Construction Contract and Contracting.

NCP 23

2011

Assignment NCP-23
Construction Contract and Contracting
The assignment is about the contract administration and monitoring. This assignment has an brief detail of project contract which is currently in progress in our company and has discussion on how the administration and monitoring is being done and the result achieved.

SUBMITTED BY: REGISTRATION 9240-2123 NO:

JOSEPH TE 211-03-14-

SUBMITTED TO: CENTRE OF DISTANCE EDUCATION NATIONAL INSTITUTE OF CONSTRUCTIONMANAGEMENT AND RESEARCH 25/1 BALEWADI, N.I.A POST OFFICE PUNE - 411045 1

Construction Contract and Contracting.

NCP 23

Construction Contract and Contracting Assignment Contract administration and monitoring is the most important area of construction management. Contract administration process start right from the day work is assigned to the contract. Discuss any project contract currently in progress with your company and how administration and monitoring is being done. Draw the organization chart for the activity and explain all the function carried out. Do you think the system is achieving results? Discuss. Name of Project: CIVIL AND STRUCTURAL WORKS FOR CEMENT PLANT, AT CHITTAURGARH, RAJASTHAN INDIA. Scope of Work: The Works shall include all the supply and deliver of construction materials, underground works including excavation, piling works (if required), above ground works, civil works, steel structure fabrication and erection, building works, drainage works, road works, water proofing works, and other specific civil and structure works specify in the Contract. for the construction and completion of the cement plant civil and structural 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 paid according to the rates specified in the Contract Bill of Quantities. The rates shall remain valid, fixed and firm for the entire duration of Contract until the Completion of the Contract Works to the satisfaction of Employer and is not subject to any adjustments or modifications or spilt ups for any reason
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whatsoever including due to variation in quantities, unless and until an amendment is issued in writing by M/s. ABC India. The agreed rates shall be inclusive of all direct cost, overheads and profit margins for executing the Contract Work. Price of the contract The total value of the work assign to the contractor based on agreed and accepted rates as per the bill of quantities are including all taxes. The value of the work may vary as per actual quantity of work. Any error whether of Arithmetic or not in the computation of the Contract Sum shall be deemed to have been accepted by the parties here to. Price Variation In this contract the aforesaid contract price shall remain firm throughout the entire contract period and shall not be subject to any escalation on the any account whatsoever expect for any statutory variation (Increase or decrease) in taxes and duties. The variation in basic prized materials shall be adjusted progressively as per actual difference of landed cost at site. EXTRA ITEMS: If at any time during the course of the work it is found expedient or necessary by the Architect or by the Foundation to order material or work of a different description, or to substitute one class of work for another, they shall have the full power to do so, and the Contractor shall be bound to carry out such extra, additional, altered or substituted work on the same terms and conditions in all respects on which it was agreed 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 approval obtained 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% (TWENTY PERCENT) for profit, supervision charges, overheads etc) and charges for tool / plant / machinery etc. JURISDICTION FOR DISPUTE: In case any dispute arises in respect of any matter relating to the 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 the option 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 work and to provide a uniform basis for tendering. The Owner reserves the right to increase or decrease any of the quantities or to totally omit any item or work and the Contractor shall not claim any extras or damages on these grounds. Any error in description or in quantity or omission of items from the Contract Bill shall not vitiate this Contract but shall be treated as a variation Basic Rates The Basic prize of material shall be: Cement Rs.250.00 per Bag Reinforcement Steel Rs. 35000.00 per Ton Structural Steel Rs. 40000.00 per Ton Sand Rs. 1590.00 per Cum Metal Rs. 1237.00 per Cum 4 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 shall mobilize and start activities at site as per the directions of Engineer In charge from M/s. ABC India.. The Work shall be completed in all respects including milestones to be met (if any) within the period stipulated in the Work Order. ie. 18 months from issue of LOI. Payment terms 10% 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 and approved by the Client during the fortnight. All bills shall be supported by proof of certification for acceptable quantities.. The Client shall release payments of 60% of assessed value within 10 days of submission of RA bills. Balance within 21 days of issue of interim payment certificate by the owners representative. An amount of 5% shall be deducted towards retention money and shall be released in 2 stages. (50% of retention amount on
