirements
(e)
A concrete road 1 km long & 3.5 meter wide.
(f)
100 Nos. identical bungalows on uneven plot of land.
(g)
Client owns land in CBD area of a big city but does not have money to develop the
land for building a commercial complex.
(h)
There are unstable market conditions & PWD has to complete a job under
emergency in a limited time.
(i)
Donor is a contractor for building a grant in aid educational institute like SBST.
(j)
For construction of a building with lots of architectural features.
(k)
Fixing a projector for citys planetarium.
(l)
Constructing a Navigable bridge connecting an island at 25 km. away in sea.
2.
Analyze the cost of a project and explain the two extreme types of contracts emerging out
the analysis.
3.
Explain the legal spirit of lumpsum contract.
-18-
Chapter 4
Parties to the Contract
A construction contract involves specific relations between specific people to perform specific
functions. It can involve hundreds of people but they can be categorized into the following titles.
1)
Owner
2)
Designer
ROLES AND FUNCTIONS OF PARTIES TO CONTRACT
3)
Consultants
4)
Contractor
5)
Suppliers
6)
Employees
7)
Other parties
In reality, it is possible for any individual to perform more than one function. There is a great
scope for flexibility of thought and imagination in the possible arrangements through manipulation
of the functions indicated by the given title.
1)
OWNER
The owner is a person or a party who owns the rights of the land and who presumably has
the means to develop the land. The owner desires development and therefore initiates the
design and contract process. He also pays for the process as it progresses upto completion,
the owner owns the development (building). To bring about the development of his land,
the owner must get involved in the contractual relationships with several parties. The
owner of the property is obliged to ensure that all the work done on his property confirms
to all the local ordinances and regulations. He usually ensures the all the necessary permits
to authorize all works are secured to the satisfaction of the local authorities. The owner
often passes this responsibility to the contractor but the liability rests with the owner of the
project and property.
The owner of the property may be an individual person, husband and wife, a family, a
company, a public body or government, but by law they are all viewed as individual legal
entities like individual persons. The owner may develop the land with his own resources. He
may use his own money or use ownership rights as security to raise money.
2)
DESIGNER
The designer is a person or a party retained by the owner to design the project
contemplated (considered) by the owner. He can be an architect if functions and
appearance predominate or he may be an engineer if the project involves design where
engineering principles predominate. E.g. bridges, dams, tunnels, etc. He can be any other
person as specialist such as an interior designer.
The designer enters into a contract with the owner to provide a service. The exact extent
of the service is described in the contract. These are usually detailed working drawings,
specifications sufficient to permit bidding for the work. Other services can be supervision
and certifying payments on account of work done the designer will work as an agent of the
-19-
owner and he will look after the work as if it was his own. He should be very careful in
designing and estimating the project, otherwise he will put the owner in a very bad
position. The owner can sue him for his carelessness. Now-a-days buildings are becoming
too complicated to handle single-handedly by a consultant. Time schedule is also very tight,
so the consultant requires the services of many other specialist consultants to assist him to
complete the project on time. In short, the owner contracts with the designer because the
designer has the access to the means of design in the form of experience, staff,
equipments and relationship with specialists.
3)
CONSULTANTS
The consultants as a group comes under two categories; those who directly contract with
the designer and those who contract directly with the consultant.
i)
ii)
4)
Direct Consultants :
These are the consultants who specialize in a
particular aspect of construction. E.g. structural system, services system.
Indirect Consultants :
These consultants contract with direct consultants to
provide highly specialized services, E.g. guidance in cost control production of
specifications and contracts, inspection services, computer services, quantity
surveying.
CONTRACTORS
The contractor is a person, a firm or a party who contracts with the owner to build the
building. The owner contracts with the contractor because the contractor has an access to
the means of construction. He has experience, staff, equipments, funds and business
connections that enable him to undertake construction work. He is known as the main
contractor.
5)
SUB CONTRACTORS
These also fall under two categories those who contract directly with the contractor E.g.
service contractor are the direct sub-contractors and those who contract with the subcontractors are known as indirect sub-contractors. E.g. ducting insulation, thermal controls,
fans and motors.
6)
SUPPLIERS
The owner, the contractor and the sub-contractor have to enter into a contract with the
suppliers of materials, equipments, m/c, systems, man power, etc.
7)
EMPLOYEES
Persons employed in the above heads will come under this category. Moreover, employees
of the organizations concerned with safety, health and welfare of public inspects of tests
the supplies and contractor work under legislation at the local, regional or national level.
-20-
8)
OTHERS
In every construction project there will be several other parties who get involved in
contract with the owner depending upon the circumstances. E.g. bankers, mortgage men,
real estate people, lawyers, etc.
RELATIONSHIP AMONG THE PARTIES

Although infinite flexibility is the key aspect of the relationship, this can be represented in three
patterns.
1)
2)
3)
Traditional Arrangement
Management Arrangement
Package Arrangement.
It is important to realize that contractual relationship exists among some of the parties or persons
but not necessarily among all of them.
1)
TRADITIONAL ARRANGEMENT :
Owner
Individual
Corporation
Public Dept.
Others
Contract for Services
Others
Contract for Implementation
Designer
Contractor
Architect
Engineer
Generalist
Specialist
Direct Consul
Direct S. C.
Site work
Struc. services
Site work
Struc. services
Indirect Consul
Indirect S.C.
Specialist
inspection
Spec. Manu.
Specialist
testing, others
Suppliers
-21-
In a traditional arrangement, a relatively rigid structure of the relationships is exists. There is a

vertical pattern with the establishment of a hierarchy of power and responsibility.
Privity of contract exists between the parties as shown in the figure.
All the parties identified here will have a special relationship with their employees and with a
variety of firms or companies who may provide particular goods or services.
2)
MANAGEMENT ARRANGEMENT :
O
Designer
Others
Contracts
for Services
Owner
for implementation
Contra.
Finishes
Const.
Site
Work
Cont.
Services
Sub.
Contr.
Manager
Contracts
Contr.
Work
Reference : Contracts by Keith Coiller
-22-
ASSIGNMENT 4
1.
Explain the various titles of the parties to the contract. Justify their titles.
2.
Design Privity of Contract for BOT contracts.
-23-
Chapter 5
Specifications
DEFINITIONS
1)
2)
3)
The act or process of specifying, i.e. to name or to state explicitly (in detail).
The detailed and precise presentation of plan or proposal of something.
Written description of an invention for which a patent is sought.
INTRODUCTION
Various proportions and relative positions of various parts of a structure are shown on the
drawings. It is not possible to furnish data regarding the quality and the quantity of materials and
quality of workmanship and the methods of measurements of construction items.
Plans and specifications are the tools prepared by the designer which the contractor uses to build a
building. These terms have very definite, well organized connotations (suggestions by a word or a
thing).
Specifications is a very important contract document because the law recognizes specifications as a
part of a legal contract between both the parties. It is also required in case of arbitration or
contract cases. The nature of specifications varies with the type of the contract. The specifications
of poor quality causes delay and arbitration.
Object :1)
The main object is to state the information to fulfill the quantitative and qualitative
needs of the design for the project.
2)
The specifications defines the quantity and the quality of materials and quality of
workmanship of construction items, which helps the contractor to quote correct rates at
the time of filling the tender.(Rate Analysis).
3)
The information and instructions contained in the specification will help the contractor
and the supervising staff during the execution of works.
Specifications is a legal document and it should be prepared with great care and skill.
Following are the alphabetically listed Ten-Commandments (laws) of writing good specifications:1)
Be Complementary :
Relate all the parts of the contract without any omission and
minimum overlapping (repetitions).
2)
Be Concise : Say only what has to be said, use least no. of words, use numeral
abbreviations and list out materials and products.
3)
Be Consistent :
4)
Be Correct : Check for errors and inaccuracies.
5)
Be Current : Eliminate out-of-date references.
In style, attitude and firmness.
-24-
6)
Be Fair :
The contract should be a bargain to both the parties.
7)
Be Objective :
8)
Be Organized :
Use standard formats wherever possible, division of contract
documents in sections.
9)
Be Practical :
Contractors are not magicians, wealthy, stupid or dishonest, use
prevailing materials and methods of that locality.
10)
Be Specific : Do not talk in generalities or use ambiguous words and phrases.
1)
Be Complementary :
The job is to bid and built.
All the parts of the contract documents (agreement, conditions, specifications, BOQ and
drawings) should be complementary. i.e. it should be made to fit each other with no
omissions and minimum overlapping, particularly drawings and specifications. (Drawings
show the scope of work and dimensions and specifications show quality). It is unnecessary
and dangerous to duplicate or repeat information and instructions in more than one part of
the document because of the chance of making a mistake in one or the other place.
2)
Be Concise :
Say only what has to be said. Use the least no. of words, because each word has to be
interpreted legally. Fewer the no. of words, lower the chances of misinterpretation. Also
fewer words save the time required to type, proof read, printing and paper. E.g. the
contractor shall be, The general conditions of contract apply to the works of this section, a,
an, the ..
Use numerals instead of writing nos. in words, because drawings are made in numerals, so
there can be better co-relation between drawings and specifications. Moreover, these are
quicker to type, easier to correct or change, and simple to read and to understand.
e.g. 1.5 mts. Instead of one point five meter.
Also use abbreviations instead of writing out full titles of well known things. A list of it can
be attached in the contract document. Listing of materials and products often helps to
eliminate unnecessary words or phrases.
3)
Be Consistent :
In style and attitude. Use simple present tense and imperative mood. Select correct words
and then put them into correct context in the specifications. Each word should be examined
w.r.t. all possible meanings. Many words have optional meaning and spellings. Use only
one type throughout.
-25-
4)
Be Correct :
Check and double check the names of manufacturers, model nos., products and local
suppliers, confirm nos., quantities, amounts, proportions of mixes and spellings. Clauses
taken from previous jobs must be reviewed to make certain that they fit in the new project.
Graphical conventions and abbreviations are understood in particular regions only.
In one contract a 500 mts. road was typed as a 500 km road.
5)
Be Current :
Titles, dates, standards, govt. regulations, manufacturers literatures which are in present
use and easily available should be specified. Reference records should be updated. Industry
practices and procedures are changing from time to time, to improve services or to take
advantage of new technology. So, one must keep in touch with these moves.
6)
Be Fair :
Do not put undue responsibility and financial risk on any one party. If the writer includes
unfair clauses which give an advantage to one party, the other party will try to get around
these conditions and thus cause problems to all concerned. The more fair and equitable the
specifications, the more smoothly the job will run. Excavation in all types of soils and
conditions or provide and apply two coats of asphalt paint on the external surfaces of a
foundation wall below G.L. are examples of unfair clauses.
Following are the escape clauses which frequently occur in contracts but these should
never be used. E.g. to the satisfaction of the architect, where directed by the engineer,
unless otherwise directed from an approved source, at the discretion of the owner.
7)
Be Objective :
The objective is to bid and build. It should be such that the offer can be made, accepted,
and constructed.
8)
Be Organised :
Several portions and parts of the contract have to be put together in an organized manner.
Present project specifications are mainly divided into following technical categories :1) Recognition of main elements
2) Organizing as per the sequence of work.
Regconition of main elements :

Front and Back Cover, Flysheets to identify the project table of contents, contract portion,
specifications, drawings, bidding portion.
-26-
Organizing as per the sequence of work :

i)
General Work.
ii)
Civil Works : earthwork, concrete, masonry, metals, wood and plastics, thermal and
water protection, doors windows and glazing, finishing and painting, site
development.
iii)
Services.
iv)
Specialties.
v)
Equipments and M/c.
vi)
Conveying systems.
vii)
Mechanical Installation.
9)
Be Practical :
Contractors are not mind readers. They cannot guess what is in the owners or the
designers mind. They have to do what is indicated in the contract documents.
Contractors are equally emotionally involved in the construction.
Contractors are not stupid. They probably know the ins and outs of their trade more than
anyone else in the locality and the designer should utilize their expertise.
Contractors are not dishonest. Majority of the disputes involving contractors arise from the
difficulty in interpretation of specifications. The more care taken to eliminate these
difficulties, the harder it becomes for crooks to operate, and easier for the honorable
contractors to do their work. It is advisable to adopt local industry techniques and practices
wherever possible.
10)
Be Specific :
Include only those things in the contract that pertain to the contract and which can and will
be enforced. Dont write ambiguous words or phrases as these cause problems due to
misinterpretation.
1)
2)
3)
4)
5)
6)
Any This word introduces choice. E.g. Patch any crack in the plaster.
Either This word is confusing. E.g. Paint either side of the door.
Or equal This expression should be avoided as it gives choice and opinion to the
contractor. Designer should reserve such decision and write or other approved.
And/Or Avoid this phrase. Use and or or but not both. E.g. remove tools
and/or debris. Which thing should the contractor remove?
ETC This should never be used. It is impossible to tell which the next item is and
upto what nos. E.g. remove tools, rubbish, equipments, etc. What is the next and
how many?
Use This word does not mean provide. Contractor may use the things provided
by the owner.
-27-
ASSIGNMENT 5
1.
Explain through examples Principles of Good Specification Writing.
2.
Take one sample specification from any contract you are involved and redraft the
specification by applying principles of good specification writing.
-28-
Chapter 6
Types and Sources of Specifications
TYPES OF SPECIFICATIONS
1)
2)
Brief Specifications and

Detailed Specifications
a) General or Standard
b) Particular
Brief specifications are used only at the time of preparing the estimate. They do not form the
part of the contract document. Detailed specifications describe technical requirements of each item
of construction. They provide detailed instructions regarding the quality of the final project.
They also describe tests to be performed for the approval of materials and to check the
consistency of the supply. These should be concurrent with the drawings.
Detailed specifications are of two categories a) General
Particular or Special Specifications.
or
Standard
Specifications
b)
GENERAL OR STANDARD SPECIFICATIONS :

These are formulated in a manner such that it can be used on any project. Care should be taken to
(i) Use it on a particular job and (ii) For variable requirements blank spaces can be provided and
can be filled up as per particular requirement.
These are prepared by various public authorities or trade associations for the use throughout the
country. Equality and reliability of these specifications will depend upon the interests, abilities and
biases of the persons preparing them. For their use in the contract, care must be taken for the
reasons, purposes and even motives of the organization issuing such general specifications. These
should be updated regularly. It simplifies the control on the quality of the work.
SOURCES OF SPECIFICATIONS
i)
Govt. Departments : CPWD, PWD, MES, ISI, Railways IRC, etc.
ii)
Others : Clients requirements, previous specification, drawings, site investigation, etc.
iii)
Professional Associations : Like Architects, Consultants like EIL, Tata Consulting

