MODULE- IV

CHAPTER- 01
PROJECT CONTRACTS & TENDER
In the world of business, contracts are used for establishing business deals and partnerships. A contract is a
legal agreement. It is an exchange of promises by two or more parties to do, which resulting contract is
enforceable by law. Thus, though contract is necessarily an agreement, all agreements are not contracts.
Only those agreements that are enforceable by law are contracts. Fr an agreement to become enforceable by
law, it must satisfy certain essential elements called ‘essentials of valid contract’:
 There must be an offer not order/force & an acceptance of that offer,
 There must be an intention to create a legal relationship on the part of the parties to the contract,
 The consent of the parties to the contract shall be free & genuine,
 The parties to the contract shall be competent persons (not minor),
 There must be a lawful consideration between the parties to the contract,
 The object of the contract must be lawful & not one which the law disapproves,
 The contract must not have been declared as void by any law in force in the country,
 The meaning of the contract must be certain without any multiple interpretations,
 The terms of the contracts shall be capable of performance,
 A contract shall fulfill the necessary legal formalities,
In a project or program context, contracts typically involve the exchange of money in return for goods and
services. One or more parties may provide products or services in return to something provided by other
parties (client). The parties involved in the business engagement decide the type of the contract.
For example, a project contract may take the form of an agreement between a builder and a property owner
in which the builder agrees to build a house on the property by a certain time in a certain way and in
exchange the property owner give certain remuneration to the builder.
Usually, the type of the contract used for the business engagement varies depending on the type of the work
and the nature of the industry. The contract type is the key relationship between the parties engaged in the
business and the contract type determines the project risk.
Types of Contracts
1. Turnkey Contracts – In this contract, the entire responsibility of project execution is entrusted to the
contractor. The owner comes into the picture only when the project is completed & he turns the key of
the project to start further. Till such time, the project reaches at ‘ready to start stage’; the contractor
takes care of all aspects of project execution. This type of contract is entered into when the project

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 involves high technology, the know-how is not available with the project promoter & the contractor is
fully conversant with the technology & know-how.
2. Non-Turnkey Contracts - These contracts are preferred when the projects are small sized, the know-
how for the project is available with the promoters & when there is a strong, competent & capable
project team available with the organization.
3. Piece-Work Contract – In this method of contract, the contractor agrees to execute a specific work
for a specified rate without reference to the quantity/magnitude of the work involved or the time taken
for completing the specified work. This type of contract is suited for small works like site-clearance,
maintenance, repair works etc.
4. Lump Sum Contract – In this method, the contractor agrees to execute the work completely in all
aspects within the stipulated time in accordance with the drawings, designs & detailed specifications.
To put in simple, the service provider agrees to provide a defined service for a specific period of time
and the client agrees to pay a fixed amount of money for the service. This contract type may define
various milestones for the deliveries as well as KPIs (Key Performance Indicators). In addition, the
contractor may have an acceptance criteria defined for the milestones and the final delivery. The main
advantage of this type of contract is that the contractor knows the total project cost before the project
commences.
5. Cost Plus Percentage Contract - In this contract model, the contractor uses his own materials & labor to
execute the work according to the given drawings & specifications. The services provider (contractor)
is reimbursed for their machinery, labor and other costs, in addition to contractor paying an agreed fee
to the service provider. The project promoter exercises close control during execution to ensure that
right quality of materials is used & right specifications are maintained. In this method, the service
provider should offer a detailed schedule and the resource allocation for the project. Apart from that,
all the costs should be properly listed and should be reported to the contractor periodically. The
payments may be paid by the contractor at a certain frequency (such as monthly, quarterly) or by the
end of milestones.
6. Labor Contract – In this system, the project promoter arranges for the supply of all required material at the work site
and the contractor arranges the labor. Thus, the contractor is entered into only for the labor portion of the project, so
will be paid labor charges.
Conclusion
Selecting the contract type is the most crucial step of establishing a business agreement with another party.
This step determines the possible engagement risks. Therefore, companies should get into contracts where
there is a minimum risk for their business. It is always a good idea to engage in fixed bids (fixed priced)
whenever the project is short-termed and predictable. If the project nature is exploratory, it is always best to
adopt retainer or cost plus contract types.
Dr. Meghashree A. Dadhich
 TENDER
Tender is an offer in writing by the tenderer (the person who offers the tender) to execute some specified
work or to supply some specified goods at certain rates within a fixed time frame under certain conditions of
agreement. Tender usually refers to the process whereby governments and financial institutions invite bids
for large projects that must be submitted within a finite deadline. Tender means an invitation to offer for an
item/items or work. All Public Sector purchases/Contracts in India, over a certain value has to be publicly
notified through Tender which are advertised through All India Newspapers, Trade Journals, Departmental
Publications and Notice Boards, and on Internet.
Tender Notice
It is a public notice inviting tenders from interested parties (contractors) through publishing tender in
leading newspapers. The tender notice contains the following information:
 Name of the organization inviting for tender,
 Designation of the concern officer who is inviting tender,
 The nature of work, the place of work & the estimated cost of work,
 Cost of tender documents & drawings/plans,
 Last date & time of receipt of tender, place & availability of tender form,
 Type of specifications & time of completion.
 Amount of Earnest Money Deposit (EMD) to be paid and the method of payment,
 Amount of security deposit to be deposited by the successful tenderer,
 Date, time & place of opening tenders,
Tender Documents
Tender documents are meant to keep the tenderers informed about the general & specific conditions
applicable for tender. Tender documents usually consist:
 A letter of invitation to the tenderers,
 Specimen tender form,
 General instruction to the tenderer,
 Details of civil/structural work along with complete set of civil/structural drawings,
 Details & specifications of machinery/equipment to be supplied,
 Draft contract agreement,
 Arbitration authority who will decide in case of dispute,
 Time schedule for completion of work,
 Amount of earnest money to be deposited and the form in which it is to be deposited,

