Assignment PGPM 14

Assignment PGPM 14 Construction Contracts and Contracting

Rutvan Jariwala 211-08-31-9748-2131 Page 1

NICMAR/CODE OFFICE

ASSIGNMENT

Course code : PGPM 14

Course title : Construction Contracts And Contracting

Assignment no : Four

Prepared By :

Rutvan Jariwala

211-08-31-9748-2131



AIM

The assignment paper aims to understand the term contract, various

type of contract; contracting and issues occurred and resolved for

specified project.

METHODOLOGY

1. Explaining contract.

2. Types of contracts.

3. Scope of work and contract assigned for mentioned project.

4. Organisation charts.

5. Methods adopted by company.

6. Conclusions.



CONTRACTS

A contract is a legally binding agreement between the parties

identified in the agreement to fulfill all the terms and conditions

outlined in the agreement.

A prerequisite requirement for the enforcement of a contract,

amongst other things, is the condition that all the parties to the

contract accept the terms of the claimed contract.

Contracts can be of many type, sales contracts (including leases),

purchasing contracts, partnership agreements, trade agreements, and

intellectual property agreements.

A sales contract is a contract between a company (the seller) and

a customer that where the company agrees to sell products and/or

services.

A purchasing contract is a contract between a company (the

buyer) and a supplier who is promising to sell products and/or

services within agreed terms and conditions.

A partnership agreement may be a contract which formally

establishes the terms of a partnership between two legal entities

such that they regard each other as 'partners' in a commercial

arrangement. However, those expressions may be merely a

business-expression to reflect the desire of the contracting parties

to act 'as if' both are in a partnership with common goals.

Therefore, it might not be the common law arrangement of a

partnership which by definition creates fiduciary duties and which

also has 'joint and several' liabilities.

In construction industries various type of contracts are done between

two or more than two legal parties.



1. All in one contract

2. Lump sum contract

3. Item rate contract

4. Percentage rate contract

5. Cost plus percentage contract

6. Cost plus fixed fee contract

7. Cost plus fluctuating contract

8. Target contract

9. Labor contract

10. BOT contract

NAME OF PROJECT

Competition project from P.I.U-construction and

execution of new I.C.U. Building.

P.I.U., Gandhinagar has awarded the project of construction of new I.C.U.

Building, at Surat Municipal Government Medical Collage and Hospital to

Pankaj Patel & Associations, as their principal architects.

Some Information about Project

1. Project is located in new civil campus, a 20 bed hospital for with

specified requirement with the provision for future growth.

2. Requirements of project was parking ,site development, main I.C.U.

center, nursing staff facilities, facilities for doctors, facilities for

visitors and relatives, technical requirement for proper functioning of

unit, medical store, emergency and supplementary units, etc.



3. Preparation of conceptual designs with 3d visionaries and

presentation for design competition explaining design in brief with

primary technical bid and financial bid submitted separately.

4. Selection and award of tender to selected party.

5. Construction cost estimated for said project was 50 lakhs.

6. Contract made was on item rate basis.

Scope of work for an architect finalized for the said project

1. Site survey (for check)

2. Digitizing the survey

3. Preparing approval drawings.

4. Getting approved from competent authority-that is in this case-P.I.U,

Gandhinagar

5. Providing consultancy as an architect, principal designer of the

project.

6. Preparing detail working drawings for tendering.

7. Prepared structural design keeping in mind existing condition of site

and soil capacity.

8. Preparing tender document*

9. Provide all necessary drawings to contracted person, awarded as per

the Contract between authority and contractor on item rate basis.

10. Site supervision and quality control on site.

11. Acting as the moderator between contractor and PIU.

12. Checking of bills.

13. Preparing reports and submitting to authority.

14. Preparing completion report and get signed from authorized person

at the end.



TENDER DOCUMENTS *

Tender notice

General rules and directions for the use of contractors

The letter of submission of tender

The letter of acceptance of tender

The addenda nos.

Form of contract

Conditions of contract

Schedule A – showing the details of materials, if any , to be supplied

by the owner to the contractor

Schedule B – bill of quantities

Specifications:

o General

o Detailed or particular

Contract drawings.



IMPORTANT POINTS TO MENTION IN CONTRACT

Order approval: once the finalized drawings are submitted to

authorize body, architect is not liable to ask approval at all individual

stage. If changes in design or details occurred approval is needed.

