The document outlines the principles and practices of contract management as defined by Indian Railway regulations, emphasizing the importance of clear agreements, tendering processes, and the role of engineers in effective contract oversight. It discusses various types of contracts, the goals of timely and quality work at minimal costs, and the challenges faced in execution and dispute resolution. Additionally, it highlights common pitfalls in contract management and advocates for fairness and flexibility in dealings with contractors.

1. by RP Saxena
CONTRACT MANAGEMENT
IRITM 11th Aug 2016
1R P Saxena

2. Contract-Para 1201 of Engg code
defines contract
• When two or more persons have a common intention
communicated to each other to create some obligation
between them there is said to be an agreement.
• "An agreement" which is enforceable by law is a
"Contract".
• According to Section 10 of the Indian Contract Act, 1872
only those agreements are enforceable by law which are
made by the free consent of the parties (para 1256),
competent to contract (see para 1259), for a lawful
consideration (para 1224) and with a lawful object,
and are not expressly declared to be void.
• This is subject to any special law according to
which a contract should be in writing and attested by
witnesses. R P Saxena 2

3. Why Contracts
• All works can not be done in-house
• Economy ..paying for work done and
not for attendance
• To get out side expertise
• Reduction in inventory and manpower
• Short duration requirement like
kumbh mela or mansoon patrolling etc
R P Saxena 3

4. Advantages of contract
• In-house activity being more costly
Pay for attendence only
• Private agency being more efficient
due to flexible labor policies
• PVT agency engage modren tools &
technology to execute quality work at
less cost to survive in market
R P Saxena 4

5. How to fix contract
• Tendering is the method of
fixing the contract
• Once Tender is accepted , it
becomes contract between
Railways & tenderer
R P Saxena 5

6. Type of the contract
•Works contracts
•Stores .procurement
•Consultancy contracts
• service contracts
•Earning contract ..parking,
leasing etc
•PPP.contract
R P Saxena 6

7. Goals of Contract
Management
•RAILWAY
•GET THE WORK DONE TIMELY
•OF SPECIFIED QUALITY
• AT MINIMUM COST
•REQUIRMENT
•STRONG INFRASTRUCTURE
•PROMPT DECISION MAKING
• ASSURED FUNDING SCHEDULE

8. Goal of contract
• In simple words
• The goal of the contract is to
get the work of specified
Quality done in least possible
cost in least possible time
• This goal is achieved by better
contract management
R P Saxena 8

9. Essential of contract
management
• The contractor is the partner & have
come to earn money by executing
your work
• The contractor can survive without us
but we can not survive without him
• No contractor can survive if he is
suffering loss irrespective of what is
written in agreement
• So one has to be fair
R P Saxena 9

10. Problems Area
• work & store contracts being
traditional method in the past
• Rules/procedure framed for
traditional types of tenders
• Service contracts also more
prominent now
• Need proper policy and guide lines for
out sourcing contract
R P Saxena 10

11. 4 essential area
• Pretender planning
• Tendering process
• Contract management..timely
payment & decision on doubts
in fair manner
• Dispute settling
system..Arbitration etc
R P Saxena 11

12. Tender and contracts
• Pretender planning
• Tender opening
• Processing tender
• Accepting tender
• Issuing Accepting letter becomes
contract
• Signing contract Agreement
R P Saxena 12

13. Pretender Planning
• Scope of tender..location..items
of works..drawing etc
• Quantity..rate ..schedule …cost
• Time for completion
• Type –open ..Ltd
..single..quotations
• General condition …spl
conditions
• Eligibility criteria
• NIT ..date time place for sale
R P Saxena 13

14. It should be clear to
both party
• What is expected from contractor
• What is expected from Railways
• Payment schedule should be clear
• Remedy incase one party fail to
discharge its obligations
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15. Tender document• Tender Schedule
• Notice Inviting Tender (NIT)
• Instructions to Tenderers (IT)
• Special Conditions of Contract (SCC)
• Specifications
• General Conditions of Contract (GCC)
• Earnest money & Performance guarantee
details
• Drawing if required
R P Saxena 15

16. Processing of Tender
• Opening of tender
• Briefing note and its vetting
• Tender committee nomination
• TC meeting & its Recommendation
• Recommendation Acceptance
• Issue of acceptance letter
• Accepted tender becomes contract
R P Saxena 16

17. CONTRACT MANAGEMENT
• 1. General
• 2. Codel provisions
• 3. Type of contracts handled in
Engineering Department
• 4. Problems in Construction
contracts
• 5. Problems of Open Line
contracts
R P Saxena 17