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Types of Tenders:
Tender can be classified based on the requirement category or Procurement Type. There are various types of
Tenders. However, main Categories of the Tenders are listed below:
1. Open Tender: - Open tender is an arrangement where an advertisement in local newspapers or trade
journals invites contractors to apply for tender documents. Open Tender is a transparent process which
ensures that only the contractor with the best price and meeting all the technical requirements will win
the tender.
2. Limited or closed Tender /Selective Tender: - In Limited Tenders, only pre-qualified or known bidders
are allowed to participate. Limited Tenders are not advertised in newspapers, as a result other bidder
generally do not come to know that such tender is floated. The Lowest Bidder generally wins the
contract.
3. Single Tender: - Single Tendering means sending the Tender to one particular party. Normally, it is either
for an item where there is only one supplier or for an item where the purchaser has developed
confidence in one supplier only and would just like to verify the current price, delivery etc. Single
Tenders are also sent for items of proprietary nature.
4. Negotiated Tender: - Under Negotiated Tender method normally one contractor is approached and such
tender mainly used for specialist work such as lift system or airport project at big level, in such case
there are limited number of contractor who do such work in the market. It is based on one-to-one
discussion with contractors to negotiate the terms of contract.
5. Item Rate Tenders: - In this type of Tenders the contractors are required to quote the rates for each item
mentioned in the price bid. The quantity to be executed is given in the price bid.
6. Percentage Rate Tenders: - In this type of Tenders a detailed estimate of the quantity of work to be
carried out along with the estimate rates is given in the price bid form. The Bidders are required to quote
the amount in percentage above or below or at Par.
Global Tender
Tendering is way through which many companies find the valuable route to market, in order to enhance
their business. When it is referred that cracking a deal right away is a cumbersome task then this implies that
making a tender proposal is not everyone’s cup of tea and especially when it is meant for the international
market i.e. for all the companies of the world. This is what global tender is!
The tendering process itself generally varies between organizations. However, as a whole, the process
should be conducted ethically, fairly and honestly. Tender submissions should be prepared with honesty and
integrity, and with the intention to proceed with the offer. Organizations requesting tender submissions
should also have the intention to proceed with the tender and the evaluation process should be conducted
based on the selection criteria and conditions specified in the tender request documents.

