Estimation Costing and Valuation Unit 1 to Unit 6

1. Estimation Costing &
Valuation
Prof Padmasinh Dilip Patil

2. Introduction to estimate and
related terms
• Preliminary or approximate estimate
• 1. Its rough estimate prepared to know the approximate cost of work in short time on basis of
cost of similar work carried out.
• 2. While preparing estimate various factors of comparison may be used like cubic content, plinth
area, per capita, per km, service unit etc.
• 3. These estimate are sectioned by concerned authority with respect to financial aspect of work.
• 4. These estimate are useful to know the cost at initial stages to decide feasibility of work.
• 5. Estimate is based on practical experience of carrying out simillar work in past and their rates.

3. • Plinth Area Method
• This estimate prepared on the basis of plinth area of building.
• It can be calculated by (approximate cost = plinth area x plinth area rate).
• The rate are obtained from area building having similar specification and constructed in
same locality.
• Open area should not be include in plinth area.
• For storey building the plinth area estimate is prepared for each storey separately.

4. • b) Cubic Content method
• In this method ( approximate cost = volume of building x rate per volume)
• The volume of building can be calculate by multiplying plinth area with
height of building.
• The foundation, plinth and carpet above roof are not considered while
finding cubic content.
• cubic content method is more accurate as compared to plinth area
method.

5. • c) Service unit Method
• In this method all cost of unit quantity such as per km highway, per litre for
water tank, per meter for span of bridge etc. are considered first.
• (Approximate estimate = no. of service of unit x cost per service unit)
• This estimate can quickly prepared.
•
• Eg. For road = service unit per KM
• for School = service unit is per classroom
•

6. • d) Bay Method
• Bay is centre to centre distance between the support.
• This method is applicable to structure like godown, a railway
platform, factory shades etc.
• Such structure are constructed with intermediate column or with
roof trusses on walls placed equal distance forming bays.
• Approximate cost = no. of bays x cost of one bay

7. • e) Approximate quantity method
• In this case
• (Approximate cost = total length of wall x rate per running meter)
• The structure is divided into two parts
• Foundation including plinth
• Superstructure
• Plan and line plan should be required to prepare for the estimate.

8. • B) Detailed Estimate
• This is most accurate method
• Below are steps for calculating detailed estimate
• i) its prepared by finding out the actual quantities of item of work and then multiplied by corresponding rates.
• ii) Whole structure is subdivided into individual item of work and quantities of all item of work can be calculated form their respective
dimension form drawing and noted it in measurement sheet.
• iii) Multiplying these quantities by their respective rates in abstract sheet.
• iv) The cost of all items are worked out individually and then abstracted.
• Detailed estimate is accompanied by
• Comprehensive report of work
• General specification
• detailed specification
• Detailed drawing showing plan
• Design data and calculation
• basic rates adopted in estimate

9. • Revised Estimate
• Revised estimate is detailed estimate for revised quantities and rates for items of work originally provided in
the estimate.
• Its required to prepared under any one of following reasons.
• When originally sanctioned estimate is likely to exceed by more than 5%.
• When expenditure on work exceed or likely to exceed the amount of administrative sanction by more than
10%.
• If there is change in rate or quantity of materials.
• Major alternation is introduced in original work.
• No additional or revised drawing is necessary.
• eg. Cost of materials like cement, steel increased after construction work started.

10. • ii) Supplementary Estimate
• Its type of detailed estimate, which is prepared when additional works are required to
supplement to original proposed work during execution of work.
• The fresh detailed estimate of additional work is prepared in addition to original
estimate.
• The abstract shows the amount of original estimate and total amount including
supplementary amount for which sanction is required.
• No comparative abstract form is required.
• Eg. In large room, required to construct partition walls.

11. • iii) Revised and Supplementary Estimate
• During execution of project, if there is increase in volume of
original work, estimate is necessary to revise and if at same time
sanction of supplementary work is required.
• In that case revised estimate prepared for increased volume of
original work and detailed estimate prepared separately for
supplementary work.
• This estimate is prepared when particular work is abandoned

12. • iii) Annual maintenance or repair estimate
• This estimate is necessary after completion of work like
replacement, renewal and repair etc.
• The amount of such estimate should be between 1.5% to 2% of
original cost of construction.
• for building, items of work may be white washing, colour washing,
painting, minor repair etc.

13. • Data required for estimation
• Drawing
• Specification
• Rates
• Updated mode of measurement
• Standing circulars
a) Drawing
• Basically drawing should be prepared with showing plans, different sections and
other relevant details for work.
• Complete set of drawing is required which include plan, elevation, section and
foundation drawing.
b) Specification
• General specification
The nature and class of work and name of material to be used are explained
• Detailed Specification
It gives description of every item to be executed with qualities, quantities,
materials proportion, workmanship

14. • c) Rates
• Rates for various materials required in construction and wages of different categories of labour should be
needed for preparing estimate.
• Rates are provided by PWD, rate book schedule
• Eg: Rate of bhisti per day = Rs. 512
• d) Updated mode of measurement
• Unit of measurement for different items of work are different.
• IS 1200 gives guidelines for this measurement along with standard addition or deduction rule.
• Eg: excavation in cu.m
• e) Standing circulars
• for taxes, insurance and GST etc. are required to fix up rates of those items which are not in schedules of
rates.

