ROYAL GOVERNMENT OF BHUTAN
MINISTRY OF FINANCE
DEPARTMENT OF PROCUREMENT AND PROPERTIES
GUIDELINES FOR MILESTONE AGREEMENT 2023
1st July, 2023
PREFACE
One of the principal mandates and powers of the Ministry of Finance, as provided under section 104 (i) of the
Public Finance (amendment) Act of Bhutan 2012 is to issue rules, manuals, directives, instructions or
notifications ensuring an equitable, transparent, competitive and cost-effective procurement system in the
country. While the milestone agreement is practiced by some procuring agencies, proper understanding and
uniform implementation of Milestone Agreement is missing because of which the Guidelines for Milestone
Contract 2023 is drafted.
Ministry of Finance in the exercise of the power conferred by the section 104 (i) of the Public Finance
(amendment) Act of Bhutan 2012 hereby adopts Guidelines for Milestone Contract 2023 vide 141st Policy and
Planning Coordination Meeting on 20th February, 2023 which shall come into effect from 1st July 2023.
Any queries, clarification, interpretation on this standard bidding document contact:
Procurement Management and Development Division
Department of Procurement and Properties
Ministry of Finance
Email –
[email protected] Contact – 336962
INTRODUCTION
In an effort to bring about consistency and uniformity in the implementation of the milestone agreement,
the Ministry of Finance is pleased to issue the Guidelines for Milestone Agreement. The inconsistency in
adoption of the milestone agreement by different procuring agencies resulted in confusion among the
engineers on evaluation and implementation of relevant clauses in the Contract Agreement.
The sole intention of having milestone agreement in the contract is to ensure that the contractor starts the
work from the day the site is being handed over to them and not wait till the last phase of the contract
duration which normally ends up in contractual issues.
Therefore, the incorporation of such strategies will not only help in smooth project progress but also timely
completion and quality construction avoiding various contractual complications.
With the issue of this guidelines with removing the ambiguities, it is expected to make smooth
implementation while executing different projects.
1. Incorporation in the Standard Bidding Document
(1) In reference to Procurement Rules and Regulation 2019 clause no. 6.4.3 (b), ‘Monitoring
periodically progress in implementation of the contract, including determination of the volume
of works accomplished according to work plan, milestone agreement and inspection and testing
of quality aspects, the clause for milestone agreement shall be incorporated in the preparation
of Standard Bidding Document.
(2) The Clause which shall read as follows shall be under Section VII. Special Conditions of
Contract; B. Time Control, Program GCC 27.1 (c) & GCC 27.3, and Termination GCC 59.2
(k) & GCC 59.2 (l):
SCC; GCC 27.1 (c): The milestone agreement shall be signed within 30 days of signing the
contract agreement which shall be a part of contract.
SCC: GCC 27.3: The period between program updates is as and when required by the
Employer. However, work program updates shall not be allowed within the milestone period.
In case of force majeure, change of scope and genuine hindrances as approved by procuring
agencies resulting in time compensation, the duration of the milestone agreement may be
revised accordingly. However, the physical target specified in the milestone agreement shall
not be revised.
SCC: GCC 59.2 (k): Failure to submit, sign and execute milestone agreement in accordance
with clause GCC 27.1 (c), shall be treated as fundamental breach of contract by the contractor.
SCC: GCC 59.2 (l): Additional Clause:
(i) If the contractor fails to achieve all the three milestone agreements consecutively.
OR
(ii) In the event the contractor achieves at least one milestone agreement, but fails to achieve a
minimum of 50% in every item specified in the agreements at the end of three milestone
periods.
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(3) After signing of the Resource-Based Work Plan the contractor shall sign milestone agreement
with the employer for every (insert number of months) specifying the deliverables in terms of
physical target at the end of each milestone agreement.
2. Application
The Milestone contract shall apply to procurement of works as follows:
(1) Estimate of Nu. 10 Million and above for works in category 1 (Roads & Bridges);
(2) Estimate of Nu. 15 Million and above for works of category 2, 3 & 4 (Building works,
Bhutanese painting works & Telecommunication works);
3. Determination of Milestone Targets and Duration
(1) The milestone targets shall be specified as physical targets as deemed appropriate.
(2) The milestone agreement shall be signed for contracts having contract duration of 8 months and
above and/or contract amount exceeding Nu. 10 Million for W1 & Nu. 15 Million for W2, W3
& W4 categories respectively.
(3) The duration for the three milestone periods shall be taken as minimum of 40% to maximum of
50% of total contract duration equally divided into three milestone periods.
(4) The physical targets shall be specified for respective milestone periods.
(5) In each milestone period, the items and quantities shall be selected from the BoQ of the contract
agreement based on the approved resource based work plan1.
(6) For example; if 40% of the total contract duration is taken as the total milestone period for three
milestone agreements, approximately 35% of physical targets need to be specified.
4. Signing of Milestone Agreement
(1) The milestone agreement shall be signed within 10 days of signing the contract agreement2
(2) Milestone agreement shall be signed between the Employer and the Contractor, upon mutual
agreement on the specified physical target and period.
