Upload
jyothy-bose
View
20
Download
0
Tags:
Embed Size (px)
Citation preview
Contract Administration Lecture @ RBSC
On Mar 09, 2015 by
Jyothy SChartered Engineer, Valuer, Contract Specialist
B Tech, EEPSM (IIM-K), CAIIB, MIE, MICA, MINDT, AIV
What is a contract?In common law legal systems, a contract (or informally
known as an agreement in some jurisdictions) is anagreement having a lawful object entered into voluntarily bytwo or more parties, each of whom intends to create one ormore legal obligations between them.
The elements of a contract : "offer" and "acceptance"by "competent persons" having legal capacity who exchange"consideration" to create "mutuality of obligation”.
Contract Administration : Jyothy
Why do you enter into a contract?
To achieve our goals with the help of others.
To share the risks with others.
To minimize the risk by outsourcing certain activities for others to perform.
Contract Administration : Jyothy
.
Why should you understand “contract”?
Enforcing Contract: India is at 186th place
Contract Administration : Jyothy
Some myths
Who does win / benefit under a contract?
Whether only one party should win / benefit or both parties?
How to protect your interest?
Contract Administration : Jyothy
What is your role?
Your KPA covers procurement
The process of procurement for work, material, services, etc. ensures:
Efficiency, Value for Money (Economy), Transparency
Fair & Equitable treatment
Promotion of Competition
Quality
On timeContract Administration : Jyothy
Tendering : Key Processes Budget Provision. Administrative approval. Technical sanction.
Tendering (open / limited). Empanelment of Contractor. Eligibility criteria.
Adequate and wide publicity given thru newspaper, website, trade journals, etc.
Convenient tender receiving/opening time and address of the tender receiving officials/tender box are properly notified.
Tenders/bids are opened in the presence of bidders/their authorised representative.
Corrections/omissions/additions etc., in price bid are properly numbered and attested and accounted page –wise. Tender opening register is scrupulously maintained.
Conditions tenders are dealt before opening of the price bids.
Tender evaluation. Determining reasonableness of the Rates, ABC Analysis, HQR, LOR, etc.
Whether the tenderer / crucial documents have been submitted & duly signed ?
Whether the requisite EMD (Earnest Money Deposit) has been furnished ?
Tender is sealed
Two types of Bids: Technical & Financial, Validity of tender
Financial Sanction
Contract Administration : Jyothy
Standard Tender Document
Part I -
NIT
Instruction to bidder / tenderer
GCC, SCC
Schedule of Requirement
Tech. Specifications
Form for tender submission
Form for agreement
Form for BG, Other Standard Forms
Part II - BoQ / Price Schedule
Contract Administration : Jyothy
Forms of Contract for
Engineering works
There are several Standard Forms (GCC) available.
Following are some of the best known forms of GCC and widely used.
FIDIC
JCT
NEC etc.Contract Administration : Jyothy
Award of work
Whether LOI is sufficient to proceed?
Whether LOA is sufficient to proceed?
Whether agreement is to be executed?
What is the value of stamp paper?
Contract Administration : Jyothy
Types of Contract
Item Rate
Lump-sum
EPC
Design & Build
BOT
PPP
Cost plus etc.
Contract Administration : Jyothy
Award of work to contract
Once the bids are opened, don’t alter the scope, specification and the conditions of the contract.
Sign the agreement. Execute the contract as defined in the bid / tender, sign and seal
Obtain Security Deposit / BG. Verify the BG and monitor the validity.
Refund of EMD
Award of work to be published on website
Obtain Insurance & Labour License. Read insurance paper / certificate. Is it a contract?
Obtain Labour License
Contract Administration : Jyothy
Contract agreement: check listThe elements : "offer" and "acceptance" by "competent persons" having legal
capacity who exchange "consideration" to create "mutuality of obligation”.
Who are the parties? Are the persons representing the parties competent to sign?
What are the promises? Has the offer been accepted? Is there a mutuality of obligation?
Is there an appropriate consideration?
Is the contract legally enforceable ?Contract Administration : Jyothy
Contract Document
A set of documents containing:
The Contract Agreement
LOA
Addendums, Minutes of Pre-bid meeting
NIT, Instructions to the bidders
SCC & GCC
Technical Specifications, drawings, etc.
BoQ / Bid
Contract Administration : Jyothy
Contract Administration
While administering contracts, vital requirements & provisions sometimes overlooked. CVC often observe these shortfalls:
Signing contract agreement
Insurance
Labour License, Labour Act
Programme of work
Dealing delays
EOT, LD
Contract Administration : Jyothy
Contract Administration
What are GCC, SCC, etc.? Is it necessary to read and understand the entire contract document?
Do you ensure for compliance of all provisions under the contract? If not, what /why?
Do you quote contract clauses whilst corresponding?
Contract Administration : Jyothy
Contract Administration: Some vital
clauses
Is it possible to “extent the contract period”?
What is “Time for Completion”?
Whether the programme of work, cash flow chart etc. got any relevance?
What are Liquidated Damages? Is it a penalty? Do you think you need to give actual details /
justification of the estimated LD?
Contract Administration : Jyothy
Contract Admn.: “time is the
essence of contract”
Contract has provision:
a) Time for Completion
b) Approval of programme of work
c) Stage-wise payment
Did you any time prepare a budget? Why do you monitor & control cost?
Here comes the concept “time value of money”.
“Time Value of Money”
What is the payment cycle and mode? 60 days or back-to-back….
What is the cost of the capital?
Why does timely payment is important?
PV = FV / (1+WACC)^t
Contract Administration : Jyothy
Contract Administration : Jyothy
Why “time is the essence of contract”
and “the time value of money” are so
important?
Rs 50 lakh today
Rs 50 lakh after 5 year
Rs 50 lakh after 10 year
Compliance with Labour Act
Contract Labour Act 1970 applies to every:
Establishment in which 20 or more workmen are employed or were employed on any day of the preceding 12 months as contract labour.
Contractor who employees or who employed on any day of the preceding twelve months 20 or more workmen.
It shall not apply to establishments in which work only of an intermittent or casual nature is performed. If a question arises whether work performed in an establishment is of an intermittent or casual nature, the appropriate Government shall decide.
Principal employer needs to ensure:
Labour License
Minimum labour wages, other compliances,
Ensure welfare & health of contract labour, Other facilities: viz. canteen, rest rooms, first aid facilities, etc.
SafetyContract Administration : Jyothy
Closure
Whether the contract is closed once the time for completion of work is over?
What are the important steps in the closure?
When does the DLP start?
Contract Administration : Jyothy