15. • Items of Work
• Different type of work of load bearing structure
• site clearance
• excavation for foundation
• PCC in foundation
• CR masonry in plinth
• UCR in foundation
• damp proof course at plinth level
• plinth filling with hard murum
• brickwork in superstructure
• providing and fixing door and window frame
• Lintels over opening
• Sloping roof
• internal and external plastering, pointing
• providing and laying flooring
• door and window shutter
• water supply and sanitary arrangement
• electrification

16. • b) Different item of work of CC road
• site clearance
• excavation of road way
• Excavation for catch/side water gutter
• conveying materials obtained form road cutting
• providing, laying, spreading and compacting stone aggregate
• providing and laying in situ cement concrete
• groove cutting and joint filling
• supplying hard murum at road side

17. • Units of measurement
• Limits of measurement and degree of accuracy in estimating
• a) Dimension shall be measured to the nearest 0.01m expect the
• following cases:
• thickness of slab measured to nearest 0.005 m
• wood work to nearest 0.002m
• reinforcement to nearest 0.005m
• Thickness of road work less than 20cm, measured to nearest 0.005m
• Area shall be measured to nearest 0.01 sq.m
• Cubic content shall be worked out to nearest 0.01cu.m
• Weights shall be worked out to nearest 1kg.

18. • Rules for Deduction
• Rules for deduction in brick masonry
• Rules for deduction in plastering and pointing
• Rules for deduction in brick masonry
• No deduction is made for following
• Opening upto 0.1 sq.m
• Ends of beam, posts, afters, purlins, etc. upto 0.05sq. M in scetion
• Bed plate, wall plates, bearing of chajjas where thickness does not exceed 10cm.
• Bearing of floor and roof slab are not deducted form masonary in superstructure.

19. • For other opening, deduction are made in following manner
• a) Rectangular Opening
• Deduction = l x h x t
• b) Opening with segmental arch
• Deduction = ((l x h)+(2/3*l*r))*t
• c) Opening with semi-circular arch
• deduction = ((l x h)+(3/4*l*r))*t
• Rules for deduction in plastering and pointing
• No deduction is made for ends of beam, posts, rafter etc.
• No deduction is made for opening up to 0.5 sq.m
• For opening more than 0.5 sq.m and upto 3 sq.m.
• for opening above 3 sq.m deduction is made for both faces of opening and jambs.

20. • Valuation
• Valuation : Valuation is the technique of to estimating and determining the fair
price or value of property such as building, factory, other engineering structure of
various types, land etc. By valuation the present value of property is determined.
• Basically present value of property may be decided by its selling price, income
or rent it may fetch.
• The value of property depend on its structure, life, maintenance, location, bank
interest, legal control etc. and value also depend on supply on demand and
purpose for which valuation is required.

21. • Purpose of Valuation
• Buying and selling the property
• Taxation : Based on municipal taxation
• Rent fixation
• Security of loans and mortgage
• Compulsory acquisition : acquired by govt.
• Valuation of property required for insurance, betterment charges, speculations etc.
• Sale
• Balance sheet
• Court Fees : depend on real estate and required stamps.
• Gift Tax
• Partition
• wealth Tax : govt fixed value

22. • Price
• Cost
• Value
• Price :
• a) This is amount worked out by adding the cost of production or
• construction, interest on investment, own profit, reward to producer
• for his labour and risk. Thus selling price is fixed for commodity.
• b) For less price demand, selling price may have to lower and vice
• versa.
• 2. Cost :
• a) cost means original cost of construction or production and can be known after accounting all day to day expenditure form very planning
stage till construction is completed.
• b) cost of old building is less due to its age and changes in fashion.
• c) for valuation, cost of an old building is worked out form present cost of construction of such new building less the calculated amount of
loss in building due to its wear and tear.

23. • Value :
• a) value means worth or utility
• b) value varies time to time and depend largely on supply of that
• particular type of property ad extent of demand for it.
• c) the cost of construction of building may have no relation to
value of the same which sold in open market.
• d) value id depend on i) its utility ii) shortage in supply or demand
• iii) Events.

24. • Factors affecting value of property
• a) change in building technology
• b) Migration Tendencies
• c) forces of demand and supply
• d) cost of construction
• e) change in age distribution of population
• f) sudden change in price of building materials
• g) Rent restriction act
• h) Improvement in amenities
• i) interest on bank and government securities
• j) unstable time
• k) abnormal Condition

25. • Types of Value
• Market Value : sold in open market at particular time
• Book value : amount shows in account book of particular year
• Salvage value : without being broken into pieces or dismantled
• Scrap value : 10 %
• Distressed value : if property sold at lower price than market value.
• Sentimental value : if property is sold or purchased at higher value
• than market value
• Accommodation value
• Annual Value: local authority decided.
• Good will value
• Highest and best use value
• Liquidation value : sold or purchase under force circumstances
• Monopoly value : depend on shape, frontage and location
• Potential Value : when property is capable to getting more return due.
• Rateable value : same as annual value
• Replacement Value
• Assessed value: the value of property recorded in register
• Speculative value
• Capitalized Value : net income * year of purchase

26. • Different Types of Lease
• Building lease :
• a) if owner of free hold plot of land not able to construct building on
• his land then he gives the plot of land on lease to somebody who
• ready to construct a suitable building on particular piece of land.
• b) in such case lease holder pays yearly ground rent to free holder.
•
• Occupation lease
• a) the owner construct structure on land and together with land, he grants lease for certain
occupation such as residential, factory, shop, office etc.
• b) lease holder maintain property according to term and condition of lease.
• 3. Sub lease: a lease holder may tender sublease of his lease hold property to other person.
• Life lease : lease is granted for the duration of life or lives of one or more persons.
• 5. Perpetual lease: when lease of property is given for number of years providing condition that the
lease is renewable time to time.

