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CONTRACT DOCUMENTS

What is a contract? When two or more persons have common intention communicated to each other to create same obligation between them there is said to be an agreement. An agreement which is enforceable by law is a Contract. Types of building contracts There are basically five types of contracts which are adopted for execution of works by government departments or by private owners depending on the nature of work: Measurement Contracts Lump sum Contracts Cost plus fee Contracts Turnkey Contracts Build-Own-Operate and Transfer (BOOT) Contracts. Measurement Contracts Percentage Contracts For small works and works of repetitive nature, percentage rate contracts are adopted. Owner indicates quantities and estimated rates for all items of work. The estimated cost is reflected in tender schedule. ~ The tenderer quotes % above or % below the estimated cost put to tender. ~ Payment is made on the basis of actual quantities executed and measured. Item Rate Contracts ~ For major works, item rate contracts are adopted. Owner indicates quantities and units only for
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all items of work and the tenderer quotes rates for each individual item. ~ Payment is made for the actual work done based on measurements. 2. Lump sum Contracts Scope of Work, construction drawings & detailed specifications are given to tenderer along with terms and conditions of contract. Schedule of quantities ma or ma not form a part of tender documents. The tenderer quotes are fixed price for whole work tendered. If this type of contract is adopted, the owner will be knowing cost of work. However, this is subject to the conditions that there is no variation in scope of work. This type of contract can be considered when scope of work is frozen; when planning, designing and working drawings are completed before inviting tenders. 3.Cost Plus Fee Contracts This method of contract is adopted for ~ Emergency works ~ For miscellaneous works ~ For works in which scope cannot be defined properly at tender stage. Contractor is paid his actual cost of materials, labour, hire charges of machinery & a fee towards his profit and overheads. 4. Turnkey Contracts In a turnkey contract, the contractor takes full responsibility for design, construction &

commissioning of the facility of defined scope for a fixed lumpsum price. For a turnkey contractor, TIME IS TURLY EQUAL TO MONEY & schedule slippage may adversely affect his profitability. A bonus or penalty clause may be included as an incentive or disincentive to the contractor to the work on time. Such type of contractors are seen more in commercial defence and interior projects. 5. Build-Own-Operate and Transfer (BOOT) Contracts With the liberalization and opening up of the economy, private sector is encouraged to execute public works, own them, operate for a specific period and transfer the same to public authority. The entrepreneur will recover his investment during the period he owns and before the transfer of asset. This type of contract is adopted for highway projects, airports, convention centre, IT parks, power plants and bridges. Government avoids funding and allows a private person or group to invest, build & transfer the facility after recovering their investment. Government can also join with private companies or consortia in the form of separate holding company specifically constituted for the purpose. General Conditions of Contract There is no uniformity in general conditions of contract adopted by various central and state government

departments. The practice adopted by central/state public sector undertaking and consultants in private sector is also at variance. Critical clauses: General Conditions of contract adopted by Indian Institute of Architects and General conditions of contract for Central PWD work 2003. General Conditions of Contract - Critical Clauses Adopted by IIA : Performance bond (Security deposit): Sum to be deposited as security is mentioned in the appendix to each contract. This deposit is to be made with architect within 10 days of signing the contract in the form approved by the architect and it shall remain till the defect liability period expires
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Damages for non-completion: Liquidated damages as mentioned in the appendix to the contract shall be recovered
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3.Determination of contract : Owner can determine the contract if contractor ~ Suspends the work ~ Fails to give regular progress ~ Fails to remove or rectify defective work or materials ~ Sublets the work without written permission ~ Bankruptcy Notice period is 14 days. (Clause 48)

Contractor can determine the contract if the owner ~ Fails to make payment within specified period ~ Interferes or obstructs issue of certificate for payment ~ Suspends work for a continuous period ~ Force majeure ~ Fails to issue necessary instructions and drawings ~ Fails to decide extension of time etc. (clause 49)