(3) All the three milestone agreements shall be signed at once before the start of execution, between
the head of Engineering sector/division/services/units/ROs and the Contractor/Contractor’s
authorized representative in witness of the concerned Project Manager/Site Engineer (Regional
Office) and Contractor’s representative.
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Responsibility and accountability for reviewing and finalizing the resource-based work plan shall lie with the concerned Project Manager.
2
Responsibility and accountability for preparation of Milestone Agreement shall lie with the Engineering sector/division/services/units/Ros
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5. Revision of Milestone Agreement
The revision of milestone agreement in terms of physical targets shall not be allowed. However, in case
of force majeure, change in scope and genuine hindrances as approved by the procuring agencies resulting
in time compensation, only the milestone agreement duration may be extended.
6. Evaluation of Milestone Agreement
(1) At the end of each milestone agreement period, the physical target achieved shall be evaluated
corresponding to each item from the BoQ selected and specified in the milestone agreement.
(2) The evaluation of each milestone agreement shall be completed within 10 days from the end of
each milestone agreement period.
(3) In the event of non-achievement of the physical target specified in the 1st milestone period, there
shall be no carryover of the non-achieved quantity of the items to the 2nd milestone agreement
period and similarly to 3rd milestone period.
(4) The physical target specified initially at the time of milestone agreement signing shall remain
unchanged for each milestone period to the end of 3rd milestone period.
(5) At the end of the 3rd milestone agreement period, the overall evaluation shall be done.
Note: The above conditions are specific to milestone agreement and not to quantities of total BoQ of
the project. At the end of the contract duration, the contractor shall achieve all the quantities of the
BoQ of Contract Agreement including variation or additional works.
(6) During the evaluation of the milestone agreement the following evaluation shall be taken in to
account;
(i) 1st Milestone target specified Vs Achievement of targets for each item:
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a) If all the targets specified in the milestone agreement for each item/activity is achieved1, then
the milestone agreement is passed.
b) Even if one of the targets of any of the items/activity specified in the milestone agreement is not
achieved*, then the milestone agreement failed.
(ii) 2nd Milestone target specified Vs Achievement of target for each item.
a) If all the targets specified in the milestone agreement for each item/activity is achieved3, then
the milestone agreement is passed.
b) Even if one of the targets of any of the items/activity specified in the milestone agreement is not
achieved3, then the milestone agreement failed.
(iii) 3rd Milestone target specified Vs Achievement of target for each item.
a) If all the targets specified in the milestone agreement for each item/activity is achieved3, then
the milestone agreement is passed.
b) Even if one of the targets of any of the items/activity specified in the milestone agreement is not
achieved3, then the milestone agreement failed.
(7) Failing to achieve all the three-milestone agreement targets consecutively results in total failure
of the milestone agreement. This refers to condition No. 1 of SCC; GCC 27.1 (c).
(8) In the event, if among the three milestone agreement targets, one milestone agreement target is
achieved, then the cumulative targets achieved in all the three milestone agreements shall be
evaluated with the total targets specified in the three milestone agreement for each item.
(9) Upon final evaluation:
(i) If the cumulative physical achievement is equal to or greater than 50% of the total targets
specified in the three milestone agreement, then the milestone agreement is passed.
(ii) If the cumulative achievement of targets is less than 50% of the total quantities specified for
every item/activity in the three milestone agreement, then the milestone agreement is failed.
This refers to condition No.2 of SCC; GCC 27.1 (c)
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The physical target achieved shall be in conformity with the Design and the Technical Specification.
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(iii) If the contractor falls into any one of the conditions specified in SCC; GCC 27.1 (c), it
shall be a fundamental breach of contract by the contractor warranting termination of the
contract by the Employer.
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3. Annexure I (Sample Milestone Agreement Format)
This Agreement is made the [insert day] day of [insert month], [insert year]
between
[insert name and address of Head of Engineering Sector/Division/Section/Unit/RO] (for the Employer) of one part
and
[insert name and address Contractor] (for the Contractor) of the other part.
By signing this Agreement, the Contractor hereby agrees to execute Milestone Agreement No. 1, 2 & 3 for the Work
- [insert name and identification number of Contract] within the three milestone period; MA No. 1 (insert duration, from – to, date, month
and year). MA No 2 (insert duration, from – to, date, month and year) and MA No.3 (insert duration, from – to, date, month and year), as
per the approved resource based Work Program and as specified in Special Conditions of Contract and the General Conditions of the Contract
Agreement.
Name of Contractor: …
No. of Months in a Milestone Contract:
Physical Target for
Physical Target for MA Physical Target for MA
MA No.3 (insert
Sl No.1 (insert duration from – No.2 (insert duration from
Activity Unit duration from – to)
No to) – to)
1 Insert the description of the Specify the quantity to be Specify the quantity to be Specify the quantity to
activity in reference to BoQ achieved in this particular achieved in this particular be achieved in this
items as per the approved MA MA particular MA
resource based work plan
(Affix Legal (Affix Legal
Stamp) Stamp)
Signature for Signature for
Client Contractor
(Contractor/Contractor’s Authorized
Representative)
Witness: Witness:
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4. Annexure II (Example/Illustration)
(1) Contract duration 15 Months (Starting January 2021 to March 2022)
(2) Leaving 1 month as mobilization period, MSA can be effective from the month of February 2021.
