Module 4

Contract Management-Tender and its Process:

Contract is an agreement between the two parties and which is enforceable by
law. The force of law comes into existence when parties are entering into the contract. The
Indian Contract Act 1872 defines contract, as “an agreement enforceable by law”.
The term contract as used in engineering field can be defined as an undertaking by a
person or firm to do any work under certain terms and condition. The work may be for
the construction or maintenance and repairs, for the supply of materials, for the supply of
labor, for transport of materials etc.
Fundamentals of a Contract: -
1. Parties for contract agreement should be competent.
2. The subject-matter of the contract agreement must be legal and definite.
3. There must be a proper proposal & acceptance by both the parties.
Contract Document: -
1 Title page It contains the name of work, name of contractor, contract agreement number, total
estimated cost and earnest money to be deposited etc
2 Index page: Contains descriptions the agreement with reference to pages of other items.
3 Tender notes It gives brief descriptions of work, name of work, estimated cost, date and time for
receiving the tender amount of earnest money and security, time of completion etc.
4 Tender form Which gives information regarding bill of quantities, rates per unit, total cost of the
work, time for completion, B.M.D penalty clauses etc
5 Schedule of The schedule gives the list of materials to be issued by the department giving rates of
issue of each item and their place of issue
materials
6 Specification The detail specification is furnished

Terms and conditions of contract: -

1. Rates of each item of work inclusive of materials, transport, labour, T and P and other
arrangement required for the successful completion of work.
2. Amount of earnest money and security money to be deposited.
3. Time for completion of the work.
4. Penalty for unsatisfactory and improper work for delay in completion.
5. Extension of time limit for the completion of work.
6. Mode of payment to contractor, whether running account payment, or final payment and
conditions for refund of security.
7. Rules for terminators of contract about breach of contract.
8. Labour welfare amenities and compensation to labor.
9. Execution of work in accordance with drawing and specifications.
10. Works to be opened for inspection.
11. Authority deciding about the extra items, change in design, drawings, additions and
alterations and contractor claims there by.
12. Rules for sub-letting the general contract to other contractors.
13. Authority to act as arbitrator in case of disputes.

Types OF Contract: -
i. Lump sum contract.
ii. Item rate contract.
iii. Percentage contract.
iv. Labour contract.
v. Daily labour or Muster roll system.
vi. Work order.
vii. Piece work agreement.

Lump Sum Contract: -

In this type, contractors are required to quote a fixed sum of execution of work complete
in all respect i.e., according to the drawing, designs and specifications supplied to them with the
tender within the specified time, any addition and alterations are not covered in this.
Advantages: -
1. Owner will be aware of the expenses beforehand about the work.
2. Detailed measurements are not required unless there are any additions.
3. Since the cost and work are known prior, planning and execution is more convenient.
Disadvantages: -
1. Liable for disputes if the details and specifications are incomplete.
2. Difficulty in making part payment with the present progress of work.
3. Additions/ alternations are not possible because of specific work and schedule of prices.

Item rate Contract: - Contractors are required to quote rate for individual items of works on the
basis of schedule indication full nomenclature of the items as per sanctioned estimate, estimated
quantities and unit therein.
Advantages: -
1. This form of contract ensures a more detailed analysis of cost by the contractor and as
such is more scientific.
2. Since the contractors are to write down their individual rates of separate items in figures
as well as in words it is not easy to form a ring submission of tender and allot a work to
one of the contractors without competition.
3. Since the rates of all items are scheduled in order within the tender, unworkable rated
tender may be avoided and consequently leads to smooth progress and timely completion
of a work.
Disadvantages: -
1. In item wise amount which is calculated by the contractor by multiplying the quantity of
each item with the rate may be incorrect.
2. Contractor of this nature requires careful consideration by the Engineer before it is
entered into, as by wise anticipation or perhaps outside information a contractor may
quote high rate.
3. While following tender forms possibilities of over writing, erased rates and rates not
shown inwards are liable to be rejected.
Percentage Rate Contract: -
In this form of the contract the department drawn up the schedule of items according to the
description of items sanctioned in the estimates with quantities, rates, unit and amount shown
thereby. Thus, the department fixes up the item rates of the tender so called as “item rate
tender”. The contractors are required to carry out the work as per schedule or percentage above
or below the rates indicated in the schedule of items of work attached to the tender. The
percentage above or below or as per tendered by the contracts apply on the overall of quantities.
Advantages: -
1. This type of contract is convenient in so far as the lower rate and comparative position
amongst the contractors are readily known just on the opening of the tender.
2. As there is no provision to quote contractor‟s own rate for an individual item, benefit due to
increased quantity with a beneficial rate cannot be availed of by a contractor. Thus, there is
no possible of unbalanced tender.
3. Comparative statement can be prepared quickly and there is no possibility of tempering with
the rates by a contractor in order to be the lowest tender.
Disadvantages: -
1. While quoting tender rates, to write down the quantum of percentage in order to be
lowest tendered, contractor mostly depend on guess of the quantum of percentage of his
competitors without analyzing the workable rates of the individual rates. Hence much
time is required consideration and approval of higher authority to cancel the lowest
tender.
2. Since the contractors are to write down only the percentage above or at per or below, it is
very easy to write such a rate in few minutes before the time of submission of the tender
taking advantages with actual competitor for quoting high rates.

