A-Contracts Administration Presentation-July 2012 (MAS)

Mahmood A.
Sulehri October 2012

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SALIENT ASPECTS of CONTRACT ADMINSTRATION for PMs and REs
Throwing
a Stone in Still Water Stirs Interest Introduction Only Broad Guidance May provide Direction Helps Develop Sharper Focus Basis for Further Learning
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Schematic Design Budgetary Estimate Detailed Design Quantity Take-Off
Preparation of BOQ
Work Specifications Engineers Estimate Bid Preparation Contractor Pre-/ Qualification Contractor Selection/ Bidding and Award Project Commencement Performance Security
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Insurances Project Control Scheduling Applying Conditions of Contract on the Project
Contract Interpretations
Execution of Work in accordance with Drawings and Specs Quality Issues in Construction and their Resolution Quality Manuals/ Testing Procedures Work Inspection Procedures Payment against IPCs (Clause 60) Determination of Increase / Decrease in Contract Price (Clause 70: Price Adjustment)
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RESOLVING CLAIMS: Variation Orders Cost Claims (Clause 53) EoT Claims (Clause 44)
DISPUTE RESOLUTION:
Engineers Decision (Sub-Clause 67.1) Amicable Settlement (Sub-Clause 67.2) Arbitration (DRB, DAB, etc.) (Sub-Clause 67.3) Completion Certificate (Sub-Clause _____ ) Defects Liability Certificate (Sub-Clause ____) Final Payment certificate (Sub-Clause ________) Project Closure
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1. 2. 3.
4.
5. 6.
7.
8. 9.
Engineering Contracts Role of the Engineer & Engineers Representative Price Adjustment Introduction to Cost & EoT Claims Dispute Resolution Liquidated Damages Variation Orders Guidelines for Interpretation Introduction to PPRA Rules
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Salient Aspects of Contract Administration for PMs and REs
Evolution of Agreements / Contracts
CONTRACTS DIVISION PART
1. Engineering Contracts
Two parties and witness(es) Mutually Agreed Terms Verbal in the beginning Confirmation of verbal Contract in Simple writings (1 page)
Evolution of Agreements / Contracts
Further Clauses added with experience and specific requirements
Development of Society and Law introduced concept of EQUITIBILITY

The present form of the Contracts cater for the possible eventualities in a construction project
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Project, Tender and Bid
PROJECT is an activity, performed to achieve a defined goal/ Customer Requirements, having the following aspects:
Unique/ Non-Routine Temporary/ One Time Effort Complex Limited by:
Time Budget Resources, and Performance Specifications
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Project, Tender and Bid
TENDER is a formal offer to undertake Works, supply of Goods or provide Services BID is the price offered for executing Works
TENDER and BID are used interchangeably

PEC Standard Bidding Documents use the term BID
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What is Engineering Contract
Agreement = Offer / Proposal + Acceptance

A contract is an agreement enforceable by Law Essentials of a valid contract:
(a) competent to contract
(b) free consent (c) lawful considerations
(d) lawful object
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What is Engineering Contract
Bidding/Tendering is to seek proposal Principles conforms to Contract Act 1872 as amended Engineering Contracts when the subject matters
are the following and defined under Section-2(k) of PEC Act 1976:
Goods Works Engineering Services
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Bidding Procedure
Preparation of Detailed Design, Drawings and BOQ Preparation of Prequalification Documents and Prequalification of Constructors Preparation of Bidding Documents
Notice Inviting Bids
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Bidding Procedure
Bid Evaluation Letter of Acceptance (Award) Performance Guarantee Conformed Contract Documents
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End of Part 1
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Definitions
2. Role of The Engineer
Engineer means the person:

appointed by the Employer to act as Engineer for the purposes of the Contract and named as such in Part II of these Conditions
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Definitions
Engineers Representative means:

a person appointed from time to time by the Engineer
under Sub-Clause 2.2 [

responsible to the Engineer
and shall carry out such duties and exercise such authority as may be delegated to him by the Engineer under Sub-Clause 2.3 [.]
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Importance
The Engineer has an extensive role in the administration of the Contract and the way in which he carries out his duties
His role has a major impact on the Work of the Contractor and the success of the project
The Engineer is fully responsible for the execution and completion of the Works
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Duties of the Engineer
The Engineer has three prime and distinctive duties/ functions: Administrative Technical Managerial
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Administrative Duties of the Engineer
To fulfill his Administrative duties, The Engineer Shall: 2. Role of The Engineer
Maintain Regular correspondence with the Contractor and the Employer
Serve the notice to the concerned parties according to the condition of the Contract under Clause 68 [ ] Recommend for advance payment to the Contractor under Clause 60 [ ] Check and forward Interim Payment Certificates (ICPs) to the Employer for payment under Clause 60 Take remedial actions in case the Contractor fails to comply with the Contract Document.
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Technical Duties of the Engineer
To fulfill his Technical duties, The Engineer Shall:

