CONTRACT

ADMINISTRATION

REQUIREMENT
Contract Administration is an
important aspect so as to avoid :
Delays
Overspending
Litigation

DELAYS

Delay in any contract occurs due to

Mismanagement and

Lack of fair play on part of both the parties

For smooth management of a Contract, the following

three essential elements are needed:

End result must perform as intended.

Project must cost not more than what it was

intended.

It must be completed as it was intended.

FACTORS TO BE CONTROLLED IN CONTRACT

ADMINISTRATION
a) Performance
b) Cost
c) Time
These factors will depend upon the following:
a)

The parties to the contract must have clear

understanding of their commitment and obligations.

b) Employer should select a project team with adequate

experience.
c) Good experience to project problems.
d) Ability to give prompt decisions
e) Make timely payments

f) Settle extra items/ claims judiciously.

g) Contractor should select a competent project
manager, other member of his team.
h) Make correct assessment .
i) Display adequate resources by proper forward planning
time, cost and Quality control.

DUTIES OF EMPLOYER
1. He must believe that a construction project is a total team effort
of Management Teams, the Contractor and his teams.
2. He should coordinate diverse skills and interests into a concrete
and coordinated effort to meet the employers expectations in
terms of quality, time and cost.
3. He should demonstrate that he can make positive and
irrevocable decisions at right time. e.g.

Possession of site at the time of commencement

To provide the facilities as provided in the Contract & Timely

supply of drawings.

Freezing the changes at the early stage of the contract.

Prompt payment of dues.

Prompt and fair settlement of extra items, claims and

payments.

4. Should maintain cordial relations with proper

understanding with the contractor.
5. Must demonstrate the pre- contract policy even
after awarding the contract.
6. Members of the project control team preferably should
be other than those who drafted the contract.
7. Employer should have an attitude to help the
Contractor to overcome his problems, with judicious
approach and open mind.
[But the contractor should not make minor incidental
details as point of dispute. He should suggest the
remedies so that no delay taken place in the execution
of the project.]

QUALITIES OF PROJECT MANAGER

1. Project Manager and his team should be of proven
competence in the relevant field.
2. Should have adequate exposure to the problems likely
to be faced.
3. Should be able to provide solution to the problems on
site without delay.
4. Should work in the spirit of good will and honesty of the
purpose.
5. Should be a team builder.
6. Should be competent, firm and quality conscious.

POSSESSION OF SITE
Site conditions and the extent of work will guide towards the
proper handling over of a site.
The employer should make the site easier to work upon.

He should have completed surveys, bore holes or other

investigations.
In case of new projects, exclusive possession of site to the
contractor should be given.

Where more than one contractor is involved, than part

possession can be given.
When preliminary works are required to be carried out, then
also part possession of site would have to be thought of.

 Since the time of possession is an important aspect for

the commencement of the work by the contractor; it shall be
owners obligation to give exclusive possession to the
contractor.
The site should be handed over within a reasonable time
from the date of signing of the contract.
If in the contract, one finds that the time provided is
limited, within which the builder has to complete the work,
that means, not only that he has to do within that time frame,
it also means that he has to have that time within which to
complete the work.

INSTURCTION TO COMMENCE THE WORK.

Drawings and other information should be supplied to the
contractor within reasonable time . This reasonable time
depends upon :
Time Progress Chart/ Critical path Method of the
contractor.
Advance planning of work with respect to fabrication or
manufacturing process, foundation details for the
installation of plant / machinery needed by the
contractor.
Notice given by the contractor for making the drawings
available.
.

SUPPLY OF MATERIAL AND DRAWINGS

1. If supply of material is owners responsibility, then it
should be provided in a suitable time frame.
2. Owner shall be liable to for damages to the contractor for
any delays in supply of material.
3. Drawings should be supplied in time. Any delay, will
cause the setback to the progress of the work.
4. Employer and his control team should always take the
commitments seriously.
5. Decisions should be taken promptly for which weekly/
monthly meetings, comprising of both sites, should be
arranged.
6. Correspondence between the parties should be minimum
so as to save the time for execution activities.

PAYMENTS AND SETTLEMENTS

PAYMENT OF PROGRESS BILLS

1. All payments should be made as per contract conditions.

2. Delayed payments coupled with recovery on past of
mobilization and interest thereon will affect the progress
adversely.
3. One of the method to obviate this problem is that the
contractor should keep aside the required funds for each
year based upon his commitment of payment as reflected
in work programme.
4. Employer should also update his financial position at
regular intervals, based upon his expenditures incurred and
estimate of final cost.

5. Any delay in payments will give rise to the breach of

contract which may give an opportunity to the contractor
to put claims for compensation and loses.

6 The contractor should be encouraged to take the

payments as per estimated monthly schedule of payment.

7 This schedule may be modified if needed depending upon

the pace of work and employers own payment schedule.

SETTLEMENT OF VARIATIONS
Variations in the contract give rise to major disputes between the
employer and the contractor.