27. • Method of Depreciation
• Depreciation: the loss in the value of property due to its use, life, wear, tear decay and
obsolescence is called as depreciation.
• Straight line method : its assumed to property loses its value by same amount of year.
• Annual depreciation (D) = (C-S)/n
• Constant % method or declining balance method : the property will lose its value by
constant % of its value at beginning of every year
• P = 1-(S/C)^1/n
• Sinking fund method : the property assumed to be equal to annual sinking fund plus the
interest on fund for that year.
•

28. • Types of Value
• Method of Valuation
• Rental method
• Direct comparison method
• Profit based method
• Development or residual method
• Based on cost or contractors method
• Book value method
• Present land value method
• Method of valuation of land only
• Belting method
• Comparative method
• Abstractive method

29. • Tenders
• It is an invitation from the owner to the contractor to execute some work at
specified cost in specified time. It is published in the form of tender notice in news
papers, notice boards etc. according to the cost of works.
• Methods of inviting tenders
• Open tender–It is invitation of tenders by open advertisement through the
Indian Trade Journal or through the principal newspapers in India or Abroad up to
10000/- or over.
• Limited tender—This is direct invitation only to a selected no. of contractors to
quote rates for supply of articles. This is ordinarily adopted in the case of all orders
the estimated value of which is less than Rs.10,000.
• Single tender—Invitation is given to only one firm to render a service by quoting
their rates. If the quoted rates are high, it will be negotiated to the agreement of
the contract.

30. • Tender Notice
• Tender for work or supply are invited by issuing tender notice in
• prescribed form. Following particulars are given in the tender
• notice
• 1. Name of the authorities(dept.) inviting tender Exa: Govt. of Tamil Nadu
• Water Resources Organisation Public Works Department (PWD),
• 1. Name of work and its location
• 2. Estimated cost
• 3. Last date and time of receipt of tender
• 4. Period of availability of tender document or validity of tender
• 5. Cost of tender document
• 6. Time of completion and type of contract
• 7. Earnest Money Deposit to be paid & security deposit
• 9. Date, time and place of opening the tender
• 10. Designation of the officer opening the tender

33. Tendering Procedure
• Approval of work form govt. authority
• Prepare tender draft containing detailed specification, BOQ, contract document
by concerned govt. department
• Invitation of tender by concerned govt. department
• Submission of tender by contractor
• Opening of tender by concerned govt. authority
• Scrutiny of tender by concerned govt. authority
• Comparative statement and award of contract by concerned govt. authority
• Work order to selected contractor

34. • Pre-Qualification of contractors
• In this process, the capability/competence of contractors determined before
the tenders for the work are invited.
• The tenders are then supplied/offered only to those contractors, who
qualified for the work.
• The contractor should be filled with form
• i. Information regarding contractors past experience
• ii. Present work in hand
• iii. Financial stability
• iv. Technical qualification
• v. Plants and equipment's
• After properly studying and analyzing these fact the officer in charge decides
category of contractor and accordingly put his name in schedule of category.
• Officer then invite only selected contractors to quote tender.

35. • Post-Qualification of contractors
• 1. In this process, capability/compentency of contractor is determined after tender is opened.
• 2. The lowest tender is generally accepted, and qualification of awarded/Selected contractor are
studied before actually singing the contract
• Tender Document
• Title Page : Agreement No.
• Index
• Tender notice
• General Instruction
• Special conditions
• Forms of contract : A1,A2,B1,B2 form
• Various contract clauses, terms and condition
• Schedule A : showing materials details to be supply dept.
• Schedule B : BOQ
• Schedule C : detailed item wise specification and drawing
• Specification: general and detailed
• Complete set of drawing.

36. • Types of BID system
• 2 bid system : system include technical and financial Proposals are
submitted separately.
• 3 bid system : documents related criteria, technical bid and
financial bid
• In this system 1st two bids will be opened of only those bidders who
meet qualification criteria.

37. • Pre-Bid Conference
• The bid organised by authority or owner before last date of submission of
tenders to clear doubts of contractor with respect to execution of work.
• The main purpose of conference is to clarify the doubts about proposed
project work and answer the questions of any matter
• The pre bid conference is usually organised at place near to proposed
work site.
• The time, date and place of conference is mentioned in tender notice
• The interested contractor attend the conference on their own cost.

38. • Comparative statement
• 1. After scrutinizing the tender received by govt. officer prepared comparative statement of
all tenders.
• 2. This comparative statement contain information regarding name of contractor, date or
receipt of tender, percentage above or below rate entered by contractor and amount of
tender quoted by contractor.
• 3. Format of comparative statement:
• eg. Cost of work Rs. 10 Lakh
• 4. A special note shall be written by officer weather rate quoted by lowest tender are
workable or not.
• 5. In addition, reputation of contractor should be mentioned after considering all
parameters of lowest tender and decision for awarding contract is taken.
Sr. no. Name of firm Amount of
tender (RATE
QUOTE)
1 A 8 Lakh
2 B 8.4 Lakh
3 C 8.9 lakh
4 D 9.5 lakh
5 E 10.4 lakh

