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Construction Contract and Contracting. NCP 23

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AssignmentNCP-23

Construction Contract andContracting

The assignment is about the contract administration andmonitoring. This assignment has an brief detail of projectcontract which is currently in progress in our company and hasdiscussion on how the administration and monitoring is beingdone and the result achieved.

SUBMITTED BY: JOSEPH TE

REGISTRATION NO: 211-03-14-

9240-2123

SUBMITTED TO:

CENTRE OF DISTANCE EDUCATION

NATIONAL INSTITUTE OF

CONSTRUCTIONMANAGEMENT AND RESEARCH

25/1 BALEWADI, N.I.A POST OFFICE

PUNE - 411045

2011


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Construction Contract and Contracting

Assignment

Contract administration and monitoring is the most importantarea of construction management. Contract administrationprocess start right from the day work is assigned to thecontract. Discuss any project contract currently in progresswith your company and how administration and monitoring isbeing done. Draw the organization chart for the activity andexplain all the function carried out. Do you think the system isachieving results? Discuss.

Name of Project:CIVIL AND STRUCTURAL WORKS FOR CEMENT PLANT, ATCHITTAURGARH, RAJASTHAN INDIA.

Scope of Work: The Works shall include all the supply and deliver of construction materials, underground works includingexcavation, piling works (if required), above ground works, civil

works, steel structure fabrication and erection, building works,drainage works, road works, water proofing works, and otherspecific civil and structure works specify in the Contract. forthe construction and completion of the cement plant civil andstructural works, at Chittaurgrh, Rajasthan.

Important details of the contract:Name of the Owner/Client : M/s. ABC India Ltd.

Chittaurgrh, Rajasthan

Name of contractor : m/s. Petron Civil Engineering Ltd. Mumbai.

Type of Contract This is an item rate contract. The work done will be paidaccording to the rates specified in the Contract Bill of Quantities. The rates shall remain valid, fixed and firm for theentire duration of Contract until the Completion of the Contract

Works to the satisfaction of Employer and is not subject to anyadjustments or modifications or spilt ups for any reason

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whatsoever including due to variation in quantities, unless anduntil an amendment is issued in writing by M/s. ABC India.

The agreed rates shall be inclusive of all direct cost, overheadsand profit margins for executing the Contract Work.

Price of the contract The total value of the work assign to the contractor based onagreed and accepted rates as per the bill of quantities areincluding all taxes. The value of the work may vary as peractual quantity of work. Any error whether of Arithmetic or notin the computation of the Contract Sum shall be deemed tohave been accepted by the parties here to.

Price Variation

In this contract the aforesaid contract price shall remain firmthroughout the entire contract period and shall not be subjectto any escalation on the any account whatsoever expect forany statutory variation (Increase or decrease) in taxes andduties. The variation in basic prized materials shall beadjusted progressively as per actual difference of landed costat site.

EXTRA ITEMS:

If at any time during the course of the work it is foundexpedient or necessary by the Architect or by the Foundationto order material or work of a different description, or tosubstitute one class of work for another, they shall have thefull power to do so, and the Contractor shall be bound to carryout such extra, additional, altered or substituted work on thesame terms and conditions in all respects on which it wasagreed to do the main work. Rates for such new items, if any,should be submitted with complete rate analysis by the

Contractor prior to execution of such item and written approvalobtained from the Project Manager/Architects. The rates for such items shall be worked out on the basis of actual cost of materials (including loading, unloading,transportation and actual labour cost, plus 20% (TWENTYPERCENT) for profit, supervision charges, overheads etc) andcharges for tool / plant / machinery etc.

JURISDICTION FOR DISPUTE:In case any dispute arises in respect of any matter relating tothe contract work and the matter is taken to the Hon. Court of Law, only the competent court in Chittaurgrh will have sole

jurisdiction. No litigation, however, shall be initiated by the any

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party to this Contract without first adopting and pursuing theoption of Arbitration as per the Contract terms.

Schedule of Quantities / BOQ:- The schedule of Quantities given in the Contract Bill are

provisional and are meant to indicate the intent of the workand to provide a uniform basis for tendering. The Ownerreserves the right to increase or decrease any of the quantitiesor to totally omit any item or work and the Contractor shall notclaim any extras or damages on these grounds.Any error in description or in quantity or omission of itemsfrom the Contract Bill shall not vitiate this Contract but shall betreated as a variation

Basic Rates The Basic prize of material shall be:Cement Rs.250.00 per BagReinforcement Steel Rs. 35000.00 per TonStructural Steel Rs. 40000.00 per TonSand Rs. 1590.00 per CumMetal Rs. 1237.00 per Cum4 Brick Rs.3.50 per No.6 Brick Rs 5.5 per No

Time of Completion Time is the essence of the contract. The Contractor shallmobilize and start activities at site as per the directions of Engineer In charge from M/s. ABC India.. The Work shall becompleted in all respects including milestones to be met (if any) within the period stipulated in the Work Order. ie. 18months from issue of LOI.

