Contract management and tendering process-

Contract management
A contract is an agreement between two or more parties which is enforceable by law. This
agreement may be for selling or buying any commodity, burrowing or spending money,
using or hiring any property, or construction of the facility or rendering any service. All
contract are governed by Indian contract act 1872.
Elements of contract-
1- Mutual agreement- there should be mutual agreement between both the parties.
2- Lawful consideration- It includes set of promises which both the parties have agreed
upon, which may contain few exception to the law.
3- Lawful object- The proposal and the object of the agreement must be lawful. The
object must not be illegal, immoral or opposed to public policy.
4- Competent contracting parties- The parties entering into the agreement must be
competent, i.e. not disqualified either by infancy of insanity or by other special
qualification by personal law.

Contractual approach-
1- Traditional build-only contracts-
Traditionally, the construction management process follows a sequential approach.
It starts with procuring of facility and then design finalisation.
2- Design and build contracts-
These contract include design, construction and commissioning of the proposed
facility.
3- Build-own transfer(BOT) contracts-
In this contract, design and drawing are provided by the client to the contractor and
is viewed by the client as time consuming, capital intensive and risky, especially for
high cost infrastructure projects.
4- Organisational approach- The construction work can also be executed using contract
and departmental mix.
Contract documents-
The implementation of a construction contract between the owner and the contractor
requires certain written legal formalities. These are the form of written documents. The
specification together with the contract drawing and the bid documents, constitute the
contract documents.
The contract document is prepared by the purchaser/engineer in as detail and clear manner.
The content of typical contract document include the following-
1- Letter inviting tender.
2- Form of agreement.
 3- General condition of contract.
4- Special conditions of contract.
5- Technical specification.
6- Contract drawing.
7- Bill of qualities and client’s standard schedule of rates.

What is notice inviting tender (NIT)-

Issue of NIT is the formal start of tendering process. Through NIT, the client seeks to
inform eligible contractors about the requirement of certain work. NIT has following
information-

 Details of tender inviting authority.

 Name/brief description of work including location.
 Estimated cost of work
 Time allowed for completion of work
 Eligibility criteria for contractors
Contract types-
Because no single form of agreement contract fits every situation or project, companies
normally perform work under a wide variety of contractual arrangements, such as:
Fixed price or lump sum.
Fixed price with escalation price adjustment
Fixed price with incentive targets
Cost-plus percentage fee
Cost plus fixed fee
Cost plus guaranteed maximum and shared savings
1- Fixed price lump sum contracts- In a lump sum contract, the contractor undertakes
to construct the tendered works at a fixed price. The adjustment for deviation and
omissions ordered by the owner according to the terms of contracts are paid as
extra. The lump-sum contract are based on the tender document which include time
stipulation for construction, drawings, specifications and bill of quantities (BOQ).
Advantages-
Provide firm assurance for ultimate cost
Insure prompt advice to owner of delays and extra cost resulting from changes.
Requires minimum owner follow-up on work
Provides maximum incentive for quickest completion at lowest cost.
Involves minimal auditing by owner’s staff.
Disadvantages-
Required exact knowledge of what is wanted before contract award.
Requires substantial time and cost to develop inquiry spaces, solicit and evaluate bids.
Delays completion by 3-4 days.
2- Cost plus fee contracts-
In cost-plus-fee contracts, the client agrees to pay all costs incurred by the
contractor in execution of works plus an agreed fee to cater for contractors’
overhead and profit. This form of contracts are generally employed in fast track type
of turnkey construction, to save time by processing works based on the part design
and drawing, without waiting for completion of entire design package.
Advantages-
Provide maximum flexibility the owner.
Minimize contractor profits
Minimize negotiation and preliminary specification costs
Permit quicker start, earlier completion
Permit choice for best qualified, not lowest bidding, contractor.
Permit use of same contractor from consultation to completion, usually increasing quality
and efficiency.
Disadvantages-
No assurance of final actual cost
No financial incentive to minimise time and cost.
Permits specification of high-cost features by owner’s staff.