Review/ Prepare the design and specification and interpret them when necessary under Clause 7 [ ] Revise the design drawing as required for the successful completion of the project under Clause 7 Make the Engineers Decision for dispute settlement under Clause 67 [ ]
Make variation order (if any), and recommend for its approval under Clause 51 [ ]
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Managerial Duties of the Engineer
To fulfill his Managerial duties, The Engineer Shall:

Monitor the schedule regularly and control it to ensure that project is completed on time under Clause 46 [ ] Analyze the need for time extension and recommend the Employer to award time extension under Clause 44 [ Coordinate with the Contractor and the Employer Verify and approve Contractors Schedule ]
Lead the overall construction team in general
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End of Part 2
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Significance of Price Adjustment
If price adjustment provisions do not exist, then:

on Civil Construction Projects
3. Price Adjustment
If inflation turns out to be more, the contractor loses If deflation occurs, the employer loses For a fixed price contract, the contractor includes a margin for variation in prices as risk management. The price may be higher
Less Stringent requirements of Escalation Risk Analysis for the Bidder

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Significance of Price Adjustment Employer receives a balanced bid

3. Price Adjustment
No need for Complex Record keeping of the Consumption of the Specified items Provide reasonable and realistic bid/prices by the Contractor Price adjustment provisions protect both the employer and the contractor Less chances of claims and disputes Employer and the Contractor are in a win-win position
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Escalation
3. Price Adjustment
Payable Escalation = (Quantity of specified materials consumed during the billing period) x (Current rate Base rate)
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Formula Method of Price Adjustment of Construction Contracts
Provisions to be included in the bidding documents

3. Price Adjustment
Price adjustment formula in Particular Conditions of Contract FIDIC 1987: Sub-Clause 70.1 Increase or Decrease of Cost, OR
FIDIC 1999: Sub-Clause 13.8 Adjustment for Changes in Cost

Appendix C to Bid: Table of adjustment data under of PEC Standard Form of Bidding Documents (Civil Works)
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Major Cost Elements Subject to Adjustment
3. Price Adjustment
Cost elements are elements of costs which are estimated to have significant impact of inflation and should not be less than 7% of total contract amount. Local Labour
(covers skilled and unskilled labour working at site)
Cement
(covers OPC, SRC and all types of Cement)
Reinforcing Steel
(covers all kinds of steel used for the Works)
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Major Cost Elements Subject to Adjustment
3. Price Adjustment
High Speed Diesel (covers all types of fuel used for the Works)
Bitumen (covers asphaltic material used for the Works) Bricks
(covers all types of bricks used for the Works)
Fixed Elements (covers overhead and profit, etc.)
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Price Adjustment Formula Pn = a + b Ln/Lo + c En/Eo + d Mn/Mo + ...
where:
3. Price Adjustment
Pn is the adjustment multiplier a is a fixed coefficient specified in Appendix - C to Bid, representing non-adjustable portion in contractual payments b, c, d, are weightages or coefficients representing the estimated proportion of each cost element Ln, En, Mn,.. are the current cost indices of the cost elements for month n Lo, Eo, Mo,.. are the base cost indices prevailing on the base date as defined in the bidding documents 34
Overview of the Price Adjustment Formula
Formula method: notional price adjustment, not the actual price adjustment
The estimated contract value of the work carried out in the period n is adjusted:
3. Price Adjustment
disregarding the type of the work, or quantities of actual usage

applying weightings in the formula as determined for the whole of the Works (based on the analysis)
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Table of Adjustment Data (Appendix-C)

Cost element * Description of cost index or reference price * 2 Non-adjustable
Rate of unskilled labour shall be taken as representative of all types of labour working at the Site
Weightage
Source of cost index or reference price * 4 Monthly bulletin of Statistics, Government of Pakistan, Statistics Division, Federal Bureau of Statistics and/or PICC
1 Fixed Part Local Labour (L)
3 0.35
3. Price Adjustment
Fuel (F)
Rate of High Speed Diesel per liter shall be taken as representative of all types of fuel used at the Site
Ordinary Portland Cement (OPC) per bag shall be taken as representative of all types of cement used for the Works
PSO
Cement of all types (C) Miscellaneous Materials
Monthly bulletin of Statistics, Government of Pakistan, Statistics Division, Federal Bureau of Statistics and/or PICC
Total
1.00
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Fixed Portion
Fixed portion in a Price Adjustment Formula