4. Interim payment: To be issued by the architect within the period and payment to be made by the owner as mentioned in the appendix to the contract. 5. Completion certificate: The Architect is required to give several certificates during the execution of work. These certificates mentioned below are of special significance. a. Virtual completion certificate: Building is fit for occupation though some minor works are yet to be completed. b. Penultimate Certificate: This certificate is issued to enable collection of fee by a consultant from the contractor as prescribed in the agreement. c. Interim and Final Certificates: Interim certificate provides for interim payment to the contractors. It is to be honored within specified

period. Retention money is recovered from interim payments. Final certificate is issued to the contractor after expiry of defect liability period reckoned from date of virtual completion of work. On expiry of defects liability period plus one month for notice and rectification of defects, contract can be rescinded. Submission of all documents containing measurements and valuation within a reasonable time from the date of virtual completion of work which ever is later. The final certificate may also authorize release of balance retention money. 6. Materials: Within 30 days of signing of agreement contractor shall submit for approval of the Architect a complete list of all materials he and his sub-contractors propose to use in the work of definite brand or make which differ in any respect from those specified. 7.Fluctuations: The contractor shall not claim any extras for fluctuation of price and the contract price shall not be subject to any rise or fall of prices. 8.Variations: The Architect may issue instructions requiring a variation. Rates applicable are, quoted rates of similar items, based on fair valuation, day work rates or market rates. 9.Defective work: All materials and workmanship shall be subject to inspection, examination and test by the Architect at any or all times during manufacture and/or

construction. The architect shall have the right to reject both defective materials and workmanship or work which requires any correction. 10.Defect Liability Period: The contractor shall make good at his own cost and to the satisfaction of the architect; all defects, shrinkages or small faults, arising in the opini9n of architect from work or materials not being in accordance with drawings or specifications or schedule of quantities or the instructions of the architect, which may appear within Defects Liability Period (12months). 11.Arbitration: All disputes shall be referred to and settled by the architect who then states his decision in writing. Such decision may be in the form of a final certificate or otherwise. The decision of the architect with respect to any of the excepted matters shall be final and without appeal. If the decision of the architect is not acceptable to either party, a notice shall be given within 28 days after receiving the notice of the decision. The disputes or differences shall be referred to sole arbitration of a fellow of Indian Institute of Architect mutually agreed by the parties. The arbitration shall be conducted as per the Act in force. (The Arbitration and Conciliation Act 1996) 12.Excepted Matters: The decision, opinion, certification (Except for payment) with respect to all or any of the matters mentioned below are final and without appeal. These are termed as excepted matters.

Interpretation of drawings, specifications and Bills of quantities. Architects instructions in writing Contractors field organization and equipment. Assignments or subletting. Approval of materials and workmanship. Delay caused by nominated sub-contractors or suppliers. Extension of time due to inclement weather, strike, an act of God. Certificates to be Issued by the Architect (I.I.A. Contract Form): Certificate for nominated sub-contractor. Stipulated date of completion of sub-contractors work Interim certificate stating the amount due to the contractor. Refund of half of retention money on virtual completion of work. Final certificate. Stipulated date of completion. Virtual completion. Completion of rectification of defects. Loss and/or expense. Penultimate certificate. General Conditions of Contract Adopted by Central p.w.d - Brief Summary of Critical Clauses: Prequalification of contractors for works estimated to cost above Rupees five crores. Validity of tenders from the date of opening: 60 days.

In case of discrepancy in provisions, precedence shall be Description of item ~ Particular specifications ~ Special conditions ~ Drawings ~ Departments Specifications ~ B I S specifications
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deposit: Irrevocable performance guarantee of 5% of tendered value to be deposited within 15 days of issue of letter of intent. Deduction at the rate of 10% of gross amount of each running bill. 2. Compensation for delay: 1.5% per month of delay to be computed per day basis, subject to a maximum of 10% of tendered value. Bonus for early completion: I% of tendered value per month computed on per day basis payable along with final bill subject to a maximum of 5% of tendered value. 3. When contract can be determined: Contract can be determined by Engineer-in-charge under the following circumstances. *Delay *Inferior workmanship *Claim for damages *Work not commenced within I /8th of stipulated time. There is no provision for determination of contract by the contractor. 4. Payment on intermediate certificates to be regarded as advance:

Performance bond and security

Interim or running payments are made for works whose estimated cost is more than Rs.20,000 provided that value of the bill is more than specified amount in the contract. 5. Completion certificate and completion plans: Contractor gives a notice of completion within ten days of completion. Engineer-in charge inspects the work and issues a completion certificate within thirty days of receipt of such notice if there are no defects. Otherwise a provisional certificate shall be issued indicating list of defects for rectification. Before issue of final completion certificate, contractor is required to rectify all defects and should remove scaffolding, surplus materials, and rubbish from site of work. Completion plans shall be submitted for all internal and external electrical works as per general specifications for electrical works part I & II of Central PWD. 6. Payment of final bill: Payment in respect of items where there is no dispute and for disputed items with quantities and rates as approved by Engineer-in-charge shall be made within 3 months for works of tendered value up to 5 lakhs and within 6 months for works exceeding Rs 5 lakhs. 7. Materials supplied by the government: The quantum, place of issue, and rates to be charged are given under this clause. 8. Payment of advances and recovery: Secured advance on non-perishable materials:

This advance is admissible on nonperishable. Nonfragile and non-combustible materials brought to site for bonafide use on work. Advance is given up to 75% of its assessed value on signing of an indenture. Mobilization advance: Admissible for works whose estimated cost put to tender is rupees two crores and above. Maximum advance is 10% of the tendered value of work. Advance is paid in two or three installments. Proof of utilization of first installment is necessary before obtaining second installment and so on. Plant & Machinery and shuttering material advance: Advance is restricted to 5% of tendered value. Advance admissible is further restricted to 90% of price of new plant & machinery on production of evidence and to 50% of depreciated value for second hand and used plants. Valuation by an approved valuer may be insisted in respect of old plant & equipment.

9. Escalation clause: Provisions made for reimbursement for price variation in respect of all works whose schedule period of completion is more than 18 months. Escalation is not payable for extended period of contract even if extension of time is granted without levy of compensation. Payment is made at quarterly intervals. 10.Pricing of Deviations / Variations: The Engineer-in-charge shall have power To make alterations, omission from, additions to, or substitutions for the original specifications drawings,

designs and instructions that may appear to him to be necessary or advisable during the progress of the work. To omit a part of the work in case of non-availability of a portion of the site or for any other reasons and the contractor shall be bound to carry out the work in accordance with any instructions given to him in writing. 11.Action in case work not done as per specifications: All works in course of execution or executed shall be open and accessible to inspection and supervision of Engineer-in-charge, his superiors and subordinates of quality control organization and Chief Technical Examiners office. If any work has been executed with unsound, imperfect or unskillful workmanship, or with materials or articles not in accordance with the contract, such work shall rectified, removed and reconstituted in whole or part at contractors expenses. The Engineer-in-charge may point out substandard quality within six months from the date of completion of work. 12.Contractor liable for damages, defects during maintenance period: The defect liability period shall be 6 months for works costing Rs.10 lakhs and below. It shall be 12 months from the date of final completion certificate for all other works costing above Rs.10 lakhs. Any damages to the building, shrinkage or other faults appear within this period, the contractor shall make good the same at his expense. 13.Settlement of disputes and arbitration:

Except where otherwise provided in the contract, all disputes and issues shall be referred to Superintending Engineer in the first instance. If decision is not given or not acceptable, the contractor may appeal to Chief Engineer within time limits specified. If decision is not given or decision is not aceptable within 30 days contractor may give notice to Chief Engineer for appointment of arbitrator along with list of disputes and amounts claimed. The arbitration shall be conducted according to provisions of the "Arbitration and Conciliation Act 1996". The arbitration shall adjudicate only such disputes referred to by the appointing authority. Fees payable if any to arbitrator shall be paid equally by both the parties.

14. Refund of security deposit: The security deposit of the contractor will be refunded after Issue of Labor Clearance Certificate After expiry of defect liability period (Ail defects rectified. Finalization or works accounts (Final bill passed and paid.