39. • Qualitative and Quantitative evaluation of tenders
• After invitation tender, interested bidder should be submit their tenders and
documents to fulfil requirement of owner or department.
• After all tenders' responses are received, evaluation process starts to identify
best effective contractor for contract award.
• Evaluation team is the team of expert that involve technical expert, financial
expert, purchasing expert and if required legal and commercial expert.
• criteria for formal evaluation process.
• i. financial evaluation : Evaluate financial soundness of contractor.
• ii. Technical Evaluation : scrutinize capability of contractor
• iii. Capability evaluation : evaluate client experience, system management,
contractor strength and weakness,
• iv. Service evaluation : assessment of contractor service ranging from his
experience
• v. Contract award

40. • Tender Acceptance
1. it has been allocated as per Indian contract act 1872 : when person to whom proposal is
made signifies his assent thereto.
2. After completion of scrutiny of tender process, at last officer in charged prepared
comparative statement.
3. Normally tender with lowest amount is accepted and in some cases the rate of lowest
tender are so low that it may causes poor quality of work.
4. In that case officer decide or negotiates with second lowest contractor.
5. The contractor whose tender is accepted or awarded, should have to submit tender
acceptance letter of standard format within specified time limit (normally within 14 days of
tender opening date )
6. Within that 4 days EMD of unsuccessful contractor should returned.
7. The various method of acceptance of tender from viewpoint of law are as follows.
I conduct as proof of acceptance
II acceptance by telegram
III written acceptance
IV absolute acceptance

41. • Rejection of tender
• Rejection of all tenders
• Rejection of lowest tender
1. Rejection of all tenders
i) There is no competition for work and minimum no. tenders are not received.
ii) After publication of tender notice in news paper, its found that changes in design are very essential
iii) When any fraud is detected.
iv) The lowest tender has quoted very high rates than estimated rate.
v) There is collisions among contractors.
2. Rejection of lowest tender
i) when tender is not submitted in particular from sold by department.
ii) Earnest money is not enclosed along with tender
iii) the lowest tender may lack in experience for work
iv) unsatisfactory reputation of lowest tenderer.
v) tender is not signed by contractor
vi) If any page removed by contractor form documents.
vii) If contractor black listed by any department.

42. • Unbalanced tender
• 1.In case of item rate tender the contractor has to quote his rates against each
item indicated in tender form.
• 2. If the rates quoted by contractor are not varying much form those mentioned
in the schedule of rates prepared by PWD then tender is said to be balanced
tender.
• 3. If rates quoted by contractor for initial items are higher and for subsequent
item are lower but sum total amount practically unaffected, the tender is said to
unbalanced tender.
• 4. Contractor submit unbalanced tender for following reasons.
• i. get an excess payment in initial stage of work, which can reutilize as working
capital.
• ii. Contractor having plant, machinery, for item of work for which he has quoted
lower rates.

43. • Built operate transfer
• BOT defined as the type of arrangement in which private sector builds an infrastructure
with their funds and then operate and transfer ownership of project to the government.
• Its also called as PPP (public private partnership)
• In this work govt. grants permission to private firm to construct.
• Type of Bot contract can be enlisted as follows.
• BO – build, operate
• BOT- build operate and transfer
• BOO – build own and operate
• BOOT – build, own, operate and transfer
• BT – build, transfer
• BTO – build, transfer and operate
• BLT – build, lease and transfer

44. • Global Tender
• Some work required special equipment's, machineries which is
not fulfilled by local contractor.
• For such big and specialized job or design, global tender are
invited to get competitive offers form various specialized firms or
reputed manufactures throughout the world.
• These are published in internationally newspapers, sometimes its
also circulated through embassies offices located at different
important countries throughout world.
• global tenders are invited for big projects such as construction of
airport, under water construction, express highway etc.

45. E-tendering
• E-tendering or e-procurement or electronic tendering system is tendering
process, in which complete tendering process right from advertising or publishing
tender to awarding or selection of contractor tender is done online
• In Maharashtra before year 2009, whole process done by manually.
• In 2010 the state govt. started e tendering process after receiving flak for
corruption and many fraud cases against manual tendering process.
• Now onwards Maharashtra govt. make e tendering mandatory for project
over Rs. 3 lakh
• Data is required for E tendering process.
• Scan copy of all technical document
• Online payment mode option
• Computer/laptop
• Specific version of browser with updated java
• MS office
• Digital Key.

46. • E-tendering whole process done by online
• Submission or attaching of all scan documents
by contractor
• Tender fees and EMD online payment
• Rate quotation in financial bid is also done
online.
• Al last after tender is opened, comparative
statement is also shown online.
• Classes of Contractor
• Before 6th sept. 1982 govt. classified contractor
class as Ai, A, B, B+, C, D, E
• After 6th sept. 1982 category of contractor
classified as below
Class limit Class limit
I No limit VI Up to 50
lakh
II Up to 3
cr.
VII Up to 2
lakh
III Up to 2
cr.
IV Up to 1
cr.
V Up to 50
lakh

47. • Method of Executing Work
• 1. PWD PROCEDURE FOR WORK EXECUATION
• a. Work :
• i. the work is basically executed by public or private work
• ii. The expenditure on public work is met form public funds.
• iii. It consist of all the work pertaining to construction repairs, supply
• of materials and carriage tool plants.
• b. Work expenditure and works outlay : the term work expenditure and work outlay refers respectively to
expenditure and capital charges on special service required for construction or maintenance of any work.
• c. Appropriation:
• i. its authorised amount of expenditure that can be incurred under major or minor head by disturbing officer
• ii. Technically the term appropriation also refers to the provision made in respect of charged expenditure.