3. Price Adjustment
Part of Contract Value not subject to price adjustment Includes but is not be limited to:
Inflation for the cost pertaining Cost elements not included in the table of adjustment data/ formula
Cost of Providing various Guarantees
Taxes and duties included in the Contract Price

Contractors profit margin
Fixed portion shall not be less than 35% as per PEC Standard Bidding Documents
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Adjustment After Time for Completion
3. Price Adjustment
If Contractor fails to complete the Works within Time for Completion, adjustment of prices thereafter until the date of completion of the Works shall be made using:
Either the indices related to prescribed (Original) the current indices, if an extension of time is
granted pursuant to Sub-Clause 44 of COC of FIDIC 1987
time for completion or the current indices whichever is more favourable to the Employer, and
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3. Price Adjustment
End of Part 3
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Cost and EOT Claims
4. Introduction to Claims
Introduction to Claims
Under FIDIC 1987, 4th Edition, Reprinted 1992 Clause-44 EOT Claims Clause-53 Cost Claims
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Extension of Time (EOT) Claims [Clause 44] Acceleration Claims .. [Clause xx]
Cost Claims [Clause 53]

Claims against Subsequent Legislations [Clause 70] Counter Claims by the Employers .. [Clause xx]
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Sub-Clause 53.1 [Notice of Claims] Notice for intention to claim within 28 days Sub-Clause 53.2 [Contemporary Records] The Contractor will maintain the contemporary
records
Sub-Clause 53.3 [Substantiation of Claims] Within 28 days of giving notice, the Contractor shall
submit a detailed claim to the Engineer If the event has continuing effect, the Contractor should make interim submissions Followed by a final claim once the effect ceases
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Sub-Clause 53.4 [Failure to Comply]
If the Contractor fails to: give notice keep records, or provide detail His entitlement will be limited to the extent of available record/ data Sub-Clause 53.5 [Payment of Claims] The Contractor is obliged to include: an Interim Certificate in respect of such claim or part of claim for which Contractor has supplied sufficient particulars The Contractor shall be entitled to: an amount in respect of any claim, as the Engineer may consider due, after due consultation with the Parties
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Definition Additional time granted to the Contractor to provide an extended contractual time period by which works are to be completed
Purposes To relieve the Contractor of liability for Liquidated Damages (LDs) for delay To establish a new contract completion date to prevent Time for Completion of works becoming at large
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Original Duration
Start of Project
Original completion date
46

Original Duration
EoT Original completion date Extended completion date
Start of Project
47

Original Duration
EoT
LDs
Start of Project
Original completion date
Extended completion date
Actual Completion date
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The essential elements which must be addressed while presenting an EoT Claim are:

The Standalone Event Liability for the Event Reference to the Contractual Provisions
Contractual Compliance; Notices and Detailed Particulars

Statement of Claim Cause and Effect Admissibility Substantiation Delay Analysis Determination and Grant of EoT
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Substantiation: Provide documentary evidences for evaluation of Claim i.e.:

Letters Method Statements Instructions Progress Reports Photographs
Minutes of Meetings, and

Effective and Realistic Programme (Baseline, As-Built)
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Contractual Procedure for Granting EoT

Sub-Clause 44.1 [Extension of Time for Completion]

The Engineer is obliged to determine the EoT on the following grounds, with the consultation of the Parties, if Contractor is fairly entitled : Extra or additional work Any cause of delay referred to in these conditions Exceptionally adverse climatic conditions Delays not attributable to the Contractor (incl. Employer Delays) Special circumstances, e.g., war, revolution, etc. (other than through a default of or breach of Contract by the Contractor)
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Sub-Clause 44.2
[Contractor to Provide Notification and Detailed Particulars]
The Engineer is not bound to make any determination if the Contractor does not give; Notification; and
Detailed Particulars within specified time frame
Sub-Clause 44.3 [Interim Determination of Extension]