18. • 6. Problems Faced By open line
Engineers
• 7. Problems in contract
management
• 8 .Suggestions
• 9. General precaution to avoid
problems in tenders & contract
managements
• 10. Contract management – myth &
R P Saxena 18

19. General
• common perception is that Indian
Railways is failing in contract
management – in Quality as well as
timely completion
• strong talk of fixing responsibility not
only from Railway Ministry but also from
PMO and planning commission
• Concerns of slow progress are also
being expressed by various Parliamentary
committees
R P Saxena 19

20. General
• Indian Railways are executing 340
projects consisting of 129 new
line, 45 gauge conversion and 166
doubling projects having a throw
forward of about Rs. 5,47,000
crore
• Interest cost 5470 cr/yr or 15cr
per day-delay cost is 15 cr per day
• Annual budget out lay is about
50000 cr R P Saxena 20

21. Engineer Role in
contract management
• The Success of Engineer is in
getting the work done’.
• He has to use his skill & vision in
selecting good contractor by
following all rules & regulation in
force
• not only select a good contractor
but also make him successful
R P Saxena 21

22. • The terminating of the contract
is very easy but making him
successful is difficult.
• Completing the work is more
important than finalizing the
tender.
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23. Code, manuals ,circular
• There are plenty of instruction &
procedures to be followed in work
getting sanctioned, tendered,
contracted, executed, monitored &
finished
• Is it Possible to follow all the rules
• In India, the Work to Rule is
considered a strike
R P Saxena 23

24. Master or Slave of Rules
• All rules & regulation of tendering &
contract are made with sole objective to
get the work of required specification at
least cost & in least time
• If some rules are coming in way of
achieving above objectives, then the rule
needs to be changed rather than officer
should be harassed for the breaching the
rules to get the work completed early
R P Saxena 24

25. Codal provisions
• The contract management on
Indian Railways is governed by
the provision of Chapter 12 of
Engineering code, Chapter 6 of
Finance code & chapter 4 of
store code
• Engineering code Para 1201
defined contract
R P Saxena 25

26. Approach of
engineering officers
• Process Oriented or
• Result oriented or
• Get result duly following a
process..really efficient ?
• In field all type of approach is
followed depending on officer &
importance of particular work
R P Saxena 26

27. Common sense says
that
• if person is made responsible/
accountable to achieve certain
results, he should be given full
authority to achieve that result
• It is not so in Railways . At
every stage CAO or executive
has to approach finance , GM or
somebody else to implement
his decision R P Saxena 27

28. Foundation of contract
management –The
contract Agreement
• The principles to be observed in
framing the contract agreements
are given in Para 1217 of Engg Code
• What the contractor is to do
• What railway administration is
to do
• What payment is to be made
• When payment to be made
• Grievance addressal system
R P Saxena 28

29. • The terms on which
variations and
modifications can be made
• Action in case of breach of
contract
• The method of settling disputes
• Arbitration R P Saxena 29

30. Tenders -instructions
• System of tender –open ,
global , two packet etc
• Eligibility criteria
• Performance guarantee
• Price variations
• Advances
• How tenders documents is
prepared , bids invited , offer
evaluated etc
R P Saxena 30

31. Tendering & vigilance
• Tendering is area where many
complaints generate against the
officials handling tenders which
some times lead to vigilance
cases or legal/audit scrutiny of
cases.
• Do not put such specification or
condition which can not or will
not be followed during execution
R P Saxena 31

32. Probelems in field- in
openline
• Organizational problem
• Inter departmental coordination
– Finance, store, traffic, signal,
electrical Mech. Deptt.
• Funding problems
• Co-ordination with state govt –
Land acquisition, environmental
clearance , Road over bridges
etc R P Saxena 32

33. Area of Problems
• 1. Proposal of works & its sanction
• whether adequate care is taken in framing
the proposal-
• whether plans & estimates are made with
adequate care & verifying feasibility in field
- yes or no
• whether scope of work is clearly defined in
proposal -
• whether tentative target for completion is
fixed &funding schedule prescribed in
commensurate with the target
R P Saxena 33
•b. whether plan is changed after approval varying scope of work
– yes or no
•whether estimate is sanctioned within 6 month of sanction of work
- yes or no

34. 2. Approval of plan &
estimate
• a. whether plans are approved
within 3 months of sanction
• b. whether plan is changed after
approval varying scope of work
• whether estimate is sanctioned
within 6 month of sanction of
work
• Any other problem
R P Saxena 34

35. 3. Tendering
• whether adequate infrastructure is
available in Srden office to prepare tender
document
• whether DEN/ Srden are careful in
framing special tender condition –
• whether reasonability of estimated
rates are examined before floating
tender
• whether Quality clause /quality test is
clearly defined in tender
• whether Eligibility criteria is clearly
defined
R P Saxena 35

36. • whether correct price variation
clause is incorporated
• whether tender is finalized
within validity - yes or no
• How many tenders at any given
time are pending with
DEN/srden for finalization
• How many contract in progressR P Saxena 36

37. 4. Execution of contract
–monitoring & supervision
• How many contract ( maintenance + new works) on an
average are handled by an officer at any given time ..
• whether separate supervisor available for supervision of
new work
• Whether site supervisor is able to ensure quality in work
• whether Drg/design/material/work orders issued to
contractor in time
• whether decision are given timely on disputes between
contractor & site supervisor - yes or no
• whether payment schedule ie at least one bill every month
or in 2 month is ensured-
• whether regular meeting are held with contractors to
monitor progress & minutes are drawn for such meeting
R P Saxena 37

38. • whether contractor are completing work
as per date of completion .if not ,any
action is taken……
• whether termination of contract is done in
time in case of poor performer
• whether new contract is finalized promptly
• Whether you are really managinging your
contract or GOD is managing it
R P Saxena 38

39. So if contract fails
• 5.Dispute redressal system – whether
grievance Redressal system exists in
contract to handle genuine grievance of
the contractor
• 6. Arbitration – whether proper record
of correspondence with contractor is kept
whether letters of claims are promptly
replied.
• Whether arbitration cases are increasing in
your division .if yes, reasons there of
R P Saxena 39

40. Major Problems in
Field
• Large number of contracts in division
• Lack of infrastructure / man power at every
stage- no supervision/monitoring
• Lack of funding schedule. Targets without
funds
• Authority is not commensurate with
accountability –
• Procedures are more important than
Results
• No system of grievance reprisal-Pre
arbitration
• Lack of assured block/power for track work

41. CONTRACT
MANAGEMENT.Myth
• Drawing good CPM/PERT Charts makes a good
Contract Manager
• Saving lots of money makes a good Contract
Manager
• Adhering to laid down rules and sticking to good
and impressive formats for reporting makes a
good Contract Manager.
• Using advance soft wares and computer driven
techniques such as MS Projects makes a good
Contract Manager.
• Interpreting Contract provisions verbatim
makes a good Contract Manager
• Process is important than Result

42. CONTRACT MANAGEMENT
-Reality
• Understanding the Costs, requirements, limitations of
employed technology, materials, keeping in view the
overall objective makes a good Contracts Manager.
• Having more reliance on flexibility rather than being rule
bound makes a good Contracts Manager.
• Using Simpler, objective tools to monitor various stages
of progress leading to overall performances makes a
good Contracts Manager
• Dividing the task in various small accomplishable
milestones, and monitoring the achievements both at
micro as well as macro level makes a good Contracts
Manager.

43. How to make a Bad
contract
• Be very legal and verbose while drafting the text of
Contract documents.
• Keep the provisions as inequitable and amorphous as
possible
• Make sure that your Contractor is responsible for any
thing, which may or not effect the performance
• Make sure your Contractor is selected through a very
subjective process.
• Never check and verify the antecedents physically, rely
only on the paper submitted by him to you.
• Keep changing your project team as frequently as
possible.
• Always remain indecisive, for vigilance /audit /CBI/CVC is
watching you.
• Insure your communication with other constituents and
also in house is scanty vague.

44. Things should Never be done
in contract management
• Award the contract on exorbitant rates
• Execute work in good faith without sanction or estimate or tender
• Execution & acceptance of substandard work- quality check
• Payment for works not executed –overpayments ,false payments
• Manipulation in tender such as
• Exaggerating performance of favorite tenderer & failures of
Rivals
• Projecting artificial urgency –time is valuable
• Doctoring briefing note to project someone as most suitable
• Bypassing lowest bidder without convincing reasons
• Call negotiation for reduction of rates but accepting it after
negotiation even if no appreciable reduction achieved in
negotiation
• Non application of mind in tender Acceptance
• Do a thing for which your conscious is not permitting-Right
or wrong –conscious will give you one signal –respect or
overshoot

45. Human behaviour –
Think ..why
• Why engineering & account departments overlooks the
existing instructions to sanction works beyond norms
• why one contractor works efficiently under one engineers
& fails under another engineer
• Why some one is able to get his work done from the all
department in spite of all the constraints.
• why someone who follow religiously the rules is not
considered good officer & some time do lands up in
problem
• why such instruction are given at times which does not
follow any canon of financial propriety ( Do whatever you
want but complete this work .
R P Saxena 45

46. • Any question is most welcome
• rajendrasaxena@gmail.com
• THANKS
46R P Saxena