Project Management Consultant for PMGSY

Rural Roads Project in Jharkhand

(World Bank Funded)
Procurement and Contract Management
30 Aug 2013
Presented by:
Soumitra Ghosh
General Manager,
PROCUREMENT PLAN
Procurement Plan shall include:
Identifying work, its administrative and Technical
approval/ sanction
Packaging of various Works
Nature of Contract
Lumpsum Contract (EPC, BOT etc.)
Item- rate Contract
Type of Contract
FIDIC/ Modified FIDIC
Other Govt. Tender Forms
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PROCUREMENT PLAN
Mode of Bidding
National Competitive Bidding (NCB)
International Competitive Bidding (ICB)
Criteria of NCB or ICB (e.g. Contract upto Rs. 100 Crore-
NCB, above- Rs. 100 Crore- ICB etc.)
Others e.g. Whether on-line or off-line bidding, Time frame for
bidding, evaluation etc.
Formation of Tender Evaluation Committee
Technical Committee
Financial Committee
Approving Authority

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PROCUREMENT PROCESS FLOW
Receipt of Offers
(Technical & Price)
Cost of RFP document
accompanying tender
Earnest Money Deposit
accompanying tender
Opening of Technical
Bids
Price Bids kept un-
opened and sealed
Evaluation of Technical
Proposal
Evaluation of Commercial Terms
& Conditions
Announcement of
Qualified Bidders
Opening of Price Bids of
Qualified Bidders
Price Bids of Unqualified
Bidders kept unopened
Evaluation of Price Bids
Placement of Order/
LOI
Return EMD and unopened Price
Bids to Unqualified Bidders and
Unsuccessful Bidders
Invitation of Bids
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Bidding Document
Invitation for Bids
o Letter/ Notice indicating brief description
of Project
o Cost of tender Doc.
o Earnest Money
o Deadline (Date) of various submissions,
openings etc.


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Bidding document
Instructions to Bidders
Background information
Source of funding
Type of Bidding, NCB, ICB
Procedures to be followed by Bidders in the
preparation and submission of their Bids e.g.
whether two part or one part, tax/ duties to be
considered, validity, power of attorney etc.

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Bidding Document
Evaluation and Qualification Criteria
This Section contains all the criteria that the Employer shall use to
evaluate bids and qualify Bidders, such as
o Technical
Experience on similar type of completed jobs
Possession of required machinery/ equipment
Having qualified technical staff of reqd. experience etc.
o Financial Criteria
Annual Turnover
Net worth etc.
o Others viz. Domestic preference etc.



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Bidding document
Technical Specification
o Specification
o Drawings
o Reports etc.
General Conditions of Contract
o This part is elaborated in the
Presentation on Contract
Management

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Bidding Document
Particular Conditions of Contract, or
Special Conditions of Contract
o This Section deals with the Conditions specially
applicable to the Works under consideration e.g.
Time for Completion, Milestones, rate of
deduction of Liquidated damage, Insurance etc.
Bidding Forms
o This Section includes formats for Letter of
Transmittal, Performance Security, Advance,
Financial Bid submission forms etc.


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CONTRACT MANAGEMENT
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A Contract is a written Agreement
between the parties that is intended to be
legally enforceable
A prerequisite requirement for the
enforcement of a contract, is that the
terms & conditions are accepted by
parties of the contract.
WHAT IS A CONTRACT ?
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Contract Management or Contract
Administration is the management
of Contracts within the provisions and
intentions of the Contract accepted by the
Parties.
It is the process of systematically and
efficiently managing contract creation,
execution, and analysis for the purpose of
maximizing financial and operational
performance and minimizing risk

WHAT IS CONTRACT MANAGEMENT ?
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A very wide subject to highlight and discuss
all aspects of Contract Management
Accordingly only important aspects of the
Contract Provisions under the following,
which need to be closely monitored will be
discussed
General Conditions of Contract
Special Conditions of Contract
Technical Specification

An Overview
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Right of Access to the Site
Employer shall give the Contractor right of
access to, and possession of, the Site within a
specified time
Permits, Licences or Approvals
Employer shall provide permits, licences or
approvals required by the Laws of the Country,
clearance through customs for the delivery of
Goods etc.


Obligation of Employer
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Contractors General Obligations
The Contractor shall execute and complete the Works in
accordance with the Contract and as per Engineers
instructions, and shall remedy any defects. This includes
Environmental & Social issues also
shall provide the Plant, Personnel, Goods, consumables,
material, and services for successful execution of Works as
specified in the Contract
shall appoint an Engineer as in-charge of Project and shall give
him all authority necessary to act on his behalf for execution of
the job.
Overall management of site including Safety of men and
machineries.

Obligations of the Contractor
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The Contractor shall furnish (at his cost) a
Performance Security for proper
performance
This is generally in the form of Bank
Guarantee for an amount of 5%- 10% of
the Contract Value, as agreed in the
Contract
It is normally valid up to Defect Liability
period
Performance Security
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Broadly:
Engineer named in the document shall carry out the
duties on behalf of the Employer as assigned to him
shall approve all drawings prepared by the Contractor
for execution of temporary and permanent Works
He and his team shall supervise, examine, inspect,
instruction site activities, take measurements of work
done, recommend for payment, extension of time etc.
the Engineer shall determine any prayer for extension
of Time for Completion, Variation order, Extra claims
and other contractual issues

