This document discusses project execution and contracting. It explains that large projects are normally contracted out, while small projects may be done in-house. Medium projects can be a mix of contracting and in-house work. Statutory approvals are required before project execution. Contracts must satisfy elements like offer/acceptance and consideration to be valid. Turnkey contracts assign all responsibility to the contractor, while non-turnkey contracts divide the work into packages contracted separately. Tenders are used to solicit bids from contractors in a transparent manner.

2. Introduction
 A project is ready for execution when required funds are
arranged and necessary statutory approvals are obtained.
 Small projects are normally executed by employing workers
directly.
 Medium sized projects can be executed either by: executing
all the works by employing work force directly. Or by
entrusting the entire work to contractors. Or entrusting some
work to contractors and executing the remaining work
directly.
 Large sized projects are normally executed by entrusting to
contractors.

3. Statutory Approvals:
 Building Permit (From the Municipality).
 No objection certificate from the Chief Fire Officer.
 Authorization from Pollution Control for Handling Biomedical Waste.
 X-ray room layout approval from AERB.
 Excise permit to store Spirit.
 Vehicle registration certificates.
 License for the blood bank.
 Authorization for MTP.

4. Contract
 Section 2 (b) of the Indian Contract Act
1972, defines contract as “ an agreement
enforceable by law.”
 The definition has two distinct parts:
1. A contract is an agreement
2. The agreement must be one enforceable
by law.

5. Contd…
 All agreements are not contracts only those that
are enforceable by law are contracts.
 For agreement to become enforceable by law, it
must satisfy certain essential elements called “
essentials” of valid contracts.
 The contractor is a person, a firm, or a company
who undertakes contract.

6. Essentials of valid contract
 There must be an offer and an acceptance of that offer.
 There must be an intention to create a legal relationship on the
part of the parties to the contract.
 The consent of the parties to the contract shall be free and
genuine.
 The parties to the contract shall be competent persons.
 There must be a lawful consideration between the parties to the
contract.
 The object of the contract must be lawful.
 A contract shall fulfill the necessary legal formalities.

7. Types of Contract
 Broadly can be divided into two types:
1. Turnkey Contracts.
2. Non- Turnkey contracts.

8. Turnkey Contracts
 In a turnkey contract the entire responsibility of project
execution is entrusted to the contractor.
 Till such time the project reaches a ready-to-start stage, the
contractor takes care of all aspects of project execution.
 This type of contract is entered into when the project
involves high technology, the know-how is not available with
the project promoter and the contractor is fully conversant
with the technology.
 There may be some projects that involve integration of many
areas, of which, the project promoter is conversant with only
certain areas and has to depend on others for some other
areas of the project.

9. Turnkey Hospital Project:
Project Planning
 Market survey: Market survey is done to find out the best mix of the services and the beds in the
proposed hospital.
 Planning & Designing of the hospital: After getting the correct mix of beds and services,
planning of the services and based on the services approved by the promoters, design the
hospital which can cater the need of next 25 Yrs.
 Interior Design Services: Interior, furniture and equipment layouts for all areas of the hospital
along with details as necessary, with the approval of the promoter.
 This may include assistance on selection of finishing materials with respect to functionality and
cost effectiveness.
 Interior layouts and detailing for specialized areas like the Operation theatres, ICUs,
Laboratories, Radiology, and OPD etc. will be suggested as these are of vital importance for
efficient functioning of hospital.
 Complete civil and furniture details apart from merely the layout for such specialized areas along
with their co-ordination with the various building and medical services like Gas / Suction lines etc.

