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7/30/2019 contract payment and variation
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CONTRACT PAYMENTS
&
VARIATIONS
Training programme on Construction
Management & Supervision
Eng. Rangith Kulanatha
Project Director(WWDP -R/M &J/E)
28th January 2013
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Before we start
Contract
What is your first experience with a
Contract
Who are we
Essence of live contract
For what Contractors are
Roles of the Engineer, Engineers Rep and
Other officers in Engineer and Employer
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Out Line Contract Payments, Types
Authority Levels
Types of Payment
Definition of Variation Orders
ICTAD Document to be refer for VO
Authority for VO and contents of VO
Valuation procedure for VO NWSDB procedure for VO
Procurement Guile Lines
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Contract Payment - Definition
All payment to the Contractor for the completion
of entire scope of work(including Variations)
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Who has to authority to approve the payments
-EngineerThe Engineer is the person named in the Contract Data( or
any other competent person appointed by the Employer andnotified to Contractor) who is responsible for
administrating and supervising the execution of the work.
Such person may be Engineer, Architect or any other
technical person . In the absence of such appointment theEmployer himself( Defined under A. General, Section 3 of
Condition of Contract ,ICTAD/SBD/01 - page no 36)
Who actually pays: - The EmployerThe Employer is the party named in the Contract Data who
employs the Contractor to carry out the Works ( Defined
under A. General, Section 3 of Condition of Contract,ICTAD/SBD/01 - a e no 36
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Authority of Engineers Representative
- Written authority delegated by the Engineer
(Clause 5.2,ICTAD/SBD/01)
Who are we?
- Engineers Representative
A Person appointed from time to time by theEngineer under sub clause 5.1 (ICTAD/SBD/01)
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Obligation of the Engineer
Being impartial
Fair in determinations
Consistency in affairs
Administrating and supervising the execution of
the work
Issuing decisions, certificates and orders
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Obligation of the Employer
Employs the Contractor to carry out theworks. (The Contractor is carrying out
works for the Employer)
Shall give possession of all parts of the siteto the Contractor.
Timely payment
- Delay Payment
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Types of Payment
Advance Payment
IPC (monthly)On Account Payments
Need for even 0 IPC for price escalation
Final Accounts
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Advance Payment means
Interest-free loan for mobilization, when the
contractor submits a guarantee in a form by a
Bank or a Company acceptable to the Employer.
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Advance payment(clause 51) The Employer shall make advance payment to the contractor in
an amount to 20% of the Initial Contract Price excludingprovisional sums and contingencies, within 14 Days after
furnishing of an unconditional guarantee in a form and by a bank
or company acceptable to the Employer. The guarantee shall
remain effective until the advance payment has been
repaid(clause 51.1,ICTAD/SBD/01).
The Contractor is used the advance payment only to pay for
Equipment, Plant, Materials and Mobilization expenses required
specially for execution of Contract(Clause51.2
ICTAD/SBD/01).
The advance payment shall be repaid by deducting proportions
and repaid in full when total certified value of work reaches
90% of the Initial Contract Price(clause 51.3,ICTAD/SBD/01).
I t P t t t IP 42
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Inter m Payment ert cate IP -c ause 42
-Reasonable Valuation-The Contractor shall submit to the Engineer monthly
statements of the estimated value of the workexecuted.
- The Engineer shall check and certify monthly
statement within 21 days of the receipt of the
contractors statementThe Employer shall pay the amount certified within 14 Days
On Account Payments
Authority for approval in NWSDB(General
Manager)
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Final Certificate(clause 55)
Upon completion of the Defects Liability Period
the Contractor shall request the Engineer to
issue a Final Certificate and the Engineershall issue the Final Certificate upon being
satisfied that the Contractor has rectified the
Defects(clause 55.1,ICTAD/SBD/01).
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Retention
Retention money is warranty for hidden defects duringconstruction, including the 1-year defects liability
period after project completion. Retention money is
therefore released after the end of the 1-year defects
liability period and when the certificate of acceptance
is already issued. If the contractor wants the release of
the retention money before the lapse of the 1-year
defects liability period, replacement by the surety bondmay be allowed.
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Retention(clause 48)
The Employer shall retain from each payment
due to the Contractor the proportion stated in the
Contract Data subject to the limit of retention
stated in the Contract data(clause 48.1,
ICTAD/SBD/01).
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When to release?
On Completion of the whole of the Works,first half the total amount retained shall be
repaid to the contractor and second half
when the Defects liability Period has
passed(clause 48.2 ,ICTAD/SBD/01).
Releasing against a Bond at the time of
completion
Reserving money to pay after D/L period
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How they are being practiced in NWSDB
The Engineers Representative has the
authority to the extent what is specified in
the BOQ in the Contract
Variations (?) and Time extension is notdelegated
Variations: To be certified by the Engineer and
agreed upon by all parties(Engineer, Contractorand Employer.