48. • Administrative setup of PWD
• Govt.
• Secretary of govt.
• Chief engineer (CE)
• i. Superintending Engineer (SE) (circle 1)
• ii. Superintending Engineer (SE) (circle 2)
• iii. Superintending Engineer (SE) (circle 3)
• iv. Superintending Engineer (SE) (circle 4)
• 4. Executive Engineer (EE)
• 5. Deputy engineer or Assistant Executive Engineer (AEE)
• 6. Junior Engineer (JE)
• 7. Assistant of JE or supervisor
• i. Skilled workers
• ii. Semi-skilled workers
• iii. Un-skilled workers.

49. • Organization work setup of PWD
• 1. Project
• i. Engaged by contractor
• ii. Departmental – worked charge staff and casual labour
• 2. Material
i. supplied by contractor or supplier
• ii. Manufactured by Department
• 3. Overheads
• i. CE /ACE
• ii. SE
• iii. EE
• iv. AEE
• v. JE

50. • Functions of PWD officer
• Chief Engineer (CE) : CE administrative head of department. He is directly responsible to govt, when department has to execute large project.
• Functions of chief Engineer
• CE coordinates and supervises work of superintending engineer of various circle.
• To give administrative approval of work under his control.
• He has full authority to sanction/accept unlimited amount tender.
• Purchase of live stock Rs. 30000/ at only one time.
• He prepare the budget estimates annually relating to work under his control.
• 3. Superintending Engineer (SE)
• SE is responsible for execution of work under his circle.
• Function
• Inspect division in his circle and report to CE
• To check progress of work under his circle.
• Technical sanction under his control.
• Financial control over execution of original repair work.
• Examine books of divisional offices and sub divisional offices

51. • Executive Engineer (EE) : EE is also known as divisional officer. He is responsible to
execution of work in his division. (eg. South and north division)
• Functions of Executive Engineer
• He monitor administration for division
• His responsible to make payment towards contractor
• He need to undergo estimation for coming project
• Guiding and suggesting changes, requirement and necessities.
• Invite tender for work valued within his power.
• 3. Deputy Engineer/ Assistant executive engineer
• he is also known as sub divisional officer (SDO)
• Function
• Check muster roll
• Physical verification of measurement book and dead stock.
• Submit monthly report of progress of work to divisional officer.
• Administrative control over office and filed staff division.
• Visit and impact all execution site once in week

52. • Junior Engineer (JE) : He is responsible for execution of
original/maintenance work in allotted area of particular
subdivision.
• Functions
• Supervision of work in his charge
• Maintain attendance of daily worker, labour.
• Taking measurement of all work form site and recording it in MB.
• Preparation of running and final bills for work in his section.
• Prepare estimate for all types of works in his section.
• Carry out field survey for proposed project.

53. • Administrative Approval
• For any new original work, including special repair work initiated by or related to the
requirement of department. Its necessary to obtain formal acceptance with respect to cost
and work which is called administrative approval.
• For administrative approval the department (PWD) send a proposal to govt. for taking up the
work.
• After considering all aspects like feasibility of project and financial aspect, the govt. accept
proposal.
• After getting administrative approval the detailed drawing, design and estimate are prepared
and submitted for technical sanction.
• Stages of administrative approval
• Initiation of proposal by concerned department.
• Preparation of “ Block estimate” by engineering department.
• Approval form competent authority of the head of the concerned department.

54. • Technical Sanction
• After obtaining administrative approval to a work. Its necessary to prepare detailed drawing and estimates
of the proposed work, which are to be submitted to the appropriate of PWD of state govt. for further
sanction. Such a sanction competent authority is called technical sanction.
• Technical sanction means the sanction of detailed estimate, design, drawing, quantities of different items
of work and their rates and cost of work.
• The work is taken for execution only after getting technical sanction.
• If the estimated amount exceed 10% of administratively approval amount, technical sanction is granted
only after obtaining revised administrative approval for work.
• Technical sanction once given to any work, it will remain valid for 5years.
• Power of technical sanction to various officer
• 1. Chief Engineer – full power
• 2. Superintending Engineer – up to 50 lakh
• 3. Executive Engineer – up to 25 lakh

55. • Budget Provision
• Budget is annual financial statement showing the estimated receipts and expenditure in
respect of financial year before commencement of that year.
• After getting administrative approval and technical sanction, a report is prepared mentioning
raw materials, organization setup and total cost required for execution of project
• Considering budget proposal, provision are made in five years plan and yearly budgetary
provision are made. This budget sanction is approved by financial department.
• Originally estimate are prepared from different division and submitted to superintending
engineer.
• The chief engineer prepared annual estimate after receiving the estimate form
superintending engineers.
• Budget statement is send to minister concerned and to financial department after scrutiny by
secretary of the department.

56. • Classification of original works on the basis of expenditure
• Major work : its an original work, estimated cost of which
excluding departmental charges is more than rs. 1 lakh or any
other ceiling fixed by the engineering department.
• Minor work : its an original work, estimated cost of which
excluding departmental charges is less than rs. 1 lakh or any other
ceiling fixed by the engineering department.
• Project work : it may either work or repair work, the estimated
cost of which is up to 5000/- or any other limit fixed by PWD.