Payment terms10% contact value as advance with LOI against BG, which shall

be recovered in pro rata basis. The Contractor shall submit Fortnightly running account bills /interim bills / invoices for the work completed by him andapproved by the Client during the fortnight. All bills shall besupported by proof of certification for acceptable quantities..

The Client shall release payments of 60% of assessed valuewithin 10 days of submission of RA bills.Balance within 21 days of issue of interim payment certificateby the owners representative.An amount of 5% shall be deducted towards retention moneyand shall be released in 2 stages. (50% of retention amount on

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virtual completion and balance 50% on successful completionof defect liability period, ie. 12 months.

Secured Advance for Materials The Contractor shall also be paid for non perishable materialbrought to the site and properly stored for incorporation in the

work to the extent of 70% of the landed cost of such material.Claim for such payment shall be supported by themeasurements, vouchers, receipts etc. However the value of such materials shall be related to the tendered unit rate in thebill of quantities and lower of value of the material will be paid.

The materials will be brought to the site in a phased manner asapproved by the Project manager.

The amount thus paid shall be treated as Material Advanceand adjusted against progressive payments

Quality inspection and testing during Execution. The Owner shall have the right to inspect the Works or tohave his representatives, or any other organization acting onhis behalf inspect the Works . This inspection can take placeat the Contractor s premises or at the premises of theContractor s sub- Contractor s or at the Site .

The Contractor shall undertake to complete any QualityControl Plan and Documents required to prepare and planthe inspection. The Contractor shall undertake to facilitateany inspection of design, Plant s and Works at any stage of Project implementation. This inspection does not relieve theContractor of his responsibilities and shall in no case bedeemed to induce any delay in delivery.

Materials and Workmanship:All materials and workmanship shall be as per the relevantcode of B.I.S. Specification and of approved type and theContractor shall immediately remove from the works anymaterial and/or workmanship which in the opinion of theArchitect are defective or unsuitable and shall substituteproper materials and/or workmanship at his own cost. Theterm approval used in connection with this contract shallmean the approval of the Architect.

Deduction for uncorrected work:If the Architect deems it inexpedient to correct workdamaged or not done in accordance with the Contract, anequitable deduction from the Contract prices shall be madethereof.

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Project Management, Co-Ordination, Monitoring andSupervision

The Contractor shall provide such managers, engineers,supervisors, draftsman, field personnel and Services as arerequired to execute the Works in accordance withContract .

The Contractor shall provide the Owner with any update of his Approved management plan that shall includeorganisation charts, particulars of key personnel andSupervision procedures. The Owner may at any timerequire the Contractor to provide a copy of the currentmanagement plan and resources schedule.

1. Engineering The Contractor shall ensure that he assigns to theContract at all times an engineering team, which is capableof fulfilling the Contractors obligations under theContract .

2. Co-ordination and Expediting The Contractor shall provide all the Co-ordination andexpediting services which are required to ensure the properand regular flow of information between the Contractor,Sub-Contractors the Owner , Owner's Assistants andOthers for the purposes of delivering Services inaccordance with the Contract .

3. Quality Control The Contractor shall be responsible for controlling thequality of theConstruction Drawings, Documents, Materials and Worksand forpreparing proper quality management and quality assuranceplans for the purposes of ensuring quality control. Copies of

such plans shall be provided to the Owner for its Approvalwithin the time stated in the Special Conditions.4. Site Management

The Contractor shall be responsible for managing andcontrolling the activities at Site and providing sufficientmanpower and resources (Contractors Equipment) for theexecution of Works . The Contractor shall ensure his sitemanager and the team have the necessary skills,qualifications, expertise, experience and authorization to

direct and supervise the execution of the works in the mostefficient manner possible.

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5. The Architect The Architect and his representative shall at all reasonabletimes have access to the Works and to the workshops orother places of the Contractor where work is being preparedfor the Contract and when work is to be so prepared inworkshops or other places of Sub-Contractor the Contractorshall have a term in the Sub-Contract so as to secure asimilar right of access to those workshops or places for theArchitect and his representative and shall do all thingsreasonably necessary to make such right effective.Architects Status and Decisions:

The Architect shall be the Owners representative during theConstruction Period. The Architect shall periodically visit thesite to familiarize himself generally with the progress andthe quality of the work and to determine in general if thework is proceeding in accordance with the ContractDocument .