1. Changes if any, which may be inescapable in the contracts,

will give rise to disputes due to financial implications.

2. This problem increases when the pricing of such items is not

decided in time and in equitable manner.

3. Provision should be make limiting the pricing of quantities

exceeding variation limits at the rates quoted plus escalation
as provided in the contract.

5. Objective method of pricing of extra item should include

actual cost, with addition of overheads and profits.

6. The pricing of substitute items should be kept in such a

way that the relative cost should took as if no change has
occurred.

7. Fair price adjustments will involve the difference of cost

between the changed work and contractors estimate for
the original work plus overheads and profits.

SETTLEMENT OF CLAIMS
1. The problems in settlement of claims arise due to
a)

Non-appreciation of the subject of claims by both

the parties.

b) Most of the Contracts are prepared in haste,

leading to lot of ambiguities.
c) After the award of the contract, when the short
comings are brought out, the employer generally
defends his contract documents, and denies the
contractor his right leading to delays and disputes.

d) Any unforeseen situation leading to change in quantities or variation

of scope of work should be seen by the employer from an angle,
whether the contractor could anticipate such a situation in advance.
e)

If after appreciations, one could establish that the variations could

not have been foreseen by the Contractor, then his dues should be
settled promptly.

f)

Legal action should be avoided as it may lead to lot of loss of

executives time on both side, and loss of legal expenses.

g)

Arbitration should be resorted in most rare cases where you have

reached to a point of no return.

OBLIGATIONS OF A CONTRACTOR TO COMPLETE

THE WORK
1. Carry out work in accordance with the terms and conditions of
the contract, adhering to the time limit.
2. Maintenance of assets and rectification of defects during
defect liability period.
3. Contractor should complete the work substantially to enable
receipt of payment from the employer. The payment may be
full payment or the entire payment depending upon the nature
of the contract.
4. If the contractor abandons the contract, he may not be able to
see the owner for part contract price.
5. If contract stipulates certification of work form Architect and
then only get the payment, he may not be able to get interim
payment, if the certificate form Architect is not submitted .

SELECTION OF RESOURCEFUL SUB-CONTRACTOR

1. Contractor should
judiciously.

select

sub-contractor

very

2. He should not get tempted to award a sub-contractor who

has quoted much lower rates.
3. He should be resourceful on workable rates.
4. He should be made aware of general plans of operations,
requirement of resources including technical and
managerial skills.
5. The prime contractor should be fully satisfied that the
resources committed by the sub-contractor, shall be fully
available for deployments.
6. If any equipments has been committed to other projects,
that should also be made available.

If there is no certainty, then the prime contractor may

purchase such equipments and provide to the sub-contractor
on hiring charges basis to be recovered in monthly in
settlements.
8 Prime Contractor should identify each resource required for
satisfactory , competition of the work in time.
9 He must list out full particulars of these items and should form
part of the sub-contract agreement.
10 Where sub-contractor has appropriate technical and
managerial skills and also he has experience to meet the job
requirements , the prime-contractor should engage selective
staff to manage the working on a sub-contractor.
11 He should not deploy parallel staff as the duplication may
result in delays and avoidable cost to the prime contractor.

SELECTION OF COMPETENT
PROJECT MANAGEMENT TEAM
BY
CONTRACTOR

PROJECT MANAGER
Project Manager will be backbone of the project. Hence, he should have :
1. Sound knowledge and experience to guide the workers.
2. He should be motivator for improving their productivity and plan their
work so that nothing is overlooked.
3. He should demonstrate leadership by example.
4. He should allow everyone to perform with maximum ability.

5. He should bear in mind that resources are always scarce

weather they are people, equipment , material or cash.
6. He should enjoy the confidence of the contractor as well as
that of an employer.
7. The members of the project team should be selected
jointly by the Project Manager and the contractor so that the
skills are appropriate to the projects requirements .

PLANNING AND CONTROL

IMPORTANCE

Time, cost and quality are always critical targets for a

contractor.

To achieve these targets, forward planning and budgetary

control are very important.

Mostly bar charts are used for monitoring of the progress of

the work. These bar charts are good for monitoring of small
projects.

For monitoring of major projects, Critical Path Method

(CPM), Network analysis is good for planning and control.

CPM ensures that the sequence of activities are carefully

considered.

These activities have a room for feasibility so as to

accommodate the changes in work schedules.

It identifies the critical activities and shall enable the action

to be taken in advance.

After completing the process of optimizing the resources,

CPM diagram should be suitably modified to show the date
of commencement and completion of each activity.

The time factor required for sample approaches, testing of

material and allowance for holidays, should be taken into
account .

It must indicate the date by which the drawings and other

technical information and approval of sub-contractors and
interim payment including the amount to be arranged by the
employer, shall be completed.


Approval of employer or his controller should be obtained
towards all such documents.
To provide effective control for monitoring efficiency, progress
and cost, micro modules of individual activities or group activities
shall be required to be preferred.
Planned resource and expenditure allotted to Project Manager
should match with the reporting intervals fixed by the Contractor
for control purposes.

