TENDERING, BIDDING &

CONTRACTING
Management of a contract commences with the preparation of
the contract document, which has to be preceded by elaborate
preparatory activities involving adequate investigations of the
project to cover all aspects that influence its design , minimise
uncertainties that may raise at the time of execution , study
of possible technological alternatives, preparation of detailed
designs, construction drawings and estimates.

The designer of a project should also keep in view the type of

construction ,materials available in the vicinity, and possible
deployment of equipment needed for project execution , the
overall capacity and resources available with the management
for completion of the project in a reasonable time frame and
sometimes the operating criteria for some of the components.
The word tendering means a documentary procedure
inviting, appointing experts,
contracting firms,
equipment supplier and service providers for executing the
work (work could be of any nature).
PHASES OF A PROJECT LIFE CYCLE

Conceptualization
Engineering and design
Procurement
Construction
Commissioning
maintenance
.A bidding document consists

Invitation for bid

Instruction to bidders
Forms of bid qualifications, information and Letter of
acceptance
-Contractors Bid
-Letter of Acceptance
-Letter to proceed with the work
-Agreement form

General Conditions of Contract

Special Conditions of contract
Contract Data
Specifications
-Specifications for building
-Specifications for electrical works
-Additional Conditions of contract
-List of approved Makes

Drawings
- List of Drawings
Bills of quantities
-Bills of quantities for building works
-Bills of quantities for electrical works

Form of Schedules
-Bid Security (Bank guarantee0
-Performance Bank Guarantee
-Bank Guarantee for Advance Payment
Measurement system
Bid Writing skills
INVITATION TO BID

The first requirement in a bidding process is to invite

suppliers/Contractors to bid.
It is important that suppliers/contractors come to know of
the demand for their goods/services and the name of the
buyer.
The method of invitation has to be effective to reach a large
number of suppliers/Contractors.

The common methods of invitation to bid are:

Publication in newspapers, which have a large circulation.
Publication in journals of special interest.
In international competitive bidding, bringing the invitations to
the notice of embassies of foreign countries.
Letters to firms who have come to know of the likely purchase
and have made enquiries.
The Invitation to Bidders is a brief notice.

It gives only the essentials of the purchase/works to be done.

It also states the nature of goods/service required, the place

from where bidding documents may be purchased, price of
bidding documents, the last date for submitting bids, and the
amount of bid security.
 Format of Notice Inviting Tender-

Name of the organization

Date
Executive engineer on behalf of the ---organization invites Item rate/ lump
sum tenders from approved and eligible contractors for following works.
Last date and time of submission is 18/07/2005 up to 3.00 P.M.
Sr. Name of work Estimated cost Earnest money deposit Time
1 Construction of - Rs.7, 20,68,186 14,41,364 15 months
Space for Important conditions eligibility/performance –
Cost of tender form –Rs.1500/-
Last date and time for receipt of application: 11/07/2005 up to 16.00 hrs.
Last date and time for issue of tender documents: 14/07/2005 up to 16.00
hrs.
Validity period: 6 months
Earnest money should be deposited along with application seeking issue of
tender document. ---- ---- ---- ---
Executive Engineer
Tender notices are published in at least three national
newspapers in case of NCB, local newspapers incase of LCB and
three international publications in case of ICB.

LCB process gives preference to the local contractors and

established in the area where the project is located. Here the
bids are labour intensive.

NCB process gives preference is given to the contractors of

national repute. (Having registration with PWD, CPWD and
MES of appropriate class).

ICB process gives preference to the internationally reputed

contractors where details of foreign currency, employment of
foreign personnel, procurement of foreign machinery are
mentioned.
Instructions to the contractor-

Scope of tender,
Eligibility of contractor,
Site visit,
Clarification of tender document,
Language of tender,
Documents of the tender,
Currencies and payment,
Tender security and validity,
Signing of tender and sealing of tender,
Last date of submission,
Tender opening and evaluation,
Comparison of tenders,
Award criteria and employers right to accept or reject
Advance payment and security,
Corrupt practices.
Scope of Bid defines details of works, duration of contract and completion
date of contract etc.

Sources of Funds clearly mentions the details of agencies funding the

project.

One bid per bidder, this instruction binds the bidder to submit only one
bid one bidder.

Bidder site visit: are the instructions to the bidder to carry out site
investigation before he quotes for the work.
Instructions to bidders

General: If a buyer is purchasing goods that are financed by

borrowing from the World Bank or the Asian Development
Bank, then it is customary to state this fact. The guidelines of
the lending organisations control some important details of a
purchase transaction.

The most important of these are Restrictions on who may bid.

Only suppliers from their member countries may bid.
What kind of goods may be purchased? Only the produce of
the member countries may be offered for sale.
For purchases out of one's own resources, there is no need for
either of these conditions.

Cost of bids
Sometimes, Instructions to Bidders makes it clear that the
buyer accept no responsibility for the cost of preparing bids.
Bidding documents:

These documents help in obtaining uniformity of knowledge as both the

parties have the same set of information.

Some buyers clarify in their Instructions to Bidders the names of all the
documents which are part of the bidding documents.

This further helps both the buyers and the sellers to know how all that
which is included in the bidding documents affects their rights and
obligations.

If, later on, some new document is cited as evidence, then it would not be
admissible as a document which formed a part of the bidding process.

These state all that a supplier has to know about the bidding procedure.
Clarification of bidding documents:

A bidder has to decide whether he or she will answer questions from the
likely contractors. The questions may be about the delivery schedule,
specifications, or some conditions of contract.

A buyer may feel that the queries seeking clarifications are irritants and a
waste of time and may choose not to answer them.

In such a case, it may not receive bids from some Contractors, and may
lose the chance of obtaining a good price.

Some of the queries may also help a buyer in reviewing its specifications or
some other conditions of contract.

Hence, some buyers promise to answer questions from bidders, and also
hold a pre-bid conference to answer questions.

As a result of answering the bidders' queries, or even otherwise, a buyer

may have to amend the bidding documents.
The changes may be in specifications, requirements. or some conditions of
contract.

A buyer has the inherent right to amend the bidding documents before the
last date for submission of bids.

Of course, a buyer has to allow adequate time to bidders for submitting

their bids after the amendments.

If a bidder wished to modify its bid as a result of amendments, it has a

chance to do so.
Language of the bid.

In private trade, and for domestic bids, language may,

perhaps, not be a very important clause.

However, in international trade, it is important to specify the

language of bids as the bids may be from several countries
with different languages.

If bids are received in many languages, the buyer may find it

difficult to get them translated properly.

Moreover, as the contract will be governed by the language of

the offer, the buyer's unfamiliarity with it may give use to
difficulties and disputes.
Bid form and price schedule.

A buyer likes to lay down the format for bids.

A common format makes bid comparison easier.

It also helps to avoid different terms being used by the bidders; the use
of different terms may make it difficult to adjust the bid prices to a
common term.

For a employer, it is the total cost right up to the delivery at site that
counts.
A supplier may not disclose all the moneys that a buyer may have to pay; it
may even gloss over the taxes that the buyers have to pay.

A buyer, wary of traps, asks for bids giving a break-up of cost of goods,
ex-works, taxes payable by the buyer, freight, insurance and incidental
charges the buyer has to pay.

There are a few other terms for quoting prices. The instructions help both
the buyer and suppliers know the entire obligations of either side and their
cost.
Bid currencies.

In international competitive bidding, instructions to bidders have a clause

on bid currencies.
It states how bids in different currencies will be converted into the
domestic currency.
A bidder may choose to ask for bids in its own currency; in such a case, the
prices may be higher as the supplier will have to accept the risk of
exchange rate variations.

For example, if a bid is accepted for, say, US dollars 1000, and the rate of
exchange on the date of opening bids is Rs. 65 to one US dollar, the
purchase transaction is valued at Rs. 65,000. However, when the buyer
pays for the goods, it may have to buy US dollars for a higher amount of,
say, Rs. 66,000 if the US dollar is quoted at Rs. 66 to a dollar.

The buyer has accepted the exchange risk in this case. If a bidder is to
quote in rupees, it may either not agree to this, or may quote a rate based
on a likely future rate of exchange when the payment would fall due.
Bidder's qualifications

A buyer has to assure himself or herself about the competence of a bidder

to fulfil its obligations.

Receiving or accepting bids from incompetent bidders may only result in a

waste of time, effort and money, A buyer informs potential bidders about
the evidence required to support their claim of competence.

The competence of bidders falls in three categories. These are:

i. Financial competence: A financially weak firm may not be able to
fulfil a large order that it receives.
ii. Technical competence: A firm without technical competence
would have difficulty in producing goods that meet the desired
specifications.
iii. Production capabilities: A firm devoid of adequate production
capabilities may fail to supply goods in time.
Goods qualifications. A buyer also informs the bidders to produce
documentary evidence that the goods meet the criteria of specifications
laid down in the bidding documents.

Unless the goods are according to specifications, a buyer would be unable

to evaluate the price, as bids were not invited for lower specifications.

A buyer also needs assurance about the regular supply of spares; a clause
about the kind of spare support needed is included.
Bid security.

A buyer does not wish to receive bids from firms who have no intention to
meet their obligations.

A supplier/contractor may make a bid with the idea of seeing the market
trend; it may refuse to accept the contract.

Such frivolous or speculative bids do arise when there is no bid security,

particularly for large value contracts.

Therefore, buyers insist on a suitable amount from bidders as bid security

Bid security gets forfeited if a bidder refuses to honour the contract

when its bid gets accepted.

A very high bid security amount may discourage bidders as their money
gets blocked and a poor response will mean not receiving competitive bids.
Bid validity period.

A buyer assures suppliers about the period within which it will decide on
the bids.

After all, a supplier invests money in bid security on the chance of getting
its bid accepted.

The investment can be made only for a reasonable period, Moreover, a

supplier takes into account the likely increase in prices by the time a
contract is awarded and the goods are delivered.

In an inflationary economy, the risk of inflation is built into the price.

If the bid validity period is not indicated, suppliers may not bid at all.
Signatures on bids.

The law of contract recognises a contract between legally competent

parties only.

A minor is not competent to enter into a valid contract.

Many suppliers may be firms in the nature of partnerships, joint ventures,

or incorporated companies.

The laws of partnership, joint ventures, or companies have a legal

framework as to who is competent to bind them.

Only persons having this authority can bind their firms.

A buyer has to check the authority letters, on the basis of which bids are
signed,
Secrecy of bids.

Instructions to Bidders assure of the secrecy of bids received.

Opening any bid before the deadline for opening bids violates the sanctity
of the bid process.

The need for secrecy arises because it is essential that the bidders should
not come to know the bid price of their competitors.

Otherwise, the entire exercise of inviting bids may become a manipulated

process to give it the semblance of integrity.

Suppliers, when they come to know of it, may decline to bid for buyers who
violate this principle-

Therefore, a buyer instructs bidders to seal their bids carefully; and

offers the assurance that the bids will be opened publicly, only at a given
time and place.
Deadline for submission for bids.

Instructions to Bidders state the last date for receiving bids.

A buyer cannot keep the date of receiving bids uncertain.

The last date of receiving bids is also linked to the bid validity period.
A good practice is to refuse to consider bids that are received late,
whatever the reasons.

If a buyer thinks that the time allowed for preparing bids is not
sufficient, it may extend the deadline for bid submission, instead of
considering late bids.

The reason buyers refuse to take note of late bids is that bids are opened,
soon after the deadline for submitting bids has passed.

A buyer has, then, no way of knowing if the late bids are based on the bid
prices that have become known.
Withdrawal of bids.

The law of contract allows a bidder to withdraw its bid before acceptance.

In competitive bidding, a bidder may withdraw or modify its bid before

bid opening; this action does not result in the loss of bid security.

If a bidder withdraws its bid after the bid opening, then the buyer may
forfeit the bid security.
Bid opening and evaluation:

Opening of bids. Bidders or their representatives are invited to be present

at the bid opening ceremony.

At the bid opening, a buyer announces the major details of bids, like bid
price, discounts offered, whether bid security is there, etc.

The public opening of bids in stills confidence in the bidding process;

otherwise, some suppliers may decline to bid.

Bid examination. Bid examination is usually in two parts:

Preliminary Examination: The preliminary examination of bids means

checking that the bids are complete, there is bid security, and that the
bids meet all the essential conditions of eligibility laid down in the
Instructions to Bidders.

The bids, which meet all these criteria, are then taken up for further
examination. These bids are called 'substantive responsive bids’.
Comprehensive Evaluation:

Bids found substantively responsive are then put in a tabular

form to show their comparative position.

Bid price is tabulated to show separately:

Taxes and duties a buyer has to pay;
Freight a buyer has to pay;
Insurance cost for the buyer;
Cost of spares;
Cost of inland transportation to site;
Cost of varying delivery schedules, within the acceptable
range offered;
cost of goods.
Adjustments are then made in the bid prices to take care of varying costs
of operation owing to the different rate of consumption of raw material
and varied output.

These variations, which should be within an acceptable range and according

to specifications, are assigned a money value so that the bids may be put in
a reasonably comparable format.

If a bid is not clear on some points, a buyer may seek clarifications.

Instructions to Bidders make it clear that a buyer may seek clarifications

from the bidders, if necessary.

However the clarification should not alter the substantive nature of the
bid, giving the supplier an undue advantage of modifying its price after
knowing the price of its competitors.
Award of contract:

Instructions to Bidders make it known that a buyer has the right to accept
or reject any bid.

The bidders cannot force a buyer to accept a particular bid.

A buyer awards a contract after the evaluation of bids.

He or she also has a right to increase or decrease the quantity of items to

be purchased within the range given in the Instructions to Bidders.

Acceptance of the bid results in a binding contract.

The bidder, whose bid is accepted, is asked to sign a contract to formalise

the acceptance of the offer.
Preparation of bid documents-

In order to minimize the risks of bidding and to enable prospective bidders

to submit competitive and realistic offers and to avoid disputes, it is
necessary that tender documents include all relevant information in
concise, clear and unambiguous terms. Sufficient time and care has to be
given to the preparation of tender documents.

•Location of works
•Access to the work mentioning nearest railway station, seaport and
airport.
•Wharf- age and port charges
•Communication facilities (Road, railway, post and telegraph)
•Availability of labours
•Water supply
•Contractors working areas for-
Construction
Comps workshops, stores, offices.
Dumping and disposal areas
•Medical facilities
•Climatic conditions
•Geological data with complete details of logging, bored holes.
•Hydrological data- rainfall, flood and fair weather discharges, HFL
•Parameters of permeability coefficients and other relevant data for
selecting dewatering equipment

While preparing bid documents following aspects need to be checked from

documents.

• Materials and drawings (Issue and use of materials)

•Construction drawings
•Payments (running bills, advances (against mobilization, against plant and
tools) with the details of recovery, interest and security.
•Currency of bid
•Inspection of works
•Final and binding decisions
•Construction claims (cost escalation (labor an material), extra items,
extension of time and compensation)
Working procedure for bid submission.

In depth study of tender documents which covers drawings, specifications,

conditions of contract, provisions in the estimates, escalation clauses and
bonus and penalties applied

Taxes and royalties

Cost towards procurement of material, labor, equipment and machinery.
Transportation costs, cost towards obtaining performance bond and
related insurances, cost towards blocking the security deposit, mobilization
cost, temporary establishment such as go downs, site offices, laboratory,
establishing labor camp procuring water and power.

Clarifications during pre-bid meetings

Site visit and preparing rate analysis of various items involved in the
project by taking quotations of basic material and labor available in the
vicinity of the site, Recording geographical and geotechnical conditions and
availability of water and power.
Documents required by the employer for verification of eligibility and
evaluation of the offer.
Covering letter
D.D. for earnest money
 Confirmation of the documents duly signed
MOU and Articles of Association
Five years Income tax returns
Statement of work executed in last five years
Statement of work on hand
Statement of personnel
Statement of equipment and machinery available

All above documents are put in a cover. This cover is then sealed. Name of
the work and name and address of tender accepting authority along with
the name and address of submitting organization is written on the cover.
Documents are then submitted at the office mentioned in the tender
documents on the day and date and well before the expiry of time.
TYPES OF CONTRACTS
Lump sum Contracts
Item Rate Contracts
Cost Plus Percentage Contracts
Cost Plus Fixed Fee Contract
Maximum Price Contracts
Incentive Contracts
Turnkey Contracts.
Lump sum Contracts

As the name implies, in this type of contract, the contractor agrees to do a

certain job for a fixed remuneration.

For getting this compensation, he is to fulfill all his obligations under the
contract, even though the actual cost incurred by him may be higher or
lower than the sum agreed to.

The payment could, however, be released periodically as the work

progresses rather than a single settlement after acceptance of the work.

From contractor’s point of view, a lump sum contract may be preferable as

whatever a contractor can gain by excellent planning and efficient
management is his own and will add to his legitimate profit.
Where BOQ form a part of the contract, this constitutes the exact
measure of work undertaken by the builder for the contract price.

The BOQ usually serves as the basis for evaluation of variations and also
serve as a common basis for comparison and analysis of competing tenders.

BOQ should be comprehensive and should describe the specification of

labour and materials and in interpretation, a preference is given to BOQ
description over particular specification.

Usually bills following a laid down standard method of measurement should

be meticulously drawn.
Omissions to describe items as per standard method, would open the doors
for claims of such omissions.

When unexpected difficulties are encountered in engineering contracts, it

may mean that the expected method of work may have changed and in rare
cases completion of work in accordance with original design may not be
possible due to unforeseen contingencies and may need rectification, repair
and reinstatement.
Item Rate Contracts
In this Contract, payment for work done is made on the basis of the
quantities of work actually executed and measured, materials supplied and
used by the contractor on the project, each such quantity being multiplied
by the contractor’s corresponding unit rate given in his tender for that
unit.
In this type of contract, reasonable variations in the tendered quantities
of the works do not make any substantial difference to the contractor as
he gets payments for the actual work at rates specified in the tender.

For a contractor to submit an item rate tender, it will be necessary to

provide him with general specifications designs and drawings together with
estimates of quantities so as to enable him to assess the magnitude,
character and difficulty of the work and the probable cost at which he can
execute it.
The contractor would be entitled to claim an adjustment in his
compensation if the actual work proves to be considerably different in
specifications, quality and quantity from the data presented to him at the
time of invitation to tender.
The main satisfaction is that he gets unit rates for the quantities actually
executed.
The only uncertainty to the employer in such contracts is that he will not
be in a position to know the total cost of the job till its completion.

But he has the advantage of an earlier start of the work pending complete
detailing of entire work, along with the progress of construction.

Both the employer and the contractor have to keep detailed accounts of
material, equipment and work for purposes of making interim payments, and
for the employer to watch the progress of expenditure.

Even in item rate tenders, all items are not priced e.g. site clearance,
dewatering, shoring, grading and clearing of site after completion etc.
Cost Plus Percentage Contracts

When there is an emergency or any other condition that requires

constructing a facility in a hurry without time to develop plans for it,
neither the employer nor the contractor is sure about the cost of
construction, a ‘cost plus percentage’ contract is generally used. There is a
minor risk involved.

Since profits of the contractor are linked with cost of materials, labour
and equipment, a high cost gives the contractor a higher amount of profits.

This results in waste, inefficiency and extravagance by contractors.

A good contractor will, however, try to do the work efficiently.

A cost plus percentage contract may also be very useful in situations which
are not emergencies.

A dam was washed out due to floods in the Naugatuck River Valley in the
U.S.A.

The work of replacement of the dam was awarded in 1955 to a contractor

on a cost plus percentage fee because no one could anticipate the problems
that would arise in the course of reconstruction and decisions could be
taken only as the work progressed.

A normal condition attached to this type of contracts is, that the

contractor has to produce his books of accounts for the employer’s
inspection as and when required.

To make a contract, find out who can and will tackle the job and make an
agreement regarding the percentage to be paid to the contractor.

This contract is also known as “time and lime” (i.e. labour and material)
contract.
Cost Plus Fixed Fee Contracts

In the cost plus fixed fee contract, the contractor is reimbursed the
actual cost incurred by him on materials and labour and is given a fixed
amount of money as his fee.

It is an improved version of the “Cost plus percentage” contract, as in this

type of contract, the profit of the contractor is not linked with the cost.

The contractor receives only the stipulated sum for his part in overseeing
and doing the job, no matter what the cost of the project may be.

The contractor will, therefore, try to complete the job as fast as possible
so that his men can be available for another contract elsewhere.

Under this form of contract, the employer can easily select a reliable
contractor to execute the work. The parties can work in harmony and
accomplish amazingly fine results.
Maximum Price Contracts

This is employed when the availability of raw material and labour is

uncertain and market conditions are fluctuating.

In this, the maximum price of the work is fixed after taking into account
the actual cost of production and reasonable profit of the contractor.

The contractor gets his profit of the cost of the work below the maximum
limit fixed under the contract. More the cost of labour and materials, less
is the profit of the contractor.

If the cost exceeds the maximum, the contractor suffers a loss.

The contractor has, therefore, to strive to keep the cost low through
better planning and efficient execution.

The maximum price is adjusted upwards or downwards as may be

appropriate in the light of the contractor’s actual cost experience.
Incentive Contracts

This is an improved version of the guaranteed maximum price contract.

In this type of contract, the target price of the work/finished product is

fixed somewhat below the maximum price.

The contractor is allowed a certain percentage of savings between the

maximum price and the target price.

This works as his incentive.

This type of contract has very often been recommended in cases where
the price is to be determined.
Turnkey Contracts

Some organizations specialize in designing and constructing projects.

Employee signs an agreement with such organizations for planning, design and
construction of the project. This is called a turnkey type of contract.

Such a contract may be made on the basis of the cost plus a fixed fee or cost plus
a percentage of the cost or whatever arrangement is satisfactory to the parties.

Such combined contracts have been advantageously used in industrial projects when
there are specialists in the particular field of endeavor.

In some cases, they even assist in getting the plant into operation in order to see
that everything functions properly.

Under this type of contract, a manufacturer may also undertake to develop the
designs of any piece of equipment and then manufacture it.

The work can be greatly expedited under such contracts as extensive plans and
specifications need not be prepared by the employer. Further , there is no division
of responsibility.
In these contracts, the essential feature is that that the employer does
not employ professional staff to produce the design of the building or
project which he requires.

Either by negotiation, or by outline specifications to tendering

contractors, the employer makes known his requirements and the
contractor produces the design, in the form of drawings, specifications and
sometimes schedule of rates to cover possible variations. Bills are not
usually used in such contracts.

In some cases, the project is of a “mixed package-deal” character, with

external works and foundations under the design control of the employer in
the usual way, possibly with bills of quantities, and the superstructure
provided under an “industrialized buildings” design of the contractor.

The justification for this system advanced by its advocates is, that it
avoids duplication and the expense of design staff, and enables the
contractor, with specialized knowledge of his own techniques, to design so
as to produce maximum economy, and therefore a leaner price, in a way
that an architect or engineer without knowledge of these techniques would
not be able to produce.
Essential requirements of a package-deal contract are :

i) A warranty of suitability, absolute and independent of fault, expressed

to be available for a substantial period of time, but expecting normal
replacement and maintenance of parts of the building which might
reasonably be expected to have a limited life.

ii) The bonding of this obligation by a substantial surety.

iii) A right of the contractor to object, after giving due notice, to any
variation ordered by the employer which might prejudice his suitability /
obligation, but subject to safeguards to prevent frivolous objections.

iv) Where “mixed package-deal” contracts are involved, a warranty by the

contractor extending to the employer’s work as well as the contractor’s
work, subject to safeguards enabling the contractor to object at the time
to the design of suitability of the employer’s work.
v) In the case of industrial buildings, a totally different system of interim
payment is used, since valuation of work done and materials on site which is
the normal basis in traditional contracts cannot be applied as much of the
work done as of site and a suitable method of checking costing is not
available.
vi) The right of a contractor to be permitted to vary the work, if
necessary for purposes of suitability and safety, subject to financial and
other safeguards for the employer.
vii) A list of any parts of the work intended to be excepted from the
contractor’s suitability obligation, including any work or material of
nominated suppliers or sub-contractors which it is thought appropriate to
exclude from it.
viii) A definition of the precise status and rights of the employer’s
architect (if any), engaged in supervising the work and in regard to the
remedying of defects.

Lengthy negotiations may take place and contract work may be commenced
even before the formal contract has been signed. A contract may be
partly oral and partly in writing or it may be concluded by separate
documents or statements indicating offer and acceptance.
The course of negotiations may produce agreement on successive terms
until ultimately a point of time is reached at which the contract is finally
concluded.
Such an agreement may be concluded provided that the parties intension
from the beginning was to enter into a formal contract.

It is, therefore, perfectly possible , at some time prior to the final

conclusion of the contract, to agree on some of its terms either orally or in
written documents or letter, and these other agreements will form part of
and supplement the remainder of the contract documents.

The principle is “where a preliminary contract of any description whether

verbal or written, is intended to be superseded by one of a superior
character then the latter contract prevails, and the stipulation in earlier
one can no longer be relied upon”.
The party putting forward an earlier collateral agreement therefore
undertakes a heavy responsibility to prove because it is presumed that the
parties will take normally more logical course for suitably amending their
main agreement rather than rely on relatively less formal collateral
agreements.
Contractors frequently seek to qualify their tenders or negotiate some
mitigation or alteration of the contract conditions but the contract
documents are often nevertheless signed without alteration.

It goes without saying that positive agreements – not mere requests,

statements or contentions which are ignore – must be shown in order to
overcome the presumption that the later document supersedes earlier
discussions, negotiations or agreements.
Letter of acceptance, work order or other letters

Subject to clause the employer will award the contract to the bidder
whose bid has been determined to be substantially responsive to the bid
document and who has offered the lowest evaluated bid price provided
that such bidder has been determined to be qualified to perform the
contract satisfactorily.

This is ascertained by a comparative statement prepared after the tender

opening.

Prior to the expiration of the bid validity prescribed by the employer, the
employer will issue a letter of acceptance (LOA) to the successful bidder
containing reference of the document which forms the contract, scope of
work, contract price, scheduled period of completion of work, terms of
payment, price variation and other important accepts in consideration of
the execution and completion of the works and the remedying of any
defects therein by the contractors as prescribed by the contract.

This letter of acceptance (Form 5) will constitute the formation of

contract.
Form of Contract

Though contract is a mutual relationship, works departments normally

prepare and standardize certain formats of contracts for dealing with
engineering services and works.

All the terms and conditions of contracts are prescribed in these standard
form contracts.

And the contractor who comes forward to take up these works have to
agree and abide by these conditions of contract.

This portion of the bid document consists of Form of Agreement (Form

No. 7), Form of Bid (Form No. 6), Standard Clauses of contract (Annexure
II), Form of Bank guarantee (Form No. 8), and the terms of conditions of
contracts based on which the contract agreement is to be signed.

While attaching these agreement forms, as part of the bid document they
should be critically reviewed, for each of the clause in the agreement
form.
On receipt of LOA, the contractor should submit a letter giving his
confirmation of acceptance of contract and also submit the bid security
deposit along with this letter of confirmation which is called as Form of
Bid (Form No. 6).

This is a legal document to confirm the undertakings entered into between

and the contractor for the execution of the works in accordance with the
other contract documents.

The form should be referred to in the tender documents, to make clear

the wordings on which the tender is based.
FORM OF SECURITIES
The bidder shall furnish, as part of his bid form, securities such as, bid
security (Bank guarantee) (Form No. 8), performance bank guarantee
(Form No. 9) and bank guarantee for advanced payment (Form No. 10).

Bid Security (Bank Guarantee)

Whenever the contractor lodges with the department a security deposit in

the form of bank guarantee a separate and independent contract comes
into existence between the bank and the owner/employer.

This contract will have no relation to the original works contract signed
between the contractor and the owner/employer.

Security Deposit shall consist of two parts; a) Performance Guarantee to

be submitted at award of work, and b) Retention money to be recovered
from Running Bills.

Performance Guarantee should be 5% of Contract amount and should be

submitted as Bank Guarantee, Government Securities, FDR or any other
form of deposit stipulated by the Owner, within 28 days of receipt of
letter of acceptance.
Retention Money should be deducted at 5% from Running Bills. Total of
Performance Guarantee & Retention Money should not exceed 10% of
Contract amount or lesser sum indicated in the bid document.

5% Performance Guarantee should be refunded within 14 days of the issue

of the defect liability Certificate (taking over Certificate with a list of
defects). Retention money should be refunded after issue of No. Defects
Certificate. This balance amount can be substituted by “on demand” Bank
Guarantee.

In case there are disputes and issues relating to original contracts then
the bank is liable to make the payment of the guarantee amount
immediately on demand of the owner/employer.

In simple terms, a bank guarantee is defined as an accessory contract,

whereby the promisor undertakes to be answerable to the promisee for
the debt, default or miscarriage of another person, whose primary liability
to the promisee must exist or be contemplated.
Performance Bank Guarantee

Immediately after the acceptance is communicated to the contractor and

within a specific period of time which is normally 28 days, the contractor
has to pay the security deposit towards the security performance and
execute the contract agreement.

As per the normal procedure a contractor has to give a security of

performance to the extend of 5 to 10 % of the estimated amount put to
tender.

However in most of the contract which are executed as a part of the

internationally aided project the amount of security deposit is kept as 10
% and rest of the cases it basically kept as 5%.

Half of the amount has to be paid in the form of fixed deposit receipt
pledged in the name of the owner/employer at the time of signing of the
contract.
Nowadays, in most of public sector contracts, half of the amount is
committed in the form of an irrevocable bank guarantee issued by a
scheduled commercial bank.

The remaining half of the total amount of the security deposit is deducted
from the running account bills which are paid to the contractor.
Bank Guarantee for Advanced Payment

Certain advances can be paid to the contractor, if the condition of

contract specifically provide for such advances.

These advances are

Mobilization Advance,
Advance for Plants, Machinery, Equipments etc,
Secured Advanced against Security of Materials brought on Site and work
actually done but not measured,
Mobilization Advance

can be granted to the contractor to facilitated him to mobilize the

commencement of work including establishing a site, camp/office and
bringing on site, machineries, equipments and construction of approach
road to the site of work.

This advance can normally be granted to the extent of 10% of the

estimated cost put to tender, payable in two equal installments. The first
installment should be paid after mobilisation has started and next
installment should be paid after satisfactory utilisation of earlier advance

In the standard form contracts such advance is admissible to be paid for

works which are costing over _40lacks.( govt. of Gujarat)

This advance has to be treated as an interest bearing loan to the

contractor

The advance shall carry simple interest at a rate prescribed in the tender
document. (12%)
The responsibility of the contractor for repayment of the advance is
absolute and not dependent upon the completion

The advance can be granted on the production of an irrevocable bank

guarantee for the amount of advance

Recovery of Mobilisation and Construction Equipment advance should start

when15% of the work is executed and recovery of total advance should be
complete by the time 80% of the original Contract price is executed.
Advance against Machineries, Equipments etc:

Advance payments can be made to the contractor for financing

procurement of plants and machineries for executing the contracted work.

Grant of such advance is normally governed by the following terms of

contract.

Advance is admissible for works costing for more than Rs. 10 lacks.

Advance shall be granted against the security of the plants and machinery
brought on site and on hypothecation to the owner.

Advance shall be limited to 5% of the estimated cost put to tender,

limited
to 90% of assessed cost of machinery

The advance shall carry simple interest at a rate prescribed in the tender
document.
Advance is granted on the basis of executing a deed of hypothecation.

Construction Equipment advances should be paid in two or more

installments.

First installment should be paid after Construction Equipment has arrived

at the site and next installments should be paid after satisfactory
utilisation of earlier advance
Secured Advanced

is an advance given to contractor against materials brought on site for

used in a finished item of a works contract.

The Advance is granted towards the security of material brought on sites.

Advance is granted for an amount equivalent to the 75% of the actual
purchase value of the materials.

Secured advance has to be recovered within a period of three months from

the month in which the advance is granted.

Secured advance is granted on signing of the indenture bond.

This advance is admissible for materials brought on site which is of

imperishable in nature.

Materials which are perishable in nature should be adequately insured.

Work actually done but not measured:

Sometimes a contractor carries a part work of the works, detailed

measurements of which are not taken and recorded but the contractor
request for the bill.

In such as even the contractor can be paid an advance for work done but
not measured to the extent of 80 % of the value of work as assessed and
certified by the engineer in charge.

This advance has to be recovered from the next monthly bill, based on
detailed measurement.
Condition of Contract including condition of particular
application
General Conditions of Contract provide a complete framework for
preparation of the contract documents.

“Conditions of Contract” for works of civil engineering construction part I,

GCC addition 1987, reprinted in 1992 with further amendment of FIDIC
shall be the conditions of contract for this package.

Wherever “Conditions of Contract”/General Conditions of Contract have

been referred in the bid, it shall mean the above said document.

The bidder is required to procure this document himself from the

concerned authorities when a contract is been offered to him.

Standard Contract clauses are the basic clauses which provide the
structure for a contract between two parties for carrying out specific
activities in a desired manner.
List of materials, if any, agreed to be supplied to the
contractor by the owner, and the condition of supply

If the tender mentions that the client would supply cement, steel or any
other material at the basic rate, that he has to supply the same in time and
as per the work program without jeopardizing the interest of the
contractor (delays would result in idle labour and machinery)
Bill of Quantities
All engineering works consists of various items of work. For example, a civil
engineering work of construction of a building consists of Items like
excavation for foundation, masonry, roof, doors etc.

Bill of quantities is a statement of different items of work, labour and

materials which the engineer or the employer has estimated to be requiring
for doing the proposed work.

The Bill of quantities is of utmost importance to the tendered, since in

most cases, they form part of the contract, and constitute the exact
measures of the work done.

This schedule is also the basis for the comparison and valuation of
variation in work quantities.

Schedule of quantities normally includes the list of items of work to be

executed, quantities to be executed and specific and unambiguous
description of work item.

The bill of Quantities should be read in conjunction with the instruction to

bidder, condition of contract, specification, and drawings.
Specifications: General and detailed

It is essential and important to include the engineering specifications of

each of the work Items mentioned in the schedule of quantities.

The specifications should be brief, but clear enough to specify the manner
in which the work is to be done.

Specification should not be ambiguous and should not give double meaning.
Before drafting the detail technical specifications, the total scope of each
of the work item and its essential technical requirement should be clearly
visualized.

Some organizations have standardized these specifications of all the

standard work items and printed versions are kept ready.

While inviting tenders these printed booklets are attached with the
tender document.

It is essential to give a statement containing reference number of the

standard booklet, so as to very clearly specify which of the standard
specification will be applicable to each item of the BOQ.
In General specifications,
nature and class of works, names of materials and proportions that should
be used in the various items of works are described.

Only a brief description of each and every item is given. It is useful for
estimating the project.
The detail specifications form a part of the contract document.

Detail specification for a particular Item specify the qualities, quantities

and proportions of material and the method of preparation and execution
for that particular item of work in a project.

Detail specifications of the different item of works are prepared

separately and they describe what the work should be and how they shall
be executed and constructed.

Physical, chemical and electrical tests if any, required for the finished
work to ensure the desire strength or quality are specified in the detailed
specifications.

The type of machinery, equipments and special tools and plants, method of
operation when involved during execution are described during detailed
specifications.

The method and duration of protection of finished work are also specified
and also specify the involvement and responsibility for auxiliary works,
incidental damages etc. during execution of the original work.
While writing the detailed specifications the same order of sequence, as
the work is to be carried out, is maintained.

Generally, CPWD, PWD, MES, Irrigation and Water ways, Railway

Departments etc. have their own departmental standard specification.
Drawings
Complete set of drawings should be issued along with other tender
document, so as to form as part of the agreement.

Drawings to be followed for actual execution of work should bear the

stamp good for construction.

Any revision of working drawing should be indicated by prefixing R1, R2

etc. after original reference Nos. Reasons for each revision should be
clearly noted in the drawing.

The following drawings are attached.

An index plan indicating the site and location of the work
The plan showing the outline of the work with the basic governing
dimensions to a structure.
A plan, elevation and a cross sectional view should invariably be given.
These drawings should be properly uniformly and dimensions as per the
prescribed bureau of Indian standard specifications and should be
prepared in a manner so as to make it possible for the contractor to
visualize the scope of work by way of a simple reading of a drawing.

The drawings should also be prepared in a way so that the quantities of

work mentioned in the schedule of quantities match with the details of the
drawings and it represents a true and complete description of the work to
be undertaken by the contractor when read along with the specifications
of the work.
General Conditions of contract contain following-

Definitions and interpretations, language and law, engineers

decision and delegation, communication, other contractors,
personnel, employers and contractors risks, insurance, site
investigation reports, queries about the data,
Completion date, safety, discoveries, possession of site, access
to the site, instructions, disputes, time control, schedule of
works, extension of time, management meetings, quality
control, tests, identifying defects, correction of defects, cost
control, bill of quantities, variations, cash flow forecasts,
payment certificates, payments, compensation events, taxes,
price adjustments, retention, bonus, advance payments,
securities, day works, finishing the contract, completion,
taking over, final account, o & m, termination, release from
performance.
Special conditions of contract generally contain following-

Labor, compliance with labor regulations such as workmen

compensation act 1923, payment of gratuity act 1972,
employees P.F. and misc. provision act 1952, maternity benefit
act 1951,contract labor act 1970, minimum wages act 1948,
payment of wages act 1936, equal remuneration act 1979,
payment of bonus act 1965, industrial disputes act 1947,
industrial employment act 1946, trade union act 1926, child
labor act 1986, interstate migrant workmen’s act 1979,
building and other construction workers act 1996 and cess act
1996, sub-contracting, arbitration, protection of environment.
Specifications for civil works contain following-
Additional conditions and specifications-

Water supply and electrical supply for construction, mode of

measurement, extra items, no payment for setting out,
surveys, access to the site, canteen facility, telephones, work
samples, testing laboratory equipments, work program,
hoardings, order of standards to be referred, temporary
structure, daily report, lifts and lead, handing over of site.
Additional specifications-
Pre construction chemical treatment and guarantees, concrete
works, working in extreme weather, finishing, construction
joints, aluminium work, gypsum board false ceiling,
polyethylene storage tanks, manhole lid, glass shelf, mirror,
technical specifications for electrification, Approved list of
manufacturers
Forms of securities, bid security (bank guarantee),
performance bank guarantee, bank guarantee for advance
payment.

The requirement as mentioned above can be priced in terms of

a lump sum amount, item rate, cost plus percentage, concession
period for BOT projects.
Sound tender document always protects interests of the
employer at the same time gives equal opportunity to the
performer.
Since the employer depends upon the performers expertise,
financial and managerial capabilities, manpower and equipment
for fulfilling his requirement, a consciously planned tender
document covering details of work, techno-commercial
conditions, ways and means for smooth execution of
work/activity and remedy in case of variations, delays and
disputes.
METHODS OF BIDDING

Single-stage Single-envelope
Single-stage Two-envelope
Two stage Single envelope
Two-stage Two-envelope.
Prequalification.
Single-stage Single-envelope

The single-stage single-envelope is the most common method of

procurement.

A purchaser invites bids indicating the kind of goods required.

The bidders submit bids stating prices, quality and performance

characteristics of goods offered and commercial terms for the sale of
goods.

There is no prequalification, the bidding document spells out the

qualification criteria for bidders.

This method has the advantage of simplicity.

Bids are invited quickly and a decision taken promptly.

This method is normally used for standardised goods, when specifications

and performance characteristics are known.
The simplicity of this method and a good working knowledge of it are not
of much help in the procurement of specialised goods, or complex works.

In the procurement of readily available goods, it is easier to purchase the

goods from the market if a supplier fails in fulfilling its commitments.

Contracts for specialised goods or complex works take a longer time to

complete and call for a detailed analysis of the financial implications of
their long-term use.

Their stakes are comparatively higher not only in the amounts involved, but
also in the long-term implications of the terms of contract, and the
viability of projects.

The single-stage single-envelope system does not seem suitable for

specialised equipments.

The need to assess a bidder's competence carefully is also essential to a

buyer.
Single-stage Two-envelope

In the single-stage two-envelope method a purchaser asks the prospective

bidders to submit bids in two envelopes.

One envelope contains the technical specifications and performance

parameters of the goods to be purchased or the plant or equipment to be
installed.
It also spells out the qualification criteria for bidders, and all the other
commercial terms except the price bid.

The second envelope contains the price details.

The bidders submit both the envelopes to the buyer at the same time.

The purchaser first opens the technical envelopes of all the bidders.

It critically analyses the technical competence of bidders, their financial

viability, and their track record in fulfilling obligations under contracts in
time. In addition, the goods offered are evaluated with reference to the
bidding documents to see if these fulfil the purpose of purchase.
Those bidders who pass the test of offering goods of acceptable quality
and who have the technical competence and financial resources to fulfil
their commitments are selected.

The other bidders are excluded from the competition; their second
envelopes containing the price bids are returned to them unopened.

To open such envelopes is fraught with risk, particularly for a Government

organisation. The reason is that if a bid is technically unsuitable, then
there is no justification for opening the price envelope.

If the price envelope is opened to find the price and use it as a lever to
make other bidders reduce their prices, then it is a faulty reason.

The affected party may argue that its bid was technically sound,
otherwise, there is no valid reason to open the price envelope.

There is no good reason to compare the price of unsuitable goods with

those of suitable goods.
In GOI, the unopened bids are not returned, but destroyed after one year.

This is not a healthy practice, especially since retaining such unopened bids
serves no purpose.

Instead, there is a temptation, and sometimes pressure from influential

quarters' to have at least a look at the price bids.

A review of technical specifications may result in a change of

specifications.

Then the bidders agreeing to the change should be asked to submit their
revised price bids, if they so wish.

All the price bids are opened at the same time.

The suppliers use their persuasive powers to convince a buyer that their
bids are technically responsive.

Every bidder is keen to ensure that it gets a fair chance to prove the
quality of its product. This system has been working well in India for
projects or equipment of medium complexity.
The single-stage two-envelope system is not followed when technical
specifications are not clear and there is a need for detailed consultations
with suppliers.

The WB no longer follows this system which otherwise works satisfactorily

in different countries.

It found discretion the better part of valour when it had to deal with a
large number of protests from bidders’ who when disqualified on technical
grounds demanded that a combined view of technical and financial bids be
taken.
Two stage single envelope

This type of procedure is adopted in large and complex contracts where

technically unequal proposals are likely to be encountered or where the
purchaser is aware of its options in the market but, for a given set of
performance requirements, there are two or more equally acceptable
technical solutions available to the purchaser.
At first bidder shall submit only technical proposals without prices
Technical details are discussed between the bidders and the technical
solution for the work is finally agreed to.
At second stage bidders are given a choice to revise and submit price
proposal to confirm to the standards agreed along with the revised
technical proposal
Two-stage Two-envelope

The two-stage two-envelope method first asks the bidders to send

envelopes with the technical specifications of goods their performance
characteristics, evidence of technical competence and financial soundness
of the bidder.

The qualification criteria for the bidders and other commercial terms of
bids except the price.

This is called the first stage.

It is used to qualify the bidders before asking them for price bids.

This method is followed in the WB and the ADB for the complex projects
and equipment.

In the first stage, the purchaser discusses with the bidders details of the
specifications and the performance data.

The purchaser also satisfies itself about the comparative consumption of

raw materials, power and fuel.
It also gets an opportunity to know the latest developments in technology
and what the market has to offer.

Based on this, the buyer finalises specifications performance

characteristics required and the methods of adjusting the price bid for
minor deviations.

It also decides on the technical and financial competence of the bidders

and selects the suitable bidders.

The selected bidders are then asked to submit their price bids including
commercial terms.

This method helps in selecting competent suppliers, capable of supplying

the goods required.
Prequalification
The prequalification method is used to first decide the competence of
bidders before asking them to bid.

Prequalification is now compulsory for works contracts in WB and ADB

aided projects of large values.

The prequalification method is different from the two-stage two-envelope

bidding method. It is used when specifications of tasks performed are
fairly well known.

Civil works are an example. Even in complex works the purchaser wants to
shortlist competent contractors.

In India, there is a system of registration of contractors for civil works.

Public Works Department (PWD) of the GOI and the State Governments,
the Indian Railways. Post and Telegraph Department and Defence
Departments regularly register contractors for different classes of civil
works. The contractors are classified with reference to the monetary
value of works for which they may bid.
Registration Categories
Class Amount of Min. Reg. Annual Estimated Authori EMD for
max work Solvency Fee .Turnover cost of work ty obtaining
which can be Rs. average in hand exemption
taken of last during
3years current year
I Without limit 30 lacks 300/- Rs. 75 Rs. 1.5 cr. Secret 2 lacks
lacks ary
II 300 lacks 15 lacks 300/- Rs. 50 Rs.1.00 cr. Secret 1 lack
lacks ary
III 100 lacks 5 lacks 150/- 25 lacks 50 lacks C.E. 75000/-

IV 50 lacks 2.5 lacks 150/- 15 lacks 30 lacks C.E. 50000/-

IVA 30 lacks 1.5 lacks 100/- 10 lacks 20 lacks S.E. 40000/-

V 15lacks 0.75 100/- 5 lacks 10 lacks S.E. 30000/-

lacks
VI 5 lacks 0.5 lacks 100/- 2 lacks 4 lacks S.E. 20000/-

VII 2 lacks 0.2 lacks 50/- 0.5 lacks 1 lack E.E Not
applicable
VIII 1 lack 0.1 lack 25/- 0.25 lacks 0.5 lack E.E. N.A.

IX 0.5 lacks 0.05 25/- 0.15 lacks 0.25 lacks E.E. N.A.
lacks
The classification or registration of contractors has an advantage. A large
group of competent bidders becomes available to generate a competitive
environment.

Disadvantage
There is no way of disqualifying a contractor who has not completed any
works during the last three or four years.

In theory, any newcomer may claim to possess competence to execute

complex and intricate civil works.

However, a bidder not able to show its competence by way of works

already executed may be rightly excluded.

Generally, persons who have done similar works, though of a somewhat

lesser value are also considered,

A newcomer may enter into joint ventures with other experts and bid.
Moreover, large sums of moneys and the viability of projects cannot be
gambled on to provide a chance to a newcomer.
One advantage of prequalification is that it is specific to each project.

There is no preference given to a contractor who is already a registered

contractor with the Public Works Department of the government.

For WB and ADB contracts, every firm is eligible to compete for the pre-
qualifying test.

A new contractor should aim to qualify for large WB and ADB by planning
ahead for future years.
For registration of class-I contractors, turn over be taken as 4.5 times
minimum or 3 times maximum for 3 to 5 years which ever is higher as
mentioned in the latest income tax certificate produced by contractor
shall be considered.

Verification of income tax clearance certificate be done separately from

concerned income tax office. Proposal shall not be considered for
registration till the verification of income tax certificate from concerned
office.

In case of private works executed / in hand, if certified by licensed

Architect or Chartered Engineers, 50% of the estimated cost of these
works shall be considered while working out Annual turnover.

For registration of contractors from Class-I to Class-V the contractor

should have his own minimum machinery as mentioned below. Documentary
proof regarding ownership of machinery shall be produced by the
contractor while submitting proposal.
 Contractor should have set of machinery of any one group as
mentioned below.
Details of Machinery Class- 1/2/3 Class- 4/4A Class-5

Group-1      
Trucks / Tipper / Tractor-Trolly. 4 3 2

Concrete Mixer. 3 2 1
Vibrator 3 2 1
5 H.P. Pump. 2 1 1
Centering Material. 500 Sqm. 300 Sqm. 100 Sqm.
Mechanical Hoist 1 Set. - -
       
Group-2      
Trucks / Tipper / Tractor-Trolly. 10 6 2

Excavator 2 1 -
Road Roller. (DRR) 2 1 1
Vibratory Roller 1 - -
Water Tanker. 2 1 1
Air Compressor. 2 1 -
Concrete Mixer. 2 1 1
Vibrator 2 1 1
Group-3      
Trucks / Tipper / Tractor-Trolly. 6 3 2

Road Roller. (DRR) 2 1 1

Vibratory Roller 1 - -
Asphalt Mixer and Boiler. 1 1 1
Drum Mix Plant. 1 - -
Sensor Paver Finisher. 1 - -
Mechanical Asphalt Spryer. 1 - -

Concrete Mixer. 1 1 1
Vibrator 1 1 1
Additional Useful Information
1) A register containing names and the addresses of the Registered
Contractors shall be maintained by the Registering Authorities and the
Registration Sanctioning Authorities. Such consolidated list shall be
circulated by Registering Authorities to all Public Works and Irrigation
Division once in a year for the first time and subsequently the list of
contractors added or deleted from the list should only be circulated from
the next year.

2) The name of contractor who has not tendered for any work and who has
tendered but failed to secure any contract of the Government or  Semi-
Government bodies, local bodies or registered co-operatives during the
period of five years from the date of registration/renewal, should be
removed from the register of approved contractors.

3) In order to facilitate scrutiny by the registering authority, the

contractors shall submit by 30th of April every year to the registering
authority concerned an annul return ending March every year in the form
prescribed  with the remarks regarding his performance from the
Executive Engineers in whose Division the contractor has
tendered/executed works shown in the return.
4) It is likely that some contractors may omit some works from annual
return, where there performance is not satisfactory.

The Executive Engineer concerned should ensure that whenever it is

observed that the performance of contractor is not satisfactory and some
action towards his down grading or removal from a particular category is
necessary he shall report the matter directly to the registration/renewal
Sanction authority with full justification for taking necessary action
against the contractor.

5) If the contractor, whose name has been removed, desires to take up

contracts subsequently, he should apply for re-enrolment along with all
prescribed documents with payment if prescribed fees. Such application
shall be considered on its merit.
6) The contractor may, if he so desires, deposit the amount as per scale
prescribed below with Government and secure exemption from the payment
of earnest money after executing the necessary bond and a copy of which
should be submitted to Government record.

The original shall be preserved carefully in the Office of the registering

authority.

After executing necessary bond, the Executive Engineer shall issue

necessary exemption certificate to the contractor registered in a
particular category for the period up to which his registration is valid.

This will exempt the contractor from payment of earnest money with each
individual tender if he produces a copy of bond and certificate before the
local officer whenever he tenders for works and seeks exemption
  

A. General Works
Category Capable of Executing    Work Earnest Money Deposit for Remarks
of  Value Obtaining Exemption

  Class-1   Without Limit   Rs. 5.00 lakhs -

  Class-2   Rs. 750 lakhs    Rs. 3.50 lakhs -

  Class-3   Rs. 300 lakhs   Rs. 3.00 lakhs -

  Class-4   Rs. 150 lakhs   Rs. 2.00 lakhs -

  Class-4a   Rs.   90 lakhs   Rs. 1.50 lakhs -

  Class-5   Rs.   50 lakhs   Rs. 1.25 lakhs -

  Class-6   Rs.   15  lakhs   Rs. 1.00 lakhs -

  Class-7   Rs.      7 lakhs   -

  Class-8   Rs.      3 lakhs   -

  Class-9   Rs.      2 lakhs   -

 
This deposit may be in the form of National Saving Certificate or interest
bearing securities postal savings/bank pass-book, etc. Duly pledged for
part or whole and will not be convertible to security deposit.

The Executive Engineers in-charge of work shall report telegraphically to

the executive engineers who has issued exemption certificate when any
earnest money is forfeited and the contractor shall make up that amount
within ten days from the notice. In case of failure to do so his registration
shall stand cancelled and this fact shall be circulated to all the officers of
the Public Works Department/ Irrigation Department and other concerned
Department.

The exemption certificate once issued to the contractor, registered in a

particular class will be valid up to the validity period of that registration.
If the registration is renewed, fresh exemption certificate from payment
of earnest money with each tender may be issued to the contractor for
renewed period of registration. The refund of lump sum amount of Earnest
Money deposit if applied for by the contractor shall not be made prior to
its validity period.
The contractor, upgaraded to higher category is not entitled to avail the
concession payment of earnest money unless he makes payment of balance
amount of deposit required for the new category and obtain fresh
exemption certificate.

The amount of deposit when received in cash is creditable to the head

"8336-Civil Deposit, P.W. Deposit".

The work of registration of contractors or their removal or Down

gradation will be done by incharge of territorial Public Works Divisions at
Executive engineer’s level, Public Works Circle Superintendent Engineer’s
level, Public Works Region at Chief Engineer’s level and Public Works
Department, Mantralaya at Secretary’s level.

7) Any contractor whose registration is rejected, cancelled or downgraded

by an officer is competent to do so, may appeal against the orders to the
Secretaries’ Committee at Mantralaya consisting of secretary, Irrigation
Department & Secretary, Public Works Department.
8) A contractor registered in one division shall be allowed to tender for
works in other division provided he produces a certificate of registration
or renewal there of from the original division that he is a registered
contractor in that Division and certificate is valid at the time of issue of
tender forms.

9) If some of the partners of any registered firm desire to float a new

firm and apply for registration by seeking benefit of experience gained and
annual turnover by virtue of their being the partners in that firm having
some percentage share to their credit, such benefit equivalent to their
share can be granted to the newly floated firm for registration in
appropriate class provided they retire from the First firm and produce
retirement deed along with other required document to the registering
authority.

It should be further be verified that the classification of original firm

does not get adversely affected as a result of withdrawal of a major
partner. If any partner who desires to join another Company without
retiring from original Company can be permitted subject to condition that
he will not claim his experience gained for registration of this new
Company.
10) For Registration of contractors from the other states all the
documents and certificates of work done, solvency certificate etc. shall be
sent to the concerned department of the other state for verification and
certification and proposal shall be forwarded to Registration Sanctioning
Authority after getting conformation report.

No contractor may be registered or his registration renewed / Up-graded

unless he has registered office in the state of Maharashtra and without
full inquiry as to his stability in regard to – a. Financial status supported by
a certificate of solvency obtained from the collector of  the District /
S.D.O. of concerned district or a banker’s Solvency certificate. Banker’s
Solvency Certificate should be obtained in the following form :

" This is to certify that to the best of our knowledge and information
M/s / Shri ----------------------- a   customer of our Bank is
respectable and can be treated as good for any engagement upto Limit
Rs.   (Rs. In words)"
This certificate is issued without any guarantee or responsibility on the
bank or any of its officer"      

i.  A solvency certificate shall not be accepted for the purpose of

registration more than twelve months after the date on which it was
granted.
    
 ii.  A Bankers certificate which bring out the financial soundness of the
contractor to the extend required for  relevant category shall be
accepted.     

iii.  A solvency certificate in the name of a firm need not be insisted upon
if such a certificate  for the required   amount in the name of one or more
partners, is forth coming and it is  made clear   in the partnership deed
that all partners are jointly and severally responsible to meet all liabilities
over and above the business of firm.
iv  A solvency Certificate issued by the Revenue Department and produced
by the contractor from  outside Maharashtra State can be accepted for
the above purpose. However solvency certificate issued by a Bank from a
Branch of a Scheduled Bank located in Maharashtra only shall be accepted.
    

v. The contractor shall produce Sales Tax Registration Certificate in Form

II, Rule 4(1) as provided by Maharashtra State Sales Tax Act
(Maharashtra Act No.XXVI of 1989. The Maharashtra Sales Tax on
transfer of  property in goods involved in execution of Works Contract
(Reenacted) Act 1989 ) from the Sales Tax Department of Maharashtra
State.
Registration Procedure

A) Initial Registration
(a) For the registration, the contractor shall submit an application in the
form given.  to the registration authority. The contractor shall produce
the following documents along with his application.

(1) Solvency Certificate of an appropriate amount

2. Professional capacity and reliability supported by certificates or
recommendations of officers who have had personal knowledge of the
applicant and his work The concerned officers should ask the contractors
to produce the list of works together with the information in the proforma
given blew supported by the original or attested copies of certificates
from the concerned departmental authorities in respect of works carried
out and works in progress in proforma along with performance certificate.

Sr No Name Amount of work Date & year   Amount spent during ) Amount of work Remarks
of Works put to tender of commencement each of last yeas till remaining to be executed
(preceding year of application
3.Upto-date income tax clearance certificate
.
4.List of technical personnel employed by contractors with their
qualification and experience. The minimun inputs by contractor as far as
technical personnel to be engged by the contractor will be as follow:

General Works
Class I & Class II

Two graduates in Civil Engineering or equivalent four diploma holders  in

civil Engineering and six Civil Eng. assistants Trained in I.T.I.or equivalent;
min 50% of the staff in each category should have minimum experience of
5 yrs in execution of  construction work.

Class-III & Class IV

One graduates in Civil Eng. or equivalent one diploma holder in civil
Engineering and two Civil Eng. assistant Trained in I.T.I. or its equivalent
course.

Class-IV-A& Class V
One diploma holder in civil Engineering and one Civil Eng. assistants Trained
in I.T.I..
5. List Of Machinery owned by contractors with its present condition and
location.

6. Attested copy of partnership or Articles and Memorandum of

Association or Affidavit on stamp paper in case the individual is sole
proprietor of the firm.

7. Undertaking(in case of applicant for class I and class II )

for  employment of two unemployed engineers who have passed form state
of Maharashtra from 1967 onwords.

8. Attested photos of all the partners/directors/individual.

9. Attested copies of sales tax registration certificate.

10. Attested copies of electrical licences.

11. Attested copies of Professional  tax certificate for appropriate class

only while Registration and Reneval.

12. Attested copies of Registration under employees Provident Fund Acts.

13. Affidavit stating that contractor is not Blacklisted in any other
Government/Semi Government Orginazation.

14. List of Technical staff in prescribed format.

B) Registration for Retired Engineers

The retired engineers or resigned engineers from Government of

Maharashtra or any Maharashtra Government Undertaking / Board of the
categories of Executive Engineer and above shall be eligible for granting
direct registration in Class V while the engineers at lower level will be
enrolled in Class VI of the revised category of general work as well as in
Class C and D category of Electrical works respectively. This concession
may however, not be granted to person who were compulsorily retired by
way of punishment and with unsatisfactory record of service.

The resigned engineer of State Government (Junior Engineer and above)

may be given registration only in Class VII if they resign with less than
five years experience.
Intending engineers will have to fulfill the conditions of solvency
certificate, security deposit, Earnest money etc. as in the case of other
contractors. They are however exempted in respect of requirement of
average annual turnover and works in hand at the time of first registration.
This concession may be granted to those who apply for registration within
five years from the date of their retirement/ resignation. Registration
may not be permitted for the first 2 years after the retirement/
resignation except with the permission of Government, for Engineers of
the category of Executive Engineers and above.

A retired member of the Armed Forces desirous of starting business as an

approved contractor may be registered in Class VII or below on obtaining
from him a simple application supported by a certificate of his having
served in the Armed Forces and solvency certificate along with
registration fees.
C) Upgradation

The contractors who desire upgradation in the higher class should submit
their applications in the same form which is used for initial registration
along with fresh solvency certificate and all other documents as mentioned
in the registration procedure to registering authority and pay fresh
registration fee. The registering authority should submit these proposals
directly to the Registration Sanctioning Authority.

Upgradation form one class to another should be made on merits by the

authority competent to do so taking into account the cost of works in hand
and the annual average turnover, technical personal as per the
requirements for initial registration.

Subsequent to the registration in a particular category, application for

upgradation to a higher category should be considered only if the
contractor has carried out at least one sizable work of the Government or
of Semi-Government bodies, such as MHADA, MSEB, MIDC, CIDCO, etc.
or local bodies, registered co-operatives or public limited companies where
the value of each work is more than the maximum limit of the lower
category in which the contractor is seeking registration.
The contractor’s upgradation to higher category should not be normally
considered within first two years of his registration. The contractor
should prove his capacity by executing sizable work as mentioned in his
existing category during this period before applying for upgradation.
However, the registering authority after considering the merit of
individual case may consider relaxation of the limit of 2 years in deserving
cases if all other criteria are satisfied.

While applying for renewal of registration for Class-I to V, the contractor

should satisfy the registering authority that he has continuously employed
Engineers as per prescribed in Rule.
D) Renewal

1) For the renewal of registration, contractors shall submit their

application in prescribed form along with fresh solvency certificate issued
not earlier than one month prior to the date of application and all other
documents mentioned in the registration procedure to the concerned
Executive Engineer, three months prior to expiry of the validity and shall
pay prescribed registration fee. The Executive Engineer should submit the
proposal of renewal of registration directly to the authority competent to
sanction registration/ renewals. It should be ensured that all the
necessary document are submitted along with the proposals.

2) While recommending the proposal, it should be examined that the

contractor has executed at least one sizable work of the Government or
Semi Government bodies such as MHADA, MSEB, MIDC, & CIDCO etc.
Local bodies and registered co-operative has fulfilled the requirement of
Annul Turnover and cost of works in hand. Cost of the sizable work should
be more than the top limit of lower, but one class as compared to the class
in which contractor is seeking renewal. While doing so turnover shall appear
in the Income tax clearance certificate.
3) The contractor’s performance certificate should be considered before
granting sanction to renewal of registration.

4) The renewal of registration if granted by the competent authority will

be valid for a further period up to 5 years and the concerned Executive
Engineer should issue renewal certificate to the contractor on payment of
balance of registration fees.

5) In order to avoid delays, the contractors shall apply for upgradation and
renewal of their registration separately.

6) If the contractor has applied for renewal of his registration three

months prior to the expiry of his registration and in case the renewal is
delayed in processing, then the already eligible contractors may be allowed
to tender for works by extending validity of the registration by 180 days
by the Executive Engineer issuing registration. This period will not be
extended further in any case.

7) If any contractor fails for renewal of his registration in time as per (i)
above, his registration should be treated as canceled. He shall have to
apply for registration.