Organisation Chart:

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Project Manager.

Project Director

MD/ Chairman.


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FinanceProcurement

Construction HR

HSE

QA/QC P&MPlanning

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1. The Group Head (MD/ Chairman): The group heads role would be the monitoring of thedesigners output and activities, and taking responsibility forall the work that is generated by the group.

2. Project Director (Sr. V.P.):Interaction with contractors to detail out their requirements,obtaining signoffs and overseeing the tendering andnegotiating process. Subsequently, during the executionstage, he monitors the project for cost, quality, andschedules and local administration.

3. The Project Manager (GM): The project manager audits the project during thedrawing/design stage, for conformance to the stipulatedprocess, and for adherence to agreed schedules.Subsequently, during the execution stage, he monitors theproject for cost, quality, and schedules.

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4. The Site In Charge(Manager/ Sr. Manager): The site in charge is responsible for achieving quality onsite, interpreting the drawings and documentation on site,and raising reports on quality and scheduling.

5. Assistant Site In charge (Asst. Manager/ Engineer): The role of a Assistant site In Charge is the day to daymonitoring of site activities. Monitoring of day to dayschedules and raw material quality fall within the scope of duties. He is responsible for Co-ordination between Vendorsand the generation of daily and weekly status reports.

6. Owners Engineer/ Engineer in charge: The term Owners Engineer shall mean the person

appointed by the owner and approved by the Architect The Contractor shall afford the Owners Engineer everyfacility and assistance for inspecting the works andmaterials and for checking and measuring time andmaterials. Neither the Owners Engineer nor anyrepresentative of the Architect shall have power to set outworks or to revoke, alter, enlarge or relax any requirementsof the Contract or to sanction any day work, additions,alterations, deviations or omissions, or any extra work

whatever except in so far as such authority may be speciallyconferred by a written order of the Architect. The Ownersor any representative of the Architect shall have power togive notice to the Contractor or to his representative of non-approval of any work or materials and such work shall besuspended or the use of such materials shall bediscontinued until the decision of the Architect is obtained.

The works will from time to time be examined by theArchitect, the Owners Engineer or the Architectsrepresentative but such examination shall not in any wayexonerate the Contractor from the obligation to remedy anydefects which may be found to exist at any stage of theworks or after the same is completed.

Liquidated damages (LD) for delays and shortfall inperformance

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In case the Contractor does not mobilize adequately, or doesnot commence the work, or does not progress satisfactorily,or does not maintain quality of work or neglect or does notcomply with instructions, or do not make payments to theirworkmen, do not comply and observe statutory laws of the

place of work The owner reserves the rights to take all orany of the following remedial measures (not necessarily inthe same order) by serving 7 days notice,

i. Reduce the Scope of Work.ii. Execute the balance work in full or part (including any

rectification in work already executed by the Contractor) eitheron its own or through any other agency at the risk and cost of the Contractor as well as recover all losses from the

Contractor.iii. Termination of Contract.iv. Confiscate Retention Money and use them for completing the

work.v. Any other method as appropriate for due performance.

In the event of the contractor fail to complete the contract worksor any part thereof or fails to achieve any key date or mile stonewithin time or time prescribed, the owner shall be entitled to

recover from the contractor such lose or damage. Which shall belimited to 0.5% of the contract price per week of delay or partthereof, subjected to a maximum of 5% of the contract prices of the work performed at completion.

Project Evaluation and review:Project review meeting will be held every week on projectsite to monitor the progress of the work. Contractor shouldsubmit fortnightly report with photographs describing the

progress of the work to the Project Manager. The report shallalso include progress, decisions and drawings required fornext month and any other information, which will facilitatethe construction work.

Virtual Completion and Defects Liability Period:When in the opinion of the Architect the Works arepractically completed, he shall forthwith issue a certificate tothat effect and Virtual Completion of the Work shall be

deemed for all the purposes of this contract to have takenplace on the day named in such certificate.