Dr. Meghashree A. Dadhich

With the availability of online and offline services, sending a request of proposal for a tender and finding
out the appropriate ones are quite easy. But, what matters most is how to write a tender, which points should
be used in order to attract the people to crack the deal. When it comes about global tenders, the
responsibility for writing down the same increases as it should be focused completely on the requirements
and the fulfillment of the basic necessities of the firm which is giving the request for proposal. Hence it’s
always said that written tender proposals are very important documents. They need to be well written and
thus include essential points. Few of the important points to remember while writing global tenders proposal
are -
 Official letterhead should be used for writing a global tender as it’s to be published on international
level, which makes it more important.
 Font should be used such as Time Roman, which looks good and quite professional.
 Whatever company’s requirements are, they should have to be mentioned clearly.
 Always mention the date and stipulated timings within which the tender is open, failure to which any
revert will not be entertained.
 Status of the company and brief description regarding the history of the company in the same respective
field should be an important task, and should be mentioned by every participating company for cracking
the deal.
 Complete contact details should be mentioned such as name, designation, contact numbers along with
address, email id etc.
 End the tender by thanking followed by name and the designation of yours.
There are many other formalities which need to be followed as before you write your global
tenders proposal. It is must to get legal advice especially when the tender is very large or when it is more
complex. Proper assessment of the tender should be done by adhering to all the compliances for the tender
requirements. Clarification and understanding of the tender is very necessary.
A good tender proposal pays more attention while mentioning the dates by which revert should come from
the companies which may be interested in applying for the deal. It’s very important to mind that price is not
everything and thus quality experience should matter and the same should be highlighted in the proposal. At
last when global tenders proposals are about to get published, it should be checked properly and should be
vetted by the legal advisors of the organization.
Basic Aspects of Global Tenders That Are Important For the Bidder
Some important factors come into play in case of international tenders. However basic aspects of such
global tenders are that the company inviting the international tenders will give all the information about the
work concerned, and their overall requirements. Similarly, the provider company should give their
background history and assessment of experiences on the issue. Competitive nature of the international bids

Dr. Meghashree A. Dadhich

makes it imperative that the bidder is able to create a strong impression on the inviting company for winning
the global bids. As this type of Global tenders is open for international bidders from all over the world, it is
also important learning about the legal requirements of the country where the project would be
implemented.
 Basic Aspects of International Bidding - Getting detailed information about the international global
tenders is most important. Both companies that are inviting the international global tender as well as the
company that is bidding such tenders should take care of all these aspects. The company inviting the
global bids should provide all the details about the nature of the tender, the type of project to be
implemented, and their own background. Similarly, the bidder company should also give the details
about their type, nature; areas covered, and background history so that they are considered suitable for
carrying out works of international nature.
 Defining the Requirements - International competitive bidding company should make it a point to
specify the points that will count in awarding the tender to any bidder. Usual features of such
requirements are stipulated time period, structure of the proposal, and making a good impact on the
minds of the clients. In addition, it is also required to have total pricing relating to project completions.
Mentioning the prices will enable the bidder company to decide how best they can go for the tasks to be
accomplished in case of winning the international tenders.
 Competitive Nature - Usually the competition is very stiff in case of international tenders. One of the
reasons for such fierce competition is that these tenders are open to all. In most cases the participation
levels are higher than others and it requires creating an impression with the inviting company to ensure
that the tender is won over. Creating such impression is not the easiest of the tasks for any of the bidders
and requires dedication, discipline, and determination in approach.
 Global Nature of Tenders - In all cases the international tenders remain open for bidders from all over
the world. Any company having the necessary infrastructure and financial stability working in the
particular field can participate in bidding for the tender. As the tenders are global in nature, they also
open up multiple avenues for enhancing the business of the entrepreneurs trying to find global
recognition.
Last but not the least; because of the global nature of the international tenders, one has to understand
clearly the legal aspects relating to the country where the project would be implemented. Such legal
requirements can vary widely from the requirements in the bidder’s country and may lead them into
unwarranted troubles due to ignorance.

