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1. Tender
Offer in writing to execute some specified work
between contractor and owner:
• at certain rates,
• with in a fixed time
• under certain conditions of contract and
agreement

2. Earnest Money
• Confirmation of his intention to take up the
work if accepted in his favor.
• 1% or 2% of the total estimated cost
Objective:
– Compensation if refuses to work
– Punishment
– Restriction on unnecessary competition.
What will happen to the money who doesn’t get the
tender???

3. Security money
• Contractor have to deposit % of the tender value inclusive of the
earnest money already deposited
• It is kept as security to ensure work has to be done satisfactorily.
• Security of material or any tools if provided by the owner of the
project.
• It is deducted from the running bill @ 10% from every month’s bill
• Refunded after satisfactory completion of work or one rainy season
or 6 months from the completion of work whichever is later

4. Cont..
• Tender form:
– BOQ
– Contractor’s rates and cost of work
– Earnest money
– Security money
– Time allowed for the work
– Signature of contractor, contractor’s witness &
authority

5. Tender Documents
• Notice Inviting Tender
• Tender from
• Schedule of work to be done
• Tools and plants to be supplied by the
department
• General and special conditions of contract
• Complete specifications
• Drawings where necessary
Above documents are submitted along with cover letter with earnest money.

6. Tender Notice
Will have below information:
– Name of the authority / Dept.
– Name of work and its location
– Estimated Cost
– Time of Completion
– Cost of Tender form and condition of contracts
– Date, Time & Place of the opening the tender
– Earnest Money and Security Money
– Validity of tender

7. Contract
• An agreement enforced by law.
•Proposal from one party and its
acceptance from by the other party.

8. Essentials of Contract
• Legally Competant Parties :
– Age of majority
– Sound mind
– Should and the signing authority
• Free Consent of the Parties
– Consent of parties must be real and genuine
– Same opinion, purpose and understanding
– Not caused under influence, mistake, misrepresentation, fruad &
duress
Note: In case of mistake and misrepresentation contact becomes invalid,
both the parties lose their claim but in case of fraud and duress , not
only the contract becomes invalid, the party involved is subject to the
legal punishment.

9. Cont..
• A lawful Subject Matter: contracts becomes
invalid:
– Violates Indian or state law
– Contrary to the rules of common law (uniform
commercial code)
– Forbidden by public policy (policy made by govt. body
to protect state or citizens)
Once contract is signed parties can escape saying that it
happened unknowingly.

10. Cont.
• Proper and Valid consideration
– Consideration must be competent, real and
should not be illegal, ambiguous, impossible or
uncertain.
• Meaningful contract in writing signed by both
parties

11. Work order
• letter of acceptance is received by the
contractor
• Signing of Agreement
• Work order in the form of letter given to the
contractor to start the work immediately.

12. Contract Document
• Title page
• Index page
• Tender inviting notice
• Tender form
• Schedule of issue of material
• Drawings
• Specifications
– General specification
– Detailed specification

13. Cont..
• Conditions of Contract : terms and condition
• Special Conditions:
– Special cases like taxes, royalties, condition for
labour like camp condition, compensation in case
of accident, etc.

14. Types of Contract
Item Rate Contract : Rates are defined for
individual item of work on the basis of BOQ
furnished by the owner/Authority.

15. Cont..
Merits:
– payment is done based on detailed measurement
of each item actually done.
– Changes in drawing and quantity can be done as
per requirement.
– There is no urgency of providing detailed drawing
at the time of contract.
– Comparison can be done for the rate with SOR
and analyze the tender.

16. Cont.
Demerits:
– Comparison statement is more elaborate and can
be scrutinized only by highly experienced staff.
– Rates some times quoted in words excluding paise
intentionally.
– Total cost can be known only after completion of
work.
– Additional staff is required for verifying detailed
measurement.

17. Cont..
Lump Sum Contract: contractor quote a fixed sum
for execution of work complete in all respect in
the stipulated time according to the drawing,
design and specification.
Merits:
– Fund can be arranged in time.
– Detailed measurement is not required
– Contractor’s profit lies in the completion time.
– Contractor intend to complete the project early.
– Contractor quotes low due to high competition in the
market.

18. Cont..
Demerits:
– Owner aims to get maximum work and contractor
tries to get maximum profit.
– Detailed specification and site conditions must be
explained, chances of disputes is more.
– Intermediate payment is always cumbersome.
– It is suitable form of contract where considerable
amount of additions are expected.

19. Cont..
Percentage Rate Contract: Client draws BOQ,
rate and amount. Contractors are required to
work with the same rate with some
percentage above, below or same.
Merits:
– Ranking can be done easily.
– Chances of unbalanced tender gets eliminated.
Demerits:
– More than one contractor may quote the same
rate, in that case it may be difficulty to divide the
work at equal amount among the contractor.

20. Cont..
Labour Contract: Contractor undertakes
contract for the labour portion only excluding
the materials which are arranged and supplied
at the work site by client.
Merits:
– Quality materials can be ensured.
– Overall cost may be less
– Convenient for private building construction.

