PROFESSIONAL PRACTICE – I

(IN THE FIELD OF ARCHITECURE- INDIA)

By: Prof. Shivalinge Gowda S K

 COURCE OBJECTIVES(CO)

To Understand The Responsibilities & Liabilities Of The

Profession. To Appreciate The Attitude Of The Profession
 MODULE - 3
Tender:
• Tender document an its content.
• Types of tenders, advantages and disadvantages of each type; suitability to
various projects
• Tender notices, opening, scrutiny, process of selection and award

•Architect’s role in tender process

•Earnest Money Deposit (EMD), Security Deposit, Retention Amount,
Mobilization Amount and Bonus & Penalty Clauses
•Issues arising out of tendering process and the role of an architect.
Participants in the Construction Industry
• There are numerous participants that take part in the construction process. The
key participants are listed below:
• Contractors
• General/Prime Contractors
• Construction Managers
• Commercial Contractors
• Commercial Project Owners
• Residential Construction Developers
• Subcontractors
• Highway Contractors
• Heavy Construction Contractors
• General Architects
• Landscape Architects
• Engineers/Consultants
• Material Suppliers
• Construction Lenders
• Surety Companies
Each of the above participants can and often do have multiple roles in the
construction process.
For example, the owner could also be the general contractor (builder/developer).
The general contractor in addition to providing supervision may also do specialty
work that would typically be subcontracted (for example, concrete work).
Construction lenders frequently hold an equity position in a development
partnership in order to participate in the management decisions and to share in the
profits.
Anchor tenants, such as major department store chains participate in the
development partnership in exchange for signing long-term leases.
Contractors and material suppliers can obtain rights in the project by filing
mechanics liens (lease) against the property.
What is Tendering?
Tender is nothing but an offer made by one party to another for execution of
specified work at a specified cost in keeping with all the terms and conditions set
there in the tender document including the extent of the work shown on the plans.
It remains floating till it receives a seal of acceptance either by the employer
and/or his architect/engineer and thereafter form a binding contract.

In case of the building work and even in the case of major repairs, it is the
architect/engineer who prepares detailed tender papers on behalf of the owner
and issues to the contractors against a specified tender fees. This is not an offer
by the employer/owner but an invitation to offer to find the extent of finance
needed for execution of the work within the prescribed time limit.
Tender document and its content.
The tender documents occupy important position not only from the view point of
contractors and employers, but also to the architects. They find their place in the
contract documents with required modifications if any. The tender documents are
to comprise of the following:
1. Tender notice
2. Special notice
3. Letter of offer
4. Special conditions
5. Form of contract with conditions
6. General specifications
7. One set of building plans
8. One set of RCC Plans/Details
9. Bill of quantities (BOQ)
Detailed description of work for tender on lump-sum basis.(OR)Unit of Sq.m
basis: which at times take the form of “supplementary specifications”.
Types of Tenders.
1. (a) Tenders based on measurements.(Item rate tender)
(b) Schedule of rates with percentage up or down (basic rate with rise and fall
clauses)
2. (a) Lump-sum tender.
(b) Lump-sum percentage tender (target tender)
3. (a) Cost plus percentage or “Cost plus fee tender”
(b) Cost plus fixed fee tender
(c) Cost plus fixed fee with bonus and penalty
4. Labour tender
5. Turn key tenders
6. Tenders based on Build-Own-operate and Transfer (BOOT) concept
7. Tender for demolition work
Item Rate Tender:
It is an offer to execute the work based on the rates of different items of work.
The tender form usually contains the bill of quantities wherein all the items of
work are fully described with their quantities. The quantities given are always
approximate and are not binding on the owner. The contractor is required to fill in
the rates of the items and thus it becomes a simplified job so far as the
calculations and estimating are concerned.

The contractor is paid on the measurement of the work executed at the rates
quoted by him in the tender. In fact the rates of the items are the part of the
contract and the approximate quantities are not.

This is a balanced method of execution and the chances for extra works are
minimized. It is not risky for the contractor and hence quality of workmanship
will be assured. Reasonable variations can be made in the plans and also in the
quantities during the execution of work.

