Unit 1-Contract Documents & Byelaws
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The document discusses various aspects of construction project contracts and tendering processes. It describes earnest money deposits (EMD) and security deposits contractors must provide, as well as retention amounts deducted from payments. It outlines different methods for selecting contractors, including public tender, prequalification, post-qualification, limited tender, and nomination. Key clauses like liquidated damages, defect liability periods, and arbitration are also summarized.
Unit 1-Contract Documents & Byelaws
- 1. Contract Documents & Byelaws Tender
- 2. Earnest money deposit (EMD) • Earnest money deposited by each tenderer to enable the owner to ensure that a tenderer does not refuse to execute the work if it is awarded him. It is a guarantee for due performance of the contract. • Rate of EMD deposit varies from one organization to another. It also varies with value of work. • Normally EMD is 2% or 2.5% of estimated cost put to tender. • The earnest money of successful tender can be adjusted against the security deposit required to be furnished by him. • The earnest money of all the unsuccessful tenderers should be returned as early as possible after the expiry of validity period or after award of contract whichever is earlier.
- 3. Security deposit • It is a check or safeguard for the owner to ensure that contractor fulfills all terms & condition of contract, carries out the work to his satisfaction , maintains desired progrss and complete the work as envisaged in the contract agreement. • Security deposit is refunded on - Completion of work after expiry of defect liability period. - On obtaining labour labour clearance certificate - On finalization of final bill and work account. Retention amount - On award of contract , the contractor is required to deposit specific amount as security deposit with the owner. Since there may be financial constraint for the contractor to deposit such amount at one time , an alternative method of deduction from running bill is given to contractor . The amount of deduction made from running bill towards security deposit is known as retention amount.
- 4. - Thus retention amount is also a security deposit recovered from running bills. Method to select contractors Method to select contractor Post-qualificationPre-qualificationPublic tender Limited tender Nomination
- 5. Public tender The objective of inviting public tender are - To give wide publicity - To obtain competitive bids - To provide equal opportunity to all contractors eligible to tender. Prequalification of contractor - For major works, complex work , specified work and for works of multidisciplinary involvement, contractors are prequalified to ensure that competition is only among bidders who are capable of executing work. -The basic requirement of prequalification is not the selection of the best contractor , but to eliminate incompetent and insincere contractor.
- 6. - Prequalification notice is published in newspapers with wide circulation. Relevant details such as nature of work , estimated cost , period allowed for completion and eligibility criteria of contractors are described in the press notice. Post qualification - In this system two cover system is followed. - It has inherent advantages , technical & commercial bids and price bids are submitted in separate sealed cover. - The technical & commercial bid containing all particulars required to evaluate contractor’s suitability except for price is opened first and a critical evaluation of contractor’s capabilities is done. - If some of the contractors are eliminated on the basis of their technical & commercial bid, their price bid are not opened and retained or returned to the tenderers.
- 7. Two cover system In this system tenderers are required to submit tenders in two covers -The first cover contains (i) One envelop contain EMD (ii) Another envelop contains qualification relating to - Work done during five year. - Existing commitment & details of on-going works - Works for which tenders already submitted - Equipment details owned by the tenderer. The second cover contains priced bill of quantities. All duties, taxes and other levies payable by the contractor under the contract or for any other cause shall be included in the rates, prices and total price submitted by the tenderers.
- 8. Limited tender • In this method tender notice is sent to selected contractors of repute & no press tender notice is issued. • The lowest tenderer may be called for negotiations • This method of selection of contractor is adopted in private sector as an alternative to other methods. Nomination • Selection of a contractor by nomination is adopted for works of small magnitude or for emergency works. • This contract is awarded based on prevailing market rates in respect of government work. • In private sector the rates are negotiated with nominated contractor keeping in view the trend of market rates.
- 9. Liquidated damage • It is fixed stipulated sum payable by the contractor on account of penalty for delays and does not bear any relationship with the real damage to the owner. • It is generally high & fixed per day for the excess period over the specified period in the tender. Defect liability period • The contractor shall make good at his own cost and to the satisfaction of the architect; all defects, shrinkages or small faults , arising in the opinion of Architect from work or materials not being in accordance with drawings or specifications or schedule of quantities or instructions of architect, which may be appear within.
- 10. Mobilisation advance • Admissible for woks whose estimated cost put to tender is 2 crores & above. • Maximum advance is 10% of the tendered value of work. • Advance is paid two or three instalments. • Proof of utilisation of first instalment is necessary before obtaining second instalment and so on. • Advance is given against bank guarantee bond.
- 11. A r b i t r a t i o n
- 12. Advantages of Arbitration There are several advantages of arbitration over a court decision Cost Arbitration is less expansive than court action. Speed Dispute are settled much faster through arbitration as compared to law suit in the courts. Convenience Arbitration hearing are fixed considering the convenience of the
- 13. Both parties. Technical knowledge Both the parties have the distinct advantage of appointing Arbitrator having technical knowledge & expertise which facilitates satisfactory judgement. Informality Arbitration is conducted in a relatively informal atmosphere observing certain minimum prescribed legal formalities. Proceedings in the private premises Arbitration proceeding are held in the private premises , consequently business activity of the parties do not suffer.
- 14. Termination of contract The contract may be terminated in the following conditions Completion of work When the work is completed according to the contract agreements and the owner is satisfied , the security money is released and the contract is terminated. By agreement If due to some unavoidable circumstances , it is not possible to complete the work, the contract is terminated by mutual agreement.
- 15. By breach of conditions If any party does not follow the conditions of contract, the party has the right to terminate the contract due to such breach. By impossibility to complete When the site does not belong to the owner , or the land is acquired by the government or it is flooded or damaged due to natural calamities , the construction of work is impossible and the contract is terminated. By bankruptcy If either party becomes bankrupt , the contract may be terminated.