Labour Contract: -
This is a contract where the contractor quotes rates for item work exclusive of the element
of materials which are supplied by the department free of cost. It is only for labor charges in
order to complete particular work.
Advantages:
1. The materials stored by the government (department) are thus utilized with their assured
quality as per specification
2. The increase in the cost of the work is alone checked in spite of any rise in the price of
such materials in market
3. Difficulty in obtaining certain materials in open markets in right time

Disadvantages:
1. There may be delay in obtaining the materials by department consequently the contractor
is required to keep himself in touch with the day-to-day position regarding the supply of
materials from department
 2. A large storage area is required to store the different kinds of material and constant
guarding etc
3. Refund of surplus departmental materials by a contractor in good condition, wastage,
damage etc. are also involved in this type of contract

5. Material Supply Contract:

In this form of contracts have to offer their rates for supply of the required quality of
materials, inclusive of all local taxes, carriages and delivery charges to the specified stores within
fixed time in the tender.
Example bricks, stones, furniture, pipes and special items etc
Advantages:
1. Payment of this type of contract can be made promptly,
2. Since material supply through contractor, department receiving the supply of materials is
not worried due to loss of materials, breakage, damage charges during transit
3. Since the payment of this type is done promptly, the contractor tries to take the supply
order even at less profit, resulting low-cost of materials

Disadvantages:
1. Constant control for quality of materials to be received in several batches at different
times is required
2. During submission of tender intending contractors may from a ring to get the supply
order at the higher rates at different terms

6. Piece Work Agreement:

Is that for which only a rate is agreed upon without reference to that quality of work to be
done or the quality of work to be done within a given period of time. In case of petty work
valued up to Rs 10000/- each inclusive of cost of material may be carried out through contractors
by piece-work agreement
Advantages:
 Urgent small work may be taken up for execution without inviting tender and
considerable time is saved
 If contractor delays to execute the work or uses inferior quality of materials or leaves the
work partially complete, another contractor may be engaged at the time

Disadvantages:
 For this, type of small work approved contractors find little interest and as much work is
entrusted to petty contractors having little experience in management system and
adequate knowledge to carry out the work according to departmental procedures.

7. Measured Contract Or Schedule Contract:

Except lump-sum contract all other types of contracts are measured contract. In this case
the total cost of work is worked out by detailing measurement of different item of work after its
completion a bill is then prepared by multiplying the measured qualities by their respective rates.
example of measured contacts one item rate contract, percentage contract, cost-plus type
contract, material supply contract etc

8. Conditional Contract:
A contract is said to be conditional if its performance depends upon some future in
uncertain events or contingency falling the event there is no obligation to perform the contract
(at-least that part affected) thus in the famine flood, or fire insurance policy the company
“conditions” its liability upon the happening of a fire, where upon the obligations to pay because
active and enforced
Conditions precedent: is exists when the performance or some promise is made dependent
upon the doing of some other act, generally by promise or upon the happening of some event
after the contact terms have been agreed upon
It has following advantages:
This method gives equal opportunities to all prospective competitive contractors to bid
for work
 It helps in getting in work done at time at the lowest possible rates hence saving of public
funds. This saving should not be at the cost of equality protects government or local
authorities from possible favoritism.
TENDER:
It is an offer in writing to execute some specified works or to supply materials at certain
rates within a fixed time under certain conditions of contract and agreement between the
contractor and the department or owner or party. The work may be
1. Construction work of a project
2. Supplies of materials and or labour required to complete the specified works
Tenders are invited in any one of the forms:
1. Negotiation tender
2. Limited competitions
3. Open competitions
Negotiation Tender: In this method only single contractor whose integrity, reliability, and
capacity are already known is negotiated as regards the price to be paid to him for the execution
of certain work. It is advantageous as the owner run the risk of higher cost when the firm chosen
is of good reputation and the work done by the firm is better quality a completed within a
reasonable time. The only draw-back in this type of system is, that the owner does not receive
competitive rates and the cost of the project will be more.
Limited Competition Tender: In this method owner calls tenders from few contractors who are
renowned in that particulars type of work this method can be advantageous for the private works
in which the owner has the rights to negotiate directly and enter into agreement with
whomsoever he chose
Open Condition Tender: In this method sealed tenders are called from different contractors by
advertisement in the leading newspapers displaying the notice on public places and writing
letters to the competent firms this procedure is generally adopted in public works
Penalty: Penalty is a sort of fine for non-fulfillment of terms of contract every contract usually,
contains certain provisions for penalty for breach of terms and conditions of contract as not
maintaining the progress, for delay in completion in bad work etc and it may be fixed up to 10%
estimated cost
NEED OF ADVERTISEMENT OF TENDER:
So as to secure the benefit of keen competition amongst a considerable number of firm
contractors the advertisement should reach to the greatest number of potential bidders,
newspaper, journals and leading magazines etc. are the best medium of advertisement.