It is suitable of all types of works like buildings, bridges, culverts, sewer lines,
roads, etc.
Schedule of Rates with Percentage Up or Down:
It is also known as basic rate with rise and fall clauses. It is a modified form of
item rate of tender. In this case a bill of quantities duly priced is given to each of
the tenderer and the are asked to quote only the percentages above or below the
prices schedule of rates, at which they are prepared to execute the work. All other
facts as given for the item rate tender will holds good in this case also.
Lump-sum Tender:
In a lump-sum tender the contractor undertakes to carry out the work as shown
on the plans and described in the specifications till completion, supplying all the
materials and labours for a fixed lump-sum or at a fixed rate per cubic or square
meter of work. The contractor will be paid from time-to-time if specified in the
contract and if not specified, then he has to recover the full amount on
completion of the work. He cannot make part payments as a ground for leaving
the work if the contract does not specify the same.
Essential Characteristics
1. Work to be executed should be clearly shown on the plans with all the
relevant details and elevations.
2. Work should be described in details in the specifications with special
conditions if any.
3. Time for completion of the work should be specified in advance.
4. If the contractor is not to be given any part payments for the works, the same
should be specified in advance as otherwise, it is understood that part payments
will be effected as mutually agreed.
5. Site shall be accessible to the contractor so that he can ascertain the nature of
soil, approximate cost of foundation and other relevant working conditions.
[Link] serious variations are contemplated.
7. Contract amount is not decided on the basis of measurements except for
additions and omissions.
At times the contractor is asked to submit a priced bill of quantities along with
the tender which will not form part of the contract. The owner will not be entitled
to deduct any amount from the lump-sum contract on the ground that quantities
worked out by the contractor are less, even the mistakes in the quantities are not
taken into consideration.

The advantage of this type of the Tender:

1. Total cost of construction is known in advance and as such the owner can
make the necessary arrangements for the finance.
2. The contractor will try to complete the work as early as possible so as to
have good margin of profit and that his equipments will be free earlier which
can be utilised on his other jobs.
3. Work load of the engineer and the architect is reduced, as no detailed
measurements are required to be taken for each item of the work executed.

Disadvantages:
1. More and more of the extra works.
2. Design is likely to be adversely affected unless heavy variations cannot be
ascertained in advance.
3. Quality of work is not guaranteed.
4. Contains more elements of speculation and a risky form of tender.

This type of tender is not suitable

5. For such works where the nature of soil and the type of foundation cannot be
ascertained in advance.
2. For works of additions and alterations to an existing building.
3. Works of repairs to a building.
4. Works under water like foundations for bridges, culverts, etc.

It is Suitable for
5. All building works
2. Laying of main sewers.
3. General drainage and plumbing.
4. Electric installations works.
5. Road works.

Lump-sum Plus Percentage (Target) Tender:

It is the same as the lump-sum tender except that if the contractor completes
the works before the specified date, he is usually granted certain bonus in terms
of percentage of the cost of the project. All other facts as given for lump-sum
tenders will holds good in this case also.

“Cost Plus Percentage Tender” or “Cost Plus Fee Method”:

The expenditure incurred by the contractor is paid by the owner as agreed and
over the above he is paid certain percentage as profit for his professional
services. At times such tenders are invited from a few contractors asking them
to name the price at which they will execute the work and fees that they expect
for the same. The fee are usually fixed at a certain percentage of the cost of
work:
1. The work on the site can be commenced immediately without waiting for
all the formalities.
2. Contractor can be chosen at any time and he should be trust-worthy for the
successful execution of the work. He acts as the manager of the owner and
assumes the position parallel to that of an architect.
3. Suitable for public and private works.
4. All details need not be worked out prior to the commencement of the
work.
5. Necessary variations as are required can be made, so as not to spoil the
design.
6. No guarantee of the cost of project in advance and ultimate cost is not
known.
7. No time limit for completion of work.
8. Owner will be entitled to discounts, rebates and refunds.
9. No economy in the purchase of the materials and employment of the
labour.
10. There are chances of fictitious bills creeping in and calls for more care.
11. The owner can get the best of the work at the cost of economy and proper
planning, as the inferior and ill-planned works will be demolished at the
cost of the owner, thus increasing the ultimate cost.