57. • Method of execution of minor work in PWD
• Piece work agreement (PWA)
• Rate list
• Day Work
• Employing labour on daily wages.
• 1. Piece work agreement (PWA):
• i. its adopted for small work of very urgent nature and where labours cooperative society are not willing to accept such
work.
• ii. In this method, piece worker is to be paid as per measurement of actual work carried out by him at agreed rate.
• iii. Piece of work is agreement which involve the payment for work done at agreed rate without quantity of work to be
done or time of completion
• 2. Rate List : if the work costing less than Rs. 5000 is carried out by piece worker as per Schedule of cost or rate quoted
by him is called as rate list.
• 3. Day work : there having certain items of work which can neither be measured accurately nor valued correctly due to
its complexity.

58. • 4. Employing labour on daily wages
• Part1. Nominal Muster roll (form no. 21)
• Part2. Measurement Book ( form no. 23)
• 5. Various Account forms and their uses
• Nominal Muster roll (form 21)
• Measurement book (form no. 23)
• Imprest cash account (form no. 2)
• Intent (from no.7)
• Invoice

59. • Registration of contractor for PWd
• Regular Civil contractor
• Work done certificate of last 3 years
• BID capacity certificate
• Last 3 years ITR with pan card
• Technical staff appointed by contractor
• List of plants and machines ( rent / purches)
• Attested copy of partnership
• Copy of power of duly signed
• Unemployed Engineer - license
• degree/diploma
• College leaving certificate
• Marksheet of SSC, final year
• Employment exchange card
• Domicile, pan card, affidavit, bank certificate

60. Contracts
contract is a mutual or legally binding agreement between two parties based on
policies and conditions recorded in document form.
1. The two parties involved are one or more owners and one or more contractors.
2. The owner has full authority to decide what type of contract should be used for a
specific development to be constructed and to set forth the legally-binding terms and
conditions in a contractual agreement.
3. A construction contract is an important piece of document that outlines the scope of
work, risks, duties, and legal rights of both the contractor and the owner.
Objective:
• To execute the work in quality.
• To execute the work as per agreed competitive rate.
• To completing the work as per specification.
• To use latest machineries and techniques.
• To avoid dispute between two parties, while completing work.

61. • Essentials of a valid contract as per Indian contract ACT (1872)
• Free Consent : Free Consent means an act of assenting to an offer. According to section
13, "Two or more persons are said to consent when they agree upon the same thing in
the same thing in same sense.
• Legally Competent parties: basically depend upon as per section 11 of indian contract
act.
• a) The age should be more than 18 years.
• b) who is sound mind
• c) who is not idiot and lunatic ( mentally ill)
• d) who is not drunken person.
• 3. Lawful subject matter :
• a. The subject matter of agreement must be legal and definite.
• b. It should be easy to understand and not too complex to understand and execute
• 4. Can be enforced in court of law : all term and condition should be according to law.
• 5. Contract should be in writing and attested by witness

62. • Types of Contract
Lump-sum Contract
• a. In lump sum construction contract contractor bids a single fixed price for all
activities in the project scope.
• b. This method is particularly used for large construction projects and is a
conventional but most popular types of construction contract.
• c. The contractor bears the risks associated with this contract and is responsible for
estimating project costs from drawings including overhead and his profit to determine the
price of the project.
• d. lump sum construction contract is considered as the most effective means of
reducing construction price and is useful when projects and its activities are well
defined.
• Advantages
• Fixed Amount
• Early Completion of work
• No need for measurement
• Low cost
Disadvantages
• Unbalanced contract
• Extra items and extra cost
• More Dispute
• Quality of materials and good workmanship is not
guaranteed
• Delay in commencement of work

63. Unit Price Contract
• In a unit price contract, the total contract price is based upon the price of all the individual item of the
work.
• Under a unit price contract, the contractor provides the owner with a specific price for one or more tasks
or a partial “segment” or a “block” of the overall work that’s required on the project.
• The owner agrees to pay the contractor for the units that the contractor expends to complete the project.
• rather than taking a look at the project as a whole and setting a price based on that finished product, a
unit price contract will determine the price based on the “units” that will be required to make up that job.
Advantages
• Flexibility
• Economical
• Balance Contract
• Early commencement of work
• Quality of work
Disadvantages
• classification of materials
• final cost
• clashing of interests
• more measurement
• variation in plan

64. Cost Plus Or Percentage Contract
• Cost plus percentage of cost is a method contractors often use to price services.
• This type of contract specifies that the buyer must pay all the project costs incurred by
the seller, plus an additional amount for profit.
• Cost plus percentage of cost is a method contractors often use to price services.
• This type of contract specifies that the buyer must pay all the project costs incurred by
the seller, plus an additional amount for profit.
• Products such as purses and services such as car detailing have fixed prices. Other
services and projects, such as home remodels, have variable costs that are hard to
predict.
Classification
• cost plus fixed percentage
• cost plus fixed sum
• cost plus fixed sum with profit sharing
• cost plus fixed sum with bonus
• cost plus varying percentage

65. • Cost plus fixed percentage : fixed % of total amount spent by
owner ie. between 10 to 15%
• Cost plus fixed sum : instead of making payment to contractor on
fixed % basis of contractor for his service.
• Cost plus fixed sum with bonus: the cost of work lower than
estimated work and sharing will be 25 to 50%.
• Cost plus fixed sum with bonus : when the work is completed
urgently and before time.
• Cost plus varying % : payment to contractor is made on varying %
basis.