Dr. Meghashree A. Dadhich

 MODULE- IV
CHAPTER- 02
CLOSING THE PROJECT OR PROJECT TERMINATION
The Project Life Cycle
There are several stages in the life cycle of a project: (1) project selection, (2) planning, (3) execution, and
(4) termination. The first phase, project selection, will vary among firms. Each project must be evaluated to
determine which the best use of corporate funds is. Each will have different risks, benefits, and costs,
making the selection very difficult. The final decision should be based on the project's financial return and
how well it assists the organization in achieving its long-run strategic objectives.
Once a selection has been made, formal plans must be developed. The importance of thorough project
planning cannot be overemphasized. The objective of this process should be to develop a master plan that
details how each asset of the organization will be used to accomplish the project's goals. Thorough and
aggressive planning will also increase the team's commitment to success. The two most important
components of the master plan are the project budget and the master schedule, which are developed from a
detailed list of specific project tasks. The master plan should include measures for evaluating the progress of
the project as well as guidelines for its termination.
During the execution phase, resources are consumed to complete the project. Throughout this period, the
actual progress of the project, in terms of cost, schedule, and performance, is measured against the planned
goals. The results of this monitoring process are assembled into status reports, which are then distributed to
the project team and senior management.
In the end all projects, both successful and unsuccessful, will have to be terminated. During the termination
phase the project's resources are redistributed, financial records are closed, and project personnel are
reassigned. The organization's sensitivity to the concerns of the project team can have a lasting impact on
their commitment and productivity. Lastly, a final report, which discusses the project's successes and
shortcomings, is prepared for senior management. This report can significantly influence how the
organization manages projects in the future.
Project Termination
Project termination is sometimes also called project close-out or final shutdown. During this phase the
people involved are acknowledged for their achieved goals and the work is considered complete.
First let’s look at what a successful project is:

Dr. Meghashree A. Dadhich

"A project is successful when: The objectives of the project have been achieved to the full satisfaction of the
users, All closeout activities have been completed and All designated interests, including the project's
sponsor and/or initiator officially accept the project results or products and close the project."
Project Termination (project close-out & project finalization) is a situation when a given project is
supposed to be closed or finalized because there’s no more need or sense for further continuation. Project
termination is managed under a respective procedure that requires the management team to examine current
state of the project work, review progress of goals and objectives, evaluate the project against success
criteria, and check status of deliverables.
Project Termination
Every project has to officially end sometime. Project termination need not necessarily mean project failure
or premature abandonment. A project may be terminated for a variety of reasons, including successful
completion of the endeavor. We'll take a closer look at what some of these reasons are and how to know
when to terminate a project.
Projects usually are terminated for two basic reasons: project success or project failure. In order to
determine which of the reason is relevant to a project, first the team needs to understand criteria for success
& failure and then evaluate the project against those criteria. Here’re some tips on this point:
 Success: a project reaches success when its goals and objectives are accomplished on time and under
budget, deliverables are produced as expected by stakeholders, and the final product is accepted by
and handed over to the customer (end-user).
 Failure: a project is regarded as failed when its requirements are not met; the customer refuses
accepting the product; there’re some technical issues that can’t be resolved by using existing tools
and technologies; there’s an unanticipated loss or lack of human, funding and other valuable
resources; the project effort becomes counter-productive because initial goals and objectives are
unmet.
Senior managers, who “own” the project and who see the project as a building block in the design and
execution of organizational strategy, must create a cultural ambience that encourages projects to be
successful, but also allows a project to fail if it has lost its strategic fit in the organization’s plans for the
future. However, all project terminations don't necessarily mean the project ended successfully. Either way
though, there are some steps or project termination strategies that should be taken -
 Finalize all outstanding contracts to vendors, suppliers or customers including final payments (in some
cases, according to federal regulations, project-related revenue that is earned on or before project
termination is considered program income. If it is earned after project termination, it is an external sale);
 Transfer any responsibilities necessary;
 Reassign the project team members to other duties;