Engineers and Contractors produce well researched, reliable, fairly unbiased and uniform
information for use in the construction contracts.
-29-
iv)
Trade Associations : The service trade personnel like roofers and painters produce
manuals and pamphlets of practice for use in the construction contracts. Some of them are
excellent but these show inclination towards protection of affairs of the member of the
association. So while using them care should be taken to protect the interest of the other
party.
v)
Manufacturers Associations : They also produce specifications on products or systems

that have been well proved in the market. These can be used as a guide to enable member
companies to manufacture products within known and acceptable tolerances.
vi)
Manufacturing Companies : Many reputed and reliable companies produce promotional

literature of one type or the other for their products. Such literature will be varying in
quality as per the knowledge, experience and ability of the person or the firm preparing the
information and the budget available to research the product and to print and distribute the
literature.
Other factors are deliberate or accidental suppression of negative features of the product
and the extent to which the information about the products superiority to the actual facts
related to the product is correct.
Although there are good reliable companies, a few unreliable companies also make
products and their specifications. So this point must be carefully surveyed before specifying
a particular companys products.
vii)
Text and Reference Books : It is an excellent source available. In short, factors to be

considered while selecting the specifications from various sources are :
(a)
Nature of the source of information.
(b)
Its potential reliability.
(c)
Motive of the persons or the bodies preparing specifications.
(d)
Updating by removing obsolete specifications.
PARTICULAR SPECIFICATIONS :
These are prepared for specific projects and they may include general specifications either in fact
or in reference. These are intended to be used on one job only, although may be applicable in
parts or full to similar jobs.
Specifications are also classified as under :a)
b)
c)
d)
e)
f)
Open
Restricted
Closed
Prescription
Performance
Proprietary
-30-
a)
Open Type : These are desirable from the owners point of view as these permit the
widest possible amount of competition in price. Any company that makes a product or a
system that meets the parameters specified can bid for the job. The owner or the
designer do not care which product is used, provided it meets with the requirements of
the specifications. E.g. using toilet partitions for use in school or public buildings. It
usually does not matter which company makes the partitions, provided they function
properly and economically for adequate life. Many companies make such products and
all are able to bid for supply and installation of these partitions.
b)
Closed Type : Sometimes the owner or the designer require a specific item or a
system, made by one or two companies only. These is no competition, so there is a
financial benefit to these companies. The owner may pay inflated price. If there is
substantial amount involved, it is better to negotiate a good price for that item or
system in advance before using it for the specification. The contractor can be instructed
to include that amount of money in his bid and then special sub-contract is arranged to
ensure delivery and installation of that item or system. E.g. installing a major projector
for a city planetarium. If the price cannot be negotiated, then funds should be arranged
for or the project should be scrapped off. Another example, BK. Manufacturing Co.
having a new H.O. designed, the company will not like to build this building with the
bricks of their competitors.
c)
Prescription Specifications : The method to be followed by the contractor is

described in detail. The contractor follows the described method to arrive at the
required results. If the desired results are not obtained, it might not be the fault of the
contractor. E.g. a roofing contractor who followed the prescribed specifications to put a
roof on the building, the roof blew away in a storm. A more common example is brick
masonry where everything is mentioned.
d)
Performance Specifications : In contrast to prescribed specifications, the detailed

description of the end result is given. Method to achieve this end result is left to the
contractor although there are some suggestions given. E.g. in A/c system, temperature,
flow of air, noise levels are specified but the system of m/c, ducting insulation and grills
is left to the contractor. The problem in this type is that what will be the useful life and
maintenance cost?
e)
Proprietary Specifications : This specification writer mentions manufacturers by

name, model no. and describes optional features like colour, style and accessories. This
can be restricted or closed. In this type the writer has to survey all the products he
wants to specify. In PWD, it is not adopted because i) monopoly is created ii) doubt of
favorism is put on the specification writer iii) it is possible that other manufacturers
may be able to supply the same article of better quality and at cheaper rates.
-31-
LANGUAGE OF SPECIFICATIONS
Language is one of the basic modes of human communication w.r.t the world of ideas. Drawing is
the main language for engineers, but drawings are to be accompanied by written notes describing
many abstract quantities such as time, legal relationship, value and other technicalities that cannot
be graphically represented.
Language is a pattern of both shapes and sounds. The sounds are interpreted as spoken words
and shapes are interpreted as written words. In both these patterns, there are barriers to clear
communications which are interruptions, faulty interpretations, distractions, diversions and other
filters between the source and the terminal in the communication chain.
The specification writer does not want to loose the attention of the persons who will be reading
them. Some general principles of specification writing can be developed as :
1) Choose words carefully 2) Use least no. of words 3) Arrange words to command attention.
4) Eliminate distractions and diversions.
Learning building technology is like learning another language. Building technology has its own
vocabulary or terminology and it has its own forms of syntax and grammar.
To become proficient in writing specifications, it is necessary to learn this particular language by
studying construction materials, codes, methods, contracts, procedures, systems, costs and the
like. Important things to be observed in this context are:
1) Meaning of words 2) Form of words 3) Categories of words 4) Punctuation and 5) Verbs.
1)
Meaning of the words : In construction contracts, any word that has more than one
meaning should be placed in a context where the intended meaning expresses only one
interpretation. E.g. consider the word Pitch, which is often used in the construction
communications. There are 10 current and 4 obsolete meanings of this word.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
A distillate of tar.
A reserved portion of the ground.
To set-down and erect a tent.
A slope or inclination.
A point on a scale.
To throw underhand.
To fall headlong.
Fancy sales talks.
A musical tone.
A screw convolution.
i)
ii)
iii)
iv)
Earth or Soil
Paving Stone
A quantity as in the pitch fork.
The highest point in the falconry.
Thus, such words can be misinterpreted very easily and they require very careful consideration.
-32-
2)
Forms of words : In construction specifications most important are forms and nos., case,
tense and mood. One must be very careful about quantities, putting words in the right
context, selecting the correct verb and tense and mood to achieve desired actions by
parties to whom specifications are to be read. E.g. Time Flies here Noun-time Flies Verb.
Now compare with Flies Time here Noun-Flies and Verb Time.
3)
Categories of words : There are 8 categories of words i) Nouns ii) Pronouns iii) Verbs
iv) Adverbs v) Adjectives vi) Prepositions vii) Conjunctions viii) Interjections. Some words
appear in several categories. E.g. Paint can be either noun, verb or adjective. Some
words in one category can have several meanings. E.g. moment means, a short time and
result of motion about an axis. Different words can have identical sounds. E.g. site, sight,
cite, etc.
4)
i)
Nouns : Denotes persons, places, things, and this is the largest category of words
in the language. Specifications writers must develop extensive vocabulary of
construction nouns by studying construction materials and methods.
ii)
Pronouns : These are substitutes for nouns. E.g You, he, she, it, this, that, what,
who, etc. Their use should be avoided in specifications as they are general, not
specific.
iii)
Verbs : Expresses occurrence of an action or existence of a state. E.g. construct,

notify, supply.
iv)
Adverbs : Quality or limit of verbs. They give verbs more specialized meaning. E.g.
He builds well and compare with He builds wells.
v)
Adjectives : They qualify or limit nouns. They give nouns more specialized
meaning. E.g. The word Pitch after the word roof makes roof an adjective. E.g
The roof pitch is steep/soft.
vi)
Conjunctions : These are used to link the phrases or sentences together. E.g.
and, but. They can be usually avoided.
vii)
Interjections :
Such as on, ah have no place in the construction
specifications except when the job runs over the budget.
Punctuations :
i)
Apostrophes () usually proceeds or follows the possessive S either in singular or

in plural. They can usually be avoided.
E.g. Perform work to Architects direction singular
Perform work to Architects direction plural
Perform work as directed by architect preferred.
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5)
ii)
Asterisks (*) : Usually signify a footnote or a word of warning. E.g. Mortar for
internal use * shall consist of 1 part cement, 1 part times and 6 parts sand. * do
not use antifreeze chemicals in the mortar.
iii)
Colons (:) : Usually suggest an elaboration of the things just stated. They
replace the word shall be or shall
e.g.
Cement : Type 1 Portland
Grout : 1 part cement, 3 parts sand, 3 parts gravels.
iv)
Commas (,) : Used to separate phrases or words occurring in lists. E.g. provide
ladders, tools, brushes, and clothes. Compare with provide, ladders, tools,
brushes and clothes.
v)
Dashes (-) : Should not be used in specifications.
vi)
Exclamation Marks (!) : Never required in specifications. (except in connection

with the price)
vii)
Hyphens (-) : are used either to join words together to make their meaning
more precise or used to divide lengthy words at the end of the lines.
e.g.
Joining : rust resistant, built-up.
Division : Avoid contractor, contract-tor use (preferable) con-tractor,
or contract-or.
viii)
Slashes (/) : These should be used with particular care as they can mean either
add or multiply or divide.
e.g.
and/or, .
ix)
Periods (.) : These are the full stops. But are also used to denote decimals.
x)
Question Marks (?) : Should never be used in specifications. The project manual
should answer the questions, not pose them.
xi)
Parenthesis ( ) : Are generally used for secondary insertions. E.g. Mortar for
external use shall consist of 1 part cement, part lime, and 4 parts sand
(ASTM type M)
xii)
Quotion Marks (
) : Inverted commas are used to denote model nos. E.g.
provide and install Cera sanitary fitting.
xiii)
Semi Colons (;) : In place of periods where two statements suggest closely
linked activities.
Verb Section :
Will, shall, may can, must, could, should, ought to, have to, have got
to, are to, are, could have, would have, etc.
Normally select present tense and imperative mood.
e.g. Install fixtures to be supplied by owner, rather than.
Install fixtures which will be supplied by the owner OR
Install fixtures supplied by the owner.
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ASSIGNMENT 6
1.
Through examples explain various types of specifications stating their advantages and
disadvantages.
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Chapter 7
Fair and Equitable Contracts
NEED TO EVOLVE FAIR, EQUITABLE and EFFICIENT CONTRACT MANAGEMENT SYSTEM
Construction work is generally carried out through contracts. The contract documents lay down the
relationship and contracts are governed by ICA 1872 which was prepared under the colonial rules.
Till to date, even though there are changes in it, the spirit of the contract act remains the same.
i.e. in favour of the owner. The present contract agreement form is not fair and equitable. Even
though the contract is between the owner and the contractor, there are many direct and indirect
participants who also influence the contract. Since about 50% of the national plan outlays are
allotted to the construction sector even the slightest improvement in the productivity of this sector
which could be achieved by efficient management of contract, construction process and system,
will be a great boon to the national economy. The need to evolve fair and efficient construction
management system is the need of today.
Factors like planning, technological innovations in construction techniques, mechanization, use of a
variety of new materials etc. have a considerable influence on construction costs; but an aspect
which is equally important is the mode of execution of works. Although there are a no. of
construction departments and organizations under the central ministries and states which execute
works financed from public funds, construction is largely executed through the agency of private
contractors. Departmental execution is generally resorted to the special cases only. The volume of
construction handled by voluntary organizations, labour co-operatives and govt. sponsored private
bodies is comparatively small.
General conditions of contract which are at present in vogue in govt. departments were drawn
upon in the pre-independence days when the magnitude of construction was small and the
approach to the contractors problems was vastly different. Although these conditions are modified
from time to time, the spirit underlying them has not materially altered. The present day
developmental activities under which the magnitude of construction is large and more technical in
nature, necessitates a different approach and a fuller appreciation of contractors problems.
Contract forms in use in govt. depts., throw on contractor an undue share of risk of unforeseen
conditions. Terms of payment and settlement of disputes are not equitable. Capital gets unduly
locked up in the form of EM, SD, and retention money. If the rates quoted by the contractors are
to be fair to both the parties, conditions of contract must not be unreasonable or vague and open
to argument. Financial arrangements should be equitable and payments prompt. Powers of
supervisory staff to suspend work, to order deviations and to reject work should be clearly defined.
These reasonable and essential conditions cannot be said to prevail at present. Consequently,
contractors cater for all these eventualities in their quotations and raise them correspondingly.
Govt. would have to pay less if the conditions were more equitable. It is essential that all the
factors which contribute towards an avoidable increase in cost are eliminated.
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ORIGIN OF CONTRACT
Construction is a complex process involving a no. of participants with differing requirements and
attitudes. A major complexity is the contractual obligations linking the participants. The
construction industry is one where the product - a building, a bridge or a power station, say is sold
before it is built. This is quite unlike the manufacturing industry where the products cost is known.
This is the characteristic of the origin of a contract bond associated with the construction industry
in all countries at all levels of development. Because of this special nature, there is a complicated
process of written documents which elaborately detail and define contractual obligations of the
parties concerned. In the documents, the final product must be described and qualified in
unequivocal terms, to enable the contracting agency to offer a firm price for the product
envisaged.
The scope, quality and substance of information exchanged among the participants, and their
obligations, are all embodied in form of contract.
Growing Difficulties due to mistrust:
Earlier, the contract agreement used to be a document of only a few pages. Negotiations were
done across the table. There was no protracted procedure to sign the agreement. All actions were
based on mutual trust, but now these are based on mutual distrust between the owner and the
contractor. There is distrust between the owner and the indirect participants, without whose cooperation the owner cannot fulfill his contractual obligations.
For the improvement of the construction industry, this mistrust must change into a relationship of
mutual trust. This is possible when all parties to the contract are made equal parties in sharing
responsibilities and obligations are not one-sided.
Thus, the disputes have increased for extras, variations, delays, non-fulfillment of obligations by
the owner, unforeseen subsoil conditions, instead of analyzing the causes for the state of affairs
and finding the remedies, have put a ban on procedures of settling disputes by arbitration.
There has arisen a vicious circle of mutual suspicion and differing objectives, whereas the contract
is supposed to have been entered into with the object of constructing a facility in time, at a
reasonable cost and quality by both the parties for the benefit of the community.
NEED FOR EVOLVING FAIR and EQUITABLE CONTRACT DOCUMENTS
Many improvements are needed in contract documents which are initially tender documents and
when accepted and signed by both the parties make contract. It is worthwhile looking at the views
of the parties to the contract.
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CONTRACTORS VIEWS
1)
The tender documents should be standardized for a state or the country as a whole. At
present each dept. in a state has its own contract form. This imposes too much strain and
risk on the contractor who has to bid for many works in a short time, and proper scrutiny
and understanding of each contract becomes difficult. For special types of works, an
additional list of conditions could be included while the rest could be according to a
standard format.
2)
The conditions are loaded in favour of the owner and the contractors position is weakened.
The authorities and powers of various officials entrusted to operate a contract are limited
and not well-defined. The procedures for approval are complicated. Checks and
counterchecks, even within a department are based on mutual distress. This causes the
officer in-charge to play safe. There is often non-fulfillment of obligations in time on the
part of the officer on the owners side, as the responsibilities are not specific and
pinpointed. This situation leads to disputes and claims and a vicious circle appears.
3)
The types of soil, sub-soil conditions, hydrology materials, resources etc. are not properly
investigated and sufficient data are not available in the tender document. The project
should have been undertaken after careful investigation by the owner and he is expected to
have detailed and accurate information. Often this is not given and the contractor is asked
to do his own investigations. This is not a practical proposal. Most of the disputes on
contracts arise due to wrong, vague or incomplete data provided by the owner in the
contract specifications.
4)
The requirement of construction materials and their availability are not estimated,
investigated and planned by the owner, even for the items of materials to be supplied by
him. The delay in supply of cement, steel, electricity, land, quarry rights, etc. retards
progress, but the conditions of the contract do not hold owner responsible nor does it allow
compensation to the contractor on the above grounds.
5)
In most of the cases, projects are sanctioned without proper investigations or model
studies. After the work has started, the entire scope of work may be changed, making the
contractors plight extremely difficult, as the contractor may not have the technical knowhow, skill and equipment for such changed conditions. The resources arranged according to
the earlier needs of the work thus become redundant.
6)
Construction drawings are never ready in time and changes in them are an accepted
privilege of the owner. The situation again leads to claims and disputes.
7)
Since the contractor has to invest heavily on labour, equipments and funds, any delay on
the part of the owner will cause to heavy losses to him. Delays on projects due to the
owner not fulfilling his obligations are on the increase everywhere.
8)
Any construction work involves the coordinated efforts of many govt. depts. and other
public utility services. Often, lack of understanding of the problems involved and
uncoordination, affect the work. Further, the attitude, it is after all the contractor who will
suffer, should change. In reality, the contractor is only a part of the entire system, and
ultimately society and nation suffer, in an unfair and one-sided system.
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9)
The contract conditions do not provide for any fluctuations in the cost of wages and
materials. This provision is particularly necessary for the projects of duration of more than
one year, as it is seen that policies of the govt. on taxation imports and export priorities
and inflation, all affect the prices. Escalation based on the construction cost indices.
10)
Another important matter that affects a contract is a change in the labour wages and
benefits that are introduced for many reasons social, economic, or political. Construction,
being labour intensive, has a great effect on cost. So, suitable compensation models need
to be introduced in a contract.
11)
In the absence of any credit policy applicable to this industry, there is almost no fair chance
with banks and financial institutions to serve the construction activity in the country. There
are three stages at which the contractor needs funds i) Registration EMD ii) SD and RD
iii) procurement of plant and equipment and working capital for contract execution. The
owners, banks and financial institutions should be able to help in these by adopting uniform
codes for B.G. and insurance instead of deposits. This would help reduce locking up of
funds.
12)
At present, some manufacturers enjoy the facility of IDB Schemes to sell machinery on a
deferred payment basis with reasonable rates of interest. This facility is available to certain
earthmoving machinery only on a differed payment basis. This should be extended to other
construction equipments and vehicles to help improve the methods of working of medium
and small size contractors.
13)
Another problem is financing the contract itself. Tight money conditions deprive contractors
of the facilities of even short-term credits from suppliers and manufacturers of construction
materials, stores and spares. This is particularly so with nationalized industries like oil,
steel, cement which demand 20% to 30% advance against the order.
14)
Financial problems can to a great extent be eased if the owner makes timely payments,
settles rates of extra items and stops unilateral deductions. Proper advance against plant,
machinery and materials by the owners, and proper phasing of the recoveries, will also help
to a great extent. Even though in some big contracts these conditions are being accepted
of late, they are not followed in all contracts. With the present day tight money conditions
such methods, if adopted, will ultimately help the owner in reducing the total costs.
OWNERS VIEWS
The views of the owner are yet the other side of the picture. The owners or clients share their own
problems with the contractors. These are :1) Normally, private contractors except the few who are well organized, have no organization
at all, nor do they have qualified men to manage.
2) Technical personnel are not employed and contracts have to specify employment of
technical persons and enforce this.
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3) Haphazard construction practices are adopted which become responsible for failure of
structures during construction.
4) Quality is at stake always, particularly in BKWK, concrete and asphalt works as the
contractors do not employ qualified persons who understand specifications and codes of
practice.
5) Many contractors quote very low bids and try to make it up with bad workmanship and use
of sub-standard materials. Many bids are not balanced in rates of individual items.
6) Contractors do not pay attention to the welfare of the workers, their wages and amenities.
Even when escalation is allowed on these items, they do not pass it on to their workers.
7) Contractors do not treat their sub-contractors or labour contractors justly and contract
conditions between them are not fair. Escalation and extras the general contractor gets are
not passed on proportionately to the sub-contractors.
8) The construction agency often acts merely as a middleman and sublets large portions of
work and earns profits without making any proportional contributions. The margins kept
are large and the sub-contractors are forced to adopt malpractices, sub-standard work and
the use of sub-standard materials.
9) There is no code of ethics among contractors. Even if there is any, associations are not
able to enforce it. With the result, unhealthy practices are adopted by many contractors to
detriment the contracting industry and profession.
COMMON PROBLEMS
There are problems on both sides which are the causes of dissatisfaction between the owner
and the contractor. So, if the industry has to improve by better contract conditions to suit the
ever changing national and international situation and technological developments, efforts have
to be made by both sides to improve their images and eliminate distrust.
It so happens that in many states contractors associations are not active and united. They
themselves do not know what they want.
It is also true that many of the owners as well as the contracting agencies do not understand
and appreciate the problems they will be facing from the attitudes and actions of various
indirect participants, in fulfilling the contractual obligations.
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INDIRECT PARTICIPANTS and THEIR INFLUENCES