66. • 4. Basic Price Contract
• Unit Price Contracts are based on anticipated quantities of items
which are counted in the project in addition to their unit prices.
• The final price of the project depends upon the quantities
required to carry out the work.

67. • Condition of Contract
• Earnest Money deposit : the amount a buyer pays to show that his interest in
a said property is genuine. The money is often paid once a verbal acceptance
upon an offer has been made. The Earnest Money deposit is also known as a
binder, token money or good-faith deposit
• Security Deposit : The contractor is required to deposit with the owner a sum
stated as a percentage of the cost of the work in order to safeguard the
interests of the owner in the event of improper performance of the contract.
• Time as an Essence of contract : A Time is of the Essence clause may mean
that one party to the contract must perform its contractual obligations at a
specific date and time as required in order to compel performance by the
other party to the contract. A failure to perform by the time specified will be
a material breach of the contract.
• Voidable contract : it means a contract has been created which a party is able
to annul at their pleasure. A voidable contract is only considered an
enforceable contract against the party which cannot void the contract.

68. • 5. Extension of time for delay in completion : a delay which could not be
reasonably foreseen at the time of contract signing. The granting of
an Extension of Time relieves the contractor from liability of damages such as
Liquidated Damages from the original date of contract completion for the
period of the claim.
• 6. Extension of time due to addition and alteration
• 7. Extra Item
• 8. Price variation Clause : in order to protect the contractor against the risk
of rising prices due to inflation. At each interim payment the formula is
applied using the latest published indices to give a multiplier representing the
change in construction prices since the date of tender.
• 9. Defective materials and workmanship
• 10. Subletting of Contract
• 11. liquidity damages.

69. FIDIC Documents
• FIDIC is Federation International Des Ingenieurs-Conseils (which is
international federation of consulting engineers based out of
Geneva, Switzerland).
• FIDC has published a document, which contain the general condition
for entering into contracts.
• The content of FEDIC documents is as below: '•
• General provisions of contract.
• Rights and claims of employer.

70. FIDIC Documents
The content of FEDIC documents is as below:
1. General provisions of contract.
2. Rights and claims of employer.
3. Instructions and duties of engineer.
4. General obligations and operation of contractor.
5. Definition, objection, payments of nominated sub-contractor.
6. Facilities for staff and labour and labour laws.
7. Plant, material and workmanship.
8. Commencement, delay and suspension of work.
9. Test on completion.
10. Employees taking over.
11. Defect liability.
12. Measurement and evaluation.
13. Variations and adjustments.
14. Contract price and payment.
15. Termination by employer.
16. Suspension and termination by contractor.
17. Risk and responsibility.
18. Insurance.
19. Force majeure.
20. Claims, disputes arbitration.
FIDIC document is treated as bible for entering into contract in the Western Countries. Similar to FIDIC, Indian
government publish MOS and PI in 2005. Website to download FIDIC document: www.fidic.org

71. Arbitration
• During execution of work, owner and contractor may come across
situations where disputes amongst them may arises.
• If dispute is not solved it may affect progress of work.
• ‘Arbitration’ is process in which dispute between the contractor and
owner or department is referred to third impartial person known as
‘Arbitrator’. For settlement of dispute, the arbitrator after hearing
both the parties in judicial manner gives their decision which is
known as Award.
• Award (decision of the arbitrator) is executed on stamp paper in
accordance with stamp duty ‘Act’.
• The award is binding on both the parties.
• Due to arbitration legal formalities of ‘court of law’ can be avoided
and quick result is possible.

72. • Advantages of arbitration
• The entire procedure of arbitration is very simple as compared to the
court of law proceeding.
• It takes less time to declare the award.
• It is cheap as compared to filling civil suits.
• The dispute between the contracting parties is not made public as it is
solved privately.
• The time and place for arbitration proceeding can be fixed as per
convenience of both the parties.
• The dispute involving technical points or requiring experience of
particular trade or business can be submitted to arbitrator who are
experts for such type of work. For matters related with building industry
and valuation, the arbitrator can easy to solve it since he may be
engineer, architects or Surveyors.

73. • Disadvantages of arbitration
• Parties must be bear costs of both the arbitrator and the venue.
• Sometimes arbitration simply copied to court process and so you do not
get the advantages of informality and speed.
• In some cases, injustice may result due to neglect of formal rules of
evidence and violation of legal principles.

74. When dispute take place between owner / department and contractor, it
may refer to arbitrator instead of court law for following reason or need :
• To avoid lengthy procedure of court law.
• To avoid costly process of court.
• To maintain reputation of both parties by disclosing matter or solving
dispute in privately.
• By arbitration settlement of dispute take place quickly.
• Due to fair judgement of arbitrator, constructions activity or project again
started smoothly.
Following matter of dispute are referred to an arbitrator :
• Variation or escalation of rates.
• Delay on the part of owner or department to supply necessary drawing.
• Delay in payment to be made to the contractor.
• Extra - claims by the contractor.
• Termination of contract.
• Hire charges to be paid for the tools and plant supplied by department.
• Extension of time.

