This presentation talks about various kinds of service contracts .

1. SERVICE CONTRACTS -II
AVINASH KUMAR GUPTA
07/02/2017

2. Types of Contracts
 Lump-sum (Firm Fixed Price) contract;
 Time based (Retainer-ship) contracts;
 Per centage (Success Fee) contract;
 Retainer-ship cum Success fee based
contract;
 Indefinite delivery contract

3. Lump-sum (Firm Fixed Price) Contract
• Consultant’s proposal is deemed to include all
prices – no arithmetical correction or price
adjustments are allowed during evaluation.
• Lump-sum consultancy contracts are easy to
administer because there is fixed price for a fixed
scope and payments are linked to clearly
specified outputs/milestones/ deliverables such
as reports, documents, drawings, bills of
quantities, software programs
• contracts are widely used for simple planning
and feasibility studies, environmental studies,
detailed design of standard or common
structures,

4. Lump-sum (Firm Fixed Price) Contract
• R- Disputes may arise due to different possible
interpretations of quality and scope of assignment.
• M- provision for evaluation of quality and scope of
deliverables and certificate for its acceptability may
be recorded. Payment should be made only against
certificate of acceptance of deliverables.
• R- Time is not linked to payment so time- over- run.
• M-assignment should be monitored per month to
ensure that the output per month is in line with
planned and estimated time-line

5. Time-Based (Retainer-ship) Contract
• these are also called as retainer ship ontracts,
since the consultant/service provider are
retained for a pre-decided period
• payments are based on agreed hourly, daily,
weekly or monthly rates for staff and on
reimbursable items using actual expenses
and/or agreed unit prices.
• this type of contract is widely used for complex
studies, supervision of construction, advisory
ervices and most training assignments etc

6. Time-Based (Retainer-ship) Contract
• R-Disputes may arise due to different possible
interpretations of quality and scope of assignment.
• M-The contract should include provision for evaluation
of quality and scope of deliverables and certificate for
its acceptability may be recorded.
• R-There may be tendency for the consultant/service
provider to use paid staff in a dilatory and un-
productive manner
• M-A system of monthly reporting of payouts and
quantum of work achieved by the consultant/service
provider to CA should be instituted to enable
supervision

7. Time-Based (Retainer-ship) Contract
• This type of contract should include an upper limit of
total payments to be made to the
consultants/service providers for the assignment to
safeguard against excessive prolonging of time and
payments. After this limit is reached, or the period of
completion is exceeded, CA should review
justification for extension of the contract.

8. Percentage (Success/Contingency Fee)
Contract
 Percentage (Success/Contingency Fee) contracts
directly relate the fees paid to the consultant/service
provider to the estimated or actual project cost, or
the cost of the goods procured or inspected.
 Since the payment is made after the successful
realisation of objectives, it is also called success (or
contingency) fee contract.
 There may be tendency for the consultant/service
provider to cut corners on quality and scope of the
output/deliverables by saving on resources
employed. Payment should be made only against
certificate of acceptance of deliverables.

9. Percentage (Success/Contingency
Fee) Contract
 There may be tendency for the consultant/service
provider to save on deployment of resources which
may result in time-over-run. Assignment should be
monitored per month to ensure that the output per
month is in line with planned and estimated time-
line.
 In the case of architectural or engineering services, per
centage contracts implicitly lack incentive for economic
design and are hence discouraged. The use of such a
contract for architectural services is recommended
only if it is based on a fixed target cost and covers
precisely defined services

10. Retainer and Success (Contingency)
Fee Contract
• The Remuneration of the consultant includes a
retainer (time based, monthly payment) and a success
fee (Per centage based payment). Thus, this type of
contract is a combination of Time Based and Per
centage Contracts.
• Retainer and Contingency fee contracts are widely
used when consultants (banks or financial firms) are
preparing companies for sales or mergers of firms,
notably in privatization operations. It can also be used
for assignments related to organizational
restructuring/change.

11. Retainer and Success (Contingency)
Fee Contract
All risks as applicable to both Per centage
Contracts and Time Based contracts
are encountered in this case.
Same mitigation strategies as in both
Percentage and Time Based contracts
may be adopted in this case

12. Indefinite Delivery Contract (Price
Agreement
• when Procuring Entity need to have “on call” specialized
services, the extent and timing of which cannot be
defined in advance.
• There is no commitment from Procuring Entity for the
quantum of work that may be assigned to the
consultant/service provider.
• The consultant/service provider shall be selected based
on the unit rate quoted by them for providing the
services
• example; expert adjudicators for dispute resolution
panels, institutional reforms, procurement advice,
technical troubleshooting, Document Management, Taxi
Services, Temporary Manpower Deployment

13. Indefinite Delivery Contract (Price
Agreement
• Indefinite Delivery Contracts are at risk of being
over-utilized. To be closely monitored and
administered by the 'Procuring Entity' to
ensure that the there is no indiscriminate or
unwarranted usage and a maximum contract
value may be laid down to keep control over
usage.
• There may be tendency for the onsultant/service
provider to cut corners on quality. Include
provision for evaluation of quality and scope of
deliverables and certificate for its acceptability.

14. Indefinite Delivery Contract (Price
Agreement
 Time and Cost over-run is a major risk in such
contracts. Include an upper limit of total
payments to be made to the
consultants/service providers to safeguard
against excessive prolonging of time and
payments.
 System of monthly reporting of payouts and
quantum of work achieved by the
consultant/service provider to CA should be
instituted to enable supervision.

15. The END