If delaying event has continuous effect;
Contractor will submit interim particulars and Engineer will make interim determination of EoT When the effect of the event is ceased, Contractor will submit final particulars and Engineer will make final determination of EoT
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Type of Delay
Excusable Delays Non-Excusable Delays Concurrent Delays Neutral Delays Compensable Delays
Reasons/Conditions
Employers default (delays) Contractors default (delays) Parallel/ overlapping delays of both Contractor and Employer Not attributable to either Contractor or Employer Contractor is entitled for EOT and/or Cost: Neutral delays (Time + Cost) Employers delays (Time + Cost) Contractors delays (Time Only)
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Basic Component of EOT is a stand-alone event
Each stand-alone event is reviewed and analyzed in the light of available information
Admissibility determined Delay (if any admissible) caused by a stand-alone event is determined in days
Delay time of individual events is incorporated in the respective

activities of the Schedule
Overall Impact (EOT) on contract completion date is determined by

using various Delay Analysis Techniques using scheduling software
Approval from the Employer is sought of such determination (EOT)

and notified to the Parties accordingly [Sub-Clause 44.1]
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Most commonly used delay analysis techniques:

Impacted As-Planned
Collapsed As-Built
Time Impact Analysis Typical Layout of an EOT Report
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Variation/ Change Orders (VO) Supervisory Staff Salary Costs Regularly Consumed Materials General Expenses (stationery, printing, lighting charges, etc.) Equipment & Plant Ownership Costs Equipment Operation & Maintenance Costs Warehouse Inventory Financing Costs Insurance and Bond Costs Head Office Overheads Escalation
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By Negotiation By Mediation/ Amicable Settlement Through Arbitration Through Litigation
88% 05% 05% 02%
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End of Part 4
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Introduction
Every project involves some kind of dispute between the Employer and the Contractor
5. Dispute Resolution
Provides Mechanism for resolving disputes between the Parties Engineer is approached for dispute resolution i.e., Engineers Decision (ED) If ED not accepted, then dispute may be settled by:
Amicable Settlement; or Arbitration
Pakistan Arbitration Act, 1940 UNCITRAL Model
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Dispute
The dispute can be of any kind whatsoever arising : in connection with the contract/ works including any:
opinion, instruction, determination, certificate, or valuation of the Engineer;
arising during execution or after completion of works; or arising before or after termination of the contract The request for ED to be made in writing by either party with reference to Sub-Clause 67.1 of CoC
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Introduction to ED
A chance for the Engineer to Review his previous Stance on the Issue
ED may be different from ERs previously Stated Position ED to be made pursuant to Sub-Clause 67.1 of the Contract ED to be given within eighty-four (84) days ED shall be final and binding (resolved) if not challenged Arbitration can commence only if a party gives notice to If dissatisfied with ED, Parties may settle the dispute (after 70 days notice) through:
Amicable settlement Arbitration under Arbitration Act 1940

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Documents/ Record
Relevant documents may be required from: 5. Dispute Resolution

Employer
Contractor
Engineers Representative Project Manager
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Format of ED
Engineers Decision should cover the following:
The Dispute : The Partys contention (+ Notice to other Party) Introduction/Background : A short history of dispute & Parties contentions Relevant Contract Provisions Discussion and Review by the Engineer: Parties stance, relevant Contract Clauses, overall scenario, Engineers viewpoint Conclusion: ED should be based strictly on the merits of the case Engineers Decision : A clear-cut/crisp decision by the Engineer - No justification - Only answer to the problem statement Right of Appeal : Appeal for Arbitration by either party
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End of Part 5
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6. Liquidated Damages
LIQUIDATED DAMAGES
Under Clause 47
[PEC STANDARD BIDDING DOCUMENTS
(CIVIL WORKS) BASED ON FIDIC CONDITIONS]
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Liquidated Damages is the sum to be paid by the Contractor to the Employer, if the Contractor fails to comply with:

the Time for Completion for the Works for the day which elapses between the Time for Completion and Taking-Over Certificate
It is the pre-estimate of all the losses which are likely to be incurred by the Employer as a result of late completion of the works.
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Sub-Clause 47.1 makes it clear that:

The Employer may deduct the amount of the LDs from any monies due or to become due to the Contractor This, however, is without prejudice to any other method of recovery
Payment of the LDs shall not relieve the Contractor from his obligations to complete the works
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To compensate the Employer for the losses incurred, due to the Contractor, in not completing the Works on the specified date
It helps the Contractor to concentrate on finishing the project on

time
LDs
act as an exhaustive remedy for damages for late completion
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The amount of the damages must roughly approximate the damages likely to be incurred by the Employer
The amount (%) of damages must be known at the time of signing of Contract Normally not to exceed 10% of the Contract Price The Employer who receives late completion does not have to prove his losses due to such delay
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It makes the contract price more certain the Bidder can price the level of LDs into his tender bid If project is behind schedule, the Contractor can decide whether to:
pay LDs on late completion or devote more resources (Accelerate) to the project to bring it back on Schedule
Equitable treatment calls Bonus (@ 50% of Total LDs)
for
including
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The daily amount of LDs should be based on a reasonable assessment of the actual damages which he would suffer It is usual to put a limit to daily Rate of LDs (0.3% to 0.4 %) In general practice , at tender stage, LDs are calculated according to the following formula:
LDs/day = 10% of Estimated Contract Price F x Time for Completion in days Where; F is the factor as a fraction of the Completion Period (F= 0.25 to 0.33)
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End of Part 6
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7. Procedure for Variation Orders
For a Construction Contract:
(51 & 52)
A Variation is a change to the Works required under the Contract A Variation Order (VO) is a written instruction
issued by the Engineer to the Contractor to vary the Works by the way of:
Adding (A)
Removing (R) or
Modifying (M)
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Methodology for Processing a Variation Order 7. Procedure for Variation Orders
Major steps generally followed in processing a variation order are: [HYPER LINKS]
1. Determination of Variation by the Engineer (Ref Sub-Clause 51.1)
2. Issuance of written instruction(s) by the Engineer (Ref Sub-Clause 51.2)

3. Notice by the Contractor to the Engineer or vice versa of his intention to claim extra payment or a varied rate/price (Ref Sub-Clause 52.2) 4. Valuation of Variations by the Engineer (Ref Sub-Clause 52.1)
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1. Determination of Variation by the Engineer
Engineer shall determine variation by instructing the Contractor to do any of the following regarding any work:
Increase or decrease the quantity in the Contract (A/D) Omit/ Delete any such work (D) Change/ Modify the (M) - character - quality - kind - levels - lines - positions - dimensions - specified sequence - timing of construction Carry out additional work of any kind necessary for completion of the Works (A)
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2. Issuance of Written Instruction(s) by the Engineer

Engineer shall issue written instruction to the Contractor to carry out the varied work
Contractor not to make a variation without the written instruction of the Engineer
Contractor not to claim the cost of variation performed without the written instruction of the Engineer No instruction shall be required for the change in quantity(ies) exceeding or being less than those given in the BoQ
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3. Notice of intention to claim 7. Procedure for Variation Orders
Basic requirement for valuation of varied work under

Sub-Clauses 52.1 & 52.2 instruction by the Engineer notice shall be given within 14 days of the date of instruction by: Contractor to the Engineer of his intension to claim extra payment or a varied rate or price, or Engineer to the Contractor of his intension to vary a rate or price Valid notice of intension to claim is a condition precedent to any additional payment
Such notice is not required where the variation entails

an instruction to omit work
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4. Valuation of Variations by the Engineer
Evaluate variation using the rates or prices set out in the Contract, to the extent of their applicability
When there are no applicable rates or prices, use the existing (reasonable) rates as a basis for valuation
Determination of provisional rates to enable on-account payments in any certificate issued under Clause 60 Agreement of suitable rates or prices with the Employer and the Contractor by the Engineer If no agreement is reached, the Engineer shall fix such rates or prices what he considers appropriate For supplied items, the rates/prices shall be developed on the basis of quotations of at least three suppliers
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Applicable Clauses/Sub-Clauses [HYPER LINK]

Sub-Clause 2.1 Engineers Duties and Authority
Setting-out Boreholes and Exploratory Excavation Fossil Facilities for Other Contractors
Sub-Clause 17.1 Sub-Clause 18.1 Sub-Clause 27.1 Sub-Clause 31.2 Sub-Clause 36.5 Sub-Clause 40.2
Engineer's Determination where Tests not Provided for Engineer's Determination following Suspension
Sub-Clause 42.2
Sub-Clause 44.1 Sub-Clause 58.2
Failure to Give Possession

Extension of Time for Completion Use of Provisional Sums
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End of Part 7
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Plain Meaning Rule & Contextual vs. Textual meaning
Plain Meaning Rule

8. GUIDELINES FOR CONTRACT INTERPRETATION
In clear and unambiguous language:

Express meaning will be given higher priority Implied meaning will have lower priority
Contextual vs. Textual meaning

Meaning of Words and Phrases without reference to the Context should be discouraged Context of words and phrases shall be given due consideration while determining their meaning
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Standard Terms Specific provisions have precedence