75. APPOINTMENT OF ARBITRATOR
• Appointment by parties
• Appointment by courts
• (a) Appointment by parties
• An arbitrator is judge appointed by the disputing parties to resolve the dispute.
• If both parties agree to appoint only one person as an arbitrator, he is known as a
sole arbitrator .
• However if each party appoints their own arbitrator then they are known as joint
arbitrator.
• In case of even number of joint arbitrators, the appointed arbitrator will refer the
matter to another person known as 'Umpire’ whose decision i.e award will be
final.
• (b) Appointed by courts
• In case-parties fail to appoint arbitrators, the either of them can approach the
court and then the court will appoint a sole arbitrator for the arbitration.
• While appointing an arbitrator, the court also has power to decide on the
existence and validity of arbitration agreement.

76. QUALIFICATION OF THE ARBITRATOR
• Arbitrator should be fair, impartial, honest and disinterested person.
• He should be knowledgeable and expert in the field of dispute and
having good reputation.
• He should have sufficient knowledge of the law.
• He should be conversant with arbitration proceedings.
• He should be capable of handling the entire procedure of arbitration.
• For the dispute in building instrudries or valuation, he may be an
eminent engineer or an architect, acceptable to both the parties.

77. QUALITIES OF AN ARBITRATOR
• Throughout the arbitration, arbitrator has to be impartial and fair to
both the disputed parties.
• During the process of arbitration, he has to assume a role of third
party and disinterested judge.
• While collecting evidence, he must give equal opportunities to both
the disputed parties to present their cases.
• He should always talk to one party only in the presence of other
party to prove his impartiality.
• He should not be a person of doubtful character.
• The arbitrator should be conscious and always stand for norms of
natural justice and equality while carrying out arbitration
proceedings.
• He should not be under pressure or under influence of either parties.
•

78. POWERS OF ARBITRATOR
• He can administer both the disputed contracting parties and
administer the witness appearing before him for collecting the
evidence.
• The arbitrator has full power to ask any question related of disputed
matter, to both the parties and witness.
• He is empowered to declare the judgement called award, which will
be binding on both the parties.
• In certain special dispute cases, he has authority to refer it to court of
law for it’s opinion in the matter.
• He can correct the mistakes or any problem in award arising from
exception or accidental slip.
• In order to protect dispute property, the arbitrator have the power to
grant interim relief to the parties. The power of arbitrator can be
explained under the following heads :
(a) Power to make award. (b) Power to take assistance.
(c) Power to rule on its jurisdiction.

79. ROLE OF ARBITRATOR IN CIVIL ENGINEERING WORKS
• Arbitrator review testimony and evidence presented by disputed
parties at hearing and resolves the dispute by issuing a decision that
may include an award of money.
• Arbitrator listen statement of both department or owner and
contractor.
• Arbitrator go through all evidence of dispute it may be plan,
specification of work, time duration, payment clause, extra item,
escalation etc. of all term and condition of mentioned in contact.
• After analysing all evidence, arbitrator gives fair decision to solve
dispute, e.g. he find out fault of any parties, or deficiencies in
specification or work, check whether claims for time, payments extra
item, addition is valid or not.
• Arbitrations main role is to gives fair decision as early as possible, so
that construction activities starts once again without any dispute.
• He solve the clashes of owner and contractor and maintain well
relationship between them.

80. Following are type of arbitration :
1. Voluntary arbitration
2. Compulsory arbitration
3. Institutional arbitration
4. Adhoc arbitration
5. Fast track arbitration
6. Statutory arbitration
7. Online arbitration

81. • 1. Voluntary arbitration
• Is a binding, adversarial dispute resolution process.
• When conciliation officer or board of conciliation fail to resolve
conflict or dispute between two parties, parties can advised tp agree
to voluntary arbitration for setting their dispute, e.g. panchayati
system.
• This was advocated by Mahatma Gandhi and encouraged by the
government.
• In 1956, the government decided to place voluntary arbitration as
one of the measured for settlement of. a dispute through third party
intervention under the law.
• Essentials of voluntary arbitration :
• The voluntary submission of dispute to an arbitrator.
• The subsequent attendance of witness and investigation.
• The enforcement of an award may not be necessary and binding.
• Voluntary arbitration may be specially needed for disputes a rising
under agreements/contract.

82. 2 Compulsory arbitration
• Is a non-binding, adversarial dispute resolution process.
• Compulsory arbitration is one where the parties are required to
accept arbitration without any willingness on their part.
• When one of the party to an industrial dispute feels aggrieved by an
act of the other, it may apply to the appropriate government to refer
the dispute to an adjudication machinery.
• Essentials of compulsory arbitration :
• The country is passing through grove economic crisis.
• Industries of strategic importance are involved.
• Parties are ill balanced.
• Compulsory arbitration leaves no scope for strikes and lock outs, it
take away very important and fundamental
• rights of both parties.
• There are several well established institutions with settled and tested
rules of procedure, which Pr for administering arbitration.

83. 4. Adhoc arbitration
• This arbitration is agreed to get justice for the balance of the un-
settled part of the dispute only.
5. Fast track arbitration
• When parties mutually decide that no oral hearings will be
conducted in the arbitration and the arbitrator shall formulate its
decision based on written submission and the evidence submitted by
both parties such arbitration proceeding is known as fast track
arbitration.
6. Statutory arbitration
• Certain statues (i.e. a written law passed by a legislative body)
specially provide for dispute to be resolved through arbitration.
7. Online arbitration
• Arbitration can be conducted through various online arbitration
platforms, which use a mixture of arbitration and technology to
resolve dispute.

84. ARBITRATION PROCESS
Normal arbitration flow chart given as below