Dr. Meghashree A. Dadhich

 Release all remaining resources such as materials
 Complete the final accounting on the project such as totally final costs, paying bills, etc so project
manager can "close the book";
 Document the results of the project and make recommendations for future projects (opportunity for
learning and anticipating new risks);
 Presentation of the system and approval (or rejection) of the system by the client according to
acceptance criteria set forth in the Project Agreement.
Reasons for Project Termination
Here are a few reasons why a project gets terminated before the natural closing date: -
 Premature abandonment due to technical grounds that impede achievement of core goals.
 It is suddenly found that another group publishes results in same core area of interest.
 The principal investigator or an equitant person suddenly quits and the project cannot continue as
planned and the project has to terminated, as putting on hold will be counter-productive.
 Unanticipated loss of human, funding and other valuable resources.
 A variety of insurmountable problems may force termination of the project.
 An interim review suggests the project will not help achieve the desired objectives.
Person Responsible for Termination Decision
It is the principal investigator (PI) who is entrusted with the task of conducting periodic reviews of the
project and is responsible for closely monitoring the project progress throughout the project life cycle. Thus,
the exact closing date for a project has to be decided by the principal investigator after consulting the co-
principal investigators and subprogram leader.
The principal investigator will be aware that for all projects, final technical and financial reports will have to
be prepared and presented. It is therefore only to be expected that the principal investigator will work
closely with the subprogram leader to handle necessary project termination work. It is believed that under
certain extraordinary circumstances, the subprogram leader may seek a time extension for completing the
project, provided no additional funds are demanded.
The Project Termination Procedures
As projects near completion or a decision is taken to prematurely abandon a project, there is a compelling
urgency to stop all further funding also transferring the work force for other productive deployment. As a
matter of fact, project termination activities must form part of the original project plan and not hurriedly be
undertaken as an afterthought.
It is critical that final reports are properly written without ambiguity and an effective transfer of raw
materials to other programs takes place on time. Professionals estimate that sometimes project termination
work, involving administrative reporting and final cost summary, may well extend to a couple of months