Some of these are:
i)
The sanctioning authorities at different levels whose decisions delay implementations.
ii)
Actual user who may not have a clear concept of what he wants and may many a time
change his mind during the actual execution of construction.
iii)
The manufacturers and suppliers of utilities, equipments, tools, stores, etc. whose
quality, delivery schedule, erection services, etc. affect the construction schedule and
process.
iv)
Electricity, water supply and communication services who are to supply these facilities
in time in quantity required and keep continuity.
v)
Financial institutions who are to arrange for overdrafts, discounting, transfer of funds,
etc.
vi)
Labour unions : Particularly the leaders who become unreasonable.
vii)
Technical Advisory Committee who takes away all the initiatives from the project incharge and who unknowingly contributes to delays of the project and cost escalation.
viii)
New environmentalists and ecologists.
ix)
Local politicians of various parties trying utmost to delay on matters of project

investigation sanction, land acquisition, local employment, rehabilitation and other
matters, but are very vocal in public forums to criticize the construction sector for the
delays and cost escalations which are many times due to their unaccountable actions.
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ASSIGNMENT - 7
1.
Analyse the contracts of the projects governed by ADB or World Bank and critically
comment on their fairness and equitability.
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Chapter 8
Comparision of FIDIC and MES General Conditions of Contract
FIDIC and CONVENTIONAL INDIAN CONTRACT FORMS
The conventional contract forms used by various govt. departments in India are one-sided and in
favour of the client.
In the globalizing economy, the FIDIC form of contract is more equitable as it defines clearly the
role and responsibility of both the parties to the contract.
Due to globalization of the economy, many MNCS contract for various infrastructure and
development projects in India. These companies do not consider this conventional form of contract
as suitable but prefer the global contract form such as FIDIC. The World Bank or the Asian
Development Bank while awarding loans for any project also insist upon the FIDIC form.
Any contract form containing several conditions, each linked with another is not easily
understandable at first reading, except to the practical and experience persons. This is also true
with the FIDIC form in India.
In UK and other European countries, FIDIC form has been practice for a long time yet many
seminars have been organized to educate the professionals about the applicability and
interpretations of the conditions of FIDIC form in context to various issues of construction. The
comparision of MES (Military Engineering Services) form and FIDIC (Federation International des
Ingeniews Conseils) (International Federation of Consulting Engineer) is given below.
MES is an organization under the Ministry of Defence and provides engineering services for the
armed forces both in peace and war. It had prepared the contract form in 1947 and no. of
amendments have been issued from time to time to keep pace with the new requirements.
FIDIC was formed in 1913 and has 60 member countries now. The secretariat is situated in
Switzerland.
Since the contract form is used internationally, English language has been considered as the
official language. The present FIDICA form is in the 4th edition having 2 parts. Part 1 contains
general conditions, while Part 2 is a tailor-made extention of Part 1 and gives full and detailed
meanings and interpretations to various conditions.
If having two parts, why Part-III In Part III conditions of particular application have not been
standardized and they require to be drafted separately for individual contracts. They are based on
the guidelines/ examples for clauses given in Part 2. It also contains certain blank spaces to be
filled in, such as the name of ruling language, the country or state whose law is applicable to the
contract, deviation limits, security deposits, etc.
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The differences between MES and FIDIC forms are as given below :
MES
FIDIC
Obligations :
In all Indian contracts, including MES, the In FIDIC obligations of contractor as well as
obligations of contractors are spelled out owner and engineer are set out clearly.
elaborately but the conditions of owners
obligations are not expressed clearly, duties in
particular.
Engineer :
Engineer is an employee of the department who
administers the contract and works as a
representative of the owner to settle all matters
which arise in relation to the construction of the
project.
- Decisions taken by the engineer/ accepting
authority are final and binding to the contractor.
Delay and Extension :

Default of owner
If the delay is caused due to non-availability of
Govt. Stores shown in the respective schedule.
OR
Non-availability of or breakdown of Govt. tools
and plants listed in the respective schedule, the
contractor shall be entitled for the extension of
time only.
Remedy for non-issue of drawings or not
handing over the site on time is not emphasized
anywhere.
Default of Contractor :
If the delay is caused due to any default of the
contractor, then the contractor is liable to pay
compensation at the rate of 1% of the contract
value for every week of delay subject to max.
limit stated in contract.
Engineer may be the employee of the

department but is not a signatory or party to
the contract between the employer and the
contractor. He has to perform as an interpreter
of the contract and as a judge of its
performance by both the parties.
- Decision / opinion taken by the engineer may
be opened up, reviewed or revised by the
arbitrator, if challenged within the stipulated
time.
Procurement of all materials, plant, equipment

and all other things required for execution of
work is the responsibility of the contractor.
However, if delay is caused due to any failure or
inability of the engineer to issue any drawing or
instruction for which notice has been given by
the contractor
OR
Failure on the part of the employer to give
possession of the site. Then the contractor shall
be entitled for
1. Extension of time
2. Additional amount which the contractor has
incurred due to delay.
Default of Contractor :
If the delay is caused due to any default of the
contractor, then the contractor is liable to pay
to the employer relevant sum stated in the
appendix to contract as liquidated damages for
every day for the period of such delay subject
to the applicable limit stated in the contract.
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MES
FIDIC
Performance Security :
S.D. may be refunded to the contractor after S.D. shall be refunded to the contractor within
the expiry of defect liability period provided that 14 days of the issue of defect liability
the contractor has always been paid the Final completion certificate.
Bill first and has rendered a No demand
certificate. However, no time limit has been
specified for such refund.
Owners lien on withheld amount :
Any sum of money due from the contractor or
any account whatsoever may be deducted from,
or paid by the sale of a sufficient part of SD.
Although in practice prior notices are given, no
clause expressly states about the requirement
of any notice regarding the claim.
Bank Guarantee Format :
The BG shall be executed for a period and on a
form as directed by the employer. Generally the
employer uses unconditional and irrevocable
BG.
Suspension of Work :
The engineer for any of the following reasons
can order suspension of progress of work or
part thereof :
1. On account of any default on the part of the
contractor.
2. For improper execution of the work for
reasons other than the default of the
contractor.
3. For the safety of the work. While no
compensation or extension of the time is
admissible for reason no. 1 stated above,
however, if the suspension is ordered for
the reasons 2 and 3 stated above, then the
contractor shall be entitled for extension of
time equal to the period of every such
suspension plus 25%,
Prior to making any claim under the S.D., the

employer shall notify the contractor stating the
nature of defect with respect to which the claim
is made.
S.D. shall be in the form annexed to these

conditions or in such other form as may be
agreed between the employer and the
contractor. The institution providing such a
guarantee shall be subjected to the approve of
the employer. Generally guarantees are
conditional and can be encashed for certain
stipulated reasons.
The engineer can order suspension of progress

of entire or part of the work for any reason.
Contractor shall not be entitled for any
compensation if the suspension is
1. Otherwise stated in the contract.
2. Necessary by reasons of some default or by
breach of contract by contractor or for
which contractor is responsible.
3. Necessary by reasons of conditions on site
or
4. Necessary for proper execution of work or
for safety of the works (Except the default
of engineer or employer)
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MES
If the total period of all such suspensions
exceeds 60 days, then the contractor is entitled
to
- extension of time equal to the period of
every such suspension plus 25%.
- A reasonable compensation
If the suspension exceeds 120 days at a time,
then the contractor after 60 days gives a notice
to the engineer requiring a permission within 15
days from the receipt thereof, to proceed with
the suspended work. If such permission is not
granted then the contractor may elect to treat
the suspension as an abandonment of work.
In such a case, the contractor shall not have
any claim on account of any profit or advantage
which he may have derived from the execution
of work.
He shall, however, be entitled to a reasonable
compensation with respect to salaries and
wages paid to labour, which remain idle due to
such suspension including 5% overhead.
Deviation :
Work that radically changes the original nature
and scope of contract should not be ordered as
a deviation and in the event of disagreement
the engineers decision shall be final and
binding.
Deviation Limit :
Such deviation (+ and/or -) should not change
the contract sum by more than the % setout in
the tender subject to following restrictions.
1) The sum of all deviations should not be
more than twice the deviation limit.
Deviation in items of individual trade should not
be more than 25% of the value of the contract
sum as a whole or half the deviation limit
whichever is less. The value of addition of any
individual item not included in contract 10%
of deviation limit.
FIDIC
If the suspension is ordered due to the default
of the engineer or employer then the contractor
shall be entitled to
1) Reasonable extention of time.
2) An additional amount as per the cost
incurred by the contractor due to such
suspension.
If the suspension exceeds 84 days, then the
contractor may after 84 days, give a notice to
the engineer requiring permission within 28
days from the receipt thereof to proceed with
the suspended work then, if such permission is
not granted, then the contractor may elect to
terminate the work as an event caused by
employee default. In the event of such
termination the contractor is entitled to
(1) The amount of any loss or damage to the
contractor arising out of or in connection
with or by consequence of such termination.
(2) The reasonable cost of return of
contractors staff in connection with the
work at the time of such termination.
(3) Such proportion of the cost as may be
reasonable for the removal of contractors
equipments.
A sum being the amount of any expenditure
reasonably incurred by the contractor in
expectation of completing the work.
The engineer can make any variation of the

form, quality or quantity of the work or any part
thereof that may in his opinion be necessary.
No deviation limit is specified. However, if the
sum of the price of all deviations exceeds 15%
of the contract price then in such an event the
contract price shall be adjusted. Such
adjustment shall be based only on amount
exceeding 15%.
Provided that if the deviation is ordered as a
result of some default of the contractor or a
breach of contract by the contractor or for
which he is responsible the cost of such
deviation shall be borne by the contractor.
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MES
FIDIC
Sharing of Risk
The employer accepts accepted risk only and Employers Risks are :
the contractor is required to take the
1) War, hostilities, invasion act of foreign
responsibility for all other risks, till the handing
enemies.
over of the works to the engineer. The accepted
2) Rebellion, revolution, military power,
risks are
civil war.
1) War, hostilities, invasion act of foreign
3) Riots, commotion or disorders (except
enemies.
among contractors or subcontractors
2) Rebellion, revolution, insurrection, military
workers)
power, civil war
4) Pressure waves caused by aircraft or
3) Riots (except among the contractors
other aerial devices traveling at sonic or
employees).
supersonic speed.
4) Damage from aircraft.
5) Any operations of forces of nature.
5) AOG perils : earthquake lightening, floods,
6) Loss or damage due to the use or
tornado.
occupation by the employer of any
section or part of permanent works.
Loss or Damage due to Employers Risks :
7) Loss or damage due to defective design
In the event of any loss or damage from any of
provided by employer or engineer.
the accepted risks the contractor shall
8) Ionizing radiations or contamination by
1) Remove from site any debris and
radioactivity from any nuclear fuel or
damaged works, shift the articles and/or
waste, radioactive toxic explosives.
materials to engineers stores or as
directed by the engineer.
If the loss or damage happens from any of the
2) Proceed with the work as per the employers risks, the contractor shall if and to
provisions of contract.
the extent required by the engineer rectify the
loss or damage.
Such works shall be valued as deviations or as
prescribed for payment, provided that the Such works shall be treated as variations and
contractor shall not be entitled to payment shall be valued accordingly. In case of
under this condition, in respect of so much loss combination of owners and others risks the
or damage as has been incurred by any failure engineer shall take into account the proportional
on his part to perform his obligations under the responsibilities of the contractor and the
contract.
employer before such valuation.
- If any equipment, plants or temporary
buildings on the site, which are necessary for
the completion of the work, but not being
incorporated in the work sustains damage even
due to accepted risks, the contractor shall be
responsible to make good such damages.
- If any of the contractors equipment, plant or

temporary works on or near the site or in transit
sustains destruction or damage by a special
risk, then the contractor shall be entitled to
payment for replacing or rectifying such
equipment.
The compensation to make good such damages

is however not mentioned anywhere and it
creates disputes.
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MES
Unforeseeable physical obstruction or
condition:
- No such clause regarding unforeseeable
physical obstruction or conditions is given. The
contractor is deemed to have satisfied himself
about all matters affecting the completion of
work. He will not be paid any extra charge in
this regard.
FIDIC
If during the execution of works the contractor
encounters physical obstructions or conditions,
which an experienced contractor cannot
foresee, then the contractor shall be entitled to
extension of time and the amount of any cost
which may be incurred by the contractor due to
such obstruction or conditions.
FIDIC describes the procedure for additional