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virtual completion and balance 50% on successful completion of defect liability period, ie. 12 months. Secured Advance for Materials The Contractor shall also be paid for non perishable material brought 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 the measurements, vouchers, receipts etc. However the value of such materials shall be related to the tendered unit rate in the bill of quantities and lower of value of the material will be paid. The materials will be brought to the site in a phased manner as approved by the Project manager. The amount thus paid shall be treated as Material Advance and adjusted against progressive payments Quality inspection and testing during Execution. The Owner shall have the right to inspect the Works or to have his representatives, or any other organization acting on his behalf inspect the Works. This inspection can take place at the Contractors premises or at the premises of the Contractors sub-Contractors or at the Site. The Contractor shall undertake to complete any Quality Control Plan and Documents required to prepare and plan the inspection. The Contractor shall undertake to facilitate any inspection of design, Plants and Works at any stage of Project implementation. This inspection does not relieve the Contractor of his responsibilities and shall in no case be deemed to induce any delay in delivery. Materials and Workmanship: All materials and workmanship shall be as per the relevant code of B.I.S. Specification and of approved type and the Contractor shall immediately remove from the works any material and/or workmanship which in the opinion of the Architect are defective or unsuitable and shall substitute proper materials and/or workmanship at his own cost. The term approval used in connection with this contract shall mean the approval of the Architect. Deduction for uncorrected work: If the Architect deems it inexpedient to correct work damaged or not done in accordance with the Contract, an equitable deduction from the Contract prices shall be made thereof.
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Project Management, Co-Ordination, Monitoring and Supervision The Contractor shall provide such managers, engineers, supervisors, draftsman, field personnel and Services as are required to execute the Works in accordance with Contract. The Contractor shall provide the Owner with any update of his Approved management plan that shall include organisation charts, particulars of key personnel and Supervision procedures. The Owner may at any time require the Contractor to provide a copy of the current management plan and resources schedule. 1. Engineering The Contractor shall ensure that he assigns to the Contract at all times an engineering team, which is capable of fulfilling the Contractors obligations under the Contract. 2. Co-ordination and Expediting The Contractor shall provide all the Co-ordination and expediting services which are required to ensure the proper and regular flow of information between the Contractor, Sub-Contractors the Owner, Owner's Assistants and Others for the purposes of delivering Services in accordance with the Contract. 3. Quality Control The Contractor shall be responsible for controlling the quality of the Construction Drawings, Documents, Materials and Works and for preparing proper quality management and quality assurance plans for the purposes of ensuring quality control. Copies of such plans shall be provided to the Owner for its Approval within the time stated in the Special Conditions. 4. Site Management The Contractor shall be responsible for managing and controlling the activities at Site and providing sufficient manpower and resources (Contractors Equipment) for the execution of Works. The Contractor shall ensure his site manager and the team have the necessary skills, qualifications, expertise, experience and authorization to direct and supervise the execution of the works in the most efficient manner possible.
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5. The Architect The Architect and his representative shall at all reasonable times have access to the Works and to the workshops or other places of the Contractor where work is being prepared for the Contract and when work is to be so prepared in workshops or other places of Sub-Contractor the Contractor shall have a term in the Sub-Contract so as to secure a similar right of access to those workshops or places for the Architect and his representative and shall do all things reasonably necessary to make such right effective. Architects Status and Decisions: The Architect shall be the Owners representative during the Construction Period. The Architect shall periodically visit the site to familiarize himself generally with the progress and the quality of the work and to determine in general if the work is proceeding in accordance with the Contract Document.

Organisation Chart:

MD/ Chairman.

Project Director

Project Manager.

Construction Contract and Contracting.

NCP 23

Finance

Procurement

HSE

Constructio n

HR

Planning

QA/QC

P&M

Construction Contract and Contracting.

NCP 23

1. The Group Head (MD/ Chairman): The group heads role would be the monitoring of the designers output and activities, and taking responsibility for all 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 and negotiating process. Subsequently, during the execution stage, he monitors the project for cost, quality, and schedules and local administration. 3. The Project Manager (GM): The project manager audits the project during the drawing/design stage, for conformance to the stipulated process, and for adherence to agreed schedules. Subsequently, during the execution stage, he monitors the project for cost, quality, and schedules.

Construction Contract and Contracting.

4.

NCP 23

The Site In Charge(Manager/ Sr. Manager): The site in charge is responsible for achieving quality on site, 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 day monitoring of site activities. Monitoring of day to day schedules and raw material quality fall within the scope of duties. He is responsible for Co-ordination between Vendors and 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 every facility and assistance for inspecting the works and materials and for checking and measuring time and materials. Neither the Owners Engineer nor any representative of the Architect shall have power to set out works or to revoke, alter, enlarge or relax any requirements of 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 specially conferred by a written order of the Architect. The Owners or any representative of the Architect shall have power to give notice to the Contractor or to his representative of nonapproval of any work or materials and such work shall be suspended or the use of such materials shall be discontinued until the decision of the Architect is obtained. The works will from time to time be examined by the Architect, the Owners Engineer or the Architects representative but such examination shall not in any way exonerate the Contractor from the obligation to remedy any defects which may be found to exist at any stage of the works or after the same is completed. Liquidated damages (LD) for delays and shortfall in performance

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In case the Contractor does not mobilize adequately, or does not commence the work, or does not progress satisfactorily, or does not maintain quality of work or neglect or does not comply with instructions, or do not make payments to their workmen, do not comply and observe statutory laws of the place of work The owner reserves the rights to take all or any of the following remedial measures (not necessarily in the same order) by serving 7 days notice, i. ii. Reduce the Scope of Work. Execute the balance work in full or part (including any rectification in work already executed by the Contractor) either on its own or through any other agency at the risk and cost of the Contractor as well as recover all losses from the Contractor. Termination of Contract. Confiscate Retention Money and use them for completing the work. Any other method as appropriate for due performance.

iii. iv. v.

In the event of the contractor fail to complete the contract works or any part thereof or fails to achieve any key date or mile stone within time or time prescribed, the owner shall be entitled to recover from the contractor such lose or damage. Which shall be limited to 0.5% of the contract price per week of delay or part thereof, 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 project site to monitor the progress of the work. Contractor should submit fortnightly report with photographs describing the progress of the work to the Project Manager. The report shall also include progress, decisions and drawings required for next month and any other information, which will facilitate the construction work. Virtual Completion and Defects Liability Period: When in the opinion of the Architect the Works are practically completed, he shall forthwith issue a certificate to that effect and Virtual Completion of the Work shall be deemed for all the purposes of this contract to have taken place on the day named in such certificate.
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Claim Dispute & Arbitration: All dispute and differences of any kind whatever arising out of or in connection with the Contract or the carrying out of the works (whether during the progress of the works or after their completion and whether before or after the determination, abandonment or breach of the Contract) shall be referred to Dispute Adjudication Board, and settled by the DAB who shall state his decision in writing. Such decision may be in the form of a Final Certificate or otherwise. The decision of the DAB with respect of any of the excepted matters shall be final and bonding to each party. But, if either the Owner or the Contractor be dissatisfied with the decision of the DAB on any matter, question or dispute of any kind (except any of the expected matters) or as to the withholding by the DAB of any certificate to which the Contractor may claim to be entitled then and in any such case either party (the Owner of the Contractor) may within 28 days after receiving notice of such decision give a written notice to the other party through the DAB requiring that such matters in dispute be Arbitrated upon. Such written notice shall specify the matters which are in dispute and such dispute or difference of which such written notice has been given and no other shall be and is hereby referred to the Arbitration and final decision of a single Arbitrator to be agreed upon and appointed by both the parties or in case of disagreement as to the appointment of a single Arbitrator to the Arbitration of two Arbitrators. One to be appointed by each part, which Arbitrators shall, before taking upon themselves the burden of reference, appoint an Umpire. The Arbitrator, the Arbitrators or the Umpire as the case may be shall have power to open up review and revise any certificate, opinion, decision, requisition or notice save in regard 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 have been given as aforesaid. Upon every or any such reference the cost of and incidental to the reference and Award respectively shall be in the direction of the Arbitrator or Arbitrators or the Umpire as the case may be who may determine the amount thereof or direct the same to be taxed as between Attorneys and Client or as between party and party shall direct by whom and to whom and in what manner the same shall be borne and paid. This submission shall be deemed to be a submission to Arbitration within the meaning of the Indian Arbitration Act 1940 or any modification thereof for the time being in force. The Award of the Arbitrator or Arbitrators or the Umpire as the case may be shall be final and binding on the parties. The Owner and the Contractor hereby also agree that Arbitration under this clause shall be a condition precedent to any right of action under the Contract and it is hereby mutually agreed that no party to this Contract shall initiate and litigation without first seeking arbitration.

The important point from contract point of view to be monitored/ resolved

1.

2.

The company should furnish all the pertinent data and informations available to it without charges and within a reasonable time and should give such assistance as should reasonably required by the contractor for carrying out the contractors obligations under the contract as per schedule. The contractor , in carrying out its responsibilities, shall comply with the legislation, laws, by-laws, rules, regulations of the Govt. of India, the State of Rajasthan and other local authorities as may be applicable including those relating to environment, labour and safety.
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3.

NCP 23

The company should make timely payment to the contractor for all amounts due to the contractor under the contract in accordingly with the terms and provisions of the contract. The Engineer-in-charge (EIC) carryout such duties in issuing certificates, decision, instructions and order as per contract to be carried out by the contractor. EIC shall have the full authority to act on behalf of the company for all purpose in connection with the contract and shall be contractor primary point 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 EIC subject to and in accordance with the contract, including provision for variation hereof. Liaison and co-ordination for processing of all statutory clearances with State Government Authority at Chittaurgrh or at District Level During the contractual period, the Contractor shall indemnify the company to co-ordinate and ensure to take care of all the Local, socio, economic, cultural, education and political requirement of various non profitable organizations, association, institution including district and local administration if any form time to time as a part of their contractual and social obligation with due consultation and approval from the company. The contractor shall also get approved by the company the list of its vendors engaged for the purpose of the contract. The contractor shall make its own arrangement for land, supply of water, electricity or any other facilities required for fabrication, erection, and commissioning of the work. The contractor shall indemnify to the company that they will create as environment of awareness and physical being that
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4.

5.

6.

7.

8.

9.

Construction Contract and Contracting.

NCP 23

is conducive to a safe and healthy workplace, in accordance with all federal, state, local and corporate regulation and contractual obligations. The contractor shall provide safety programs that are effective in identifying and reducing hazards in the work place and impart training to their employees to develop safe work practices that efficiently produce quality products in a safe manner with an objective to have an injury free workplace and zero accident. 10. The contractor shall use liberal factors of safety throughout the design and shall follow all other relevant IS and also international codes, wherever applicable. Recommendations & Conclusion The contract doesnt have the provision of the penalty as per contract the contract cant leave work there is provision of the liquidity damage maximum of 5 % of the contract value. The contract has to complete the work and if there is any defect in the work the contractor has to rectify it on his own expenses within the guarantee period in case of any delay of contract due to unsatisfactory work the company will suffer the loss by unavailability of the water at plant area. References: NICMAR publication lesson books on Construction Contract Management

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