Dr. Meghashree A. Dadhich

after project completion. Project termination work is important for all projects, including failed projects
where there will also be wrap-up activities to make the most of what has already been done in the project.
Evaluation of Termination Possibilities
Termination of a project is inevitable, but how it is terminated and when may have a profound and long
lasting impact on the organization and its employees. The success of future projects may depend on
not only the success of past ones, but also on how unsuccessful projects were treated by the
organization and its stakeholders. Firms have the option of initiating a variety of entrepreneurial
projects with varying degrees of risk. If an organization chooses to accept greater risks, it should
avoid penalizing members of projects that turn out to be unsuccessful. If team members believe they
will be penalized for participating in unsuccessful projects, they will be less willing to terminate
failed projects and may become risk adverse.
Organizing a project's termination process is especially important when it has failed, because of the lasting
impact on future projects as well as the organization's image. Including project team members in the
termination process will increase their loyalty and commitment, not only to the organization but also to the
success of future projects. At the end of a project a post-audit report will be prepared that summarizes the
project and provides recommendations for similar projects in the future. Lastly, as a project is closed down
or completed it is important that senior management recognize the contributions of the project team.
Factors Influencing Project Success
During the life of a project, senior management and the project team must continually reassess these critical
factors to ensure that it can still accomplish the goals set by the organization.
1. Technology - The technological path of the project can have a major influence on its chance of success.
Senior management and the project team must understand the technological track so they can (a)
measure the progress of the project; (b) have a general idea of when technological breakthroughs can be
expected; and (c) not become discouraged when the pace of development appears slow. Based on a
review of a project's progress, it is possible that the technological approach used by the project team may
be deemed infeasible. It is not uncommon for "leading edge technologies" to have several false starts,
while projects that rely on older more proven technology remain stable. By keeping abreast of the team's
progress along the technological track, senior management can avoid funding a project that is unlikely to
succeed.
2. Organization - Organizational factors that can influence the viability of a project include internal
competition, management support, and the company's market strategy. The presence of internal
competition, especially for access to important resources or funding, will affect the project team's
motivation. Also, as the number of projects in a firm's portfolio increases, the more likely it is that one
of them will end in failure. This reflects a natural diffusion of management support. Maintaining
management's focused support tends to be the single most important factor predicting the success or
Dr. Meghashree A. Dadhich
 failure of a project. Another extremely important factor is the compatibility of the project with the
corporation's long-term goals. A project that no longer fits with the organization's objectives is usually
slated for termination.
3. Market forces - The competition a firm faces in the market has a strong influence on the viability of new
or ongoing projects. The value of a project can be diminished by the sudden availability of alternative or
competing technological innovations. Continuing to fund an obsolete project can be avoided by
maintaining communication between the marketing, manufacturing, and R&D departments.
4. Planning - Naturally the firm's ability to manage a project will have a significant impact on its eventual
success or failure. Central to this, of course, is the project plan, which should be exceptionally detailed.
Obstacles that could threaten the schedule must be identified so that workable alternatives can be
developed ahead of time. There will always be a basic, inherent level of uncertainty in every project;
however, thorough planning can reduce most of these risks to an acceptable level. It is also important to
note that the quality and level of planning for a project is frequently related to the level of experience of
the project team. More experienced project teams tend to plan and organize more effectively.
5. The project team - As would be expected, the team plays a key role in the project's success or failure.
The effectiveness of a team is, in turn, governed by the abilities of its project manager, the team's overall
commitment and enthusiasm, and the synergy of the team as a whole. Of these, the role of the project
manager is the most critical. He or she must be able to coordinate changing activities, resolve conflicts,
and keep management informed and committed to the project -- while also keeping the project on track.
The project team should also be relatively stable. Changing important team members at critical junctures
in the schedule can have a devastating effect. On the other hand, a new team member, if briefed
properly, can provide a fresh approach to many problems.
6. Economic factors - These factors may have a significant influence on the project's ability to generate a
minimum acceptable return on the organization's investment. While financial measures, such as return
on investment (ROI), are not the only factors influencing success or failure, they do provide a
measurement tool for evaluation. It is entirely possible that a project, which is on schedule and well its
budget may be cancelled because of unrelated financial constraints dictated by the organization. When
firms fail to achieve their desired level of profitability, they always have the option to reevaluate
ongoing projects and terminate those that are less viable or overly expensive.
7. Other - Miscellaneous factors that influence the success or failure of a project include new government
regulations, problems with patent ownership, or new environmental concerns.

Conclusion
Projects have a life cycle. They are born from an idea, develop into a finished product or service, and then terminate.
As a project moves through this process, the project manager and senior management should continually monitor the

Dr. Meghashree A. Dadhich

project's critical success factors to ensure it is still viable. Although terminating a project is inevitable, the timing and
planning of this termination can affect future projects and possibly the entire organization. Just as successful projects
can have a positive impact on the organization, unsuccessful projects can have the opposite effect. To minimize this
unfortunate side effect, management must be especially sensitive to the needs of its employees during the termination
process. Cancellation, in particular, can have a profound and lasting affect on the organization and its employees.
Lastly, the final report is the opportunity to reflect on the project -- to document its successes and shortcomings and
make recommendations for the future. It is a fact that, particularly in an era of rapid technological
advancements, a lot of software projects, though properly started and well managed, are getting terminated
before completion because the original assumptions have changed. However, premature termination or
midway abandonment of projects can, in many cases, be avoided if risky and ill-conceived projects are not
started in the first place.

Dr. Meghashree A. Dadhich