Additional Claims :
claims as given under :MES contract is silent on the procedure to be
1. Notice of claims by the contractor.
adopted for claims involving additional claims.
2. Contractor to keep contemporary
records to support claims.
3. Inspection of such records by engineer.
4. Substantiation of claims.
5. Payment of claims.
Payment of Bills : RA Bill
Contractor may submit claims for payment on
account of work done at an interval of < 30
days. No time frame is given in the contractor
to process the RA bills and for pay to the
contractor.
Final Bill :
The contractor shall submit the final bill within 3
months (90 days) from the date of physical
completion of work. The final Bill shall be paid
within 1.4 months, if contract value is < 5 lakhs
and 2.6 month, if contract value is > 5 lakhs.
The Contractor shall submit to the engineer

after the end of each month a statement
showing the amount to be claimed. The
engineer shall within 28 days of receiving such
statement give to the employer an interim
payment certificate and the payment has to be
made by the employer within 28 days after
receiving certificate from the engineer.
The contractor shall submit the final bill within

56 days from the date of issue of defect liability
certificate. The final bill shall be paid within 56
days after the receipt of the final payment
certificate from the engineer.
Interest on the delayed payment :

Contract is silent on paying interest on delayed
payments to the contractor.
Termination of contract due to delayed
Contractor is entitled to receive interest on
payments :
delayed payments and to terminate the
No such provision.
contract.
-48-
MES
Taking over of completed works :
On completion of work, the contractor shall give
a notice thereof to the engineer.
The Engineer shall issue a certificate to the
contractor if the work is completed to his
satisfaction. No time frame is stated for issue
of such certificate.
Dispute Resolution :
All disputes (other than those for which the
decision of accepting officer to be final and
binding) shall be referred to sole arbitrator to be
appointed by the authority mentioned in the
contract.
If the contract is cancelled for contractors
default such reference cannot be made unless
alternative arrangements are finalized.
Unless both parties agree in writing, the
reference to arbitration shall not take place
before completion of work or termination of
contract.
FIDIC
On substantial completion of work, the
contractor shall give notice to the engineer
accompanied by a written understanding to
finish outstanding work during defect liability
period.
Engineer shall issue a taking over certificate
within 21 days after receipt of contractors
notice and undertaking, if the work is
substantially completed in his opinion.
All disputes shall be first referred in writing to
the engineer.
The engineer shall give his decision within 84
days after receipt of such reference.
If either the employer or the contractor is
dissatisfied with the engineers decision or if the
engineer fails to give his decision within 84 days
dispute may be referred to Arbitration.
If the dispute is not referred to arbitration
within 70 days after the day on which the
engineer gives his decision, then the decision of
the engineer shall become final and binding.
If the engineer fails to give a decision and either
party does not intend for arbitration, then both
the parties loose their entitlement to commence
arbitration.
Unless the parties otherwise agree, reference to
arbitration may be made during execution of
work or after completion of work.
From the above comparison it can be observed that MES contract form does not elaborately define
the obligations of owners or contractors as compared to FIDIC form.
In FIDIC form, various clauses have been subdivided into sub clauses to make it easy to
understand while clauses in MES contract are lengthy and hence difficult to interpret.
Some of the additional obligations of the contractor which are not found in MES contract :
1)
Programme and Method statement to be submitted by the contractor.
2)
FIDIC form also lists out the default of the employer and entitlement of the contractor to
terminate his employment and receive compensation in the event of such default.
In MES contract, while there are numerous reasons on account of which the employer can
terminate or cancel the contract but there is not a single reason for which the contractor can
terminate his contract.
Hence, it can be concluded that FIDIC form of contract is well balanced, more fair and equitable
and user friendly.
-49-
ASSIGNMENT 8
1.
Compare between FIDIC contracts and PWD contracts of your state.
-50-
Analyze NIT of a project. State lacunas for its contents and redraft the NIT to make it ideal
NIT.
Chapter 9
Tendering Procedure
NOTICE INVITING TENDERS

This is the starting point of tendering procedure.
PURPOSE :
Advertisement to inform those interested in doing the work.
WHEN :
Well in advance of the date of opening of tenders to prepare realistic estimates.
HOW :
It should be conspicuous, i.e. bold and attractive and also it should contain :-
1.
Name and Kind of job, locality, time and place of opening of tender.
2.
Name of the owner.
3.
Mag./Size and Character of job.
4.
Completion time of work and date of handing over the site to contractor by client.
5.
Name, designation, and address of person authorized to give tender.
6.
Name, designation and address of person authorized to receive tenders.
7.
Type of Contract.
8.
Note on Alternative Quotation.
9.
Principal items of work with approx. quantities.
10.
Amount and mode of EMD.
11.
Amount and mode of SD/ PB.
12.
Price of tender documents.
13.
Condition of award reserving right of owner.
14.
Way of submitting tender.
15.
Special requirements.
16.
Date of Signing Contract.
17.
Official designation of person giving Notice Inviting Tenders (NIT).
-51-
NOTICE INVITING TENDER : A Case Study :Sealed tenders in 2 bid system are invited from reputed contractors working with designers of Architectural
Projects by the Director, School of Building Science and Technology (SBST), Centre for Environmental
Planning and Technology, K. L. Campus, Navrangpura, Ahmedabad, for construction of SBST Building having
following details :1)
Name of the Project
Construction of Building for SBST, CEPT.
2)
Designer
M/s. Stein Doshi and Bhalla,

Sangath, Drive in Road, Ahmedabad.
3)
Total Built-up Area
Approx. 1200 M2.
4)
Type of the Building
Mainly load bearing structure with spans of 36, 29 and

36, having basement of full floor and some class rooms
with double height.
5)
Estimated cost of the Project
Rs. 50 Lakhs.
6)
Location of the Building
7)
Major Items of Works
8)
Tenders can be collected from the Office of Registrar, CEPT from 1st Dec.03 to 7th Dec. 03 between
09.00 am to 05.00 pm.
9)
Cost of Tender Documents
10)
Duly filled tenders are to be submitted on or before 30th Dec.03 upto 5.00 pm at the Office of
Registrar, CEPT.
11)
Tenders shall be opened at the office of the Director, SBST, CEPT on 7th Jan.04 at 11.30 am.
12)
Tenders can be withdrawn before the time of opening the tenders.
13)
Date of Awarding Contract
15th Jan.04.
14)
Date of Starting the works
21st Jan.04.
15)
Date of Completion of the project :
20th Jan.05.
16)
Type of contract
Item Rate. Alternative Quotations shall be rejected.
17)
EMD shall be submitted along with the technical bid for Rs.50,000/- in form of B.G. from a
Nationalized Bank, for a period of 90 days, the EMD must be valid.
18)
Performance Bond to be submitted at the time of signing the contract, shall be Rs.5 lakhs in form of
B.G. from a Nationalized Bank.
K. L. Campus, Navrangpura, Ahmedabad.

:
i)
ii)
Exposed Brick work 10,000 M2

Exposed R.C.C. work 2,500 M2
Rs. 3000/- (Non Refundable).
Signed By
Director,
SBST, CEPT
-52-
QUALIFICATION OF CONTRACTORS
Selection of Contractor for inviting tenders : Suitability of contractor is muct more important than
the technical competence or legal formalities of the agreement.
It is essential to invite contractors of equal standing. So, it is necessary to provide all contractors
with identical particulars.
1. Size of the projects he can handle.
2. Type of the projects he can handle.
3. Locality where he can work.
4. Financial status.
5. Reputation for fair and punctual performance.
6. Quality and experience of his permanent staff.
7. Organizing capacity, management and co-ordination of work of sub-contractors.
8. Available plant and equipment for the project.
9. Average value of work done per year.
10. Jobs on hand.
11. Available working capital : value of works completed out of works in hand in the current
year minus value of uncompleted works in progress
12. Attitude towards arbitration.
13. Income tax clearance.
Disqualification of a contractor is a serious action and it must be taken by the owner for well
established reasons. The default of a previous contract is sufficient ground. Litigation with
previous contract will generally disqualify the contractor for future tenders.
Dishonesty, evidence of lack of ability, insufficient working capital and evasion of income tax
payment are the grounds of disqualification.
There are normally two ways of selling tender documents. They are :
(A)
either send straight-away to the contractors who are specifically qualified for the job or
(B)
advertise the job and invite the contractors, who are either already qualified or are
eligible for such qualification, to buy.
-53-
A Case Study of evaluation of qualification document:Prequalification Comparision for Admn. Building, North Gujarat University, Patan.
Sr.
No.
Name of
the Co.
1.
Parameters
Type of Org.
Ltd.
Pvt.
Ltd.
10
Yrs
Adequate
Partnership
10
Yrs
Adequate
Ltd.
30
Yrs
Adequate
Pvt.
Ltd.
38
Yrs
Adequate
Partnership
19
Yrs
Adequate
Sufficient
Sufficient
Sufficient
Partnership
18
Yrs
Just
Adequate
Sufficient
Partnership
18
Yrs
Just
Adequate
Sufficient
Proprietorship
24
Yrs
Adequate
Sufficient
Very
Few
30
lakhs
No
Partnership
24
Yrs
Not
Adequate
Not
Sufficient
Yes
No
No
No
No
50
lakhs
25
lakhs
100
lakhs
150
lakhs
Very
few
30
lakhs
Proprietorship
29
Yrs
Not
Adequate
Not
Suffcieint
No
20
lakhs
35
lakhs
10
lakhs
Govt.
Private
Govt.
Semi
Govt.
Govt.
Private
Private
Govt.
Yrs. In
Business
Equip.
Strength
52
Yrs.
Adequate
Pvt.
Ltd.
10
Yrs
Adequate
4.
Technical
Staff
Sufficient
Sufficient
5.
Arch. Work
Executed
Solvency
Certificate
(Rs.)
Works
executed
Private/
Govt.
Yes
Yes
Just
Sufficient
Yes
100
lakhs
100
lakhs
25
lakhs
Both
Private
Private
2.
3.
6.
7.
Semi
Govt.
Sufficient
PREQUALIFICATION COMPARISION
Sr.
No.
Name of
the Co.
Parameters
1.
Type
Org.
2.
3.
4.
5.
6.
7.
of
Marks
Out
Of
Solvency
Certificate
(Rs.)
Properitor
Partnership
Pvt. Ltd.
Public
5 Yrs.
10 Yrs.
Above 10 Yrs.
Not Adequate
Just Adequate
Adequate
Not Sufficient
Just Sufficient
Sufficient
No
Very Few
Yes
25 Lakhs
25 to 50 Lakhs
Above 50 Lakhs
2
2
3
5
5
5
5
4
6
10
4
6
10
5
8
15
2
3
5
Works
executed
Private/
Govt.
Govt.
Semi Govt.
Pvt.
Both
2
3
4
5
Yrs. In
Business
Equip.
Strength
Technical
Staff
Arch. Work
Executed
5
5
5
5
5
5
5
10
10
10
10
10
10
15
15
15
5
5
5
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
15
15
15
15
5
5
5
4
4
3
2
4
2
3
2
4
4
5
5
55
55
50 43
39
40 36
40
40
36
34
39
Conclusion we will select contractors above 40 marks. So Contractors A, B, C, E, G, H are qualified for
bidding.
-54-
24
TYPES OF TENDERS and BIDDING METHODS

Open Tenders :
Open Tenders are adopted for public works executed by govts., municipalities, etc., where there is
a statutory obligation to advertise and invite competitive tenders. Keen competition is assumed by
the use of this method. Open tendering ignores the likely different qualities of work from good to
not so good contractors. Any hard and fast rule that the lowest tender must be accepted will often
put the engineer or the architect in difficulty, because in open tendering contractors of unequal
standing may quote and the comparison may not be realistic. It also keeps the door open for new
entrants in the business.
Limited Tenders :
This method overcomes the drawbacks of open tenders, as the invitation to tender is restricted to
a small number of equal ranking contractors. Any one of them can be relied upon to co-operate
professionally with engineers or architect, in the execution of the job and in proper interpretation
of the contract drawings and specifications. For more complex or specialized work requiring skill
and experience and where high quality construction is needed, the system of limited tendering is
advantageous. This method is normally adopted in private sector.
Single/Negotiated Tenders :
Sometimes works of very small value are undertaken without tenders. They are executed through
negotiations where the price and quality of work is decided mutually without a written contract.
Two Envelop System :
Tender documents are normally prepared in 2 volumes.
Volume 1 : Technical bid = Envelop A. It contains Tender Notice, Tender Forms, Instructions to
Tenderers, General and Special Conditions of Contract, Various performas and formats, List of
drawings and EMD.
Volume 2 : Financial Bid = Envelop B. It contains specifications for materials and workmanship
and Bill of quantity
Technical Bid of the contractor should normally contain : Attested copy of the valid registration
certificate, attested copy of the valid I.T. Clearance Certificate, details of turnover, Balance Sheet
of the earlier year, attested copy of registered power of attorney, proposed construction and
resources schedules, method statement, details of works in hand, attested copy of partnership
deed; EMD, name of the selected sub-contractors, detailed organization structure, experience in
similar works, bank solvency certificate, performance certificates. Based on the above criteria, a
marking system is carried out and tenders are evaluated.
-55-
Three Envelop System :

Volume 1
Prequalification bid = Envelop A1
Volume 2
Technical Bid = Envelop A2
Volume 3
Price Bid = Envelop A3

Filled up B.O.Q.
PRE-BID MEETING :
Before the submission of tenders, a pre-bid meeting is normally held at the consultants/Clients
office to clarify the doubts of the contractors regarding the tender. The doubts may be following :1)
a)
b)
Corrections in the quantities of items.

Corrections in sub-soil conditions.
2)
Corrections in estimate made by client.
3)
Value and form of EMD.
4)
Initial Security Deposit (Value and Mode).
5)
% deduction from R.A. Bills towards retention. Method and stages of refund of retention
amount.
6)
Value and mode of mobilization advance and value and mode of refunding or recovering at
what % of interests.
7)
Method of accounting and value of materials supplied by the client.
8)
Value of any advance to be paid against consumables delivered at the site and method of
its recovery.
9)
Terms of payment, min.value and intervals of interim bills.
10)
Procedure of final bill and settlement of A/c.
11)
Whether water and electrical services will be supplied at the site free of cost.
12)
Whether labour-camp will be permitted on site.
13)
Details of Insurance.
14)
Type of Contract.
15)
Escalation Clause.
16)
Supply of drawings.
17)
Method of resolving disputes.
-56-
MODE OF COLLECTION OF BLANK TENDER DOCUMENT

By post
By collection in person
RECORDS MAINTAINED REGARDING SALE OF TENDER
(Normally followed by Government Department)
Mode of payment by each bidder.