PREPARATION OF MONTHLY REPORT BY PROJECT

MANAGER
Project Manager should prepare a monthly report for the site of
the contractor showing :
Actual quantity of work executed.
Resources spent and expenditure incurred, vis- a-vis quantity of
work.
Resources and expenditure planned.
Reasons for slippages and extra expenditure.
Names of the individuals responsible for slippages.
Remedial measures proposed.
Details of the backlog cleared during previous month.

QUALITY ASSURANCE
Wherever adequate attention is not paid on Quality Control by
the Contractor, this leads not only delays and extra cost to the
contractor but also leads to friction between the two.
Contractor must lay proper attention on Quality Assurance to
complete the project in time and also to build this reputation.
Documentation should be done properly by the contractor. He
should have a record of what he wants to do and how to do it.
Then the records pertaining to that what has been done and then
recording it.
Prepare proper Quality Assurance Plan and Quality
acceptance Criteria for each item of material and workmanship.
Get the plan approved form Project Controller of the employer.

PROCUREMENT OF MATERIAL
The material required to be procured for the project, should be planned well
in advance to avoid:
- Delay in procurement of material
- Wastage of material
- Extra expenditure form distress purchases
- Loss of labour productivity
2. To work out correct requirement of structural, finishing and services material;
the contractor must prepare shop drawings.
3. All the samples should be approved by the client and documentary evidence
should be recorded. This will also facilitate timely procurement of material.
4. Timely procurement of material will facilitate
o
Planned deliveries
o
Will get reassurance that deliveries shall be made.
o
Deliveries should begin immediately after placing the P. O.
1.

5. Slippages in the manufacturer

programme must be tackled well.

/ Supplier, committed

6. The problems should be anticipated and remedial action

should be taken expeditiously.
7. Personal visits should be made to suppliers place to
impress need for urgency instead of tackling it on
telephone.
8. The personal employed in purchase department should be
well qualified and experienced.
9. These personnel should be able to evaluate the estimates
correctly given by the supplier / manufacturer.

CONTROL ON WASTAGE OF MATERIAL

Wastage of material within prescribed limit has immense
importance
to achieve desired profitability.
Wastage
generally occurs due to
Imperfect workmanship. This results in consumption of
more material .
Imperfect system of handling storage.
Short measurements recorded by the engineers of the
employer.
Bar bending schedules are not prepared.
Proper checking of the quantities is not done while taking
delivery form supplier.

HOW TO REDUCE THE WASTAGE?

1. Prepare wastage accounting schedule per week or on per
month basis.
2. Explore the causes of wastage and advise measures to
eliminate them.
3. Project manager should exert within the organization to
reduce the wastage.
4. An awareness should be created within the organization to
reduce the wastage.
5. Detailed measurements from drawings should be
prepared to assess the stage wise quantum of work so as to
check theoretical consumption of material and the stock lying
on site. This will reduce the wastage of material.
6. Surprise checks should be carried out to ensure proper use
and restrict the wastage.

LABOUR WELFARE
The following facilities should be provided at site:
1. Safety measures.
2. Good sanitary conditions.
3. Transport arrangement
4. Cleanliness of labour colony.
5. Good labour relations for better productivity.
6. Introduction of bonafide productivity scheme e.g. bonus
etc.

MAINTENANCE OF CONSTRUCTION EQUIPMENT

1. Maintain adequate workshop facilitate for repairs .
2. Maintenance principles and practices should be well
understood by the operators and suppliers.
3. Running spares should be easily available. If need be, they
should be stocked.
4. Proper ties up with the maintenance workshop should be
made so that there is no loss of productivity.
5. If equipment takes long for repairs, then alternative machine
should be made available.

HANDLING OF CONTRACT MATTERS

1. Every clause of Contract reflects many responsibilities
and obligations of a contractor.
2. They should prepare -Valuation of variations
- Interim and final payments
- Delays
- Any other factor which may affect
completion of time and costs.
3. His site office and main office should maintain true copy
of all the documents.
4. All the amendments should be duly indexed with the
dates of completion .
5. Check that contract sum is properly related to the total of

6. The drawings and dimensions from which the bill of quantities

were prepared, should be readily available at site and main
office.
7. These documents should be indexed and referred properly.
8. Besides this, copies of original constructions programmes
relativity to contract sum and the original contract period
along with the revised Construction programme, should also
be maintained.
9. Copies of agreed minutes relating to regular site meetings
held with the client and his management team.
10. These minutes should contain the actual progress in relation
to construction programme and matters pertaining to the
contract.

11. Valuation of daily work and record of labour and other inputs
should also be maintained.
12. A detailed contract diary should be maintained at site giving
out daily notes of general activities, problems arising,
information required, information received, climatic conditions
etc.
13. The agreed measurements should be taken when the work
proceeds so that economic execution of work progress
smoothly.
14. The decisions
promptly.

should be communicated to the contractor

15. The decisions should be communicated logically under the

frame work of contract conditions.