Tendering for contract and its processes-

Tendering is the process of finalising the construction contract. The purpose of tendering is
to obtain from a relevant contractor, an acceptable tender or offer, at appropriate time, for
the pre-formulated client proposal, based on which a contract can be finalised.
Types of tender-
A) Open tender- it involves advertising, inviting tenders from the selected tenderers
and awarding the contract to successful binder.
B) Selective tender- It restricts the number of tenderers who are invited to submit the
bids.
C) Negotiating single tenders- This form of tendering is used in case of specialist
complicated works.
 D) Joint ventures- It is particularly suitable for complex project where number of
consultant and specialists involved. The agreement among the joint venture
participants are carefully worked out and possibly backed up with performance
guarantee.

Tenders preparation- The first step in tender preparation is to conduct the site
investigation for collecting all relevant data relating to site, the availability of materials
at the sites, rates of labour and material, sources of water and power, labour situation,
political environment of the area. Following aspects should be rechecked prior to issue
of tenders-
Scrutiny of contract drawings
Verification to ensure bill of quantities (BOQ) is prepared in accordance with the
standards methods of measurements
Correctness of bureau of Indian standards (BIS) specification referred in the contract,
and
Correctness of figures in numerals and words.
Tendering procedure-
The tendering procedure includes series of activities. Following is the sequence wise
details of those activities in tendering procedure.
1) Pre- Qualification of contractors
Eligibility criteria of contractors: parameters for selection of contractors for all high
value and specialist works shall be as given below:
A) Financial status: classification, liquidity status etc
B) Technical competence: organisation set up, past experience and reputation of
the consultant/firm, architectural/structural design facilities.
C) Resources: Equipment and T & P required for the specific task.
D) Records of service: works completed performance on on-going work, response to
defects rectification of completed works.
E) Attitude: Finalisation of bills/star rates and contractual disputes.
Tenders are issued to pre-qualified contractors. For pre-qualification of contractors,
notifications are issued giving details of name of purchase/engineer, project outline,
enquiry issue and tender submission dates, instruction for applying for pre-
qualification and submission date for the contractor’s pre-qualification data.
Period of submission of tenders-
It is essential that time allowed to tenderers should be adequate to enable them to correctly
calculate and check their tenders before submission. Hurried calculations on their part may
involve an element of approximation or an error on the safe side, which may not be in the
interest of the state. Allowing a short period to tenderers for submitting their quotations
may not save time in the long run because the work may have to be put to retendering due
to an unreasonable quotations received at the first instance.
Sufficient time should be allowed to the tenderer to study the amendments and allow for
these in their quotation in addition to the time required in dispatch/receipt of the
amendment and the tender. It is, therefore essential that when an amendment to the
tender effects the quotations, date of submission of tender is suitable extended.
Issue of tender-
Tender documents are issued to selected/pre-qualified contractors. These are dispatched
under the registered AD. Before issuing tender documents, the issuing officer must ensure
that he has obtained the sanction of the competent authority to issue tender and the tender
document have been scrutinised by the technical authorities.

Opening and evaluation of bids-

The tenders are received at fixed time and date and open in the presence of the tenderers.
All the tenders will be signed by the officers opening the tenders, duly numbered. The price
bids of only those tenders, which are .technically acceptable and are quoted without
conditions will be considered for making a comparative statement. In case any clarification
is necessary, the same would be obtained.
Awards and signing of contract-
Once the tender is accepted, the letter of intent can be issued to the successful tender. This
is to be sent in duplicate, so that one copy can be returned duly accepted to the owner.
Thereafter agreement can be signed on the stamp paper. And all the document forming part
of the agreement, shall be attached to it and certifies copies distributed to the concerned
officials. The usual documents .accompanying the agreement will include-
a)original tender document
b)Schedule of rates/prices including those of engaging workmen, equipment etc. for
contingent works required during execution where not envisaged at the tendering stage and
c) List of variations from what was originally specified in the tender as mutually agreed upon
between the owner and the contractor.