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Claim Dispute & Arbitration:All dispute and differences of any kind whatever arising outof or in connection with the Contract or the carrying out of the works (whether during the progress of the works or aftertheir completion and whether before or after thedetermination, abandonment or breach of the Contract)shall be referred to Dispute Adjudication Board, and settledby the DAB who shall state his decision in writing. Suchdecision may be in the form of a Final Certificate orotherwise. The decision of the DAB with respect of any of the excepted matters shall be final and bonding to eachparty. But, if either the Owner or the Contractor bedissatisfied with the decision of the DAB on any matter,question or dispute of any kind (except any of the expectedmatters) or as to the withholding by the DAB of anycertificate to which the Contractor may claim to be entitledthen and in any such case either party (the Owner of theContractor) may within 28 days after receiving notice of such decision give a written notice to the other partythrough the DAB requiring that such matters in dispute beArbitrated upon. Such written notice shall specify thematters which are in dispute and such dispute or differenceof which such written notice has been given and no othershall be and is hereby referred to the Arbitration and finaldecision of a single Arbitrator to be agreed upon andappointed by both the parties or in case of disagreement asto the appointment of a single Arbitrator to the Arbitration of

two Arbitrators. One to be appointed by each part, whichArbitrators shall, before taking upon themselves the burdenof reference, appoint an Umpire.

The Arbitrator, the Arbitrators or the Umpire as the casemay be shall have power to open up review and revise anycertificate, opinion, decision, requisition or notice save inregard to the excepted matters referred to in the clause 54

and to determine all matters in dispute which shall be

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submitted to him or them and of which notice shall havebeen given as aforesaid.

Upon every or any such reference the cost of and incidentalto the reference and Award respectively shall be in thedirection of the Arbitrator or Arbitrators or the Umpire as thecase may be who may determine the amount thereof ordirect the same to be taxed as between Attorneys and Clientor as between party and party shall direct by whom and towhom and in what manner the same shall be borne andpaid. This submission shall be deemed to be a submissionto Arbitration within the meaning of the Indian Arbitration

Act 1940 or any modification thereof for the time being inforce.

The Award of the Arbitrator or Arbitrators or the Umpire asthe case may be shall be final and binding on the parties.

The Owner and the Contractor hereby also agree thatArbitration under this clause shall be a condition precedent

to any right of action under the Contract and it is herebymutually agreed that no party to this Contract shall initiateand litigation without first seeking arbitration.

The important point from contract point of view to bemonitored/ resolved

1. The company should furnish all the pertinent data andinformations available to it without charges and within areasonable time and should give such assistance as shouldreasonably required by the contractor for carrying out thecontractors obligations under the contract as per schedule.

2. The contractor , in carrying out its responsibilities, shallcomply with the legislation, laws, by-laws, rules, regulationsof the Govt. of India, the State of Rajasthan and other local

authorities as may be applicable including those relating toenvironment, labour and safety.

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3. The company should make timely payment to the contractorfor all amounts due to the contractor under the contract inaccordingly with the terms and provisions of the contract.

4. The Engineer-in-charge (EIC) carryout such duties in issuingcertificates, decision, instructions and order as per contractto be carried out by the contractor. EIC shall have the fullauthority to act on behalf of the company for all purpose inconnection with the contract and shall be contractor primarypoint of contact with company in relation to the execution of the work. The contractor shall proceed with the works in

accordance with decision, instruction and order given by EICsubject to and in accordance with the contract, includingprovision for variation hereof.

5. Liaison and co-ordination for processing of all statutoryclearances with State Government Authority at Chittaurgrhor at District Level

6. During the contractual period, the Contractor shallindemnify the company to co-ordinate and ensure to takecare of all the Local, socio, economic, cultural, educationand political requirement of various non profitableorganizations, association, institution including district andlocal administration if any form time to time as a part of their contractual and social obligation with due consultationand approval from the company.

7. The contractor shall also get approved by the company thelist of its vendors engaged for the purpose of the contract.

8. The contractor shall make its own arrangement for land,supply of water, electricity or any other facilities required forfabrication, erection, and commissioning of the work.

9. The contractor shall indemnify to the company that they willcreate as environment of awareness and physical being that

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is conducive to a safe and healthy workplace, in accordancewith all federal, state, local and corporate regulation andcontractual obligations. The contractor shall provide safetyprograms that are effective in identifying and reducinghazards in the work place and impart training to theiremployees to develop safe work practices that efficientlyproduce quality products in a safe manner with an objectiveto have an injury free workplace and zero accident.

10. The contractor shall use liberal factors of safety throughoutthe design and shall follow all other relevant IS and alsointernational codes, wherever applicable.

Recommendations & Conclusion The contract doesnt have the provision of the penalty asper contract the contract cant leave work there is provisionof the liquidity damage maximum of 5 % of the contractvalue. The contract has to complete the work and if there isany defect in the work the contractor has to rectify it on hisown expenses within the guarantee period in case of anydelay of contract due to unsatisfactory work the companywill suffer the loss by unavailability of the water at plantarea.

References:

NICMAR publication lesson books on Construction ContractManagement

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