Tender sale register (List of those who have purchased the tenders)
Tender opening register
Tender finalization register
Numbering of tender booklets before sale.
TENDER SUBMISSION
Tender has to be submitted in a sealed cover and to be marked on the left hand top comer
Tender for the construction of .... The full name and address of the tenderer and the name of
the authorised agent delivering the sealed cover containing the tender, shall be written at the
bottom left hand corner. If submitted by post, the sealed envelope marked as above, shall be
enclosed in another cover properly addressed and shall be sent by Registered Post
Acknowledgement Due. The date and time for receipt of envelope containing the tender shall
strictly apply, in all cases. Tender offered or received after the date and time is over, will either not
be accepted or if inadvertently accepted, will not be opened and shall be returned to the tenderer
unaccepted.
The time interval between the date of sale of tender and the last date of submission of tender
should normally be 4 weeks, which may be reduced to 3 weeks in case of emergency. In private
sector, this may sometimes be reduced to 2 weeks.
TENDER OR BID OPENING
The time interval between the time of the tender submission and the time of the tender opening
should be minimum 5 minutes. This is as adopted in the Government departments. It varies
considerably in the private sector.
Public contract policy dictates that all bids are to be opened publicly and read aloud. It is attended
by all the bidders.
Markup process
We frequently confuse Markup with Profit, and we want to set the record straight. Markup isn't profit. Markup is a general term that applies to
the overhead and profit that any business needs to realize if the business wants to stay in business. It is the amount a business charges above
their direct cost.If your contractor has a 1.50 markup (which is reasonable for a remodelling contractor), that means that if the estimated cost for
a job is $10,000, they'll multiply the $10,000 x 1.50 and arrive at a $15,000 sales price.Now many people who know little about business and
even less about the costs of running a business will say, "Oh, look at that crook. He is making $5,000 profit on my job." Nope, not true.Your
contractor gets $5,000 to pay their overhead expenses (which include salary) and make a reasonable profit.
-57-
Procedure, as adopted by Government departments :
Activities carried out by the tender opening committee :

Open the box where the tenders are deposited.
Count the number of envelopes and number them.
Points read out by the representative of the tender committee:
Name of the tenderer
Earnest Money Deposit (EMD), Amount and mode of payment
List of variations given by the tenderers
Final total value of the bid
Marking made on each tender:
Circle all rates
Note the conditions having financial implications
Note any erasures/ overwriting
Do not leave any space for somebody to make any alterations.
The total number of corrections is given at the end of the page.
Signed by all members of the tender committee.
Procedure for opening of bids in the private sector:

Sealed bids are normally received in the office of the owner/client in the custody of the project
Manager. At the written request of the owner, they could be received in the office of the
architect/consulting engineer.
Sealed bids are kept in the custody of the Project Manager or an equivalent responsible person.
These sealed bids are opened on the scheduled date and time at the office of the owner/
architect/ consulting engineer, in the presence of a responsible authorised person. Right is
reserved to reject any item, any tender or all tenders, without assigning any reason thereof.
Closed bidding (For projects in the Private sector) :In closed bidding, the amount and value of the bids are not disclosed. After delivery, the owner
uses the bids in any way that fits to serve their own best interest. The owner makes a final
selection of the successful contractor only after extensive negotiations.
Bid Analysis and Comparative Statement (Scrutiny)
After the bids are received, the client and/or the architect/engineer analyse each bid thoroughly
and compare them with the equivalent standard bid. The purpose of this exercise is to select the
right contractor for the right job, so that the work reaches its completion without any trouble and
to the satisfaction of all concerned. Selecting a contractor on price alone has, in many cases,
amounted to 'buying trouble'. It is essential to examine and compare, before selecting a contractor
for the work, the following aspects:
Contractor's financial capacity
Contractor's organizational capacity
Experience in execution of similar type of jobs
Plants and machinery available to execute the job
Works in hand at present
-58-
General behavior and temperament of the contractor

Tendered rates and amount and workability of the same
Important document of vigilance department with remarks against any bidder, if any
This involves preparation of a tabulated statement of items, quantities, rates and amounts quoted
by each bidder.
In the competitive bidding process, the winner is usually the lowest. So, the estimator who
produces the lowest estimate has a better chance of winning.
But, it must be kept in mind while considering the tenders that the lowest rate may not
necessarily be reasonable and may lead to absurdly higher or lower costs. These can be
manipulated through unbalanced bids. To have an ease of cash flow, many contractors quote
higher rates for the initial items of tenders, such as earthwork and this practice is called front
loading. If over-done, it may act as a dis-incentive to the contractor to execute the latter items
of work. During the tender evaluation, this aspect should be given due attention.
Normally in the Government and Public sector, the selected contractor is the one quoting the lower
price, unless there is some solid reason for not selecting the lowest. In the private sector, the
selected contractor may not necessarily also be the lowest, though justification has to be given in
case of such a decision.
PREPARATION OF BRIEFING NOTE
The word brief is misleading in this context and this is standard government nomenclature
referring to the recommendation by the authorized person, based on remarks by persons, down
the line.
Briefing note normally includes;
Nature and name of work
File no.
NIT no.
Tender opening place and time
No. of bids sold and received
Income-tax clearance certificate indicating the financial position of the bidders
Credentials of the tenderers
Financial implication of the bids, with respect to the estimates (namely percentage
higher/lower)
Variations reduced to monetary values i.e. financial implications of the conditions
Complete details of similar works, with value of the same
Availability of the materials, suitability of rates, etc.
Technical data i.e. escalation formula, etc.
Validity of the offers (with remark on whether extension of validity will be necessary)
Period specified by client for completion of the job
Period asked by the bidders
Name of the office opening the bids, with names of the persons present
Name and position of the accepting authority
Discrepancy of the bids (if any) to be noted
Reasonableness of the rates.
-59-
The above mentioned is the procedure in Government departments. In the private sector, there is
no such procedure of noting. The comparative statement with the covering letter and annexure
conveys all that is essential to the client and to the highest authority in the architect's/consultants
office.
CIRCULATION ROUTE OF THE BRIEFING NOTE

Briefing Note
Executive head
Accounts officer
For checking & bringing out their observations, if any
Return back to the Executive head
Put for clarification of discrepancy, if any,

at tender committee meeting
Fig. 1 : Shows the circulation route of the briefing note.
The tender committee will be the final authority for selecting the bidder (normally the lowest,
unless justified other wise).
General criteria for acceptance of bid by the tender committee :
Reasonable / viable / workable rates.
All credentials are checked
Undue emphasis should not be laid only on experience.
Certified credentials like :
Financial credentials,
Bank account,
Turnover,
Income Tax Clearance Certificate (ITCC),
Balance sheet (latest and earlier years),
Books of account,
Assets,
Scale of business,
Solvency certificate.
-60-
Resource credentials,
Tools and plants,
Manpower,
Machinery,
Factory, land, site, etc.,
Information system.
Experience
Capacity
Quality
Prior works with names of clients and other details.

Bench marking and ability to complete the work on time.
Quality assurance facilities and ISO certificate.
Negotiation- if the rates are higher than the estimated rates. (Not encouraged normally, as
it could lead to suspicion, to manipulation, underhand dealings, etc.)
Accepting authority will decide on further negotiations (if any), under the Tender
Committee recommendations.
For negotiations, minimum two bidders and all valid tenderers.
When negotiation starts, the law says that, offer once rejected cannot be accepted.
All members of the Tender Committee (T.C.) are equally responsible.
NEGOTIATIONS
In addition to that, in the case of a Negotiated tender, negotiations are also held sometimes with
some selected bidders, after the bids are opened. This could be a routine operation in the case of
the private sector but it would be exceptional Government tenders and may involve
recommendation of the concerned authority, like the Tender Committee.
During negotiations the tenderer is given the option to reconsider and revise the rates tendered
by him in response to public invitation of tenders.
The contract negotiations are best when conducted at the highest level rather than at lower levels.
The contractor coming for negotiation should come thoroughly prepared and should preferably
someone who can take a decision.
-61-
BIDDING PROCESS FLOW CHART (From Contractors point of view)

LEARNING ABOUT NOTICE INVITING TENDER (NIT)
NO
DECISION TO BID
YES
IS PREQUALIFICATION REQUIRED
YES
FURNISH INFORMATION
CHECK IF PREQUALIFIED
NO
STOP
NO
GET BID DOCUMENTS

STUDY BID DOCUMENTS
MAKE A SITE VISIT
PRE-BID MEETING
CLARIFICATION TO THE QUERIES
RAISED BY THE CONTRACTORS
INITIAL APPRAISAL OF
WHETHER TO GO IN
FOR THE BIDDING
NO
TYPE OF BID
ITEM RATE
COMPUTE APPROX.
QUANTITIES & COMPARE
WITH BILL OF
QUANTITIES
TURNKEY
PERCENTAGE
RATE
QUOTE THE PERCENTAGE
OR FIXED FEE TO BE
ADDED OR SUBSTRACTED
FROM THE COST
BILL OF QUANTITIES (B.O.Q.)

1
CONTD. ON NEXT PAGE
-62-
PREPARE DESIGN,
DRAWING AND DRAFT
SPECIFICATION
BUILD, OPERATE
& TRANSFER
PREPARE DESIGN,
BUILD, FINANCE &
OPERATE
1
PLAN OF ACTION
SUB-CONTRACTOR OR
DEPARTMENTALLY
SELECTION OF A
SUB-CONTRACTOR
INVITE QUOTATION
RECEIVE & COMPARE
SUBCONT.
ESTIMATION OF
MATERIAL/MANPOWER/PLANT-EQUIPMENT REQD.
INVITE QUOTATION
RECEIVE & COMPARE
RATE ANALYSIS
PROFIT
SPECIAL CONTRACT
CONDITIONS
SITE VISIT & LOCATION
CONDITIONS
COST ESTIMATE
CONDITIONS
BANK & INSURANCE COSTS

CONDITIONS
RISK, OVERHEAD % AGE

CONDITIONS
OCTROI, DUTY, TAX, ETC.

CONDITIONS
MANAGEMENT APPRAISAL
CONDITIONS
LAST MOMENT CHANGES

CONDITIONS
REVISED FINAL BID

CONDITIONS
SUBMISSION OF BID
CONDITIONS
OPENING OF PRE-QUALIFICATION
A-I PART OF THE TENDER
CHECK IF PRE-QUALIFIED
CONDITIONS
SUBMISSION OF EVALUATION
SHEETS TO CLIENT
OPENING OF THE TECHNICAL

BID A-II PART OF TENDER
CONTD. ON NEXT PAGE
-63-
STOP
3
YES
CHECK QUALIFIED
2
NO
OPENING OF PRICED BID

VOLUME II OF TENDER
SELECTED
YES
FINAL SELECTION FOR NEGOTIATION

NOT SUCCESSFUL
NEGOTIATIONS
SUCCESSFUL
FINAL DECISION ON COST
AWARD OF CONTRACT & BID ANALYSED AND BRIEFING NOTE

PREPARED BY TENDER COMMITTEE
CHART 1 :
SHOWS THE BIDDING PROCESS FLOW CHART (BY CONTRACTOR)
-64-
ASSIGNMENT 9
1.
Analyze NIT of a project. State lacunas for its contents and redraft the NIT to make it ideal
NIT.
2.
What is the importance of Qualification document. Explain its importance in completing the
project successfully through examples of failures of projects because of not following
qualification process.
3.
Explain in detail through an example the Prebid Meeting process.
4.
Through an example explain the Scrutiny of Tenders for a tender for deciding the winning
bidder.
5.
Explain in term Markup in the bidding process for contractors.
-65-
Chapter 10
World Bank Group (Introduction)
The World Bank Group :
International Bank for Reconstruction and Development (IBRD) : Established 1945.

International Development Association (IDA) : Established 1960.
International Finance Corporation (IFC) : Established 1956.
Multilateral Investment Guarantee Agency (MIGA) : Established 1988.
IBRD Loans and IDA Credits :
Administered by the same staff.

Projects must meet the same criteria to qualify for financing.
Same procedures apply for the procurement of goods and works.
Same procedures apply for selection of consultants.
IFC : IFC promotes economic growth by lending directly to the private sector in developing
countries.
MIGA : MIGA promotes private investment in developing countries.
FUNCTIONS OF THE WORLD BANK
To provide funds for developmental projects.
To provide policy advice and technical assistance.
To promote investment in developing countries.
INTRODUCTION
a)
The Articles of agreement require the Bank to ensure that the proceeds of Loan/Credit
are used for the purposes intended with due attention to economy and efficiency.
b)
Accordingly, the bank has developed guidelines for procurement of goods, works, and
consultancy, represents :
a. accumulated experience of Bank/IDA; and
b. good public procurement practices on a global scale.
c)
Bank is a co-operative institution and equal business opportunities have to be provided

to all the member countries of the Bank. Impartial administration of procurement
among all eligible bidders is essential to maintain the Banks ability to raise financial
resources from its member countries in the capital markets.
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d)
Procurement is an important aspect of the Banks operation. It is a critical element in

project implementation and unless it is carried out efficiently and promptly, the full
benefits of the project cannot be realized. Bank loans/credits are normally disbursed as
expenditures are incurred.
e)
Good procurement practices alone cannot assure that the Bank assisted projects will
achieve their developmental goals; but it will definitely enhance the developmental
effectiveness. However, poor procurement practices virtually guarantee that these goals
will not be fully achieved.
f)
The responsibility for the execution of the project and for the award and administration
of the contracts under the project rests with the borrower.
g)
Role of Procurement :
It is critical for :
Ensuring satisfactory implementation.
Ensuring speedy transfer of resources by way of disbursement
Achieving economy and efficiency
Ensuring success of the project.
(Sound public procurement is a valid arm for promoting good governance and
better fiscal management of projects. The Bank supports the clients developing
capacity for the above.)
h)
Corruption :
The Bank firmly believes that corruption is a major factor impeding development. The
World Bank President has observed, Corruption hampers economic growth, burdens
the poor disproportionately, and undermines the effectiveness of investment and aid.
Anti-corruption strategies need to be an integral part of a development framework
designed to help countries eradicate poverty. The Bank supports all steps in the above
direction.
i)
Four Considerations for Procurement in Bank Financed Projects :

Need for economy and efficiency in the execution of the project;
Banks interest as a co-operative institution in giving all eligible bidders from
developed and developing countries an opportunity to compete;
Banks interest as a development institution in encouraging the developing of
domestic contracting and manufacturing industries; and
The importance of transparency in the procurement process.
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ASSIGNMENT 10
MAJOR ASSIGNMENT
1.
Differentiate exhaustively the complete bidding process followed conventionally and

through World Bank.
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Chapter 11
Introduction to World Bank Procurement
IMPORTANCE OF PROCUREMENT
Critical to project implementation

Large amounts involved
Member countries expectation by way of exports
Perception of fairness
CONSIDERATIONS THAT GUIDE WORLD BANK PROCUREMENT POLICIES
Economy and efficiency

