contracts & contracting - nicmar ncp-23
DESCRIPTION
Construction Contracts & contracting - NICMAR NCP 23TRANSCRIPT
NICMAR- SODE
PGP-CM - MODULE NO: 01 ASSIGNMENT NO: TWO
CONSTRUCTION
CONTRACTS AND
CONTRACTING
COURSE CODE: NCP 23
PREPARED & SUBMITTED BY:
NAME: M.S.MADHURI
REG NO: 212-06-11-10652-2141
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CONTENTS
(I) Introduction……………………………………….………..03
(II) Contracts…………………………………………….……..03
(III) Contract administration…………………………………….03 (IV) Functions of contract administration……………………… 05 (V) Case Study………………………………………………….06 (VI) Organization Chart………………………………………....15 (VII) Functions…………………………………………………...16 (VIII) Recommendations………………………………………….19
(IX) Conclusion………………………………………………….20
(X) Bibliography………………………………………………..20
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CONSTRUCTION CONTRACTS AND CONTRACTING
INTRODUCTION:
CONTRACTS:
Contract in law can be defined as an agreement made between two or more parties whereby
legal rights and obligations are created which the law will enforce and have no existence
outside the legal system. All such details, clauses, and conditions are recorded by
documentation legally signed by the judiciary on mutual agreement of the parties involved.
These documents are listed and enumerated in the agreement and referred to in the conditions
of the contract for the work to be performed. Construction documents are defined as the
written and graphic documents prepared or assembled by the owner or engineer for
communicating the project design for construction and administering the construction
contract. One should understand the process of preparation of these documents for a greater
understanding of how to benefit from their use.
CONTRACT ADMINISTRATION:
Construction Contract Administration or CCA involves the activities necessary to affect and
determine the fulfillment of the contract requirements by the parties to the construction
contract. A prerequisite to executing the work is a basic understanding of the documents used
in construction. The parties should understand the contract conditions and the implications of
agreeing to a particular condition.
Contract Administration usually begins when the owner-contractor agreement is signed till
the work as per contract concludes and final payment is accepted by the contractor. The start
and completion milestones of construction, will identify the duration of CCA—that is,
beginning with execution of the owner-contractor agreement and ending with acceptance of
final payment by the contractor.
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The following can be listed as synopsis for contract administration and its role:
Duration:
Contract administration begins when the contract is awarded to when the work is
completed, payments have been made, all disputes have been resolved and/or till the
contract is terminated.
Need - Contract Files :
Since contracts are very specific in nature, contract administration ensures that the
department and the supplier have a clear and mutual understanding of all the
requirements of the contract.
Purpose - Contract outline:
The purpose of contract administration is to administer a contract which defines the
need, develops a means and method to meet the need, ensures that all the legal
requirements are met, assessing any and all risks, allocating necessary resources,
monitoring the actual contract, comparing measured performance to established
standards, open communication throughout the process, the receipt of the product
and/or service and the documentation of all final results.
Process - Business team:
Contract administration manages the contract from the pre-contract to the final stages.
This is done by both parties forming a contract administration team and/or appointing a
contract administration manager.
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Problems – Facilitator:
To help avoid contract administration problems, both parties utilize an alternative
dispute resolution technique called partnering. Under partnering, both parties
develop a plan for success with the help of a neutral facilitator
FUNCTIONS OF CONTRACT ADMINISTRATION:
For effective administration of the contract, the following activities must be carried out with
regularity and perfection:
• Communication- The basis of contract administration is to keep the lines of
communication open among the contractor, the buyer, the end user and any
other stakeholders. This is necessary to ensure everyone has a clear
understanding of the contract terms and of their rights and obligations.
• Quality -Regularly check the executed work against agreed-upon quality
standards. This ensures your organization gets the quality expected by the
owner for his money.
• Deadlines Verify that contract milestones are met with and that regular
deliveries are made within the required turnaround time. This prevents project
delays and ensures the smooth flow of operations within your organization.
• Cost Savings - Check all invoices and expenses carefully against the goods
received or services being carried out, and against contract pricing. Enforce
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agreed-upon price escalations and ensure your organization is paid for all
executed works without having to incur losses.
