Important Laws for Civil Engineers

• Indian Contract Act, 1872

• The Arbitration and Conciliation Act, 1996

• The Limitation Act, 1963

• Contract Labour (Regulation & Abolition) Act, 1970

• Workmen’s compensation act, 1923

• The minimum wages act, 1948

Who is a contractor ?
• Contractor - a person or firm that undertakes a
contract to provide materials or labour to perform a
service or do a job.

• A contractor is bound by a ‘CONTRACT’ between

himself and the person who has engaged him.

• The contract is valid only if it is in accordance with

the Indian Contract Act, 1872.
What is an agreement
• An Agreement is a set of reciprocal promises.
• In an agreement –
One person (Promisor) makes a proposal or offer.
Another person (Promisee) accepts such offer or
proposal. A proposal when accepted becomes a
promise.
A promise accompanied by a consideration becomes
an agreement.
What is an agreement …. Cont.
Eg.
• A person “A” goes to hotel and says “May I have tea”.
He is making a proposal (Promisor).
• The waiter brings tea. By supplying tea, it is understood
that he has accepted the proposal made by A.
(Promisee)
• The cost of tea, say Rs.10, is the consideration.
• There cannot be an agreement unless there is a
consideration.
What is a contract ?
• As per the Indian Contract Act, 1872, An agreement
enforceable by law is a contract.

• All contracts are agreements but all agreements are not

contract.

• Agreements of moral, religious or social nature are not

contracts (as parties never intend to create a legal obligation).
What is ‘enforceable by law’?
A contract --

• Must be lawful.

• Must be with consideration, otherwise it is void (few exceptions).

• Must be with Free consent.(No coercion, undue influence, fraud,

misrepresentation or mistake).

• Parties must be of sound mind.

• No party should be a minor.

• Not in restrain of legal proceedings.

Types of civil contracts
• Item-rate contracts /
Unit-Price contracts.

• Percentage rate contract.

• Lump Sum contracts.

• Cost plus contracts.

 PRE-REQUISITES TO TENDERING PROCESS:-
• Administrative Approval
• Expenditure Sanction /Availability Of Funds
• Approval of Building Plans From Local Bodies
• Detailed Estimate & Technical Sanction
• Architectural and Structural Drawings
• Availability Of Clear Site
 PREPARATION OF NOTICE INVITING TENDER
• Very carefully prepared.
• In the prescribed standard form.
• Serially numbered.
• A proper register shall be maintained.
• Finalized by the authority who is competent to
technically sanction the work.
 Publicity of Tenders
• Wide publicity to ‘Notice Inviting Tender’ is
mandatory.
• Must be displayed on website
• Advertisements may be given in newspapers.
Newspaper cuttings are preserved in file.
• Displayed on notice board.
Exercise: Open your institute website and look for ‘tenders’ link.
 Cost of tender documents
For works costing:
• Upto Rs. 1 lakh ………………………...... - Rs. 150/-
• Between Rs.1 lakh upto Rs. 50 lakhs - Rs. 500/-
• Between Rs.50 lakhs upto Rs.2 crores -Rs.1000/-
• Above Rs.2 crores…………......…………. Rs. 1500/-

(can be changed by NIT approving authority)

 Time Limit for Publicity
• 7 days for works < Rs.20 lakhs
• 10 days for works of Rs. 20 lakhs to 2 crores
• 14 days for works >Rs.2 crores