8. GUIDELINES FOR CONTRACT INTERPRETATION Standard Terms
Defined Terms will have the specific meaning throughout the document
Standard Terms consistently used throughout the document Ordinary meaning will be given to words other than Defined Terms and Standard Terms
Specific provisions have precedence

Specific language will usually Supersede more general clauses Specific language will have Higher Priority More General clauses will have Lower Priority
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Items not explicitly covered are excluded Disadvantage to the Drafter
Items not explicitly covered are excluded

Mention of certain items and not others usually means that the excluded items were not meant to be covered
Disadvantage to the Drafter

An adhesion contract is a contract drafted by one party and Reduced to a form agreement that generally presents no opportunity for negotiation In adhesion contracts, ambiguous language may be construed against the drafter Headings not part of the interpretation
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Negotiated Terms Gap-filling

Negotiated Terms
Negotiated Terms are to be given greater weight than Standard Terms
Gap-filling
If there is a gap (that is if the contract does not address the contingency that caused the dispute), the person interpreting/ arbitrator may apply a default/ standard rule
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Role of Knowledge-Base
If the contract is silent or unclear the interpreter will try to determine what the parties meant when the contract was written To make interpretation/ determinations, History of negotiations may be studied as an aid, including:
Minutes of Meeting Oral authentication and Past experience
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Spirit of Contract
Contract as a whole will be examined, while considering:

That all parts have some meaning and effect (Read Together!) Priority of Various Documents Defined Terms Standard Terms
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Standards of Preference
An interpretation which gives a reasonable/rational and effective meaning to terms is preferred to an interpretation which imparts an unreasonable or null effect Priority of the documents for the purpose of interpretation, considering order of their significance and weight, is:
express terms course of performance course of dealing and trade usage
Negotiated terms are to be given greater weight than standard terms In adhesion contracts, ambiguous language may be construed against the drafter
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Reasonable Person Rule
Reasonable results are sought

Not ones that lead to:

Harsh results or Nonsensical results
A well balanced use of the preceding rules is warranted

Sound/ Prudent Engineering Practice
Extensive use of Logic

Augmented by Experience Never Interpret to meet a demand
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End of Part 8
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Contents 9. Introduction to PPRA Rules- 2004
1. Overview of PPRA Act & Rules 2. Application of PPRA Rules 3. Salient Provisions of PPRA Rules
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1. Overview of PPRA Act and Rules 9. Introduction to PPRA Rules-2004
World Bank prepared CPAR [Define] in the year 2000 PPRA Ordinance promulgated in 2002 (Authority to make Rules) PPR 2004 made by Federal Government
(Section 26 of the PPRA Ordinance, 2002 (XXII of 2002))
Finance Division (Admn. and Coord. Wing) vide S.R.O. 432(I)/2004 published these Rules on June 09, 2004
PPRA having jurisdiction to Federal procurement only
Provincial PPRAs Coming up

Application of PPRA Rules 2004 needed basic Procurement Documents with the embedded rules PEC Harmonised its Documents with PPRA in 2008
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2. Application of PPRA Rules 9. Introduction to PPRA Rules-2004
Applicable to all procurements of GOODS, SERVICES and WORKS made by all procuring agencies* of the Federal Government whether within or outside Pakistan. * Procuring Agencies means any: Ministry Division Department or any Office of the Federal Government. Authority Corporation Body or Organization established by or under a Federal law or which is owned or controlled by the Federal Government.
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3. Major Theme of PPRA Rules 9. Introduction to PPRA Rules- 2004
Curb/Minimise Corruption Fair and Transparent (Rule 4) Ensure Best Value for Money (VFM) (Rule 4) Open Competitive Bidding (Rule 21) Award to the Lowest Evaluated Bidder (Rule 38) Negotiation(s) Not Permitted (Rule 40) Redressal
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4. Provisions of PPRA Rules
9. Introduction to PPRA Rules-2004
Part 1: General Provisions

Rule 1: Title and Commencement
Rule 2: Definitions Rule 3: Scope and Applicability Rule 4: Principles of Procurement (Fair & Transparent, VFM) Rule 5: International Treaties and Commitments of the Government excepted Rule 6: Language (Urdu & English in Pakistan, Local Language elsewhere) Rule 7: Integrity Pact required for Contracts valuing Rs. 10 m & above
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Part 2: Procurement Planning

Rule 8: Procurement Planning (within 1 Year of these Rules)
Rule 9: Limitation on Splitting and Regrouping Rule 10: Specifications (Generic, encourage competition)
Rule 11: Approval Mechanism (Powers to be delegated in advance)
Part 3: Procurement Advertisement