Procedure for inviting and accepting tenders:

 preparation of contract documents
 issue of tender call notice (Notice Inviting Tender)
 opening of tender
 Accepting of tenders.
 Contract agreement

Unbalanced Tender: In case of rate of item rate contract the total cost is based on the
estimated quantities mentioned in the schedule. There quantity is approximate and actual cost
of work may vary the contractor submits and unbalanced tender.
Corrigendum To Tender Notice: Partial modification of the tender notice advertisement
published
Earnest Money: Earnest money is an assurance or guarantee in the form of cash on the part
of contractor to keep open offer for consideration and to confirm his intensions to take up the
work accepted in his favor for execution as per term and conditions in the tender no interest
is payable upon earnest money deposit to the contractor. Generally, 2% of estimated cost of
the work
Security Deposit: On acceptance of the tender, the contractor has to deposit of 10 to 20 % of
the tender amount as the security deposit with the department which is inclusive of the
earnest money already deposited and is check on the work satisfaction according to the
specifications and maintains progress and completes the work in the time if the contractor
fails to do this money may be forfeited by the department time may be extended by the
competent authority on written application of the contractor on valid reasons.
Instead of collecting this while of security money by one installment before starting the
work, this can be collected gradually deducting from the running account bill of the
contractor
COMPENSATION IN DELAY IN COMPLETION (PENALTY):
Contractor is liable to pay as completion of penalty of amount equal to 1% of estimated
cost of the work are such smaller amount as executive engineer are the competent authority may
decide for every day that the work remains uncommented or unfinished, after the due date. The
max limit, of the penalty is 10% of the total contract amount.
Liquidated Damages: In case of civil engineer contract, it is a fixed stipulation sum of penalty
(as agreed between the parties) payable by the contractor having no relationship with real
damaged.
Ex suppose the owner has fallen in contract with a contractor “x" to supply certain
material at cost of as 13000/- but contractor “x" breaks his contactor the owner gets the supply
from another contractor of the same type if material at a cost of 13500/- the owner is entitled to
recover rs500/- From “x” by way of compensation and is known as liquidated damages
Unliquidated Damages: This is known as ordinary damages having relation with actual damage
which vary depending upon the size of the damage for the non-completion of work within due
dates of completion
Termination Of Contract: The contactor may be terminated by the executive engineer or by the
competent authority in default or bankruptcy of the contractor and penalty may be imposed as
per terms of contract agreement
Debitable Agency: This is an agency which is employed to executive at work or part of the work
at the cost of contractor who fails to complete or to show satisfactory progress of works
MEASUREMENT BOOK (M B):
The measurement of all works and supplies are recorded in the M B from number 23 and
payments of the all works and supplies are made in basis of measurements recorded

Sl no Particulars of item No‟s Details of actual measurement quantity

All measurement books are numbered serially and a register is maintained in the divisional office
showing the serial number of each book the names of the sub division or officer to whom issued
the date of the return and remarks in the sub-divisional office showing the names of the officer to
whom issued, date of issue, date of return, etc

Procedures To Be Observed In Recording Measurement:

1) The measurement of works is taken accurately and recorded neatly for different items of
work with respective units
2) Measurements should be taken with correct metallic (steel) tape.
3) Corrections If made in M B should be initialed, dated and the reason is recorded.
4) A reliable record is object to be aimed at, as it may have to be produced as evidence in the
court if law
5) Loss of M B is a serious matter and is to be reported to the higher authorities for suitable
action
Purpose of E-Procurement
• Reduce the time and cost of works/services/goods for both vendors and government;
• Ensure better value for money spent through increased competition and the prevention of cartel
formation;
• Standardize the procurement processes across government departments/agencies;
• Provide single window shop for all procurements;
• Provide equal opportunity to all vendors;
• Ensure transparency and ultimately reduce corruption.