 Excluding date of publication/ Web & Date of

Opening
 NIT approving authority can change.
 Action in case of poor response of tenders
• Throw open tenders to next lower class.
• Allow contractors registered with other
departments.
• Relax other eligibility criteria.
 Restricted Tenders
• The work is required to be executed with very great
speed, and not all contractors are in a position to
generate.
• Works requiring specialized equipment, which is not
likely to be available with all contractors.
• Where the work is of secret nature and public
announcement is not desirable.
• Where the list of pre-qualified contractors is required
to be shortened to a suitable limited number.
 Validity for Acceptance of Tender
Time Limit for period of acceptance from the
date of opening of tenders:
• 30 Days - NITs within EE’s power
• 60 Days - NITs within SE’s power
• 90 Days - NITs within CE’s power and beyond.
Receipt, Opening and acceptance of Tenders
Tenders should be opened in the presence of
such intending tenderers.
Tenders received after due date and time of
receipt not to be considered at all.
Eligibility to be checked carefully before opening.
 Procedure for conducting Negotiations
• Negotiations should not normally be
conducted with the tenderer, but in case
where it becomes necessary to do so,
negotiations should be restricted only to the
lowest tenderer.
• If lowest tenderer backs out, the tenders
should be re-invited.
• If tender is acceptable, then award letter is
issued to the contractor.
POPULAR CONTRACT DOCUMENTS

• ICC (International Chamber of Commerce)- 1919. France

• JCT (Joint Contract Tribunal)- 1930. Royal Institute of
British Architects.
• NEC (New Engineering Contract)- 1993.UK.
• FIDIC (Fédération Internationale Des Ingénieurs-Conseils/
International Federation of Consulting Engineers) – 1957.
France.
• AIA (American Institute of Architects)
• Others (CPWD’s General Conditions of Contract for India)
Contents of Contract / Agreement
 Agreement on Rs.100/- non-judicial stamp paper
 Award letter
 Tender form / NIT
Contains NIT, Proforma of Schedules A to F, Additional conditions,
Additional and Particular specifications

 General Conditions of Contract

Contains General rules and directions, Conditions of contract, Clauses
of contract, Safety code, Model rules, Contractor’s Labour Regulations,
Proforma of registers

 Any other document

such as negotiation letter, extension of validity of tender, drawings
 Important Clauses in a contract…
• Earnest Money Deposit (EMD)
• Performance Guarantee
• Mobilisation advance, Secured Advance
• Time delay, Liquidated damages, EoT
• Breach of contract
• Increase in market prices of labour & material
• Extra items, unforeseen items
• Security Deposit/ Maintenance period
• Dispute resolution mechanism
• Technical staff to be employed
• Effect of Increase in taxes
• Safety/ Insurance
Clause 1: Performance Guarantee
 To be submitted @ 5% of tendered amount if the Tendered amount is more
than Rs. 15 lakhs.
 Letter of acceptance is issued first. The award letter is issued only after PG is
submitted.
 PG is initially valid for a period of 60 days beyond the stipulated DOC.
 PG is returned after recording the date of completion.
 PG can be forfeited either on breach of contract, or to settle any other amount
due under the contract.
CLAUSE 1 A:
Security deposit to be deducted – 5% or 10% of the tendered value of work
EMD to be treated as part of security deposit.
Clause 3: Breach of contract
 Fails to repair defective work for 7 days after notice
 Suspends the work
 Does not comply with terms and conditions of contract
 Fails to complete the work within time
 Obtains a contract by wrong tendering
 Becomes insolvent
 Company is wound up
 Sublets the work (piece meal basis is not subletting)
THEN
PG, EMD, SD can be forfeited
Not allowed to participate in tendering of balance work
NO RISK AND COST PROVISION.
CLAUSE 3A: Work to be started within 1/8th time
Clause 3: Breach of contract
 Show cause Notice must be issued to contractor (Audi
alteram partem) before taking any action under clause 3.
Sufficient time should be given, say 15 days.
 Notice must be approved by authority approving NIT
(though not mentioned in manual)
 After completion of notice period, action must be taken,
either to rescind the work or to accept the contractor’s
argument.
 If it is decided to rescind the contract, a letter is issued
which is called “Notice on final action/ Final notice”.
Clause 5: Time and Extension for delay
 Time allowed for completion of the work is essence of the contract. DOS &
Time shall be as specified in acceptance letter.
 If work not commenced, PG and EMD can be forfeited. Approval of tender
accepting authority is required to forfeit PG and EMD.
 Milestones defined for all works with time > 1 month
 1/4th time  1/8th work
 ½ time  3/8th work
 3/4th time  3/4th work
 Full time  full work
 In case the contractor does not achieve a particular milestone, 1% of Tendered
value shall be withheld automatically and without any notice to the contactor.
 If the contractor catches up with the progress of the work on the subsequent
milestone(s), the withheld amount shall be released to him.
 For works > 10 lakhs, program chart must be submitted by
contractor.

 For any hindrance, contractor has to give notice within 14 days of

event and seek extension of time. Competent authority shall grant
EOT and reschedule the milestones. Competent authority to be
mentioned in Schedule-F.

 Department can give EOT even without application by contractor.

Clause 2: Compensation for delays
 The contractor has to maintain progress as per Clause 5 of contract.
 For slow performance or delay in the completion of the work, compensation,
subject to a maximum of 10% of the tendered value, is recoverable.
 The compensation for slow progress or non-completion of work in stipulated
time, at the rates specified therein, is an "agreed compensation" under
clause 2, which the contractor has to pay in case of default. Therefore, there is
no choice for the Engineer-in-charge but to recover the same at the rates
mentioned in clause 2 of the contract, if the progress of the work is slow or the
work is not completed in stipulated time. In case the contractor feels
aggrieved, he may appeal to the authority specified in Schedule “F‟ against
such recovery, who can uphold, reduce or waive off the compensation levied
by Engineer-in-charge.
 Compensation amount can be adjusted against any sum payable to contractor
under this or any other contract with BSNL.
 Amount withheld for not achieving milestones under clause 5 shall be adjusted
here.
Clause 7: Running bills
 No running bills for works < Rs.20000

 Running bills to be submitted by the contractor in triplicate, provided quantum

of work done is as per Schedule F

 In case the contractor does not submit the running bills, the Engineer-in-
charge has powers to prepare the bills.

 Bill to be paid within 30 days of submission (as far as possible)

 45 days for works outside headquarters.

 All running payments are treated as advance payments against final bill.

 Making running payment does not mean that there is no defect in the item.

 Advance payment can be made without measurement also, provided SDE

gives a certificate. @ 75% of assessed value
Clause 8: Completion certificate
 Contractor to give notice of completion within 10 days.

 E-in-C to inspect within 30 days of notice, and provide a final

certificate of completion to the contractor, or a provisional certificate
specifying the defects and / or the items to be paid at reduced rates.

 Completion certificate not to be issued unless scaffolding, surplus

materials, malba, huts etc are removed.

 Completion plans for sanitary, water supply and drainage are

submitted by contractor.
Clause 9: Final Bill
 Final bill to be submitted by the contractor within 30 days of issue of
completion certificate by the E-in-C.

 E-in-C has no powers to prepare the final bill himself.

 Bill to be paid within 3 months for works upto Rs.5 lakhs and within 6
months for works exceeding Rs.5 lakhs.

 The measurements and bills should be got accepted in unambiguous

terms.
Clause 10: Materials and labour
 Clause 10: Consumption statement of cement, steel, GS & PVC pipes
to be furnished with every bill.

 Clause 10A: All materials to be provided by contractor. Samples to be

got approved in advance. Samples for testing.

 Clause 10B: Secured advance, mobilization advance

 Clause 10 C: Increase in prices after receipt of tender.- 18 months

 Clause 10CA: Increase in cement, steel – 3 months

 Clause 10D: Increase in wages exceeding 10% – 18 months

 Clause 10E: Dismantled material is govt property.

Clause 12: Deviations, Extra items
 E-in-C has powers to change the drawings, designs and specifications.

 Extra time + 25% to be given for extra work.

 NEW EXTRA ITEMS:

 Contractor to submit rates within 15 days of order to carry out extra item

 E-in-C to approve final rates within 30 days on the basis of market rates.

 SUBSTITUTED ITEMS:

 Difference of market rates of original item and substitute items to be paid/

deducted.

 Contractor to give a statement of additional claims every three months.

 Rates for items exceeding 50% of schedule quantity to be derived in same

manner as extra items.

 NO CONCEPT OF CLAUSE 12 PERCENTAGE EXISTS NOW

Clause 13: Foreclosure
 BSNL can abandon or reduce the scope of work for any reason.

 Notice to be given in writing to the contractor.