• Risk Management -Ensure the company has the required insurance and
bonding in place, and the personnels are strictly adhering to all safety
protocols and applicable laws. This lowers your risk of damages, injuries and
litigation.
• Relationship Management -Provide the owner with regular feedback on
required work, and ensure timely payment of the company’s invoices. This
fosters a long and mutually profitable partnership between client and
contractor.
CASE STUDY:
Name of the project: 2 x 270 MW Mahadeo Prasad Super Thermal Power Plant
Client: Adhunik Power & natural Resourced Ltd.
Contractor: NCC Limited, Hyderabad.
Consultant: DCPL, Kolkata.
Location : Padampur Village, Saraikela Kharsawan Dist, Jharkhand.
Scope of work:
The scope of work shall include complete Civil, Structural, and Architectural works for the
structures listed below including mobilizing, supply of materials, manpower, equipment tools
and tackles and consumables required for all works.
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Structures to be executed:
• Power House
• Boiler feed pump foundations
• Turbine generator foundation
• Circulatory water Pipe line
• Cooling towers
• Circulatory Water Pump House with Fore bay and Channel
• Side Stream Filters
• Chlorination Building
• MCC Building
• ESP and ESP Control Room
• Boiler to chimney Duct Supports
• Air Compressor House
• Pipe and Cable Racks
• ID Fan, PA Fan, FD Fan foundations
• Mill Bay and Mill Building
• Boiler
• Intermittent Blow down Tank
• Transformer Yard
• Switch Yard Control Room
• Ash Water tank and Pump House
• Low density oil tank and Fuel Oil Pump House
• Ash Silo and Utility Building
• Water recovery system- Clariflocculator and Chemical House
• Coal Handling Plant with:
o Track Hopper for coal
o Stacker cum reclaimer for coal
o Conveyor Belt foundations
o Crusher house for coal
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o Truck tippler for coal
o Control room for Coal handling plant
• Roads, drains, culverts and pavements for all plant area.
Scope of work under the Bid document shall be on a single source responsibility basis
completely covering all services, works and materials specified and will inter-alia include
that:
a) Any item(s) though not covered in specification/ drawing/ schedule but are required
for reliability and safety and as per good engineering practice shall be deemed to be
included in the scope of work unless specifically excluded in the contract.
b) All preparatory activities including scaffoldings, formwork shall be taken as a part of
the job.
c) Drawings/plans shall mean that all drawings shall be furnished to the contractor by
the owner/ consultant
d) Construction materials namely Cement, Reinforcement steel and non-fabricated
structural steel shall be supplied free of cost to the contractor. The contractor shall
produce a calculated statement with exact quantites of issued materials consumed
with the physical stock remaining with the contractor at the end of every month. The
consumption of free issue materials shall be as per standard consumption and the
following wastages shall be termed allowable:
I. 1% allowable invisible wastage in cement.
II. 3% allowable wastage in cement
III. 1% allowable invisible wastage in reinforcement steel
IV. 3% allowable scrap production in reinforcement steel.
V. 5% allowable wastage including scrap for structural steel.
Type of contract:
The contract is an ITEM-RATE Contract. The work done will be paid according to the
rates specified in the contract Bill Of Quantities( BOQ). The rates shall remain valid, fixed
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and firm for the entire duration of the contract till the completion of execution of quantities
specified in the BOQ. The agreed rates shall be inclusive of all direct costs, overheads, and
profit margins for executing the works in the contract.
Duration of contract:
The duration of the contract shall be 48 months from the day of commencement which shall
not be later than 60 days after signing of the contract. Any work not included in the contract
shall be taken as extra work and the time for execution of the same shall be considered extra/
separate after mutual agreement by the contractor and the owner. A month shall refer to all
months irrespective of number of days and shall include all non working days and holidays)
Contract Value:
The total value of works as assigned to the contractor ( a sum of Rupees 1,96,99,12,500/-)
are based on the rates and quantities agreed upon in the BOQ of the contact. This shall be
inclusive of all prevailing taxes and duties such as excise duty, custom duty, work contract
tax, royalties, sales tax, octroi, or any other levies associated with the execution of the
contract.
However if new statutory taxes, duties, levies are imposed by the central/ state/ local
authority after commencement of work, the same shall be reimbursed at actuals by the owner
against documentary evidence furnished by the contractor.