Cost Plus Fixed Fee Tender:

A modified form of this system of tendering is “Cost plus Fixed fee”
wherein the contractor is given a fixed fee irrespective of the cost of the
work and as such, he becomes a disinterested adviser and tries to complete
 All the cost of the materials and labour are directly paid by the owner and thus
the contractor ‘s financial liability is nil. As such, he is paid a higher percentage for
Works done by him and lower percentage for those works which are given on
Subcontract. The fees charged by him will include his professional services as well
as the rentals for all his implements, plants, etc., including the cost of repairs if
required. His fees should be paid in four to five installments and the last installment
should be paid after the completion of the work.
The contract can be terminated by the owner at will, provided that the
contractor has been compensated for his fees and minor losses, if any.
The contractor’s fee includes the following:
1. Contractor’s profit
2. Use of his skill, energy, overhead, and administrative expenses.
3. Contractor’s full time supervisor on site.
4. Contractor’s office on site.
5. Contractor’s legal expenses.
6. Interest on any amount invested by him in the work.
Cost Plus Fixed Fee with Bonus and Penalty:
In order to keep a check over the cost of the work, this form of tender is
slightly modified and is known as “Cost plus Fixed fee with Bonus and
Penalty”. If the cost of the work as executed remains the same as has been
estimated in advance, the contractor receives his agreed fees with no profit and
no penalty deduction. If the cost of the work as executed turns out to be less
than the estimated cost, the contractor is to receive certain percentage from the
savings effected up to a maximum of 50% plus his agreed fee. If the cost of
the executed work turns out to be more than the estimated cost, certain
percentage of the increased cost will be deducted from his agreed fee, and
such deductions shall not be more than 66% of his agreed fees.

Labour Tender:
In this case the contractor agrees to carry out the complete labour work of
all the items of the work at the rates quoted by him. The contractor has to
supply all the tool plants, scaffolding, centering materials, coir's and nails,
etc., and the owner supplies only the materials required for the construction
work. The contractor is responsible for line, level and setting out of the work.
The labour tender generally includes the labour work for the construction
of water tank for storage of water required for construction
Purpose as well as labour work for putting up temporary sheds for office and
cement godown of reasonable size.
The owner has to keep a close watch over the materials used by the
contractor as he is least concerned with their wastages.
This method of execution of work is very popular as the materials used by
the workmanship will be of standard quality. The points of dispute are minimized
and the payments for extra works are restricted to the labour charges only.
The labour tenders are invited sometimes on the basis of rate per square
metre or cubic metre of the construction work. The contractor agrees to execute
the complete work of the building right from the stage of foundation till the
completion of the building at a specified rate per square metre or cubic metre,
excluding drainage and electric works.
It is suitable for all types of works like building, bridges, culverts, and
specially the works of additions, alterations and repairs to the existing buildings.

Advantages:
1. Saving in the cost of work.
2. Disputes are reduced to the rarest minimum.
3. Workmanship is good and design of work not affected.
4. Architect’s worry for certifying of the materials is eliminated.
Tenders based on Turnkey Concept:
In this type of contract, contractor takes full responsibility for design, for design,
construction, commissioning of the facilities. The scope of the facility is
described in detail and a fixed lump-sum price is paid to the contractor. There
may or may not be a provision for escalation.
Tenders based on Built–Own-Operate and Transfer (BOOT)
concept:
It is adopted for infrastructure projects (Highways, Bridges, Airports, water
supply and sewerage projects). Private sector is involved in these projects.
Entrepreneur invests, builds and maintains these structures. He collects toll for a
specific period based on approved tariff.
Tender for demolition work:
These tenders are usually called for the demolition of the existing building up to
ground level or up to road level and removal of all the materials of the same
including carting away of the debris. The tenderer usually takes away all the
materials that are in the old building and in turn he pays a specified amount to
the owner:
1. The highest and not the lowest tender should be approved
2. The tender should be accompanied with a specified deposit so that the work
can be carried out as per the terms of the contract. It has generally been observed
that the contractor will be reluctant to do the removal work of the plinth as the
labour required to do so is more as compared to the materials that can be
obtained from the same. Moreover, the contractor becomes careless so far as the
carting away of the debris is concerned. The owner can well utilize the deposit
money for the above two items.
3. The whole of the tender amount should be taken in advance before the
possession of the building is given for demolition. At no time the payments
should be accepted in parts as the contractor will leave the job if he feels that
most of the building materials are decayed and useless. The filing of the legal
suit for such a small work is not worth the trouble and the owner can only forfeit
the deposit.
4. The contractor should be asked to take out insurance for accident, workmen’s
compensation, third party risks and for other claims, etc.
5. The contractor has to make the necessary arrangements for cutting off the
existing water supply, drainage, connection, electric supply, etc.
Tender Notices:
As already stated that tender issued by the architect/engineer is not in strict
sense a tender or an offer. It is merely bid papers or “invitation to tender”.
There are three ways in which the tenders can be called for namely; by
private invitation, by public notice and by negotiations. Looking to the
type and nature of work that is a private work or a public work, or work of
additions and alterations, etc., and after weighing the advantages and the
disadvantage of each of the methods of calling the tenders, the client should
be advised on the most appropriate method of calling the tenders. At times,
there are specific clauses in a trust deed or public bodies like schools,
hospitals, and co-operative housing societies require the tender by public
notice only.