Payment method: payment was finalized on the percentage basis of

total work to be carried out till completion of the project.

If authority suggests any changes in approved drawing would

considered as extra work and charged separately as it involves all

lengthy process of changes in specification to estimate.

Payment to be made in different stages as per percentages and

amount mutually agreed upon.

Site supervision: architect has to visit site on regular interval basis.

Site supervision charges are included in the professional charges.

Architect must appoint one qualified site supervisor on site for better

control.

Quality control: architect is responsible for providing quality work on

site. Architect is given rite to ask the agency to repair or change

(demolished and execute from start) for said work as and if required.

Agencies are bound to act accordingly as instructed by architect. No

claims for if changes suggested due to poor construction quality by

architect.

Material control: it is desired to apply the said material as per

specification .Material has to be approved by architect after on site

sampling. Changes in any material due to availability or so it needs to

bring in to awareness of architect.

Any changes or revision of quantity: if the quantum of worked to

be carried out remains same and just material changes contractor



would pay the differences in the current rate. If new quantities are to

be added than contractor may charge as per current market rates. If

any quantity or work portion is omitted and material is purchased or

work carried out for the same, difference accruing is more than

25000/- (mutually agreed by both the parties) contractor can claim

profit. Owner has signed performance bond with contractor.

The Architect reserved the right to suggest modifications or make

complete changes in the methods proposed by the contractor.

Time line: contractor was given the time span of two years to

complete the building. If contractor fails to win time restriction he

cannot claim for profit he is liable to pay liquidated damages claimed

by owner. But if work needs to stop due to any natural calamities work

extension order may issued. Rates quoted by contractor were subject

to present market condition and valid for 1year time line only.

Technology: contract does not include any equipment installation. It

is purely a construction based contract. Installation of elevators and

HVAC control systems would require other tendering and specialized

agencies. And that was part of phase –ii.

Damages due to installation: owner can claim from said agencies

for damages occurred during installation of any specialized equipment

during construction.

The contractor had to furnish sufficient plant, equipment and labour as

may be necessary to maintain the progress schedule, also he had

to submit the progress of work in prescribed forms and statements at

periodical intervals in the form of progress charts, forms, statements

and / or reports as may be approved by the engineer.

Contractor is responsible for Initial Mobilization, Establishments of

contractors camp, work sheds, water supply arrangements,



electrification beyond the points of supply by the owners, internal

roads, plant, transport, foundations and erections, Purchase of plant

machinery and tools.

The contractor has to submit a monthly bill for the payment, for the

work done at site. The owner must commit himself to making

payments within a specified time. Interim or running bills should be

settled within six months, If the final bill is held by the client than an

advance to the extent of 90% may be payable to the contractor,

pending final settlement.

The most sensitive issues in contract management and many disputes

have their origin in delays in measurements or payments or

both. The engineer in charge does not turn up for measurements; bills

are prepared late, consequently delaying payments. It is necessary

that proper arrangements are made and enforced to ensure timely

measurements and payment. This will guarantee a smooth cash flow

for a contractor.

Breach of contract: if owner breach the contract after partially

executed work contractor is liable to claim the profit and damages.

Here architect is also liable to claim the fees as per work done and for

efforts given in. If contractor commits the breach of the contract than

owner is liable to receive the market price of correcting contractor’s

balance work.

Disputes are one of the common occurrences in construction

contracts. In construction and civil works projects execution periods

are long, many agencies get involved and imponderables are too

many. This inevitably led to extra costs, project delays and sometimes

suspension of work. Disputes arises when a demand is made by the



party and denied by the other, one of the parties to the contract may

feel aggrieved that its rights and privileges have been violated or that

the dues payable have not been paid or short paid or paid late. All

such situations and others similar to these may lead to precipitation of

disputes.

Alternative methods of dispute resolution should be considered first.

By virtue of an agreement two parties can enter into a transaction

which may be selling, or buying any commodity, borrowing or

spending money, leasing or hiring any property, rendering any service

etc.

The legal system of a country gives its people freedom to enter into

such an agreement. Any valid agreement creates mutual rights and

obligations and also legal relations between parties entering into an

agreement. Thus the contract is an agreement, between two parties,

satisfying the conditions lay down by the contract law and hence can

be enforced by law.

In India the law of contracts is contained in the Indian Contract Act,

1872.