CLAUSE I:
Quantity exceeding over and above 100% BOQ:
The contractor may claim extra amount for items that exceed over and above 100% of the
BOQ quantity and shall claim for it as:
A) CIVIL & ARCHITECTURAL WORK ITEMS:
i. +10% over existing BOQ rate for total executed Qty for such items
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or,
ii. +30% over existing BOQ rates for quantities exceeding +100% of BOQ
quantity.
B) STRUCTURAL ITEMS:
i. +8% over existing BOQ rate for total executed Qty for such items
or,
ii. +20% over existing BOQ rates for quantities exceeding +100% of BOQ
quantity.
CLAUSE II:
Price Escalation:
The contractor shall herewith produce a bill with all documentary proofs for a claim for Price
escalation of fuel (diesel) procured and consumed for all construction calculated against the
exact value of work executed considered during the period of the bill claim.
The contractor shall herewith adhere to the following Diesel rate variation formula for all
claims against price escalation:
V = 0.05 x R x (D - D0)
D0
Where,
V = Amount in INR payable extra by the owner to the contractor.
R = Value of work done in INR during the period under consideration.
D = Price of diesel prevailing during the period under consideration.
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D0 =Price of diesel prevailing at the Indian Oil Petrol Pump situated at the nearest station to
the site applicable as on the date of signing of the contract.
Project Management:
• The contractor shall submit within 15 days from the signing of the contract a detailed
extensive network prepared using Microsoft Projects software covering the various
key phases of the activities to be carried out during execution showing surveying,
procurement, manufacturing/scaffolding and execution at site.
• During the construction phase, an experienced project manager of the contractor shall
periodically prepare the schedule of execution of works at site with start and end dates
for all activities building wise and shall submit the same to the owner for approval.
The dates mentioned in the schedules shall be actual probable dates and shall be
adhered to during the construction unless delay accepted by the owner.
• The contractor shall submit daily and monthly progress reports to the owner with
remarks and reasons acceptable by the owner for non-conformity of work done.
Force Majeure Conditions
The event of “Force Majeure” means any of the event or circumstances which adversely
affects the performance of either party of the obligations in the agreement and which are
beyond the reasonable control of the affected party and which the affected party could not
have prevented by the prudent utility practices or by exercise of reasonable skill and care:
I. Act of God, epidemic, famine, lightening, earthquake, cyclone, whirlwind, flood,
accident, tempest, storm, land slide, drought, tornado, tsunami, subsidence action of
the elements, meteorite falls, objects falling from aircrafts, pressure waves caused by
air craft or aerial devices traveling at supersonic speed, volcanic eruptions, fire or
explosion, quarantine restrictions, air crash.
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II. Act of war, invasion, armed conflict, or act of foreign enemy, blockade, embargo,
revolution, riots, insurrection, piracy, terrorist or military action, civil commotion or
sabotage.
III. Strikes/ lockouts or other industrial actions
Any event or circumstances that of a nature analogous to any of the above, the contractor
shall not be liable for the delays in performing their obligations resulting from and only to
the extent applicable and necessitating rescheduling of the balance activities.
In event of any loss due to any Force Majeure conditions listed, the contractor shall be
responsible to make good all such losses/ damages at its own cost and expense.
Terms of Payment:
The total contract price shall be paid as follows:
1. 5% of the total contract price shall be paid after mobilization of sufficient
construction equipment, deployment of manpower and construction of site office.
The contractor shall give a list of construction equipment and list of manpower
which they are proposing for claiming the 5% payment. The same shall be released
within 15 days from the date of receipt of the following documents:
• invoice of 5% of total contract price
• Advance Bank Guarantee of 5% of the total contract price.
• Performance guarantee of 10% of Total contract price.
2. Payment for 85% of the total contract price shall be made as running payment on
prorate basis on actual execution of works. This payment shall be released by the
owner within 30 days from the date of receipt of the owner approval invoice from
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the contractor. For claiming this payment the contractor shall raise the monthly
invoices which shall be duly approved by the owner.
3. Remaining 10% of the total contract price will be paid by the owner after
completion of civil, structural and architectural work within 30 days after the receipt
of invoice of equivalent amount of work done from the contractor.