21. Cont..
Demerits:
– Material wastage need to be checked
– Supervision is must.
– Required storage area.
– It is not suitable for Govt. Department.

22. Cont…
Material Supply Contract: offer is made for supply
of materials, inclusive of all taxes, delivery
charges.
Merits:
– Payment is prompt, supplier may give material in less
profit.
– No risk of loss of damage during transit.
Demerits:
– Control over quality of material received is required.

23. Cont..
Cost Plus Percentage Rate Contract: Actual cost of
work + agreed percentage in addition(Profit).
Merits:
– Contract can be quickly drawn up and agreed.
– It covers the risk of uncertainty and fluctuations in the
rate of labour and materials.
Demerits:
– Contractor always try to make the cost of the project
high.
– Proper control is required in material purchase and
labour.

24. Cont..
Cost Plus Fixed Fee Contract: profit is fixed
irrespective of the cost of the work.
Merits:
– Contractor put maximum effort to finish the
project early to save overhead cost.
Demerits:
– Quality gets affected.
– Close supervision & checks is required
– Cost of project may go higher.

25. Cont..
Cost Plus Sliding or Fluctuating Fee Scale
Contract: Actual Cost + Percentage fee (varies
inversely with the cost of work).
Merits:
– Contractor and owner both will be benefitted in a
lowest possible cost.
Demerits:
– Estimated cost if calculated high, contractor will
get benefitted.

26. Cont..
Target Contract: contractor is paid based on cost
plus percentage basis of work and plus or minus
on savings or excesses effected against a prior
agreed estimate.
Merits:
– Contractor is encouraged to use his skill and expertise
in order to keep the cost as low as possible.
Demerits:
– Contractor may try to increase the cost of
construction.

27. Cont..
Negotiated Contract: when the contract is
awarded without calling tenders on the basis
of negotiation only.

28. Conditions of Contracts
To avoid dispute and keep the parties as far as
possible out of the court law.
Clauses related to work are laid down and both
the parties are abide by that.
It depends on the nature of work.

29. Clauses
• Security deposit
• Compensation for Delay: In case of delay,
contractor will be liable to pay compensation
in certain percentage to the maximum
amount of 10%.
• Action when the security deposit is forfeited.
• Contractor remains liable to pay
compensation and power to take possession
or disposal of contractor’s plant.

30. Cont…
• Extension of Time: if delay is not attributed to
the contractor, shall be brought notice to the
owner in writing, asking for extension of time.
• Completion Certification: site should be cleared
in all respect before the time specified in the
certificate.
• Payment on Certificate: final payment will be
given to the contractor on the issue of
completion certificate.

31. Cont..
• Monthly Payment on bills.
• Objection to the measurement recorded by
the Department.
• Bill to be in printed form.
• Payment to certified bill to banks.
• Materials and stores supplied by the
department.

32. Cont..
• Drawings and specifications
• Alteration in specifications and designs.
• Revisions of rates/ price escalation.
• Action and compensation payable in case of
bad works.
• Works to be open to inspection.
• Notice to be given before the work is covered
up.

33. Cont..
• Maintenance period
• Contractor to supply tools and plants
• Labour
• Work on Sunday
• Subletting of work
• Settlement of disputes
• Action where no specification exist
• Retention money

34. Cont..
• Taxes and royalties
• Natural disasters

35. Arbitration
• Process of settlement of a dispute not by
regular and ordinary court but by impartial
referees selected by the parties concerned.
• Arbitrator are selected by both the parties and
they act as a judge.
• Sole arbitrator: both parties are agreed upon a
person to act as a judge.
• Joint arbitrator: parties forward own
arbitrator.

36. Qualification of an Arbitrator
• Expert in that profession and matter in dispute.
• Not related to any parties
• Impartial, unbiased, and free from ill feelings
• Unquestionable character
• For engineering project, arbitrator should be a
person not below the rank of superintending
engineer. Preferably, he must be from the panel of
arbitrator provided by the high court.

37. Advantages of Arbitration
• Cost
• Speed
• Convenience
• Informalities
• Proceedings in the private premises
• Finality of award

38. Termination of Contract
• Completion of work
• By Mutual Agreement
• By Breach of Conditions
• By impossibility to complete
• By Bankruptcy

39. Departmental Procedure
Before Execution:
– Administrative approval : approval from ministry
concerned or assembly/parliament if project is big.
– Technical sanction: design drawing and specifications
are prepared and detailed estimate is calculated and
sent for approval.
– Expenditure sanction: approval from ministry of
finance.
– Preparation of tender, NIT, etc
– Executive engineer will assign asst. engineer, junior
engineer and other staff.

40. During Execution:
– Supervision
– Site order book
– Quality control during construction
– Issue of materials, tool or plants
– Progress report
– Payment
– Excess over estimate
After Execution: if the work has been completely
done as per contract, a completion certificate will
be issued

41. Terms in Contract
• LD
• Un-liquidated damage: damage resulted due to
the breach of the contract.
• Debitable agency: Appointed to complete the
remaining work if contractor fails to do so and
contract is terminated on the risk of contractor.
• MB
• Muster Roll: records of skilled & Unskilled worker
for the purpose of payment.