Engineers Duties & Authority
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The Contractor shall carry out the work in
accordance with recognized good practice
give the Engineer full opportunity to carry
out inspection & testing
rectify the defects, remove and re-execute
any work which is not in accordance with
the Contract and as directed by the
Engineer
WORKMANSHIP
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Contractor shall submit a detailed time
programme in the form of Bar Chart/ PERT
network immediately after commencement
Extension of Time for Completion
o Extension may be sought due to various reasons viz.
non-availability of fronts/ approved drawings/
payments, ordering additional works, hindrances due
to local or political issues, Act of God etc. and any
other delays Caused by Authorities etc.
WORK PROGRAMME
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If the Contractor fails to complete the work in
totality or in parts/ sections, the Contractor shall
pay delay damages (or Liquidated Damages) to
the Employer for this default.
This may be to the tune of 0.1% of the
unfinished work, subject to a maximum of 10%
of the Contract Value or otherwise specified in
the Contract
DELAY DAMAGES
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The Works and Sections shall be taken over by
the Employer when
the Works have been completed in
accordance with the Contract,
issue the Taking-Over Certificate
mentioning any minor outstanding work
and defects which will not substantially
affect the use of the Works or Section
However, minor defects shall be made
good during the Defect Liability Period
EMPLOYERS TAKING OVER
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This is the period after the issuance of
Completion Certificate, as stated in the Contract,
within which period the Contractor shall
o complete any work which is outstanding on
the date stated in a Taking-Over Certificate
o execute all work required to remedy defects
or damage, as may be notified by the
Employer on or before the expiry date of the
Defects Notification Period
DEFECT LIABILITY
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Variation may include additional or modified
items arising out of extra work, changes to
the quality and other characteristics work,
omission of any work not previously
mentioned
It may be determined from analogous items
available in the Contract
The Extra items may also be determined by
analysing the labour, material, fuel and other
components including Contractors overhead
& profit.
VARIATIONS & EXTRA CLAIMS
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The Contract Price may be adjusted to take account of
any increase or decrease in Cost resulting from rises or
falls in
cost of labour,
materials
fuel
other inputs to the Works
This is made after the Base Date, by addition or
deduction of the amounts determined by the formulae
prescribed in the Contract.
However for fixed price Contracts such adjustments are
not made

ESCALATION
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Advance Payment
o The Employer normally makes an advance payment, when the
Contractor submits a guarantee of equivalent amount, which is
adjusted from the Contractors bills as a percentage or in
installments as stated in the Contract
Interim Payment
o The Employer normally makes payment against monthly
Interim Bills, supported by requisite documents
Final Payment
o After receiving the Performance Certificate and other
documents e.g. As-Built drawings etc., the full and final
payment is made

PAYMENTS
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Employer shall be entitled to terminate the
Contract if
o the Contractor unreasonably fails to carry
out any obligation under the Contract,
o abandons the Works or otherwise plainly
demonstrates the intention not to continue
performance of his obligations
o Corrupt or Fraudulent Practices
o Other reasons bankruptcy, insolvency etc.

TERMINATION BY EMPLOYER
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Force Majeure means an exceptional event
or circumstance which could not reasonably
be avoided or overcome by any of the Parties
This may include, but is not limited to
o war, hostilities, invasion, act of foreign
enemies, rebellion, terrorism, riot,
commotion,
o Act of God (e.g. flood, famine etc.)
FORCE MAJEURE
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When there is a dispute between the Parties, the
following steps should be followed
o The Engineer should thoroughly examine the
Contractors claim and come to a reasonable
solution
o The disputes should be mutually and amicably
settled
o If the above step fails, the matter should be
referred to Dispute Adjudication Board (Board
should be formed at the beginning of the
Contract)

CLAIMS, DISPUTES
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Any dispute between the Parties neither settled
amicably nor through Dispute Adjudication Board,
should be referred to Arbitration
Normally each Party nominates one person each,
and these two persons mutually select another
person, who becomes the Chairman of the
Arbitration Board. The decision of Arbitration
Board remains final and binding on both the
Parties
There are several rules and procedures of
Arbitration, viz. Arbitration & Conciliation Act,
1996, United Nations Commission on International
Trade Law (UNCITRAL) etc.
ARBITRATION
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The Technical Part generally consists of the
following:
o Detailed Technical Specification related to Civil,
Mechanical, Electrical Works, as applicable, to be
carried out
o Mode of measurements
o Bill of Quantities
o Drawings
o Other technical details

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Technical Specification etc.
Contract management is successful if:
o the arrangements for service delivery continue to be
satisfactory to both parties
o the expected business benefits and value for money
are being achieved
o the client/ supplier/ contractor is co-operative and
responsive
o the organisation understands its obligations under the
contract
o there are very little disputes and the differences can be
sorted out through the Contract Clauses
WHEN IS A CONTRACT MANAGEMENT SUCCESSFUL?
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DOs
Do Spend time reading and understanding the contract,
particularly the contract management and dispute resolution
procedures
Do flow down your knowledge of key contract processes to
members of your internal team
Do notify the Employer in line with the contract if you think
you may not meet targets with consequences due to reasons
not attributable to you
Do notify the Employer in line with the contract if you think
that some extra- contractual work is to be carried out
Do use the daily, monthly reports etc., analyze the reasons
and keep records for future necessity

DOs and DONTs
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DONTs
Dont simply put the contract on the shelf once
it is signed.
Dont issue unnecessary letters of minor
nature.
Dont use any unethical or unscrupulous
languages while writing a contractual letter
Dont forget to record any correspondence or
instruction given verbally which may give rise to
future contractual claims

DOs and DONTs (....Contd.)
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ANY QUESTIONS?
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URS Scott Wilson India