Important Points from Contractor’s Point of View
The contractor must be well informed of the following conditions and also decide upon for
taking apt measures for overcoming the same:
1. Local Condition: It is imperative for the contractor to be fully informed of all local
conditions and factors that may have any affect on the execution of works covered
in the contract. The contractor must have an amicable relation with the local
inhabitants and should make sure that there shall be no resistance for execution of
work howsoever by from them for whatever reason possible. He should be planned
well for any such event occurring inevitably at site.
2. Site Condition: The contractor must examine the site well for commencement of
work. It must be well informed of all locations in that vicinity for procurement,
mobilization of manpower etc. The contractor should be well acquainted by the
region for easy procurement and execution.
3. Scope of work: The contractor should have enough knowledge of the works to be
executed in the project and should have a detailed and effective schedule prepared
for the same. The contractor should exclusively deploy one person for the
administering of the contract who can elucidate upon the activities to be executed
and monitor them from time to time.
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4. Time Required: The contractor must be well aware of the probable time to be taken
for execution of each work. Depending on this the contractor’s project planning in
charge must prepare a detailed schedule for execution of works and also monitor the
execution for non conformity.
5. Material Procurement: The contractor must make all necessary arrangements for
procurement of materials from the suppliers and also maintain good relationships
with the suppliers. The contractor should clearly plan out the procurement schedule
to avoid any delay in work execution due to non availability of material.
6. Equipment: The contractor should make sure to mobilize all necessary equipment
for construction videlicet excavators, JCB, rock/pavement breakers, dumpers, water
tankers, dozers, vibro rollers, compactors, concrete pumps, concrete boom placers,
bar cutting and bending machines, loaders, MIG machines, welding machines, Gas
Cutting sets, Drill machines, Grinding machines, Hydraulic jacks, Turn buckle,
master oven, lathe machine, scaffolding material, formwork material, winch
machine, hydra cranes, tower crane, telescopic crane, builder’s hoist, DG set,
welding transformer, surveying instruments, material weighing equipments etc.
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ORGANISATION CHART
EFFICIENCY OF THE ORGANISATION CHART The above formulated organization chart has proved to be effective in timely and profitable
execution of all works in the project. The following are the functions that are carried out by
each staff member:
Project Manager
Dy Project Manager Project planning
Administration
Site Execution QS/ Planning
QA/QC
Accounts
Stores R&M Safety Mechanical Electrical
Officer Sr Engr
Senior Engr
Officer
Officer Asst Manager
Officer
Asst Officer
Asst Engr Sr. Technician
Asst
Jr. Engr Junior Engr Sup Sr
Assistant
Assistant
Junior Asst
Junior Asst
Sr Technician
Junior electrician
Sr Engr
Jr. Engr
Jr. Engr
Jr. Engr Sup
Sup Sup Sup Sup
Sup Asst
Sup Asst
Sup Asst
Sup Asst
Sup Asst
EDP
Asst
Sup Sup
opertr
opertr opertr
opertr opertr
opertr
Dy Project Manager Structural
QS/ Billing
Senior Engr
Junior Engr
Sup
Fabrication
Asst Engr
Junior Engr
Sup
Sup
Erection / sheeting
Asst Engr
Junior Engr
Sup
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FUNCTIONS
(I) Project Manager
• The Project Manager is the authorized person for all decisions to be taken at
site for execution of work.
• He does inspect every department for quality of work to be done.
• Site execution, QS, Stores, Accounts, QC, Mechanical, and all departments
are monitored for work progress.
(II) Deputy Project Manager- Planning
• The Deputy Project manager –Planning sees and discusses with the Project
Manager for all schedules prepared and monitor for timely execution of the
same.
• He plans the cash flow schedules and accordingly plans for procurement of
material, mobilization or de-mobilisation of manpower depending o the work
front available.
• He makes sure that all works are executed as per schedules and that
manpower or hired machinery are not left idle during work hours.
• He coordinated with the QS and planning department for timely preparation
and submission of RA Bills for ensuring zero cash flow constraints.
(III) Deputy Project Manager- Structural
• The Deputy Project manager –Structural takes care of all fabrication and
erection works executed at site and ensures that all are in accordance with
the details provided by client.