By Private Invitation(Selected or Limited Invitation):

Generally, the architects and the engineers do maintain a panel of
contractors and from the panel a few are invited to quote for a particular
job. In such case, the architect knows the contractor, together with his
intelligence, integrity and financial standing and thus he is sure of the type of
work that he will get from him. This method of inviting the tender from
among the selected contractors prevents inexperienced persons from entering
the contract line.
This is suitable for private works. The usual invitation letter along with the
tender notice should be sent to the contractors concerned.

By Public Notice:
All public works are required to be advertised in the newspapers for the
purpose of tenders and any contractor can quote for the same. There are
chances of getting the work at a cheaper rate and these tenders are also not free
from collusion. At times the tenders are so low that it will not be possible to
imagine whether the contractors will be able to complete the work. Such
tenders usually end in dispute, poor quality of work and a lot headaches for
the architects. With a public tender the architect or the engineer may come in
contact with new and intelligent contractors and this opens the field for new
entrants in the contracting line. The work is generally given to the contractor
quoting the lowest amount, provided he is otherwise equally qualified.

By Negotiations:
In this case the architect/engineer do posses some base or datum for
negotiations like the work of a building cost more than Rs.15000/per S.M of
plinth area or datum like repair jobs being assigned by the Repair Board at
certain percentage above/below the schedule of rates. With this datum,
Negotiations are done with one or two contractors and work thereafter is
assigned to the right contractor. This mode is popular with developers and for
repair jobs with schedule of rates as the base.
Tender Notice
M/s XYZ&CI., Date…… …20….
22, Mumbai Samachar Marg,
Mumbai 400 023.
“Sealed tenders are invited from contractors of repute for the construction of
residential building at Juhu for Purnima CO-Operative Housing Society Limited.
The approximate cost of the works is Rs. 75,00,000/- and the last date of
submitting the tender is (Date) before 5.30 p.m. Tender forms can be had from
the office of the undersigned on (Date) on payment of tender fees Rs. 5000/-
(non-refundable) copies of the drawings can be inspected at the office during
office hours or can be had from the office on payment of Rs. 500/- per building
(non-refundable). A tender must be accompanied with an earnest money of Rs.
2,25,000/-. The architect or the owner is not bound to accept the lowest tender or
any tender or assign any reason for the same.
sd/______________
M/s XYZ&CO.,
Architects, Engineers & Survbeyors
Notice Inviting Tenders (NIT):
NIT should be clear, brief, and should contain the following salient points.
Besides this brief press notice. A detailed NIT is appended to contract
documents.
1. Brief description of the work on perusal of items (1),(2),(3),(4) and (5)
contractor will decide whether to tender for this work or not by considering type
of work, value of work, time given for completion, location, present work load
on hand.
2. Estimated cost put to tender
3. Period completion of work
4. Earnest money deposit
5. Cost of tender documents
6. Eligibility criteria for tendering
7. Production of documents for obtaining blank tender documents
8. Last date for issue of blank tender forms
9. Place and period of issue of blank tender forms
10. Last date for receipt of tenders and places of submission
11. Date, time, and place of opening of tenders
12. Validity of tenders….. Days
13. Client reserves a right to reject or to accept any tender without assigning
any
Receipt and Opening of Tenders:
Completed tender document for work specified will be received either by the
owner or his authorized person at the premises specified in the tender document
and opened at time mentioned in the tender document in the presence of bidders
or authorized reputed consultants and contractors available in construction
industry.

On the eve of opening of tenders a justification statement is prepared by the

clients organization to arrive at probable justified amount for the work. This is
done before a similar justified statement is prepared by the bidders while
submitting their bids to the client. While the justified tendered amount prepared
by the clients organization assumes 10% towards profit and overheads, it may not
be a realistic provision since overheads are site specific and dependent on
agreement terms and condition. It is observed in many cases that provision of
10% is not at all realistic.

Tenders may be received on or before the prescribed date and time through tender
box or by registered post, hand delivery, couriers or speed post. Tenders are
opened on the specified date, time and place by competent authority. Some
organizations constitute a committee for opening of tenders. The committee may
consist of owner’s respective (tender inviting authority), finance representative
EVALUATION OF TENDER(SCRUTINY):
For evaluation of tenders, it is practice both in government works and private
sectors works to constitute a committee consisting of Architect/Engineer,
finance representative and another nominated person. The following steps are
involved in the evaluation of tenders.
(i) Arithmetical accuracy is checked. Qty x Rate = Amount for each item
and sum of tender amounts all items is computed.
(ii) Consider the effect of conditions, if any, stipulated by tenderers.
Financial loading is done over quoted amount.
Normally, conditional tenders are treated as non-responsive.
However, certain conditions are considered after adding or subtracting
their financial effect. (Rebate for prompt payment of running/final bill)
(iii) Evaluated bids are arranged from L1 (First Lowest), L2,L3 and so on.
Karnataka PWD (K/W-3) stipulates that where there is discrepancy
between the rate in figures and words, the lower of the two will govern.
and another person related to a particular work. For works executed with the help
of contractor and consultant, it is advisable to include consultant in the
committee. Each envelope is marked with serial no. of tender in the numerator
and total number of tenders received in the denominator. For example, 1/5
indicates that in all, five tenders have been received and that envelop relates to
the first tender. Particulars of all tenders along with their EMD are entered in the
tender register. Quoted rates or percentage of all tenders and the conditions or
their representatives if present. Signatures of renderers present are obtained in a
recorded statement and also in the tender register. Tender opening authority or
committee will also sign in the tender register.
Award of Contract:
It is a well-settled principle that precedence for award of contract should go to the
first lowest evaluated tenderer. When ever pre-qualification or post qualification
in two cover system is adopted, invariably the first lowest tenderer should be
selected as contractor for work. In case of public tenders there can be discretion
in the matter of award of contract in cases where NIT does not contain stipulation
regarding solvency and work experience.

The lowest evaluated tenderer may not be considered for award of contract in the
following cases:

1. The lowest evaluated offer is significantly higher than market rates and
negotiations did not fructify(productive). In such cases negotiations with the
second lowest tenderer or re-invitation of tenders are the alternatives.
2. There is a strong suspicion of cartel formation among pre-qualified
contractors, and the lowest pre-qualified contractor may not be considered
for award of contract. List of pre-qualified contractors is enlarged and
tenders re-invited.
3. The lowest evaluated tenderer has produced false documents for eligibility
which was discovered later before the award of contract.
4. Some of the conditions stipulated by the lowest evaluated tenderer after
the basic features of NIT, and cannot be accepted as such to facilitate equal
opportunity to other tenderers. Re-invitation of tenders would become inevitable.
5. The lowest evaluated tender is not accepted when the owner faces funding
problem, when site is not available or when the owner contemplates large
scale scope variation. In such case no tender can be accepted and scrapping of
tenders becomes inevitable.

In government contracts negotiations are discouraged. In private sector,

negotiations are common before award of contract. During negotiations, factors
contributing to avoidable cost factors should be discovered through mutual
discussions and negotiation process should ensure win-win situation.
Order of Precedence:
In case of conflicting provisions in tender documents
• Description of the item
• Particular specifications
• Working drawings
• Detailed specifications
• General specifications
• Manufacture’s specifications, if available
• Bureau of I.S. specifications
• Directions of Architect/Engineers-in-Charge
They shall prevail in the same order of precedence
EMD (earnest money deposit) payment
It can be defined as an initial deposit which is sent along with the tender in order
to show the genuineness of the contractor. The amount or earnest money varies
from 1 to 2% of the estimated cost of the project. This amount remains in the
safe custody of the architect or the engineer till the work is allotted to a
particular contractor who will be asked to deposit further sum towards the
security deposit.
The earnest money of the other contractors whose tenders are not accepted are
refunded to them. The main purpose of the earnest money is to see that a fair
competition takes place for the work. The earnest money is forfeited in favour of
the owner in case the contractor refuses to enter in to a contract after his tender
has been accepted. It is accepted in cash or cheque at times in the form of
negotiable Government securities.

Security Deposit:
When the tender of a particular contractor is accepted, he is asked to deposit a
further amount with the architect varying from 2-5% of the estimated cost of the
project and is known as security deposit. This amount of security deposit
includes the earnest money already deposited by the contractor. It is paid in cash
or cheque and at times in the form of negotiable Government securities. This
amount kept as a check so that the contractor fulfills all the terms and conditions
Progress of the work. If he fails in the same, his whole or part of the security
deposit is forfeited. It does not carries any interest and is returned to the contractor
after his defect liability period is over.
Retention Amount :
When a contract of the work is assigned, it is essential for a contractor to
deposit a fixed amount either with the architect or with the owner as a guarantee
for the faithful performance of the terms of the contract. It is very difficult for a
contractor to pay such amount all at once as his business depends mostly on the
rolling of his capital. This amount of the contractor gets blocked up and does not
bear any interest. Hence, by prior agreement, it is arranged that the contractors
should pay the so called security deposit by installments from the payments due to
him for the works already executed. These installments are retained with the
owner and is known as “Retention Amount”.

Usually 10 per cent of the value of the work is retained by the owner towards
the retention money and the architect issues at every stage of the work interim
certificates are required to be issued at their full values.

In fact Retention Amount is nothing but Security Deposit. On the acceptance

of the tender contractor is asked to pay the necessary security deposit.
In order to avoid the burden of depositing the full security amount the contractor
Requests the architect that the balance of the security deposit over and above
already paid at the time of submitting the tender, be deducted from his running bill
accounts till the deducted amount reaches its full value. Thus, the amount thus
retained from the [Link] is called the Retention Amount and the same forms
part and parcel of the Security Deposit.

Essential Characteristics:
1. It is the money that has been earned by the contractor but has not become
payable under the contract.
2. It can be assigned by the contractor to any one he likes.
3. 50% of the said amount is paid after virtual completion of the work.
4. Final installment of 50% is paid after the defect liability period has passed
and after issue of the final certificate by the architect.
5. In case of bankruptcy of the contractor, the trustees of bankruptcy will have
no claim over the retention fund, till the final certificate has been issued by
the architect for the work.
6. Retention fund does not carry any interest.

Purpose of Retention Fund:

7. To make good the defect before the final certificate has been issued.
8. To meet the claim, damages, compensation, etc,. If any by the adjoining
owner or any of the workmen for any reason whatsoever.
3. To make the necessary payments to the nominated sub-contractor in case the
contractor fails in the same.
4. To meet any compensation which may become due from the contractor for
delay in completion.
5. It can be utilized for the necessary adjustments in the final bill, over payment
and in the make up of the bills for extra works.
6. Any work left out by the contractor before virtual completion can be executed
by this amount.
7. Disposal of materials wrongly supplied.

Mobilization Fund:
In building contracts the contractors are paid by interim certificates wherein
the cost of work is paid at 90% or even 95% of its value and materials on the site
Paid at varying percentages from 50%-75% of the value of such materials on site
depending upon the terms and conditions as may have been agreed upon subject
to
deduction of the amount released as deduction of income-tax at source. For works
of small magnitudes these arrangements of part payments have proved to be
satisfactory. However, construction works of big projects stand on a different
treatments on financial sides besides payments on account, the contractor is
Labour (labour usually demands advance) travel of staff, erection of temporary
structures on site, purchase of centering materials, insurance premium, etc. Such
preparatory works involve financial outlay at the beginning for which liquid
finance is essential which will be considerable in case of big projects.

One mode of raising initial finance needed by the contractors has been the
banks. Here again since construction is not treated as an industry and contractors
being treated as traders, banks are cautious in advancing loans and overdraft
facilities and if at all granted the same will be against the fixed assets of the
contractors. The above facilities are overcome if the employers in advancing
certain amounts after the works have been awarded to the contractors and
contracts executed. Such advance payments are called Mobilization Funds, the
main purpose of which are to enable the contractors to make all initial
arrangements for commencement of works.

Characteristics of Mobilization Fund:

1. Maximum amount of mobilization fund is limited to about 10% of the
contract amount, exact percentage depends upon the terms of contract.
2. It is paid in full in one installment within one month of the award of the work
and after signing of the contract against bank guarantee for the full
mobilization fund advanced or paid in two to three sages like:
Stage-1:
50% of the mobilization fund as agreed is paid within one month of the award of
the work and signing of contract against bank guarantee for it.

Stage-2:
Part released on completion of preparatory works depending on their value.

State-3:
Part released on bringing plants and machineries on site again depending upon
their value.
3. It is recovered from each of the interim bill at specified percentage of interim
payment and entire mobilization fund is recovered on completion of 80% of
the work.
4. It can be interest free fund or carrying a specified rate of interest. However,
the contractors usually expect interest free fund. If mobilization fund clause
carries interest, the same will result in the enhanced rates of items of works.
In other words contractor recovers interest by the way to enhanced rates from
the employer and pays the employer’s own money in the form of interest.
Hence, it is advisable to advance mobilization fund free of interest.
It is rightly said that the mobilization fund is the backbone of successful
implementation of big construction projects.
Bonus and Penalty Clauses:
As per the terms and conditions of contract, If the work is going to be executed
within the agreed schedule of time and cost, the contractor is not going to receive
certain percentage from the owner as specified in the terms and conditions. If the
work executed goes beyond the scheduled time without any force majeure (any
cause which is beyond the control of the contractor or the owner as the case may
be) and due to inefficiency of the contractor then as per the specified and agreed
terms and conditions the penalty clause is applied and certain percentage of
amount will be deducted or recovered from the contractor.
Issues Encountered On Opening of Tenders (Tender Process) and Suggested
Guidelines:
(i) Contractor does not produce required documents for issue of tender forms-
Refuse issue of tender documents
(ii) Late receipt of tenders – Return the tender without opening
(iii) EMD not deposited – Reject the tender
(iv) Tender not signed by the contractor – Not valid for evaluation and
acceptance
(v) Discrepancy in rates and amount – To be dealt in the light of guidelines
incorporated in tender documents
(vi) Withdrawal of tender before opening – Legally valid
(vii) Withdrawal before expiry of validity period - Forfeit the EMD or part of it
as per tender conditions
(viii)Contractor whose Tender is accepted is asked to pay security deposit. He
deposits SD. Agreement not signed. Signing of contract is only a formality.
Contract is formed.
(ix) Proceed to accept the tender if all other factors are favourable. If the
difference between lowest tendered amount and justified amount (assessed
by the owner/consultant in the light of market rates at site of work) is more
than the limit of 5% for normal works and 10% for urgent/emergency works.
Attempt should be made to negotiate the offer
(x) Eligibility criteria is waived while issuing blank tender forms arbitrary &
(xi) Scope of work is altered after receipt of tenders and before decision is taken
on tenders – For evaluation consider both original scope and revised scope. If
precedence of tenderer is not altered there is no problem. If precedence of is
altered re-invite tenders with revised scope of work. If that is not feasible,
evaluate the contract on the basis of original scope of work. Award the
contract with revised scope with consent of tenderer.
(xii) Cartel formation – Re-invite tenders
(xiii)Response is poor – Re-invite tenders and liberalise eligibility criteria
(xiv) Bids are unbalanced – Rationalise keeping tendered amount unaltered
(xv) Some tenerers submit alternative bids – Evaluate them

Architects Role in Tender process:

• Preparation of Tender documents
• Inviting Tenders
• Receipt and opening of Tenders
• Evaluation of Tenders
• Market Rate Analysis Prepared by the Architect
• Award of contract
• Issue of work order
• Approval for sub-Contractors/Vendors/Nominated sub-Contractors