10. Equipment Planning
 This entails preparing an itemized, quantity-wise list of different
equipment required for each medical / surgical department and
service.
The list would give pre-negotiation prices of the devices.
a) Eliciting quotations
Once the list has been approved in terms of requirement of
equipment, quantities and level of technology required, quotations
are elicited from various approved, reputed and reliable vendors.
b) Comparative statement
Quotations received from various vendors are tabulated vis a vis
features, offer components and pricing. The performance of the
products are researched by visiting various relative installation
sites, seeing the performance of the product, getting inputs from
the users both on the product efficacy and service back-up.
c) Pre-installation site preparation
Post order/contract issuance, preparing details of electrical, water,
weight load, dimensions, manpower requirements for the
equipment.

11. Commissioning of the Hospital:
Manpower Planning
 Manpower budget for the hospitals for all categories of staff
 Talent search for senior doctors, senior administrative staff and senior
nursing staff
 Interview of senior staff wherever applicable and required
 Post finalization contract design.
 Training of local employees to take care of the hospital after the contract is
over.
b) Hospital Commissioning:
 To develop policies, standard operating procedures (SOP), and systems for
all major functions like admission, transfer, discharge, billing, theatre
scheduling, inventory measures, security, infection control, housekeeping,
nursing services etc.
· Salary structure
· Tariff structure design
· Personnel manual with work description
· Computerization assistance (selection of software vendor & giving
specifications)
· Departmental policies and procedures.

12.  The scope of contract covers all areas of the project:
1. Design
2. Engineering
3. Construction
4. Structural work
5. Supply and installation of plant and Machinery
6. Supply of spares
7. Testing & commissioning
Since, entire work is done by a single contractor, turnkey
contract agreements invariably have a clause on
performance guarantee.

13. Non- turnkey Contracts
 Non-turnkey contracts are preferred when the projects
are small sized, the know how for the project is available
with the promoters and when there is a strong,
competent and capable project team available with the
organization.
 The total project is divided into suitable work packages.
 The packages that need to be given to contractors are
identified.
 A contractor may be entrusted with one or more
packages.

14. A total project may be divided into:
 Site clearance & leveling
 Engineering design of the building
 Construction of foundation for the building.
 Construction of super structure.
 Construction of flooring
 Construction of machinery foundation inside the
building at the places where machinery will be
installed.

15. Types of non-turnkey contracts:
 Piece-work contract
 Lump sum contract
 Cost-plus percentage contract
 Labor Contract

16. Piece-Work Contract
 This type of contract is suited for small works
like site- clearance, maintenance/ repair works
etc.
 In this method of contract, the contractor agrees
to execute a specific work for a specified rate
without reference to the quantity/ magnitude of
the work involved.
 The cost usually for this type of work is very
small.

17. Lump- Sum Contract
 In this system, the contractor agrees to execute the work
completely in all respects, within the stipulated time, in accordance
with the drawings, designs and detailed specifications and for an
agreed sum.
 Once the contractor completes the work as per the drawings, it is
compared with the specifications.
 Payment of the agreed sum to the contractor is made on the
strength of a work completion certificate issued by engineer-in-
charge.
 Time factor is important.
 Penalty for slow progress is also included in conditions of contract.

18. Cost- Plus Percentage Contract
 The contractor uses his own materials and labor to
execute the work according to the given drawings
and specifications.
 After the completion of work, the contractor is paid
by the project promoter at a certain percentage
above the actual cost of execution.
 The cost-plus percentage is predetermined and
provided in the contract and is meant to take care
of overhead charges and also to provide the
contractor with some profit margin.

19. Labour Contract
 The project promoter arranges for the supply of all
required material at the work site and the
contractor arranges the labour. Thus, the contract
is entered into only for the labour portion of the
project.
 This type is chosen when promoter do not want to
compromise on the quality of material to be used.

20. Sub- Contract
 When a major work is undertaken by a main
contractor, he can entrust some of the works to be
executed by sub-contractors.
 There will be separate contracts between the main
contractor and his sub contractors.
 The project promoter is not liable to make any
payment to the sub-contractor, which is the liability
of the main contractor.

21. Tenders
 Tender is an offer in writing by the tenderer ( the person
who offers the tender) to execute some specified work
or to supply some specified good at certain rates within
a fixed time frame under certain conditions of
agreement.

22. The tendering process is generally utilized for
procurements or contracts involving substantial
amounts of money. Tendering is utilized by:
 Government departments, offices and agencies
 Private sector companies and businesses
 Overseas markets and businesses
The private sector is attracted to tendering to realize benefits
including; maximizing competition, providing an opportunity for a
much larger pool of suppliers to make an offer, as well as having
a greater choice in selecting a supplier that offers value for
money.

23. Tender Notice
 It is a notice inviting tenders from interested parties (contractors).
 The tender notice is a public notice and is published in leading
newspaper to give wide publicity.
The tender notice contains the following:
1. Name of the org calling for tenders and designation of officers who is
inviting the tenders.
2. The nature of work, the place of work and estimated cost of work.
3. Cost of tender documents and drawings/ plans.
4. Last date and time of receipt of tenders, place and availability of tender
forms.
5. Type of specifications and time of completion.
6. Amount of Earnest money deposit.
7. Amount of security deposit to be paid
8. Date, Time and place of opening tender.

25. Tender documents
 Tender documents are meant to keep the tenderers informed
about the general and specific conditions applicable for tender.
 It consists of:
1. A letter of invitation to the tenderers.
2. Specimen tender form.
3. General instructions to the tenderers.
4. Details of civil/ structural work with drawings.
5. Details & specification of machinery/ equipment to be supplied.
6. Draft contract agreement.
7. Arbitration authority who will decide in case of dispute.
8. Time schedule for completion of work.

26. Earnest Money Deposit (EMD)
 It is the amount to be deposited by all the tenderers when
they submit their tender.
 It varies from 1 % to 3% of tender value.
 Once the contract is finalized, the EMD remitted by all the
unsuccessful tenderers are returned back.
 The EMD of the successful tenderer is retained as a measure
of caution so that he will not withdraw his offer.
 In the event of the successful tenderer withdrawing his offer,
or refusing to take up the work, the EMD retained is forfeited.

27. Security Deposit
 Security deposit is the amount to be deposited by
the successful tenderer after the contract is
finalized.
 It is about 15 % of the total value of the contract.
 This is collected as safety measure so that
contractors fulfill all the terms & conditions.

28. Acceptance of Tenders:
On the appointed date, the sealed envelopes containing tender
and EMD are opened.
Opening of tenders is usually done in front of tenderers.
Before accepting, following aspects are to be considered:
1. Financial capacity of tenderer.
2. The technical infrastructure available.
3. Past performance of tenderer in executing similar works.
4. Specifications (general & technical) as quoted by tenderer.
Letter of Intent (LOI): issued to successful tenderer intimating
about his/ her offer being accepted.

29. Execution of Deed of Contract
 A contract as such can be oral or written.
 A contract is required by law to comply with certain
legal formalities as to writing, registration and
attestation.
 If these legal formalities are not carried out, then
the contract is not enforceable by law.

30. Penalty Clause for non-
performance:
 This clause provides for certain pre
determined percentage of price from the
contract price for non –performance of any
guarantee parameters.

31. Types of payments to
contractors:
1. First and final bill
2. Running Account Bill

32. First and Final bill:
 This method of payment is suitable for
very small, petty works.
 There is only a single payment to the
contractor on his completion of the work.

33. Running Account Bill
 Refers to the account prepared at frequent and regular
intervals for payment for the work done or supplies made at
intervals.
 Payments are made for about 90% of the bill amount,
retaining about 10%.
 Thus there will be many intermediate bills and one final bill.
 Final bill is the last bill raised on completion of the work and
in full settlement of the account.
 Sometimes advance payments is made on running account.

34. Voucher
 Voucher is a written document as a proof of
payment. Normally payment made to the
contractor is acknowledged by the
contractor by putting his signature on the
bill on a revenue stamp.
 A bill, thus becomes a voucher after
payment.