• He ensures timely preparation and submission of RA Bills for ensuring zero
cash flow constraints
• After discussing the progress status with the project manager, he indents for
the material required for further works.
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• He makes sure that all works are executed as per schedules and that
manpower or hired machinery are not left idle during work hours.
(IV) Administration:
• The officer monitors the needs of the project namely accommodation,
transportation, mess facilities, and checks to cater to all basic requirement
being fulfilled for the staff.
• He is responsible for communicating to the head office for all site
correspondence not related to contract work execution.
• He obtains all labour licenses and maintains all insurance policies with a
check for the renewal dates for the same.
• The assistant’s job is to coordinate with the office for all administrative
related works.
(V) Site Execution:
• Two senior engineers deputed at site see that all works are in accordance
with the drawings issued by the client and also follow up the same with the
client officials deputed at site.
• They are responsible to assign jobs to the junior engineers at various
locations to monitor all works with quality.
• The junior engineers .
(VI) QS/Planning:
• The department prepares Quantity estimation and billing for Client, Sub
contractor & PRW.
• Making Daily, Weekly & Monthly progress reports and MIS reports &
reporting to the HO for the same.
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• The departmental in charge coordinates with Sub-contractors and Project
Engineer.
• Executing RA Bills, Subcontractors bills, PRW and Target Bills.
• Preparing Variation Statements and Reconciliation of materials.
• Maintaining the correspondence from the client.
• Preparation of comparative statements & work orders of PRWs.
• Maintaining hindrance records (caused by client/ inclement weather
conditions).
• Preparing Time extension & Price escalation reports & bills.
• Preparing Deviation Statements/ Project Cash Flows.
• Generating periodical MIS /reports in prescribed form in order to update all
concerned authorities on the matter & reporting to HO for the same.
• Maintain Drawings & Records thereof including date of receiving &
issuance of drawings etc.
(VII) Stores:
• The stores in charge makes all purchases required for the project and is
authorized for all
• All recording of procured material, received material, consumed material,
and balance stock is maintained by the stores assistant.
• The stores supervisors make a note of all issued material on daily basis and
report the same for recording in the database.
(VIII) QA/QC:
• The QC officer checks for the quality assurance and quality control.
• He needs to be assisted by a supervisor for all supportive documentation in
the project.
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• All testing and client correspondence of the same is the responsibility that
the QC officer undertakes.
(IX) Electrical:
• All required electrical maintenance and services of earthing are carried out
by the electrical technician and his subordinates.
(X) Accounts:
• The accounts officer monitors cash flows and reports the same in accordance
to the zero cost of the project to the project manager.
• The assistant checks all bill payments and database entry of all cash
vouchers, expenses, and cheques utilized.
(XI) EDP
• The EDP person has to check for the entire service and maintenance of all
computer systems being used at site.
• He makes a database record of all important data pertaining to the site.
RECOMMENDATIONS:
Every project can be completed as per targets with the marginal profit credited if
the project is well planned and all activities are carried out as per schedules and the
contract requirement. Hence the deployment of an experienced contract
administrator is necessary.
The contract administrator must ensure that contractors, such as suppliers, meet the
contract's requirements.
Additionally, the administrator must identify specific targets in delivery, quality,
cost or other areas. Once identified, the administrator will have the knowledge
necessary for altering the contract, if necessary, to improve operational efficiency.
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Because of this compliance role, the administrator must have the authority to
recommend service provider improvements or the use of different contractors
altogether.
The Contract administrator must notice and document the building progress or
observe the program evaluations by the clients.
He must compare how much work has been done compared to how much was
required by the contract at this point.
This should be done a minimum of every three months, so if there is a delay or
problem, it can get attention before the project gets way off schedule.
CONCLUSIONS:
Whether the project is for a government, a non-profit or a private corporation, the duties as a
contract administrator are central and form the base to the organization's efficient operation.
These organizations enter into contractual agreements to receive products or service from
third parties. Hence the involvement of an efficient Contract Administrator is necessary for
any organization to have a profitable bargain.
BIBLIOGRAPHY
• Fundamentals of Building Contract Management- Thomas E Uher/ Philip
Davenport
• Managing Contracts- A guide to Contracts Administrators.