Different methods of dispute settlement are:

Negotiations

Mediations

Conciliation

Arbitration and

Adjudication



ITEM RATE CONTRACT

This contract deals in measurements of each item of the work as given in bill

of quantities and sum to be paid is arrival at based on the rates quoted

against each item.

In the bill of quantities all are items are described in detail along with the

quantity.

Here the rates are part of the contract.

Problem an ambiguity occurred

Disputes raised between parties have been solved by Negotiation, is the

method of bi-party settlement of disputes without help or intervention of

third parties. While in some case architect has to act as a mediator to

resolve the issue.

While there are two three major issues where arbitrator was needed to

resolve the issues are mention below:

PROBLEM-1

Free board for tendering quantities: owner has omitted item of work and

decrease two quantities to 15% owner has increased one item as well.

Issues were variations of quantities and claims damages by contractor due

to same.

In the same way as mentioned in terms and condition owner is liable to pay

to the contractor item quoted under terms “extra” as per current market

rate.



Solution:

Owner has rite to increase, decrease and omit any quantity or even

item of work. And contractor shall not claim for any damages due to

same.

Contractor is bound to execute

Such a small amount of variation from owner considered as a variation

not as error in quantity.

Contractor is only liable to claim differences as per quoted rates.

In the same way as mentioned in terms and condition owner is liable

to pay to the contractor item quoted under terms “extra” as per

current market rate. This clause is in support to contracture but the

added quantity was not costing more than 20,000/-. And contractor is

bound to complete the work in excess up to 10% of tendered quantity

without claiming the revised rate.

So in this case solution was contracture is bound to work on same rate

quoted in tender for increased quantities, just quantities are revised

not rate. And for new added item he can claim work on market rate

bases. But because of one extra item no need to revised tender.



PROBLEM-2: MONITORING THE WORK

Quality and quantities:

To gain maximum out of project contractor has started manipulating

with the bills.

Using lower grade construction materials he tried to built up the profit.

Here architect has asked to change purchased material to specified

material as per the specification.

For poor construction quality he was charged for the damage and

revised the said work.

He even tried to manipulated the design given by avoiding special

techniques involves in to it.

Ex.: hand compacting rather machine compactor

Less watering to brick /masonry work

Poor plaster slurry ratio

As far as, the organisational structure for the management level is concern,

it can be talked upon as a satisfactory management achieving positive goals,

and within the stipulated area of project interest. As it is seen that the

project is running in profit and giving positive results and hence our

managers enjoy the level they are assigned to.

The SITE ORGANISATIONAL CHART is attached along herewith.



ORGANIZATION CHART

Site supervisor Responsible for work on

site

Preparing reports

Maintains of materials

and equipments at site

level

He see to it that work do

happen as per mentioned and specified.

Electrical consultant Responsible for work

related to electrical

installation

Report to site

supervisor

Answerable to

contractor

Plumbing and sanitation

consultant Responsible for work

related to plumbing

and sanitation

Report to site

supervisor

Answerable to

contractor

CIVIL CONTRACTOR Civil Construction as per finalized

rates and of desired quality Material purchasing and getting

approved Producing bills and site report

Heir agencies as and if required for completion of the work

Answerable to both architect and owner.

HVAC consultant Responsible for HVACs

relate work proper

installation, Prepare reports regarding same

Answerable to architect.

SPECIALISED EQUIPMENT consultant

Responsible for installation of the equipments

Heir agencies as and if required

Answerable to architect.

Architect-As a planner Team leader of various department such as

structural design dept, project management dept,

design and development dept, account dept, etc.

Providing detail working drawings,

working out details (dev. Department),

preparing estimate ,bill of quantity, specification,

site supervision, may/can appoint site supervisor

answerable to owner

Owner

Governing

authority-

PIU

Bounded

under

contractual

obligations

Bounded under contractual obligations



CONCLUSION

Contract is the legal binding documents to all the parties.

Violence and over rule of contractual condition may lead to legal

problem.

Contract provides frame work, which distributes duties and liabilities to

all so, to run project easily and smoothly.

Contract documents are there to avoid any issues before it may

subject to occurs.



REFERENCES

Dr.Roshan H.Namavati

Professional Practice, eighth revised edition

LAKAHNI BOOK DEPOT.

NICMAR lesson book-NCP23

JULY 2010

NICMAR PUBLICATION

Documents

Assignment PGPM 14