Equal opportunity for all eligible bidders
Development of local industries in borrowing countries
Transparency of the procurement process
ROLE OF PROCUREMENT
Critical for
Project Implementation
Transfer of Resources
Economy and Efficiency
Success of the Project
PROCUREMENT POLICY
Bank Articles
Lend for specific projects
Use funds for purposes intended
Economy and efficiency
Promote competitive international trade
BANKS PROCUREMENT RULES EVOLUTION
1945
None
1951
ICB open to everyone
1956
ICB open only to member governments (and Switzerland)
1964
Procurement Guidelines published for the first time
1965
Introduction of Domestic Preferences
1972
Introduction of Regional Preferences
1974
Introduction to Works Preferences
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1975
Inclusion of Non-ICB Procedures
1985
Revisions in Transport/Insurance etc.
1995
Mandatory use of Bank SBDs

Use of any three foreign currencies plus local
Deletion of regional preference
Inclusion of BOT etc.
1996
Inclusion of provisions on fraud and corruption
1997
Inclusion of provisions in Bid forms on fraud and corruption
1999
Amendment for Euro
BANKS PROCURMENT RULES

Main Considerations :
Transparency
Simplification
Logical Presentation
New Initiatives
Private Sector Projects
Social Sector Projects
Guidance to Bidders
Fraud and Corruption
Revisions in New Guidelines :Major: Transparency as objective

Eligibility/ boycott
Public Sector eligibility
Reserved Procurement Redefined
Regional Preference Deleted
Management Contractor Introduced
Private Sector Projects (BOT/BOO/BOOT)
Community participation
Procurement rules under guarantees
Dispute Resolution Board
Fraud and Corruption
PREFERRED PROCUREMENT PROCEDURES
ICB; open to all eligible bidders with an element of domestic preferences.
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THRUST OF BANKS CURRENT PROCUREMENT POLICY

Stronger focus on the development function and on increased borrower accountability;
Emphasis on upfront project work, stressing better procurement planning and client
capacity analysis to ensure good quality at entry; and
An integral approach to supervision of procurement that strengthens post review of
contracts and sets prior review thresholds on the basis of borrowers procurement capacity
and past performance.
FEATURES OF BANKS MODEL PROCUREMENT DOCUMENTS
Sharing of risks between the parties of the contract;

Incorporation of suitable qualification criteria;
Incorporation of precise and fair evaluation criteria;
Incorporation of non-discriminatory/broad technical specification;
Ensure transparency by public bid opening, pre-disclosure of qualification and evaluation
criteria, absence of negotiations;
Award to the lowest evaluated responsive bidder meeting the specified qualification criteria;
and
Incorporation of a suitable dispute resolution mechanism and market oriented payment
terms.
BUSINESS COMMUNITYS PERCEPTION
Timely and accurate information on business opportunities;

Predictable procurement system;
Level playing field; and
Open competition.
SPECIFIC CONCERNS IN INDIA
Delays in finalization of procurement planning and compilation of bidding documents;

Delays in bid evaluation and award of contracts;
Delays in signing of contracts after obtaining no objection from Bank;
Delays in releasing of advances and other payments during execution;
Inadequate engineering leading to wide variations at the time of implementation and
consequent disputes;
Delays in resolving issues during contract implementation; and
Weak contract administration.
Subcontracting
Enforcing Specifications
Timely Responses to Issues
Management meetings
Lack of timely availability of counterpart funds.
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WORLD BANK DISBURSEMENTS

(Value in Billion Dollars)
FY
FY
FY
FY
FY
FY
FY
FY
FY
1994
1995
1996
1997
1998
1999
2000
2001
DISBURSEMENT
15.98
17.72
19.26
19.76
24.86
24.38
18.50
15.16
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WORLD BANK DISBURSEMENTS

FY
FY 1994
FY 1995
FY 1996
FY 1997
FY 1998
FY 1999
FY 2000
FY 2001
IBRD
10.45
12.67
13.37
14.00
19.23
18.21
14.10
5.72
IDA
5.53
5.05
5.89
5.76
5.63
6.17
4.40
9.44
TOTAL
15.98
17.72
19.26
19.76
24.86
24.38
18.50
15.16
WORLD BANK LENDING

Cumulative upto FY 2001
COUNTRY
INDIA
CHINA
MEXICO
INDONESIA
AGRENTINA
TURKEY
KOREA
PAKISTAN
RUSSIA
PHILLIPINES
IBRD
28.80
25.74
33.44
27.34
18.46
16.57
15.65
6.98
12.51
11.11
IDA
27.81
9.95
1.41
0.20
0.12
6.07
0.29
LARGEST BORROWERS IN 2001

COUNTRY
CHINA
INDIA
ARGENTINA
TURKEY
MEXICO
INDONESIA
PAKISTAN
BRAZIL
RUSSIA
KOREA
TOTAL
1.820
1.516 [2.08 in FY 2002]
1.009
0.820
0.771
0.684
0.647
0.561
0.455
0.043
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TOTAL
56.61
35.69
33.44
28.75
18.46
16.77
15.77
13.05
12.51
11.40
INDIA
Disbursements
FY 1993
FY 1994
FY 1995
FY 1996
FY 1997
FY 1998
FY 1999
FY 2000
FY 2001
FY 2002
Current Undisbursed
Commitments in India :
(on June 30, 2002)
FUNDING
:
:
:
:
:
:
:
:
:
:
:
US $ 1,950
US $ 1,116
US $ 1,783
US $ 1,309
US $ 1,563
US $ 1,375
US $ 1,437
US $ 1,698
US $ 1,526
US $ 2,080
US $ 8,026
millions
IBRD
Borrowings, retained
paid-in capital.
M
M
M
M
M
M
M
M
M
M
IDA
earnings, Contributions from Government
TERMS
15-20 years with 3-5 year grace 35-40 years with 10 year grace
period. 6.18% interest
period. 0% Interest. Service charge
of 0.75% on the disbursed balance.
ELIGIBILITY
Member countries with annual per Member countries with an annual

capita GNP between $ 1,506 - $ per capital GNP below $ 1,505.
5,445
RECIPIENTS
Governments,
Government Governments, but funds may be on
Agencies, and Private Enterprises lease
to
state
or
private
with GOVERNMENT GUARANTEE.
organizations.
COMMITMENTS
FY 99 $ 22.2 Billion for projects.
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FY 98 $ 6.8 Billion for projects.
RESPONSIBILITIES
Borrower
World Bank
JOINT
Identification
Preparation
Appraisal
Negotiations
Board Approval
Signing & Loan Effectiveness
Implementation
Supervision
Project Evaluation
CO-FINANCING
Banks Official Sources
Other Development Banks
Governments
Export Credit Institutions
Investment Banks
Private Sector Investors
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IMPLEMENTATION / SUPERVISION
Implementation is the responsibility of the borrower.
Bank is responsible for :a)
Monitoring progress
b)
Advising
c)
Ensuring loan proceeds are used for purposes intended
d)
Ensuring procurement is economic and provides fair opportunities
SUPERVISION METHODOLOGY
a)
b)
Field Visits
Review and Approve :
Consultant Selection
Bidding Documents
Contract Awards
Changes in Scope and Costs
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Chapter 12
World Bank Model Evaluation Report
MODEL EVALUATION REPORT FOR CIVIL WORKS
(Prior Review)
Note: This is a hypothetical case for illustration only.
1.
Scope of contract and estimated cost:

The work covered under this bid is for the construction of X kilometers of approach road to
agriculture marketing centers in Y District of Z State (Package 12). The estimated cost of
the work is Rs.202,03,000. The packaging of the work has been cleared with the Bank.
2.
Bidding document:
The bidding document is as per the model cleared with the Bank. Since the value of the
work is more than the equivalent of US$200,000 (say Rs.60,00,000), the bidding document
along with the drawings, specifications was by the Bank. No objection to the bidding
document has been issued by the Bank vide letter of March 5, 1994.
Salient points of the bidding document:
(a)
Stipulated period of completion: 24 months including rainy seasons.
(b)
Price adjustment :
Provided since the period of completion of work is more than
12 months.
(c)
Prebid conference:
Provided.
3.
Bid invitation process:

Bids were invited by the Chief Engineer, Roads AAA on May 16,1994. The copy of the
invitation to bid was also sent to.................................................... Departments for
publication in their office notice boards and wide publicity. The invitation for bid was also
sent to all the information of the Z State Public Works Department for wide publicity. The
invitation for bid was also sent to the Director of Publicity for arranging press publicity. A
copy of the invitation to bid is enclosed (Annexure I). The dates of publication of the
invitation for bid in the press are as follows:
SL.No.
Name of Newspaper
Level
Date of publication
GGGGGGGG (English Daily)
National
31-05-1994
HHHHHH (Hindi Daily)
National
02-06-1994
IIIIIIII (Hindi Daily)
State
02-06-1994
JJJJJJJ (Hindi Daily)
Local
01-06-1994
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The bidding documents were made available for sale from June 10 to July 15, 1994. The date of
bid opening was July 16,1994. Thus a minimum bidding period of 35 days was provided, which is
more than the stipulated minimum period of 30 days.
The following prospective bidders purchased the bidding document.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
A and Company;
B and Company;
C and Company;
D Construction Company;
E Construction Company;
F Construction Company;
G Constructions;
H Engineers and contractors;
J Construction Company; and
K Enterprises Ltd.
All the above purchasers are of Indian nationality.

Prebid conference was held on June 30,1994 as scheduled. No objection to the draft of the prebid
minutes and the draft of the corrigendum was issued by Bank on July 5, 1994. The copy of the
minutes of the pre-bid conference and the corrigendum was sent immediately to all the bidders
who had purchased the bidding document and was incorporated in the bidding documents sold
afterwards. {Copy of the minutes of pre-bid conference and the copy of the corrigendum is
enclosed (Annexure II)}.
4.
Bid response:
In all, ten bids were
In time
:
Late
:
Total
:
received. All are Indian. Details are as follows:

9
1 (Bid of M/s. E Const Co. received 15 minutes late)
10
In addition to the above one Withdrawal envelope from M/s. H. Engineers and Contractors
and one Modification envelope from M/s. J. Construction Company were received. The bid
of M/s. E Construction Company which was received late, was returned unopened account
to the terms of Clause 21.1 of ITB.
5.
Bid opening:
The bids were opened on July 16,1994 at 1530 hours as stipulated. The bidden or their
representatives attended the bid opening. The envelope marked Withdrawal received from
M/s. H. Engineers and Contractors was opened and read out first as per Clause 23.2 of ITB.
Since the withdrawal notice was received before the date and time for submission of the
bids, the bid of M/s. H. Engineers and Contractors was not opened as per Clause 23.2 of
ITB. The balance eight bids as well as the Modification envelope were opened one by one.
The bid security furnished by the bidders, rates of the bidders, the discounts offered by
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them, the corrections and conditions if any, were read out at the meeting. The minutes of
the bid opening were prepared (Copy of the minutes is enclosed Annexure III).
Table of Bid prices as read out at the time of bid opening is as follows:
Sl.No.
Name of Bidder
Nationality
Bid Price
1.
M/s. B and Company
Indian
216,89,345
2.
M/s. F Construction Co.
Indian
229,82,416
3.
M/s. G Constructions
Indian
231,24,221
4.
M/s. A and Company
Indian
232,64,492
5.
M/s. D Construction Co.
Indian
237,56,267
Remarks
as read out(Rs.)
Offered a discount of one percent if the

award is made within a period of 60
days.
6.
M/s. K Enterprises Ltd.
Indian
241,89,527
7.
M/s. C and Company
Indian
265,32,119
Offered a discount of five percent of

the bid amount if the award is made
within 45 days of opening of bid.
Indian
271,46,651
Offered an unconditional discount of

Ten percent of offered price in the
Modification envelope.
8.
M/s. J Construction Co.
M/s. K. Enterprise Ltd. Vide its letter of July 18, 1994 offered an unconditional suo-moto
discount of 12% on their quoted price.
6.
Clarifications obtained:
M/s. C and Company had not submitted the details of outstanding works with them. They
were asked to produce the same duly authenticated by the Employer/Engineer within 10
days, which was promptly submitted by them. Similarly M/s. F Construction and company
had submitted the quantities of work done calendar year-wise and not financial year-wise.
The financial year-wise breakup was obtained to facilitate evaluation with reference to the
stipulated post qualification criteria. [Copies of the letters requesting for the
clarification/information and the replies received from the bidders are enclosed (Annexure
IV)].
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7.
Preliminary examination of bids:

7.1
Arithmetical errors :
The following are the arithmetical errors found in the bids:
As quoted(Rs.)
As calculated (Rsr)
(i)
Bid of M/s. A and Co.
232,64,492
216,24,776
(by taking the rate
expressed in words as
correct for item no. 16)
(ii)
Bid of M/s. F Const. Co.
229,82,416
230,81,697
(by correcting the total)
The concurrences of the bidders were requested in writing for the above corrections
in terms of Clause 27.2 of Instructions to Bidders. M/s. F Construction Company
gave the concurrence for the correction in writing. M/s. A and Company did not
accept the corrected amount of the bid. Hence its bid is rejected and the Bid
Security submitted by it has been forfeited in accordance with Sub-Clause 16.6 and
Clause 27.2 of ITB.
7.2
Completeness and Legal validity:

All the bids are duly signed by the bidders. They have quoted for all the items and
are thus complete. Bids are signed by persons holding proper power of attorney and
hence are legally valid.
7.3
Bid Validity:
As per Clause 15.1 of Instructions to the Bidders (ITB), the bids shall remain valid
for a period of not less than 90 days after the deadline for the submission of the
bid. The bids were opened on July 16,1994 and hence the bids are to be valid upto
October 14,1994.
M/s. C and Company has stated in the bid that its bid is valid for 60 days after the
date of bid opening.
Neither has any condition been given by any of the other bidders nor have they
stated specifically that their bid is valid for 90 days after the bid opening. Since they
have signed the bidding document and not given any condition, it is taken for
granted that all these bids are valid for 90 days after the bid opening, i.e. valid upto
October 14,1994.
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7.4
Bid Security :
As per Clause 16.1 and 16.3 of ITB, the bid security should be Rs.4,04,000 and
bank guarantees and other instruments of fixed validity shall be valid for 45 days
after the validity of the bid, i.e. upto November 28,1994. The bid securities
furnished by the various bidders are as follows:
Sl. Name of Bidder
No.
Amount Type Bank

Security
(Rs.)
1.
2.
3.
4.
5.
6.
7.
8.
404,000
425,000
450,000
404,000
350,000
405,000
405,000
410,000
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
A and Company
B and Company
C and Company
D Const Co.
F Const Co.
G Const. Co.
J Construction Co.
K Enterprises Ltd.
F.D.
B.G.
B.G.
B.G.
B.G.
B.G.
B.G.
F.D.
Validity
Bank of Baroda
Canara Bank
Citi Bank
Canara Bank
Vysya Bank
Punjab National Bank
Union Bank of India
State Bank of India
Nov. 30, 94
Dec. 31, 94
Oct. 14, 94
Nov. 30, 94
Oct. 31, 94
Nov. 29, 94
Dec. 10, 94
Mar. 15, 95
Bank guarantees are in the prescribed format and there are no additional remarks
making them conditional and unacceptable.
7.5
Responsiveness to commercial aspects:

M/s. B and Company has stipulated that the department has to supply bitumen,
cement and steel at fixed rates. It has also given an alternative formula for price
adjustment. The other bidders have not stipulated any condition. They have signed
the contractor's bid form as well as bidding documents stipulating no reservations
and hence it is understood that they are agreeable to the commercial conditions.
7.6
Responsive to technical aspects:

None of the bidders have stipulated any condition regarding the technical aspects.
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8.
Bids rejected as non-responsive to the bidding documents:

Sl.No. Name of Bidder
1.
Bid Price(Rs.)
M/s. B and Company 216,89345
Brief reasons for rejection

(i)
(ii)
2.
M/s. C and Company 265,32,119
(i)
(ii)
3.
M/s. F. Const. Co.
229,82,416
(i)
(ii)
Requires departmental supply of

bitumen, cement and steel at
fixed rates, contrary to bidding
document stipulations;
Proposes new P.A. clause, which
is unacceptable.
Bid valid for only 60 days and
hence non-responsive in terms
of Clause 15.1 of ITB;
Bank Guarantee of bid security
is not secured 45 days beyond
the validity of the bid and hence
non-responsive in terms of
Clause 16.2 and 16.3 of ITB.
Inadequate bid security and
of Clause 16.3 of ITB ;
the bid opening and hence nonresponsive in terms of Clause
16.3 of ITB
The details of all the bids are furnished in Annexure V.

9.
Substantially responsive bids :

In view of the above the bids of the following bidders are determined as substantially
responsive to the provisions in the bidding documents.
(i)
(ii)
(iii)
(iv)
10.
M/s.
M/s.
M/s.
M/s.
D. Construction Co.
G. Construction Co;
J. Construction Company; and
K Enterprises Ltd.
Evaluation of the substantially responsive bids :

There are no conditions which warrant loading of the bid prices. No other specific
evaluation criteria have been stipulated in the bidding document. The loading of the prices
is therefore NIL.
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Evaluation table showing ranking of the bids is as follows :Rank Name of Bidder
Bid Price
Remarks
1.
M/s. G. Constructions
231,24,221
Lowest responsive bidder
2.
M/s. D. Construction Co.
237,56,267
Second lowest responsive

bidder. Since the bidder has
offered a conditional discount of
one percent for award of the
contract within a period of 60
days, the discount has not been
taken into consideration for
evaluation.
3.
M/s. K. Enterprises Ltd.
241,89,527
Third lowest responsive bidder.

Since the bidder has offered the
discount of 12% after the
deadline for submission of the
bids, the discount has not been
evaluation of the bids.
4.
M/s. J. Constr. Company
244,31,986
Fourth lowest responsive bidder,

after taking into account the
unconditional discount of 10%
offered in the Modifications
envelope received before the
bids.
Detailed item-wise comparative statement is furnished in Annexure VI.

The lowest evaluated responsive bid is that of M/s. G. Constructions and the bid
price is Rs.231,24,221/-.
11.
Comments on the unbalanced item bids :M/s. G. Constructions has quoted unbalanced rates for BOQ item numbers 3 and 4. The
bidder was requested to furnish breakdown of unit rates for these items. It has been
scrutinized and found that the information furnished is not convincing. Additional
performance security of Rs.4,35,870 is proposed to project against the financial loss in the
event of default of the successful bidder, in terms of Clause 29.5 of the ITB. The bids of
other bidders are balanced and no additional security is required.
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12.
Post-qualification/verification of the lowest evaluated responsive bidder :

The qualification criteria to be satisfied for the award of this particular contract, Package 12
is stipulated in Clause 4.5 of the ITB. In this IFB bids were invited for two packages 12 and
14. M/s. G. Constructions is lowest responsive bid for Package 12 and M/s. D. Construction
Company is lowest responsive bidder for Package 14. The following check is made for the
post qualifications of the lowest responsive bidder for Package 12.
Sl.
No.
Clause No.
Reference
Minimum
qualification
Required for
Package 12
Qualification of the
lowest bidder
Remarks
1.
4.5 A (a)
Annual financial
turnover :
Rs.12.2 M
Rs.12.3 M at 90-91 price

level i.e.
level.
Bidder satisfies
this criterion.
2.
4.5 A (b)
Satisfactory
completion of
one similar work
Rs.10 M
One similar work namely

Bidder satisfies
XXX in YYY Division, in
this criterion.
ZZZ State, of value Rs.8
million (started in the year
1991-92 and completed
(95%) in the year 1992-93)
The updated cost of the above
work at 1994-95 rates is
Rs. 9.68 million.
Bidder satisfies
the criterion fully
3.
4.
Executed the
following qnty., of
works :
(i) WBN :
80,000 Sq.m.
(ii) BT :
80,000 Sq.m.
4.5 B (a)
Availability of
critical eqpt.
Roller : 7
BT Boiler :
(4)/3 = 1.33 say
2 BT Mixer :
(3)/3 = 1
Water Tankers :
3
1,12,041 Sq.m. in
1990-91
1,12,041 Sq.m. in
1990-91
Available eqpt.
O H
P
Total
6
1
0
7
2
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Bidder satisfies
the requirement
5.
4.5 B (b)
Availability of
Project Manager
of not less than
five years exp. :
Available :
Mr. L B.E.
with 15 years
experience.
Bidder satisfies
the requirement
6.
4.5 B (c)
Liquid assets
and/or credit
facilities :
Rs. 1.75 M
Rs. 2.5 M from

Canara Bank
Bidder satisfies
the requirement
Note : WBM Water Bound Macadam; BT : Black Topped; O : Owned; H : Hired or

Leased; P : To be purchased out of Advance.
The resources and experience of the Bidder in his name has only been considered. Subcontractors experience and resources have not been taken into account in determining the
Bidders compliance with the qualifying criteria.
13.
Check for Bid Capacity :

The assessed Bid capacity of the lowest responsive bidder is computed as follows :
Assessed available Bid Capacity = (A * N * 2 B)
A=
N=
B=
Maximum value of civil engineering works executed in any one of the last five years
i.e. Rs. 18.0 M at 1994-95 rates;
Number of years prescribed for the completion of works of this package i.e. 24
months 2years.
Value at 1994-95 price level of existing commitments and on-going works to be
completed in the next 2 years i.e. Rs. 59 M.
Assessed available bid capacity of M/s. G. Constructions is = 18 * 2 * - 59 = Rs. 13 M.

The proposed contract value of the Package 12 is Rs. 23.12 M.
The assessed Bid capacity is less than the proposed value of the contract to be awarded.
Thus the lowest evaluated responsive bidder for Package 12 M/s. G. Constructions does not
satisfy the Bid capacity criteria and thus cannot be awarded the contract in terms of the
Clause 31.1 (b) of ITB.
14.
Post qualification verification of the next lowest evaluated responsive bidder :

Since the lowest evaluated responsive bidder does not meet the qualification criteria,
verification is made for the next lowest evaluated responsive bidder, M/s. D Construction
Company, who is incidentally the lowest evaluated responsive bidder in Package 14. Hence
as per Clause 4.5 C of ITB, the lowest evaluated responsive bidder for this Package (12)
must demonstrate having experience and resources sufficient to meet the aggregate of the
qualifying criteria for the individual contracts i.e. (Packages 12 and 14).
-85-
Sl.
No.
Clause No.
Reference
Maximum
qualification
lowest bidder
required for
Package 12 and 14
Remarks
1.
4.5 A (a)
Annual financial
turnover :
Pack. 12 : 12.2 M
Pack. 14 : 13.2 M
Total
: 25.4 M
Rs.26.7 M at 90-91
price level i.e.
Rs. 39.1 M at 94-95
price level
Bidder satisfies
this criterion
2.
4.5 A (b)
Satisfactory
completion of
similar works:
Pack. 12 : 10.0 M
Pack. 14 : 12.1 M
Total
: 22.1 M
Following similar works

Bidder satisfies
namely for Package 12
this criterion
PPP in QQQ Division RRR
State of value Rs.10.8
(95%) in the year 1992-93).
For package 14 KKK in
LL Division MM state of value
Rs.13.5 million (started in the
Year 1991-92 and completed
(90%) in the year 1993-94).
The updated costs of the
above works at 1994-95
rate are Rs.13.07 million
and Rs. 14.85 million
respectively.
Executed the
following qnty., of
works :
(i) WBN :
80,000 Sq.m.
(ii) BT :
80,000 Sq.m.
Bidder satisfies
the criteria fully
3.
4.
4.5 B (a)
Availability of
critical eqpt.
Roller : 7+7=14
BT Boiler :
(4+4)/3 = 2.7 say
3 BT Mixer :
(3+3)/3 = 2
Water Tankers :
3+3=6
2,12,659 Sq.m. in
1990-91
2,12,659 Sq.m. in
1990-91
Available eqpt.
O H
P
Total
10 3
1
14
3
-86-
Bidder satisfies
the requirement
5.
4.5 B (b)
Availability of
Project Manager
of not less than
five years exp. :
One each for
both packages
Available :
Mr. L Retd. S.E.
with 35 years
experience.
Mr.M B.E. with
15 years exp.
Mr. N B.E. with
12 years exp.
Bidder satisfies
the requirement
6.
4.5 B (c)
Liquid assets
and/or credit
facilities :
Rs. 1.75 M+1.9 =
Rs. 3.65 M for
both packages.
Rs. 5.5 M from

Canara Bank
Bidder satisfies
the requirement
Note : WBM Water Bound Macadam; BT : Black Topped; O : Owned; H : Hired or

Leased; P : To be purchased out of Advance.
The resources and experience of the Bidder in his name has only been considered. Subcontractors experience and resources have not been taken into account in determining the
Bidders compliance with the qualifying criteria.
15.

A=
N=
B=
i.e. Rs. 39.1 M at 1994-95 rates;
months 2years.
completed in the next 2 years i.e. Rs. 62 M.
Assessed available bid capacity = 39.1 * 2 * 2 - 62 = Rs. 92.4 M.

The proposed contract value of the Package 12 and 14 is Rs. 23.12 + 26.32 = 49.44 M.
Hence, the assessed Bid capacity is more than the proposed value of the contract to be
awarded. Thus the second lowest evaluated responsive bidder for Package 12 M/s. D.
Constructions Company satisfies the Bid capacity criteria also.
-87-
The bid of M/s. D Construction Company is thus determined to be substantially responsive

to the bidding document and it has offered the second lowest evaluated bid price. It is
eligible in accordance with Clause 3 of ITB and meets the qualification requirements
prescribed in Clause 4 of ITB.
16.
Recommendation :
The Government of XXX proposes to award the contract for Package 12 to the second
lowest evaluated responsive bidder M/s. D Construction Company. The bid amount is Rs.
237,56,267. He has offered a discount of one percent if the bid is awarded within 60 days.
The award is being made well within the period of 60 days. Though the discount was not
considered for evaluation, being conditional, it is proposed to avail the same as the bidder
happens to be the lowest responsive qualified bidder. The bid amount is Rs. 235,18,705
(after availing of the discount of one percent offered by the bidder) with the following
important features of the bid.
Mobilization advance (5% of contract value) :
Rs. 11,75,935;
Equipment advance (10% of contract value) :
Rs. 2,3,51,870;
Initial Performance security
(5% of contract value plus additional

Security for unbalanced bids)
Rs. 11,75,935;
Retention money
6% of the gross amount of each

running bill subject to a maximum
of 5% of the contract amount;
Price adjustment
as per Clause 47 of bidding document

and formula as given in the Contract
Data;
Stipulated period of completion
24 months inclusive of rainy season;

and
Bid validity
October 14, 1994.
We seek the no-objection of the Bank for award of the Contract.
Signature of the Evaluating Officer

Encl. : Annexures I to VI
-88-
MODEL EVALUATION REPORT FOR CIVIL WORKS

(Post Review)
Note: This is a hypothetical case for illustration only.
1.
Scope of contract and estimated cost:

The work covered under this bid is for the construction of X kilometers of approach road to
Agriculture marketing centers in Y District of Z State (Package 12). The estimated cost of
the work is Rs.32,03,000. The packaging of the work has been cleared with the Bank.
2.
Bidding document:
The bidding document is as per the model cleared with the Bank. Since the value of the
work is more than the equivalent of US$200,000 (say Rs.60,00,000), the bidding document
along with the drawings, specifications was reviewed by the Bank. No objection to the
bidding document has been issued by the Bank vide letter of March 5, 1994.
Salient points of the bidding document:
(a)
Stipulated period of completion: 24 months including rainy seasons.
(b)
Price adjustment :
Provided since the period of completion of work is more than
12 months.
(c)
Prebid conference:
Provided.
3.
Bid invitation process:

Bids were invited by the Chief Engineer, Roads AAA on May 16,1994. The copy of the
invitation to bid was also sent to.................................................... (Departments for
publication in their office notice boards and wide publicity). The invitation for bid was also
sent to all the information of the Z State Public Works Department for wide publicity. The
invitation for bid was also sent to the Director of Publicity for arranging press publicity. A
copy of the invitation to bid is enclosed (Annexure I). The dates of publication of the
invitation for bid in the press are as follows:
SL.No.
Name of Newspaper
Level
Date of publication
GGGGGGGG (English Daily)
National
31-05-1994
HHHHHH (Hindi Daily)
National
02-06-1994
IIIIIIII (Hindi Daily)
State
02-06-1994
JJJJJJJ (Hindi Daily)
Local
01-06-1994
The bidding documents were made available for sale from June 10 to July 15, 1994. The date of
bid opening was July 16,1994. Thus a minimum bidding period of 35 days was provided, which is
more than the stipulated minimum period of 30 days.
The following prospective bidders purchased the bidding document.
-89-
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
A and Company;
B and Company;
C and Company;
D Construction Company;
E Construction Company;
F Construction Company;
G Constructions;
H Engineers and Contractors;
J Construction Company; and
K Enterprises Ltd.
All the above purchasers are of Indian nationality.

Prebid conference was held on June 30,1994 as scheduled. No objection to the draft of the prebid
minutes and the draft of the corrigendum was issued by Bank on July 5, 1994. The copy of the
minutes of the pre-bid conference and the corrigendum was sent immediately to all the bidders
who had purchased the bidding document and was incorporated in the bidding documents sold
afterwards. {(Copy of the minutes of pre-bid conference and the copy of the corrigendum is
enclosed (Annexure II)}.
4.
Bid response:
In all, ten bids were
In time
:
Late
:
Total
:
received. All are Indian. Details are as follows:

9
1 (Bid of M/s. E Const Co. received 15 minutes late)
10
In addition to the above one, Withdrawal envelope from M/s. H. Engineers and
Contractors and one Modification envelope from M/s. J. Construction Company were
received. The bid of M/s. E Construction Company which was received late, was returned
unopened account to the terms of Clause 21.1 of ITB.
5.
Bid opening:
The bids were opened on July 16,1994 at 1530 hours as stipulated. The bidden or their
representatives attended the bid opening. The envelope marked Withdrawal received from
M/s. H. Engineers and Contractors was opened and read out first as per Clause 23.2 of ITB.
Since the withdrawal notice was received before the date and time for submission of the
bids, the bid of M/s. H. Engineers and Contractors was not opened as per Clause 23.2 of
ITB. The balance eight bids as well as the Modification envelope were opened one by one.
The bid security furnished by the bidders, rates of the bidders, the discounts offered by
them, the corrections and conditions if any, were read out at the meeting. The minutes of
the bid opening were prepared (Copy of the minutes is enclosed Annexure III).
-90-
Table of Bid prices as read out at the time of bid opening is as follows:
Sl.No.
Name of Bidder
Nationality
Bid Price
1.
M/s. B and Company
Indian
46,89,345
2.
M/s. F Construction Co.
Indian
49,82,416
3.
M/s. G Constructions
Indian
51,24,221
4.
M/s. A and Company
Indian
52,64,492
5.
M/s. D Construction Co.
Indian
52,56,267
Remarks
as read out(Rs.)
Offered a discount of one percent if the

award is made within a period of 60
days.
6.
M/s. K Enterprises Ltd.
Indian
53,89,527
7.
M/s. C and Company
Indian
55,32,119
Offered a discount of five percent of

the bid amount if the award is made
within 45 days of opening of bid.
Indian
61,46,651
Offered an unconditional discount of

Ten percent of offered price in the
Modification envelope.
8.
M/s. J Construction Co.
M/s. K. Enterprise Ltd. Vide its letter of July 18, 1994 offered an unconditional suo-moto
discount of 6% on their quoted price.
6.
Clarifications obtained:
M/s. C and Company had not submitted the details of outstanding works with them. They
were asked to produce the same duly authenticated by the Employer/Engineer within 10
days, which was promptly submitted by them. Similarly M/s. F Construction and company
had submitted the quantities of work done calendar year-wise and not financial year-wise.
The financial year-wise breakup was obtained to facilitate evaluation with reference to the
stipulated post qualification criteria. [Copies of the letters requesting for the
clarification/information and the replies received from the bidders are enclosed (Annexure
IV)].
-91-
7.
Preliminary examination of bids:

7.1
Arithmetical errors :
The following are the arithmetical errors found in the bids:
As quoted(Rs.)
As calculated (Rsr)
(i)
Bid of M/s. A and Co.
52,64,492
46,24,776
(by taking the rate
expressed in words as
correct for item no. 16)
(ii)
Bid of M/s. F Const. Co.
49,82,416
50,81,697
(by correcting the total)
The concurrences of the bidders were requested in writing for the above corrections
in terms of Clause 27.2 of Instructions to Bidders. M/s. F Construction Company
gave the concurrence for the correction in writing. M/s. A and Company did not
accept the corrected amount of the bid. Hence its bid is rejected and the Bid
Security submitted by it has been forfeited in accordance with Sub-Clause 16.6 and
Clause 27.2 of ITB.
7.2
Completeness and Legal validity:

All the bids are duly signed by the bidders. They have quoted for all the items and
are thus complete. Bids are signed by persons holding proper power of attorney and
hence are legally valid.
7.3
Bid Validity:
As per Clause 15.1 of Instructions to the Bidders (ITB), the bids shall remain valid
for a period of not less than 90 days after the deadline for the submission of the
bid. The bids were opened on July 16,1994 and hence the bids are to be valid upto
October 14,1994.
M/s. C and Company has stated in the bid that its bid is valid for 60 days after the
date of bid opening.
Neither has any condition been given by any of the other bidders, nor have they
stated specifically that their bid is valid for 90 days after the bid opening. Since they
have signed the bidding document and not given any condition, it is taken for
granted that all these bids are valid for 90 days after the bid opening, i.e. valid upto
October 14,1994.
-92-
7.4
Bid Security :
As per Clause 16.1 and 16.3 of ITB, the bid security should be Rs.64,000 and bank
guarantees and other instruments of fixed validity shall be valid for 45 days after
the validity of the bid i.e. upto November 28,1994. The bid securities furnished by
the various bidders are as follows:
Sl. Name of Bidder
No.
Amount Type Bank

Security
(Rs.)
1.
2.
3.
4.
5.
6.
7.
8.
64,000
65,000
70,000
64,000
50,000
65,000
65,000
70,000
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
M/s.
A and Company
B and Company
C and Company
D Const Co.
F Const Co.
G Const. Co.
J Construction Co.
K Enterprises Ltd.
F.D.
B.G.
B.G.
B.G.
B.G.
B.G.
B.G.
F.D.
Validity
Bank of Baroda
Canara Bank
Citi Bank
Canara Bank
Vysya Bank
Punjab National Bank
Union Bank of India
State Bank of India
Nov. 30, 94
Dec. 31, 94
Oct. 14, 94
Nov. 30, 94
Oct. 31, 94
Nov. 29, 94
Dec. 10, 94
Mar. 15, 95
Bank guarantees are in the prescribed format and there are no additional remarks
making them conditional and unacceptable.
7.5
Responsiveness to commercial conditions :

M/s. B and Company has stipulated that the department has to supply bitumen,
cement and steel at fixed rates. The other bidders have not stipulated any
condition. They have signed the contractor's bid form as well as bidding documents
stipulating no reservations and hence it is understood that they are agreeable to the
commercial conditions.
7.6
Responsive to technical aspects:

None of the bidders have stipulated any condition regarding the technical aspects.
-93-
8.
Bids rejected as non-responsive to the bidding documents:

Sl.No. Name of Bidder
Bid Price(Rs.)
Brief reasons for rejection
1.
M/s. B and Company 46,89,345
(i)
2.
M/s. C and Company 55,32,119
(i)
(ii)
3.
M/s. F. Const. Co.
50,81,697
(i)
(ii)
Requires departmental supply of

bitumen, cement and steel at
fixed rates, contrary to bidding
document stipulations;
Bid valid for only 60 days and
of Clause 15.1 of ITB;
the validity of the bid and hence
non-responsive in terms of
Clause 16.3 of ITB.
Inadequate bid security and
of Clause 16.3 of ITB ;
the bid opening and hence nonresponsive in terms of Clause
16.3 of ITB
The details of all the bids are furnished in Annexure V.

9.
Substantially responsive bids :

In view of the above the bids of the following bidders are determined as substantially
responsive to the provisions in the bidding documents.
(i)
(ii)
(iii)
(iv)
10.
M/s.
M/s.
M/s.
M/s.
D. Construction Co.
G. Construction Co;
J. Construction Company; and
K Enterprises Ltd.
Evaluation of the substantially responsive bids :

There are no conditions which warrant loading of the bid prices. No other specific
evaluation criteria have been stipulated in the bidding document. The loading of the prices
is therefore NIL.
-94-
Evaluation table showing ranking of the bids is as follows :Rank Name of Bidder
Bid Price
Remarks
1.
M/s. G. Constructions
51,24,221
Lowest responsive bidder
2.
M/s. D. Construction Co.
52,56,267
Second lowest responsive

bidder. Since the bidder has
offered a conditional discount of
one percent for award of the
contract within a period of 60
days, the discount has not been
evaluation.
3.
M/s. K. Enterprises Ltd.
53,89,527
Third lowest responsive bidder.

Since the bidder has offered the
discount of 6% after the
bids, the discount has not been
evaluation of the bids.
4.
M/s. J. Constr. Company
55,31,986
Fourth lowest responsive bidder,

after taking into account the
unconditional discount of 10%
offered in the Modifications
envelope received before the
bids.
Detailed item-wise comparative statement is furnished in Annexure VI.

The lowest evaluated responsive bid is that of M/s. G. Constructions and the bid
price is Rs. 51,24,221/-.
11.
Comments on the unbalanced item bids :M/s. G. Constructions has quoted unbalanced rates for BOQ item numbers 3 and 4. The
bidder was requested to furnish breakdown of unit rates for these items. It has been
scrutinized and found that the information furnished is not convincing. Additional
performance security of Rs.45,870 is proposed to project against the financial loss in the
event of default of the successful bidder, in terms of Clause 29.5 of the ITB. The bids of
other bidders are balanced and no additional security is required.
-95-
12.
Post-qualification/verification of the lowest evaluated responsive bidder :

The qualification criteria to be satisfied for the award of this particular contract, Package 12
is stipulated in Clause 4.5 of the ITB. In this IFB bids were invited for two packages 12 and
14. M/s. G. Constructions is lowest responsive bid for Package 12 and M/s. D. Construction
Company is lowest responsive bidder for Package 14. The following check is made for the
post qualifications of the lowest responsive bidder for Package 12.
Sl.
No.
Clause No.
Reference
Minimum
qualification
required for
Package 12
lowest bidder
Remarks
1.
4.5 A (a)
Annual financial
turnover :
Rs.4.0 M

level i.e.
level.
Bidder satisfies
this criterion.
2.
4.5 A (b)
Satisfactory
completion of
one similar work
Rs.1.6 M
One similar work namely

Bidder satisfies
XXX in YYY Division, in
this criterion.
ZZZ State, of value Rs.2.8
(95%) in the year 1992-93)
The updated cost of the above
work at 1994-95 rates is
Rs. 3.4 million.
The illustration is for a work valued less than Rs.3 million where only two
criteria are specified. In cases of works valued over Rs. 3 million where
additional criteria is specified, similar assessment should be due for all the
criteria specified in the document.
The experience of the Bidder in his name has only been considered. Sub-contractors
experience have not been taken into account in determining the Bidders compliance with
the qualifying criteria.
13.

A=
N=
B=
i.e. Rs. 6.5 M at 1994-95 rates;
months 0.75 years.
completed in the next 0.75 years i.e. Rs. 9 M.
-96-
Assessed available bid capacity of M/s. G. Constructions is = 6.5 * 0.75 * 2 - 9 = Rs.

0.75M.
The proposed contract value of the Package 12 is Rs. 5.1 M.
The assessed Bid capacity is less than the proposed value of the contract to be awarded.
Thus the lowest evaluated responsive bidder for Package 12 M/s. G. Constructions does not
satisfy the Bid capacity criteria and thus cannot be awarded the contract in terms of the
Clause 31.1 (b) of ITB.
14.
Post qualification verification of the next lowest evaluated responsive bidder :

Since the lowest evaluated responsive bidder does not meet the qualification criteria
verification is made for the next lowest evaluated responsive bidder M/s. D Construction
Company, who is incidentally the lowest evaluated responsive bidder in Package 14. Hence
as per Clause 4.5 C of ITB, the lowest evaluated responsive bidder for this Package (12)
must demonstrate having experience and resources sufficient to meet the aggregate of the
qualifying criteria for the individual contracts i.e. (Packages 12 and 14).
Sl.
No.
Clause No.
Reference
Maximum
qualification
lowest bidder
required for
Package 12 and 14
Remarks
1.
4.5 A (a)
Annual financial
turnover :
Pack. 12 : 4.0 M
Pack. 14 : 4.4 M
Total
: 8.4 M
Rs.7.7 M at 90-91
price level i.e.
Rs. 11.3 M at 94-95
price level
Bidder satisfies
this criterion
2.
4.5 A (b)
Satisfactory
completion of
similar works:
Pack. 12 : 1.6 M
Pack. 14 : 2.2 M
Total
: 2.8 M
Following similar works

Bidder satisfies
namely for Package 12
this criterion
PPP in Q Division RRR
State of value Rs.1.8
(95%) in the year 1992-93).
For package 14 KKK in
LLL Division MMM state of value
Rs.2.7 million (started in the
Year 1991-92 and completed
(90%) in the year 1993-94).
The updated costs of the
above works at 1994-95
rates are Rs.2.2 million
and Rs. 2.97 million
respectively.
-97-
Note : The above illustration is for a work valued less than Rs. 3 million where only two
criteria are specified. In cases of works valued over Rs. 3 million where
additional criteria is specified, similar assessment should be due for all the
criteria specified in the document.
The experience of the Bidder in his name has only been considered. Sub-contractors
experience have not been taken into account in determining the Bidders compliance with
the qualifying criteria.
15.

A=
N=
B=
i.e. Rs. 11.3 M at 1994-95 rates;
months 0.75 years.
completed in the next 0.75 years i.e. Rs. 62 M.
Assessed available bid capacity = 11.3 * 0.75 * 2 11 = Rs. 12.75 M.

The proposed contract value of the Package 12 and 14 is Rs. 5.2 + 5.6 = 10.8 M.
Hence, the assessed Bid capacity is more than the proposed value of the contract to be
awarded. Thus the second lowest evaluated responsive bidder for Package 12 M/s. D.
Constructions Company satisfies the Bid capacity criteria also.
The bid of M/s. D Construction Company is thus determined to be substantially responsive
to the bidding document and it has offered the second lowest evaluated bid price. It is
eligible in accordance with Clause 3 of ITB and meets the qualification requirements
prescribed in Clause 4 of ITB.
16.
Recommendation :
The Government of XXX proposes to award the contract for Package 12 to the second
lowest evaluated responsive bidder M/s. D Construction Company. The bid amount is Rs.
52,56,267. He has offered a discount of one percent if the bid is awarded within 60 days.
The award is being made well within the period of 60 days. Though the discount was not
considered for evaluation, being conditional, it is proposed to avail the same as the bidder
happens to be the lowest responsive qualified bidder. The bid amount is Rs. 52.03,705
(after availing of the discount of one percent offered by the bidder) with the following
important features of the bid.
-98-
Mobilization advance (5% of contract value) :
Rs. 58,797;
Equipment advance (10% of contract value) :
Rs. 1,17,594;
Initial Performance security
(5% of contract value plus additional

Security for unbalanced bids)
Rs. 2,60,185 + 45,870 = 3,06,055;
Retention money
6% of the gross amount of each

running bill subject to a maximum
of 5% of the contract amount;
Stipulated period of completion
9 months inclusive of rainy season; and
Bid validity
October 14, 1994.
We seek the no-objection of the Bank for the final Contract as awarded.
Signature of the Evaluating Officer

Encl. : Annexures I to VI
-99-

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TENDERS & CONTRACTS AND

Tenders & Contracts & Contract Management

Introduction to law ,indian legal system

Tenders & Contracts & Contract Management

THE INDIAN CONTRACT ACT : ACT IX OF 1872.

Tenders & Contracts & Contract Management

The contract must be made in writing.

These principles are based on the principles of equity.

Tenders & Contracts & Contract Management

Offer and Invitation to Offer :

Tenders & Contracts & Contract Management

Explain the following terms with examples:a.

Tenders & Contracts & Contract Management

Evaluation of contract documents

Agreement : It controls the legal aspects of the contract.

need of contract document

Tenders & Contracts & Contract Management

Relation with the technical provisions : (Specifications)

Conditions generally related to :1)

Documents : BOQ, drawings, IS, Notices, etc.

Tenders & Contracts & Contract Management

Tenders & Contracts & Contract Management

The study of specifications is dealt in Chapter Nos. 6, 7 and 8.

Preliminary drawings : These drawings help in preparing approximate estimate of the

DISCUSSION ON BONUS CLAUSE :

Tenders & Contracts & Contract Management

Tenders & Contracts & Contract Management

Same as liquidated damages.

Conclusions and Recommendations

Bonus to be substantial to make the proposal attractive and acceptable.

Tenders & Contracts & Contract Management

Differentiate between Tender and Contract documents.

The general condition in Indian tenders is as under :

Explain the characteristics of conditions of contract and BOQ (Bill of Quantity).

Tenders & Contracts & Contract Management

Costs that cant

Costs that cant

Cost Analysis of a Project

Tenders & Contracts & Contract Management

The types of most common contracts are as follows :1)

TYPES OF CONSTRUCTION CONTRACTS

Lump sum contract.

Tenders & Contracts & Contract Management

Unit Price or Item rate Contract :

Tenders & Contracts & Contract Management

Starting of the work : The work can be

Damages due to changes : If the plans

(Source : Estimating and Specification by S. C. Rangwala)

Cost plus Contracts :

Tenders & Contracts & Contract Management

Turnkey (All-in-one Package Deal) Contracts :

Tenders & Contracts & Contract Management

Explain the legal spirit of lumpsum contract.

Tenders & Contracts & Contract Management

Tenders & Contracts & Contract Management

Tenders & Contracts & Contract Management

RELATIONSHIP AMONG THE PARTIES

Contract for Services

Contract for Implementation

Tenders & Contracts & Contract Management

In a traditional arrangement, a relatively rigid structure of the relationships is exists. There is a

Reference : Contracts by Keith Coiller

Tenders & Contracts & Contract Management