(3) The three milestone period can be 6 months which is 40% of overall contract duration. Then this is
equally divided into three milestone periods of 2 months each.
(4) Corresponding to three milestone duration specified as 40% of the total contract duration (6
months), the physical target shall be specified as 35% of the total physical target of the contract.
(5) The 35% physical targets shall be equally divided into three for respective 2 months of milestone
period.
(6) The physical targets shall be selected from the items in the BoQ which falls within the milestone
period (6 months) of total contract duration as per the approved resource based work plan.
Note: This is merely for proper understanding of the MA but not recommended to be used during implementation of MA
Case I (Illustration)
Milestone Agreement No 1. (1st February 2021 – 31st March 2021)
Sl Activity BoQ Unit Physical Physical Remarks
No Quantity Target Target
Specified Achieved
1 FC 10,000 Cu.m 1,200 1,500 Pass
2 GSB 6,000 Cu.m 500 600 Pass
3 WMM 5,800 Cu.m 380 200 Fail
Milestone Agreement No 2. (1st April 2021 – 31st May 2021)
Sl Activity BoQ Unit Physical Physical Remarks
No Quantity Target Target
Specified Achieved
1 FC 10,000 Cu.m 1,300 1,500 Pass
2 GSB 6,000 Cu.m 700 600 Fail
3 WMM 5,800 Cu.m 650 800 Pass
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Milestone Agreement No 3. (1st June 2021 – 31st July 2021)
Sl Activity BoQ Unit Physical Physical Remarks
No Quantity Target Target
Specified Achieved
1 FC 10,000 Cu.m 1,000 1,500 Pass
2 GSB 6,000 Cu.m 900 700 Fail
3 WMM 5,800 Cu.m 1000 600 Fail
i. In this case, the total percentage of physical targets for each item in the three milestone
agreement specified is 35% of the total quantity of BoQ.
ii. The total duration of three milestone periods (6 months), which is 40% of total contract
duration.
From the above tables of three milestone agreement evaluation, it can be observed that all the three
milestone agreements failed consecutively as targets specified are not achieved in one or two of the items.
Note: This is merely for proper understanding of the MA but not recommended to be used during implementation of MA
Case II
Milestone Agreement No 1. (1st February 2021 – 31st March 2021)
Sl Activity BoQ Unit Physical Target Physical Target Remarks
No Quantity Specified Achieved
1 FC 10,000 Cu.m 1,200 600 Fail
2 GSB 6,000 Cu.m 500 200 Fail
3 WMM 5,800 Cu.m 380 100 Fail
Milestone Agreement No 2. (1st April 2021 – 31st May 2021)
Sl Activity BoQ Unit Physical Target Physical Target Remarks
No Quantity Specified Achieved
1 FC 10,000 Cu.m 1,300 700 Fail
2 GSB 6,000 Cu.m 700 400 Fail
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3 WMM 5,800 Cu.m 650 300 Fail
Milestone Agreement No 3. (1st June 2021 – 31st July 2021)
Sl Activity BoQ Unit Physical Target Physical Target Remarks
No Quantity Specified Achieved
1 FC 10,000 Cu.m 1,000 1,300 Pass
2 GSB 6,000 Cu.m 900 950 Pass
3 WMM 5,800 Cu.m 1000 1,000 Pass
i. In this case, the overall percentage of physical targets for each item in the three milestone
agreement specified is 35% of the total quantity of BoQ.
ii. The total duration of three milestone periods (6 months), which is 40% of total contract
duration.
From the above tables of three milestone agreement evaluation, it can be observed that two milestone
agreement (1st & 2nd) fails as the physical target specified is not achieved in one or two of the items.
However, the 3rd milestone agreement is passed achieving all the physical targets specified in this particular
milestone agreement.
In other words, all the items specified in this milestone agreement (3rd milestone agreement) are achieved.
In this case, the evaluation shall be done to find out whether 50% of the total physical targets specified in
the three milestone agreement are achieved for each item.
Hence,
Sl Activity Total Physical 50% of Unit Cumulative % of Remarks
No Target Specified total Physical Physical
in three Physical Target Target
milestone Target Achieved Achieved
agreement
1 FC 3,500 1,750 Cu.m 2,600 74.29% Pass
2 GSB 2,100 1,050 Cu.m 1,550 73.81% Pass
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3 WMM 2,030 1,015 Cu.m 1,400 68.97% Pass
The result of overall milestone agreement evaluation is;
The percentage of the cumulative physical target achievement in the three milestone agreement is equal or
higher than 50% of the total physical target specified in the three milestone agreement.
Hence, the milestone agreement is Pass. If it is less
than 50% then it is Fail.
Note: This is merely for proper understanding of the MA but not recommended to be used during implementation of MA
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