Defects in Manual Tendering/Procurement

Procurement in Government departments, ULBs and other public authorities involved publishing
a Notice Inviting Tenders in several media outlets, bid submissions by suppliers, bid evaluations
by buyers, and finally, the awarding of the procurement order and signing of agreements
involving voluminous paper work. The complete process required a long chain of internal
authorizations and scrutiny (at times involving several departments), several visits by suppliers
to departments, and the generation of reams of paper-based statements and evaluations. The
manual tender system was suffering from the following deficiencies:

a. Bias and delay in issue of tender schedules to suppliers there used to be bias and
discrimination during the process of invitation and bidding process and delays and mistakes
in the schedules
b. Interest Groups to suppress competition the participating bidders would gather the list of
prospective bidders for procurement request. They would use this information to lobby for
formation of interest groups and bid at higher quotations by dubious means
c. Threats to bidders sometimes, genuine bidders are physically threatened and prevented
from submitting their bids. The bidder had to risk their physical safety to submit bids in the
tender box placed in the office of the tender inviting authority.
d. Tender Boxes, Physical transportation of tender boxes from multiple locations to a central
point also proved to be a risky proposition in such an environment.
e. Tender files There was a risk of loss, tampering or delay while the files are being transported
from table to table
f. Delays in finalization of tenders
g. Red tape, lack of transparency, and manual movement of files across the administrative
hierarchy was resulting in inordinate delays in the finalization of tenders. Typically, tenders
for major projects would take 90 days to 150 days to process. These delays were contributing
to cost and time overruns for the projects.
h. Officials and venders interface at every stage
i. The manual system exposed the departmental personnel to the bidders at every stage of the
process viz., sale of tender schedules, issue clarifications, bid submission, bid evaluation.
Such repeated contact between bidders and departmental staff could lead to subjectivity,
favoritism and other undesirable practices.
 j. Lack of Transparency There is a severe lack of transparency in the entire manual process.
This lack of transparency leads to misinformation and a lack of trust in the system by the
bidders, media and the citizens.

Steps in Electronic Tendering Procedure

i. In electronic Tendering process the contractor can register through online (internet) through
concerned web/link.([Link]) e-Tendering - Register me or by sending a request to
the officer floating the tender
ii. In case of contractor registering through web site they have to submit the required documents
through courier to the office of the concerned to get authorized.
iii. In electronic tendering the contractor will have to request the tender form through web site and
send the form fee to the concerned office through courier or post or any method so as to reach
the Tendering Authority on or before the last date of issuing the tender documents.
iv. After receiving the tender documents through the web site, fill them and submit the completed
tender documents into the electronic tender box online before the last date and time of
submission of completed tender documents.
v. In electronic tendering, the contractor is required to attach his scanned signature and submit the
document.
vi. EMD document should be scanned and attached along with the bid and original EMD
document should be submitted to concerned office before the date of opening.
vii. Further information about electronic tendering may be had from the concerned Office during
office hours.

Advantages
1. The installation of electronic tendering system has enabled conduct of auctions in a transparent
manner
2. Typically, in a manual tendering system, sub-contracting and cartel formations add to the cost
of construction projects. The e-tendering system eliminated middlemen who lobby with the
government for projects. The online reverse auction, a part of e-tendering, helped tender
floating organization to obtain competitive offers and break the formation of cartels.
3. Organizations implementing e-tendering procedure are able to reduce administrative costs
substantially in the tendering process and eliminate paperwork. Digital signatures and 124-bit
encryption ensure that the system incorporates all relevant security features including privacy
of data till the tenders are opened.
4. “Transparency has led to sound decision-making and improvement in the pace at which orders
are finalized. They are able to minimize manual errors in the evaluation process. Earlier, a
single project was consuming a significant amount of time. Today, they are able to complete
multiple tasks resulting in the faster processing of tenders. The system ensures effective
participation of vendors irrespective of geographies, making the process fair and competitive,
and enabling the systematic documentation of the complete tender process.

E-Procurement Model
a. Envisioned as an end-to-end platform (i.e.) all stages of procurement from indenting until
payment will be handled electronically
b. A single platform will be shared by all government agencies in the State
c. Contractors will not be required to visit government offices to participate in tenders and also
for bid submission
d. Payment from contractors will be received electronically using NEFT • Implemented on
Private-Public-Partnership (PPP) basis; the private partner is paid on a transaction basis
e. An effective mechanism to enforce procurement policy decisions consistently across all
government agencies in the State
f. Worth the heavy investments
g. Establishment of Project Management Units
h. Investments in audit by 3rd party audit agency
i. Selection of principal bank
j. Establishment of training centers
k. Robustness of hardware and software to ensure high Quality of Service (QoS)

Essentials of Contracting and Tendering

Preparation of Line Estimate or Preliminary Estimate

It is required for preliminary studies of various aspects of work or project to decide the financial
position and policy for administrative approval or sanction by the competent authority.
Preliminary estimate is prepared on the basis of plinth area or length of road, drains etc., and
worked out on the rate per unit/length or other such methods adopted for ready and proposal.
Data required for preparing such estimate is collected from sponsoring departments or agencies.
Where required, sub-soil investigations and tests to determine the safe bearing capacity are
conducted to work out the approximate costs involved for foundation and superstructure.
Budget Provision
Project works are taken up based on the expenditure provision in the annual budget. The annual
budget is prepared every year by the departments and organizations, with the provision of
undertaking various project works. The organizations/ departments are required to prepare in
advance the draft plan for various project works to be undertaken for the upcoming year. Based
on the draft plan, budget proposal is prepared and approved. Once the budget is approved,
detailed action plans are prepared for implementation. The works under categories of the plan
and non plan and the action plans have to be approved every year. A minimum budget provision
of 30% of the cost of the project is required for inviting tenders under the plan scheme and 100%
budget provision is necessary if the works under the non-plan (Salaries, subsidies…) scheme are
to be taken up. The next step is to prepare detailed estimates for all projects.
Detailed Estimate
Detailed estimate is an accurate estimate and consists of working out the quantities of each item
of works and their and their cost. The dimensions, length, breadth and height of each item are
taken out correctly from drawing and quantities of each item are calculated and then abstracting
and billing are done. The detailed estimate is then sent for technical sanction of the competent
authority, for arranging contract and for the execution of work
Revised Estimate
Revised estimate is a detailed estimate and is required to be prepared under any one of the
following circumstances:
a) When the original sanctioned estimate is exceeded or likely to exceed by more than 8%
b) When there are material deviations from the original proposal, even though the cost may be
met from the sanctioned amount.
c) The revised estimate should be accompanied by a comparative statement showing the
variations of each item of works, its quantity, rate and cost under original and revised side by
side, the excess or saving and reason for variation.
Supplementary Estimate
Supplementary Estimate is a detailed estimate and is prepared when additional works are
required to supplement the original works, or when further development is required during the
progress of work. This is a fresh detailed estimate of additional works in addition to the original
estimate. The abstract should show the amount of original estimate and the total amount
including the supplementary amount for which the sanction is required.
Supplementary and Revised Estimate
If at times, the work is partially abandoned and if the estimated cost of the remaining work is less
than 95% of the original work, that is less than 95 per cent of the original sanctioned estimate, or
when there are material deviations and changes in the original estimate is revised by the
competent authority. A supplementary and Revised Estimate is then prepared and fresh technical
sanction of the competent authority is obtained. If any time either before or during the execution
of original work, it is found that the original estimate is excessive, and then the competent
authority may sanction the revised estimate of reduced amount.
Annual Maintenance Estimate
It is a detailed estimate prepared to maintain the building or any work or asset so as to keep it in
safe and proper condition. For example, for a building, it includes, white washing, color washing
etc. Or for road work, it includes repairs and renewals of pothole, footpath, kerb stones,
side/cross drains etc.

Contingency
The term contingency indicates incidental expenses of miscellaneous character which cannot be
classified under item/sub head; yet pertain to work as a whole. About 3 to 5 percent if the
estimated cost is provided to allow for expenses under this category. If there is any saving
against the amount provides under contingencies, this amount may be utilized with the sanction
of the competent authority, to meet the expenses of extra items of work.
Administrative Approval or Sanction
Any civil work or project initiated by Government Department/Local Body/any Government
owned organization as a mark of necessity of the project in the first instance. At this stage, the
engineering department submits the approximate estimate and plans for seeking administrative
approval of the concerned department. Only after this approval the engineering department takes
up the work/project. It means, the Administrative Approval/Sanction denotes the formal
acceptance by the department concerned of the proposal and after the administrative approval is
given, then the engineering department takes up the work and prepares detailed designs, plans,
and estimates and executes the work.
Expenditure Sanction
It means obtaining the concurrence of the Government for the proposed expenditure and
represents allotment of the money to meet the expenditure. No expenditure can be incurred
before Expenditure Sanction is given. Expenditure Sanction means allotment of money/fund for
a specific work.
Technical Sanction
Technical Sanction means the sanction of detailed estimates, designs calculations, quantities of
works, rates and cost of the work by the competent authority of the engineering department.
Work can be taken up only after the technical sanction. In case of original work, the counter
signature of the local head of the department should be obtained in the plan and estimate before
technical sanction is accorded by the engineering department.

Contractor Selection and Tender Documentation

Tender is an offer in writing to execute some specified work or to supply some specified articles
at certain rates, within a fixed time under certain conditions of contract and agreement, between
the contractor and the department or owner or party. The sealed tenders are invited and the work
is usually entrusted to the lowest tender. While inviting tenders bill of quantities, specifications,
conditions, plans, drawings, are supplied on payment of requisite cost. The process of selection
of contractor has to be transparent. All the contractors who have submitted bids for doing the
project should be treated fairly. The first step is to prepare the bid/tender documents by the
Engineering Department (PWD/ZP Engineering etc.). Before the bids are invited, the concerned
department/owner has to decide who should be invited to submit the bids

Steps followed in Contractor Selection

1. Preparation of bid/tender documents
2. Prequalification of bidders if necessary
3. Invitations of bids
Pre-bid meeting if clarifications/doubts on the amendments/corrections to all the bidders in open
meeting are required to be offered to maintain transparency
Receipt of bids and opening of the same
Bid Evaluation
1. Discussions, clarifications, negotiations with the selected bidders
2. Visits to the projects executed by the bidders, if necessary.
3. Final selection of contractor
The sealed bids can be sent by registered post, courier or deposited in the sealed box that is kept
in the office for this specific purpose by the authority. At the time fixed for opening, the seal of
the box is broken and all the submitted bids are taken out. Tender opening is not done by an
individual. The received bids are listed and counted in the presence of bidders or their
representatives. The tender envelope is opened and checked if the documents submitted are
complete in all respects. Incomplete bids are liable for rejection. Each page is checked for any
corrections and over writings and they are listed on each page so that there are no allegations by
the bidders who are not selected in the process due to uncompetitiveness. Reading out the prices
quoted by each bidder is made so as to make everyone aware of the quotes.
Evaluation of Tender
When large numbers of bids are received, it becomes difficult for the committee to take a
decision. Therefore, the there should be predefined criteria of evaluation so that bids incomplete
which do not meet the requirements could be publicly rejected. Criteria of selection could be
based on organizational strength of bidders, qualified and experienced engineers/staff, previous
experience and performance in similar projects, financial strength, turnover etc. Based on this
evaluation, preliminary short listing of bidders is done. Negotiations may be necessary when two
or more bidders have same weight age to finally select one contractor The Project is finally
awarded to successful contractor according to agreement in which terms and conditions are laid
down clearly.
Tender Documents
Following are the essential components of a tender document
• Preamble
• Notice inviting Tenders
• Instructions to bidders
• Format for submission
• Enclosures with bid
• Agreement Format
• Conditions of Contract
• Specification (Technical and Financial)
• Bill of quantities
• Drawings

All technical details and specifications should be clearly mentioned in the tender document brand
names and catalogue numbers not to be used. If necessary, the work “shall be used. If possible,
BIS codes should be mentioned the estimates for the civil works should be prepared accurately
by the technical experts. The bidders should be informed to pay EMD in the form of DD/
banker‟s cheque or bank guarantee or small savings as per guidelines of the department. It should
be made clear in the tender documents that the tenders without EMD would be rejected. The
rates mentioned in the tenders should be valid for 90 days. It shall be mentioned in the
documents that performance security deposit of 5% has to be paid if the tender is accepted. The
terms and conditions for bad quality and quantity of works and penal provisions including
recovery of losses should be mentioned clearly. In the document, it is to mention that the tender
approving authority has the right to increase or decrease the quantity of procurement by 25%. All
evaluation criteria/ parameters have to be mentioned and tenders needs to be evaluated as per
Criteria laid down in the documents. The period between date of notification and date of
submission tenders should be 30 days if cost of tender is up to Rs.2.00crores and 60days if the
tender value exceeds Rs. 2.00crores The tender inviting authority can postpone the date of
submission of tenders under following circumstance;
1. Delayed notification
2. If modifications/amendments are required in the tender documents
3. Any other justifiable reasons with written order
In such cases, the authority inviting tenders has to inform all the renderers in writing about the
new date. The tenders received as per the stipulated date shall be opened at the designated place
in presence of participant tenderers. A tender committee is required to be formed if tender value
exceeds Rs. 5.00 crores in case of PWD, Irrigation and Minor irrigation departments and
Rs.1.00crore in case of other departments. The committee is empowered to process the tenders
and submit the tender valuation report to tender approving authority.

Eligibility of Contractors.
1. Financial strength (20) Marks)
2. Experience in similar work during last five years (20 marks)
3. Performance on works (40 Marks)
4. Personnel & Establishment (10 marks)
5. Plants and Equipment (10 marks)
The contractor has to be registered and should have obtained license from the local
body/competent authority. Although, there is no specific requirement on the educational
qualification, it is preferable that the person acting as contractor possesses a basic degree or
diploma in civil engineering. For any construction work, when required, the services of a
contractor on record may be used.

Issue of Work Order

The work order is issued to the selected contractor after signing the terms and Conditions of
contract for commencing the work with following minimum details. This format does change as
per the requirements.
1. Name of the work
2. Agency
3. Estimate Cost
4. Amount put to Tender
5. Amount Quoted by the Agency
6. Percentage above or below the rates mentioned in Schedule „B‟
7. Date of Starting
8. Date of Completion
9. Duration of Completion
10. Monthly Progress
Photo Auditing
At the time of execution of works, each stage, the work is assessed and photographed whether
the work is completed as per the required quality and quantity. The photo audit report is made
obligatory requirement for payment of bills and subsequent release of funds earmarked for the
civil work/project. This report is prepared by the engineer in charge of the project. The purpose
is that each stage is photographed before it is finished. For instance the depth of foundation at the
site is photographed before it is constructed with size stone masonry. Similarly, the laying of
reinforcement bars in the form work is photographed before laying of concrete to check whether
the number of bars, spacing, bending etc., are as per the designs and schedule of bars as given to
the contractor. All such works are photo-audited. Third Party Inspection of Works, Goods and
Equipment

Essentials Of Contracting
Offer and Acceptance
An offer must contain certain elements to be valid and these are as under:
 It is made with an intention to contract after negotiations, reasonably and definite, and
should be communicated to the offeree by the offeror.
 If it is intended that no obligation is to exist until a formal document is signed by both
parties, the party involved should reiterate this condition throughout the negotiations so
as to remove any doubt concerning the legal effect of the bargaining because most courts
recognize that a contract can come into existence prior to the execution of written and
signed documents.
 An offer is not effective until the offeree has received it from either the offeror or his
agent. It is not possible for the offeree to accept an offer prior to his communication.
 Bids are the basis for certain types of contracts, and construction contracts are a common
example of this type.
Termination (Of Offer)
Once made and duly communicated, and offer is valid and continues to be in effect until it is
accepted or terminated by one of the following actions:
(1) Revocation by the offeror.
(2) Terms included in the offer.
(3) Reasonable time lapses.
(4) Rejection by the offeree, or submission of counter proposals/ Changes, and
(5) Illegality, death or insanity, bankruptcy or destruction of the subject matter.
An offer terminates at the end of a reasonable time if no definite terms are included in an offer.
Reasonable time in each case is determined by the distance between parties, method of
communication. Terms of the offer, nature of the offer and surrounding circumstances
Classification of Contracts
The contracts are classified in various ways by the project authorities according to the type,
conditions, and scope of work involved under different conditions. These are mentioned below
the types of contract are Supply only contracts; supply and erection; supply and supervision of
erection; civil works; supply; erection and commissioning; consultancy contract; maintenance
contract; and servicing contract.

Factors Requiring Attention

Need for Precise Conditions
The terms of contract must be precise and definite and there must be no room for ambiguity or
misconstructions therein. Subject to adequate prior scrutiny of terms- general or special standard
forms of contracts must be adopted wherever possible by the project authorities in consultation
with legal and financial departments.
Technical specifications
Technical specifications, in most cases, to the contractors include the following: Usually the
project manager provides detailed schedules to the contracts which specify intent of
specifications; scope and terminal points: design criteria; technical design specifications;
anticipated deviations in specifications; site test, test certificates; special inspection
requirements; drawings; construction details; list of mandatory spares; liquidated damages for
shortfall in equipment performances; supplies of similar goods/equipments designed and erected,
technical literature and pamphlets; quality assurance plan; terms and conditions, including
deviations, CPM/PERT/Bar chart/network and conditions including deviations; operating
instructions, stage wise inspection results, alternate proposals, if any; performance and guarantee
test; and special maintenance requirements, if any.
Negotiation
Following consultations or invitations to tender and their progression, a negotiation stage shall be
entered into in order to select suppliers on the basis of the assessment of the supplier and quality
requirements. At this stage, it is advisable to ensure that the supplier is in a position to comply
with all the terms of the agreement, and that common ground can be negotiated by both parties-
in particular for the terms which have not been the subject of previous negotiations, have been
modified.
Payment Schedule and Currency Changes
These must be clearly and elaborately specified taking due note of protection of owner/
purchaser‟s interests and supplier‟s genuine requirements.
Delivery Schedules/Changes
Delivery is the essence of the project contract, and hence stipulation of a definite date for supply
of machinery in the contract can hardly be overemphasized, the delivery period to be stipulated
should be worked out such that it is both realistic and in conformity with the offer by the
contractor. The time and date of delivery stipulated in the contract are deemed to be the essence
of contract. Terms like immediate, urgent etc., must be avoided.
Liquidated Damages (LD)
When a contractor is placed in a higher tendered Grade in consideration of the machinery being
offered, a price preference clause may be included binding the contractor to pay as damages the
difference of price between the lowest acceptable offer and the offer accepted as price
preference. The clause on risk purchase enables the project authority to repurchase the items,
which the contractor fails to deliver within the time allowed and the project authority is entitled
to recover from the contractor the loss suffered. If the contractor fails to perform the contract
within the time stipulated in the special conditions, the contractor is liable to pay the purchaser
liquidated damages, not penalty, as specified in the special conditions of the specifications, for a
shortfall in equipment performances; there is no limit to the liquidated damages.
Force Majeure
The following shall constitute force majeure: acts of God, acts of Government and other causes
such as strikes, lock outs or other concerted actions of workmen, war, sabotage, riots, civil
commotion, police action, revolution, flood, fire, earthquake and epidemic. If the contractor
delays in the due execution of the contractual obligations due to delays caused by force majeure
as defined above, the agreed time of completion of the work covered by this contract of the
obligations of the contractor shall be extended by the period of force majeure, provided that the
contractor immediately reports to the purchaser, in writing, the cause of delay with requisite
documentary evidence. The decision of the project authority on whether there is a force majeure
condition or not and whether extension of time shall be granted or not, should be final.
Patent Rights and Royalties
Royalties and fees for patents covering materials, articles, apparatus, devices, design, equipment
or processes used in the works should deemed to have been included in the contract price the
contractor should keep the purchaser indemnified in this regard. Contractor should defend any
case against the purchaser concerning the above and trade related intellectual Property Rights
(TRIPS) at his cost and expenses.
Transportation
The contractor should pack all plant and equipment in a manner suitable for transportation
through accredits forwarding and shipping agencies, as applicable. He should furnish full details
of cargo to the concerned authority in prescribed format well in advance, as specified. Bill of
lading should be drawn so as to indicate the project authority as the consignee. Onus of any
damage etc. should be on the contractor.
Documents, e.g. bill of lading, invoice, packing list, certificate of origin (for imported goods),
test certificate, transit insurance etc. need to be prescribed in the contract. Goods should be
handled and transported through accredited reliable transport carriers. The contractor should
assume full responsibility for ocean/inland transport, freight charges, clearing forwarding etc.
these must be stipulated in the schedule of prices.
Insurance
The contractor should arrange, secure and maintain marine, inland transit, storage and erection
insurance, as may be necessary to protect the interest of the project authority against all possible
risks. The responsibility to maintain insurance at all times during the period of contract should be
that of the contractor alone. Any loss or damage to the goods during handling, transport, storage
and erection, till such time that the plant is taken over by the purchaser, should be to the account
of the contractor. The contractor should be responsible for preferring all claims as applicable,
and make good, at his own cost, the damage or loss by way of replacement of the portion of the
works damaged or lost.
Warranty and Contract Performance Guarantee (CPG)
The contractor should guarantee that the equipment shall be new, and in accordance with the
contract specifications, and be free from defects in design, material and workmanship. The
warranty period should be 24 months (or as decided and specified by the purchaser) from the
data of last consignment at site in case of supply only contract. In case of supply-cum-erection,
the same should be limited to replacement of any defective parts arising from faulty design,
materials and/or workmanship. The plant shall be operated as per operating instructions, and all
records, logbooks and other information about the operation should be maintained. Replaced
defective parts should be taken back by the contractor. The purchaser should do no repairs or
replacement while the plant is under commissioning, except in case of serious emergency. CPG
provided by the contractor is intended as a security to cover the contract performance according
to its terms and successful operation of the contract by rectifying all defects. The value of CPG is
normally 10% or as decided by the purchaser of the contract price and must be valid till the end
of the warranty period.
Contractor’s Machinery
The contractor should provide, at his own expense, all construction equipment. He should also
provide at his cost, equipment, instruments, appliances etc. for testing and commissioning,
materials and suppliers required for unloading, transporting and storing, as may be required to
accomplish the work under the contract.
Adequacy of such tools should be subject to final progressive determination of the purchaser.
The contractor should furnish list of all such materials to the purchaser before the
commencement of erection work. These tools and tackles etc. should not be removed from site
without written permission of the purchaser. The contractor shall also supply, at his cost, all
construction tools necessary scaffolding, ladder etc. and all miscellaneous supplies required for
carrying out the work under the contract. Facilities like access to project site, water, electricity,
office accommodation, housing for labor, storage space, communication, security etc. should be
provided by the project authority.