 Contractor cannot claim for compensation or loss of profit or advantage

Payment will be made as follows –

 Full payment for work already done.

 Proportionate Expenditure on preliminary site work eg. Access roads, labour

huts, storage accommodation, water storage tanks and T&P.

 Cost of transportation of material already brought to site

 E-in-C can ask contractor to show his accounts and proof of expenditure to
enable him to asses and certify the reasonable amount payable.
Clause 14: Suspension of Work
 E-in-C can order the contractor to suspend any part of work or the whole work,
for-

 On account of default on part of contractor

 For proper execution of works for reasons other than default of contractor

 For safety of works

 The contractor will be given EoT for suspension period + 25%

 If suspension is > 30 days, compensation, wages to be paid, along with 2% to

cover indirect expenses. However, contractor has to submit claim within 45
days of start of suspension.

 If suspension is > 3 months, contractor can treat it as an abandonment of

contract by BSNL. He will be paid compensation as above.
Clause 15: Inspection and Supervision
 All works under the contract shall be open and accessible to the inspection
and supervision of 

 Engineer-in-charge

 His authorized subordinates

 His superior officers.

 Officers of the Quality control organization of BSNL

 Chief Technical Examiner’s office.

 Notice to be given for visit and contractor or his agent shall be present to
receive orders.

 Orders given to agent shall be considered to have the same force as if they
had been given to the contractor himself.
Clause 16: Rectification of defects
 Demand for rectification of defects to be given within 6 months of completion
of work.

 Period allowed for rectification to be specified in the notice.

 Compensation can be levied at the same rates as under Clause 2 of the

contract if not rectified in given period.

 E-in-C can accept the defective item at reduced rates.

 E-in-C can get the work rectified at the risk and cost of the contractor.
Clause 17: Maintenance period
 Six months for works < 15 lakhs except road work.

 12 months for works > 15 lakhs and road works

 E-in-C has to issue notice.

 Defect can be rectified by another agency and amount deducted from SD.
Clause 25: Settlement of disputes
 Dispute must exist.

 Contractor to request SE within 15 days for decision. SE to give decision

within one month of receipt of contractor’s letter.

 If SE fails to give decision or the decision is not acceptable to the contractor,

he can apply to the Chief Engineer within 30 days of receipt of decision, for
appointment of an arbitrator. List of disputes and amounts claimed to be given
with the request.

 Claims are deemed waived if no demand for arbitration is made within 120
days of receiving the intimation that final bill is ready for payment.

 Arbitrator’s fee to be shared equally.

Clause 31: Water supply & power supply
 Contractor has to make his own arrangement of water.

 Contractor has to make his own arrangement for temporary electric connection
and shall make necessary payment for it direct to the concerned authority.

 E-in-C can make alternative arrangement for water at the risk and cost of
contractor if the quality of water is not satisfactory.

CLAUSE 31A:

 Water may be supplied by BSNL @ 1% of work done. Pipeline to be laid by

contractor.

 Sub-meter to be installed by contractor and consumption charges to be

recovered.

 No guarantee for supply of water and power. No compensation on break-

down. No EoT on this ground.
Clause 36: Technical staff
 Before commencement of the work, the name, qualifications, experience, age,
address and other particulars along with certificates, of the technical staff to be
informed to the E-in-C.

 E-in-C shall convey approval within 15 days.

 Must be available at site within 15 days of start of work.

 E-in-C can suspend the work if the technical representative is absent for more than 2
days.

 Certificate of employment to be submitted by the contractor with every running/final

bill.

 E-in-C can order removal of any contractor’s worker from site.

 As per Appendix-18B of Manual, for all works upto 1.5 cr., 1 B.Tech with 2 years exp.
Or one diploma with 5 years exp is required. Recovery Rs.15000/- pm.
Clause 37 & 38: Taxes
 Rates inclusive of all taxes.

 New taxes after the “last stipulated date for the receipt of tender
including extensions”, shall be reimbursed / deducted as the case may
be.

 Proof of payment to be furnished by the contractor.

 All accounts to be provided by the contractor.

 Contractor to inform E-in-C within 30 days of imposition of new tax or

levy or cess.