For the completion of works
For improvements
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What happens when the quantity in the BOQ is not sufficient
or no provision in the BOQ
Work needed to complete the entire scope(Re-measurements)
Things that are nice to accompany( Variations)
Things that improves the long-termsustainability(Variations)
Price Escalation & others
There is BOQ provision but needs engineersapproval to proceed
Provisional sums
Remember to refer contractual provisions
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A Variation may be an addition, omission or
substitution to the design or specifications,
discrepancy between any two or more contract
documents or any statutory requirements, an error in
or omission in the contract bills etc.
Definition of Variation
Document to be referred for variation procedure
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1. Standard Bidding Document for Procurement of WorksICTAD/SBD/01
Recommended for use on works contract between Rs. 10 million and Rs.
100 million
May be used for works of higher which are not of a complex nature
2. Standard Bidding Document for Procurement of Works for Major Contracts
ICTAD/SBD/02
Recommended for use on works contracts over Rs. 100 million and forcontracts of a lesser value which are complex in nature
3. Standard Bidding Document for Procurement of Works for Minor Contracts
ICTAD/SBD/03
Recommended for use on works contracts up to Rs. 10 million
4. Standard Bidding Document for Procurement of Works for Design and BuildContractsICTAD/SBD/04
Recommended for use for works contracts where the contractor is
responsible the design and construction of the specified approvals obtained
from the Employer.
Document to be referred for variation procedure
in local contract
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Who has the authority(Clause 39 of the ICTAD)The variations may initiated by the Engineer at any time
prior to issuing the Certificate of Completion of the works.
As per the clause 39.4 ,ICTAD/SBD/01each Variation may include;
1. Changes to the quantities of any item of work included in
contract.
2. Changes to quality and other characteristics of any item of work
3. Changes to levels, positions and dimensions of any part of the
Works
4. Omission of any work unless it is to be carried out by others
5. Any additional work, plant, material or services necessary for thePermanent Works.
P t f V i ti ( l 40)
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Payments for Variations(clause 40) The Contractor shall submit quotation for carrying out variation
within 07 Days and the Engineer shall assess the quotation before
the variation is ordered(clause 40.1,ICTAD/SBD/01) The rate in the BOQ shall be used to calculate the value of
variation(refer clause 40.2 other cases, ICTAD/SBD/01)
If the Contractor quotation is unreasonable, the Engineer may fix
the price still needs to be proceed with works and then DAB(clause 40.3, ICTAD/SBD/01).
The Contractor shall not be entitled to additional payments for
costs that could have been avoided by giving early
warning(clause40.5 ,ICTAD/SBD/01).
The value of work executed shall include the valuation of Variations
and Compensation Events.(clause 42.5,ICTAD/SBD/01)
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NWSDB Procedure for VO
The NWSDB consider quantity exceed is also VO
First the contractors quotations assessed and agreed upon withthe contractor
The agreed VO shall be submitted to variations committee
approved by GM ( or the Engineer)
If the committee is approved and forwarded for GMs approval With GMs approval, it is issued to the contractor to invoice.
The Engineer, GM of NWSDB shall approve Net variationwithin 10% of the Contract Awarded Price. (Procurement
Guide Lines).
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Procurement Guide Lines Reference:8.13.4
Variations to Contracts
A: Net variation within 10% of the Contract Award Price:
Head of the Department (HD) or Project Director (PD) may approve the
variation by
revising the TCE, if required and subject to the following:
a) By obtaining explanatory note from the persons involve;b) By Satisfying that:
i. Change of scope could not have foreseen at the time of award of
contract;
ii. the change of scope is justifiable;iii. The quantity variation/s are marginal or are due to unforeseen
situation/s;
G id i f
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B: Net variation exceeds 10% of the Contract Award Price:
a) HD/PD shall forward all the relevant documents together with a
statement prepared in accordance with a) and b) above to the CAO;
HD/PD shall also submit all the documents required for the revision of
TCE.b) If the net variation is within 15% of the Contract Award Price and
CAO is satisfied with the HD/PD statement CAO may approve it;
c) If the net variation is more than 15% of the Contract Award Price or
the net variation is below 15% and CAO is not satisfied with the
statement submitted by HD/PD, CAO shall refer it to a the appropriate
PC assisted by the TEC; In this situation the appropriate PC shall be
decide on the basis of increased amount of the contract price and not
necessarily the PC relevant to the revised contract price.
Procurement Guide Lines Reference:8.13.4
Variations to Contracts
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Conclusion Contract Payments, Types
Authority Levels
Types of Payment
Definition of Variation Orders
Valuation procedure for VO
NWSDB procedure for VO
Procurement Guile Lines
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THANK YOU