Rule 12: Methods of Advertisement
(Ad on PPRA website for Rs. 0.1 m-2m, Ad in Newspapers-one in English and Urdu and PPRA website)
Rule 13: Response Time (min. 15 days for LCB & 30 days for ICB) Rule 14: Exceptions (Risks: National security & Disclosure of Information)
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4. Provisions of PPRA Rules 9. Introduction to PPRA Rules-2004
Part 4: Prequalification, Disqualification of Suppliers and Contractors

Rule 15: PQ of Suppliers and Contractors
(for expensive and technically complex procurement)
Rule 16: PQ Process

(Instructions for Preparation and submission of PQ documents and Evaluation Criteria)
Rule 17: Qualification of Suppliers and Contractors

(Professional, Technical, Financial, Legal and Managerial competence)
Rule 18: Dis-qualification of Suppliers and Contractors

(False, incomplete information)
Rule 19: Black-Listing of Suppliers and Contractors

(Consistently Failing in satisfactory Performance, Fraudulent Practices)
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Part 5: Methods of Procurement

Rule 20: Principal Method of Procurement (OCB except Rule 42)
Rule 21: Open Competitive Bidding (OCB)
(for Value exceeding Rs. 1,00,000)
Rule 22: Submission of Bids (In sealed Packages) Rule 23: Bidding Documents (Precise and Unambiguous) Rule 24: Reservations and Preference
(Free from Discrimination: NCB and Domestic preference allowed+ ICB)
Rule 25: Bid Security (Not to exceed 5% of Estimated Bid Price)

Rule 26: Bid Validity (depending upon Nature of Procurement,
Extension <= Original Bid Validity Period)
Rule 27: Extension of Time for Submission of Bids

(Reasons to be Recorded, Ad/Letter in the same manner)
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Part 6: Opening, Evaluation and Rejection of Bids

Rule 28: Opening of Bids (Same day of Submission, Min. 30 Minute
gap, in Public)
Rule 29: Evaluation Criteria (to be provided in the Bidding Documents) Rule 30: Evaluation of Bids
(based only on the evaluation criteria given in the bidding documents)
Rule 31: Clarification of Bids

(No Change after Bid Opening, Change in Substance not Permitted)
Rule 32: Discriminatory and difficult Conditions

(Ordinary Practice in specific Trade)
Rule 33: Rejection of Bids

(PAs require to give grounds for rejection, but no justification) 103
Contd. Part 6: Opening, Evaluation and Rejection of Bids
Rule 34: Re-Bidding Rule 35: Announcement of Evaluation Report Rule 36: Procedures of Open Competitive Bidding
(10 days prior to Award) Single stage-one envelop procedure; Single stage-two envelop procedure; Two stage bidding procedure; Two stage-two envelop bidding procedure
(in case of Rejection of Bids (Rule 33), Reasons of Re-Bidding to be removed)
Rule 37: Conditions for Use of Above Bidding Procedures

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Part 7: Acceptance of Bids and Award of Contracts
Rule 38: Acceptance of Bids (To Awarded Lowest Evaluated Bid) Rule 39: Performance Guarantee (Not to exceed 10% of the contract amount) Rule 40: Limitation on Negotiation (Negotiation are Prohibited) Rule 41: Confidentiality
Rule 43: On Account Payments Rule 45: Closing of Contract
(Confidentiality to be ensured until the time of the announcement) (Running Bill Payments to be made within 30 days)
Rule 44: Entry into Force of the Procurement Contract

(Acceptance Notice, Within Reasonable Time, Signing of Contract) (Issuance of delivery Certificate, Defects Liability Certificate, Final Bill to be paid within 60 days of Arbitral Award)
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Contd. Part 7: Acceptance of Bids and Award of Contracts
Rule 42: Alternate Methods of Procurement

Petty Purchase (for less than Rs. 25,000) Request for Quotations (for less than Rs. 100,000) Direct Contracting for:
Spare Parts, Single Manufacturer/Supplier Technical difficulties in O&M, Repeat Orders up to 15% Emergency, Price Fixed by Govt., Vehicles from Local Manufacturers
Negotiated Tendering for:

Specific Research/ Experiment, Technical/Artistic Reasons Extreme Urgency
106
Part 8: Maintenance of Record and
Rule 46: Record of Procurement Proceedings (To be kept for 5 Years) Rule 47: Public Access and Transparency
(All Information regarding Award to be made Public, except it is against Public Interest)
Freedom of Information
107
Part 9: Redressal of Grievances and
Settlement of Disputes
Rule 48: Redressal of Grievances by Procuring Agency
(Written Complaint within 15 Days and Committee to Dispose of within 15 Days, Appeal in Relevant Court)
Rule 49: Arbitration

(Dispute Settlement Through Arbitration, Not Inconsistent with Pakistani Law)
Rule 50: Mis-Procurement

(Any Un-Authorised Breach of these Rules)
Rule 51: Over-Riding Effect

(These Rules shall Prevail upon other Provisions) Distribute Ready Reckoner
108
Introduced five methods of selection of consultants: Quality based (QBS) Quality and Cost based (QCBS) Least Cost Single Source or direct selection Fixed budget
Eligibility under Section 4 to avoid conflict of interest EOI requires 15 days notice to National and 30 days for International
109
Differentiated between short listing and pre-qualification of consultants Components for RFP: Letter of Invitation
Instructions to consultants
TOR Evaluation criteria
Type of contracts
110
Proposed contract format Special provisions, if any

Selection Committee composed of three relevant persons Negotiation is limited to clarification and no changes in rates
Professional liability equal to remunerations up to twice
111

End of Part 9
112

Extremely
know:
Important
for PMs and REs to
BASICS of Contracts and Contractual Procedures
11 3
Feedback
How you want it to be? What is not applicable? What should be included? What exactly are YOUR REQUIREMENT(S)? MUST frankly give your feedback
114

Discussion Q&A Session

115

Thank You
116

A-Contracts Administration Presentation-July 2012 (MAS)

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A-Contracts Administration Presentation-July 2012 (MAS)

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Mahmood A.

Sulehri October 2012

SALIENT ASPECTS of CONTRACT ADMINSTRATION for PMs and REs

Schematic Design Budgetary Estimate Detailed Design Quantity Take-Off

Insurances Project Control Scheduling Applying Conditions of Contract on the Project

SALIENT ASPECTS of CONTRACT ADMINSTRATION for PMs and REs

Salient Aspects of Contract Administration for PMs and REs

Evolution of Agreements / Contracts

CONTRACTS DIVISION PART

Salient Aspects of Contract Administration for PMs and REs

Evolution of Agreements / Contracts

CONTRACTS DIVISION PART

Further Clauses added with experience and specific requirements

Development of Society and Law introduced concept of EQUITIBILITY

Salient Aspects of Contract Administration for PMs and REs

Project, Tender and Bid

CONTRACTS DIVISION PART

Salient Aspects of Contract Administration for PMs and REs

Project, Tender and Bid

CONTRACTS DIVISION PART

TENDER and BID are used interchangeably

Salient Aspects of Contract Administration for PMs and REs

What is Engineering Contract

CONTRACTS DIVISION PART

Agreement = Offer / Proposal + Acceptance

(d) lawful object

Salient Aspects of Contract Administration for PMs and REs

What is Engineering Contract

CONTRACTS DIVISION PART

Salient Aspects of Contract Administration for PMs and REs

CONTRACTS DIVISION PART

Notice Inviting Bids

Salient Aspects of Contract Administration for PMs and REs

CONTRACTS DIVISION PART

Salient Aspects of Contract Administration for PMs and REs

SALIENT ASPECTS of CONTRACT ADMINSTRATION for PMs and REs

Salient Aspects of Contract Administration for PMs and REs

CONTRACTS DIVISION PART

2. Role of The Engineer

Engineer means the person:

Salient Aspects of Contract Administration for PMs and REs

CONTRACTS DIVISION PART

2. Role of The Engineer

Engineers Representative means:

under Sub-Clause 2.2 [

Salient Aspects of Contract Administration for PMs and REs

CONTRACTS DIVISION PART

2. Role of The Engineer

Salient Aspects of Contract Administration for PMs and REs

Duties of the Engineer

CONTRACTS DIVISION PART

2. Role of The Engineer

Salient Aspects of Contract Administration for PMs and REs

Administrative Duties of the Engineer

CONTRACTS DIVISION PART

Salient Aspects of Contract Administration for PMs and REs

Technical Duties of the Engineer

CONTRACTS DIVISION PART

To fulfill his Technical duties, The Engineer Shall:

Salient Aspects of Contract Administration for PMs and REs

Managerial Duties of the Engineer

CONTRACTS DIVISION PART

To fulfill his Managerial duties, The Engineer Shall: