 An agreement enforceable by a law is called a

contract.
 It follows a proposal from one party and its
acceptance by the other.
 In the absence of any of the above elements of a
contract it becomes a void i.e., without a legal effect
or voidable.
 The term contract means a written undertaking for
execution of works or supply of material or the
performance of any service.
 It is duly accepted and registered by the competent
authority on behalf of union or state govt.
 Essentials of contract are the following particulars by
which all agreements must be made in order to constitute
a valid contract.
1) That the contract shall be made by the parties competent
to contract.
2) That the contract shall be made by free consent of the
parties.
3) That there shall be a definite proposal and its acceptance
4) that the contract shall be made so that the considerations
and objectives are lawful.
5) That the meaning shall be certain.
  He is of the age of majority according to the law to
which he is a subject.
 He is of sound mind : he should be capable of
understanding it and forming a rational judgement
 He is not disqualified from contracting by any law to
which he is subject.

 It is not caused under influence

 It is not caused by threatening
 It is not caused by fraud.
 It is not caused by misrepresentation.
 It is not caused by mistake.
 Item rate contract
 Percentage rate contract
 Lump- Sum contract.
 Labour contract.
 Materials supply contract.
 Piece work agreement
 Cost plus percentage rate contract
 Cost plus fixed fee contract
 Cost plus sliding or fluctuating fee-scale contract
 Target contract
 Also known as unit price contract or schedule contract.
 Contractors are required to quote rates for individual items of
work on the basis of schedule of quantities
 This schedule indicates full nomenclature of items, estimated
quantities and units.
 Amount should be expressed in figures and words.
 The final total of the amount tendered for work is drawn up
by them.
 Followed by railway department.
 Department draws up the schedule of items according to
description of items sanctioned in the estimate with
quantities, rates, units and amounts.
 Department fixes up the item rates of the tender.
 Contractors are required to quote a fixed sum for execution of
a work complete in all respects.
 The departmental schedule of rates for various items of work
are also provided which regulates the payment of contractor
in respect of items of work involved for any additions and
alterations not covered by original work.
 Contractor quotes rates for item work exclusive of elements
of materials which are supplied by the department free of
cost.
 Materials stored by govt are used.
 Difficulty in obtaining certain materials in open market can be
avoided and thus better progress with standard quality can be
maintained.
 There may be delay in obtaining materials from department.
 A large storage area is required to store different kinds of
materials and constant guarding is required.
Material Supply Contract:
 Contractors have to offer their rates for supply of required
quantity of materials, inclusive of all local taxes, carriage and
delivery charges to stores within time fixed in tender.
 This form of contract is used when purchase of materials are
involved.
 All the materials received should be examined and counted.

Piece-Work Agreement:
 In this a rate is agreed upon without reference to total quality
of work to be or total quantity of work to be done.
 In this type of agreement detailed specifications and the total
cost of whole work to be done are mentioned.
 it is terminable from either side at any time.
Cost plus percentage rate contract
 The contactor is paid the actual cost plus an agreed
percentage in addition, to allow for profit.
 This is adopted when the labour and material rates are liable
to fluctuate.
 No “Bill of quantities” or “ Schedule of rates” has to be
framed.
 Owner or the department should carefully define the actual
cost.

Cost plus fixed fee contract:

 The contractor is paid by the owner an agreed fixed lump-
sum amount over and above the actual cost of work.
 This fixed fee shall cover overheads and contractors profit..
 Fee doesn’t vary with actual cost of work.
Cost plus sliding fee contract
 The contractor is paid by the owner the actual cost of
construction plus an amount of fee.
 This fee is inversely variable according to increase or decrease of
estimated cost agreed first by both parties.
 Thus higher the actual cost, lower will be the value of fee and
vice-versa.

Target contract
 The contactor is paid on a cost-plus percentage basis for work
performed.
 In addition he receives a percentage plus or minus on savings or
excess against prior agreed estimate of total cost or a target value
arrived.
Measured contract or schedule contract
 Except lump-sum contract all other contracts are measured
contracts.
 The total cost of work is worked out by detailed measurements of
different items of work.
 A bill is then prepared by multiplying the quantities with rates.

Negotiated contract
 Work is awarded on contract by mutual negotiation between
parties without call of tenders.
 In PWD the contracts are negotiated only in special circumstances
with a view
i. To obtain reasonable rates
ii. To meet the situations arising out of emergency
Rate contract:
 This is contract made between director general of supplies and
disposal of central government with the manufacturer or
supplier to supply materials for certain time period.
 Chief engineer is enlisted as Direct demanding officers.
 The prices of materials remain firm and fixed unless the prices
varies.
 Direct department officers are authorized to place the supply
order directly through a prescribed from.
 There is no monetary limit for placement of supply by D.D.O.
 There are several clauses in the conditions of contract.
Governments have their own standard conditions of contract
provided in the printed tender form. The conditions mainly
specifies the following clauses:
Clause 1. Security Deposit :
 The persons whose tender may be accepted shall permit the
government to collect from the running bills of the contractor
by way of security deposit along with earnest money.
Clause 2. Compensation for delay:
 When work allotted to the contractor remains uncommenced
or if the progress of the work is not proportionate to time the
contractor has to pay compensation of 1% to 10%
Clause 3. Action when whole of security deposit is forfeited:
 When the contractor has made himself liable to pay
compensation amounting to whole of the security deposit, the
work may be allotted to other contractor.
Clause 4. Extension of time:
 If contractor cannot complete the work due to unavoidable
hindrance, the contractor shall apply for extension of time in
writing to Engineer-in-charge within 7 days of the date of
completion.
Clause 5: Completion Certificate:
 On completion of work including removal of surplus material
the contractor shall be furnished with a completion certificate.
The date of completion should be noted in measurement book
according to date as certified in the certificate.
Clause 6. Payment on certificate:
 The contractor shall be entitle to receive monthly payment on
bills submitted by him to cost more than Rs.5000/-.
Clause 7. Monthly payment on bills:
 Monthly bill shall be submitted by the contractor on or
before the date fixed by Engg-in-charge for all works
executed for previous month.
 Engg-in-charge shall check the measurements within 10 days
from date of submission of the bill.
Clause 8. Objection to measurement recorded by department:
 Before taking up the measurements ,the Engg-in-charge shall
give a notice to the contractor to attend at the time of
measurements.
 If the contractor fails to attend or fails to countersign or to
record the difference in a weak, measurements will be
finalized
Clause 9. Bills to be on printed form:
 The contractor shall submit all the bills on printed form
supplied by the department.
Clause 9 A. Payment of contractor bills to banks
Clause 10 A. Departmental Materials:
 All materials supplied by government to contract shall
remain as absolute property of Govt and shall not on any
account be removed from site of work and shall be at all the
times open to inspection by Engg-in-charge.
Clause 11. Drawings and specifications:
 All works shall be carried out truly in accordance with the
design, drawings and specifications.
 All the materials will be in strict accordance with
specifications
Clause 12. Alterations in specifications and designs:
 The Engg-in-charge reserves the right to make any change in,
omission from, addition to or substitutions for original
designs, drawings and specifications which may be given by
written form.
 The time of completion shall be extended in such cases.
Clause 12 A. Revision of rates:
 In case any altered, or substitution of work involves the
employment of additional materials and equipments, the
contractor may claim revision of rates specified in the tender
form for main work within 7 days from receipt of order.
Clause 13 No compensation for restriction or alteration of work:
 Any changes in original drawings, designs and specifications
which may cause curtailment of original work
 Clause 14. Action and compensation payable in case of bad
work:
 if any work is found to have been executed by contractor
with unsound, imperfect or unskilful workmanship or
materials of inferior quality, the contract shall repair the
defects of work at his own expense within period specified.
 If contract fails to do so, he shall be liable to pay
compensation @ 1% per say upto maximum of 10%.
Clause 15. Works to be open up to inspection:
 All works at all times shall be open to inspection.
Clause 16. Maintenance Period:
 The contractor shall be liable for any damage done or any
defects notice within the prescribed maintenance period of 3
months ( 6 months in case of road works).
 if any defects before expiry of maintenance period he has to
repair at his own expense
Clause 17. Contractor to supply tools and plants:
 The contractor shall supply at his own cost materials, tools,
plants, appliances, ladders, scaffolding etc., for proper
execution of work.
 The contractor shall also provide all necessary fencing and
lighting in order to protect from accidents.
Clause 18. A Care of departmental tools and plants:
 The contractor shall be responsible and shall take care in
respect of all departmental roller, tools, machinery etc., issued
to contractor in connection with work.
Clause 19 Labour:
 No labourers under the age of 15 years shall be employed on
work. The contractor shall obtain a valid license under the
contract labour Act and Rules before commencement of work.
Clause 20. Work on Sundays:
 No work shall be done on Sundays without written
permission of Engg-in-charge
Clause 21. Subletting of works and contract may be rescinded:
 The contractor shall not assign or sublet the contract or any
work of the contract in whole or part without written
permission from Engg-in-Charge.
Clause 22. Sums Payable by way of compensation:
 All the sums payable shall be considered as reasonable
compensation without reference to actual damage or loss
sustained.
Clause 23. Changes in constitution of firm:
 Written approval of Engg-in-charge shall be obtained before
any changes is made in the constitution of firm.
Clause 24. Direction of work :
 All the works under the contract shall be executed under the
direction and subject to the approval in all respects of the
Engg-in-charge.
Clause 25. Arbitration:
 All the questions, disputes, claims arising out of or relating to
contract, estimates, specifications, designs, drawings, quality
of workmanship or materials used in work at any stage shall
be refer to sole arbitration of Chief Engineer of the
department.
 If the chief Engineer is unwilling to act as such arbitrator he
shall appoint a person and such appointment is valid.
 Tender is a written order submitted by the contractors in
pursuance of the notification given, to execute certain work,
supply of some specified articles or transport of materials
 The terms and conditions of the contract are laid in the tender
documents,
 The form in which it is to be supplied is submitted by the
department to eligible contractors.
 The tender duly filled in is placed in the tender box kept in
the room of officer inviting the tender.
 It should be placed on or before the specifies hours and date
notified through tender notice.
 Tender Form
 It is a printed standard form of contract giving standard conditions
of contract, general rules and directions for guidance of contractors.
 It is a part of tender document
 The price of from is given on form itself has to be purchased from
the officer inviting tender.
 There is also a memorandum for giving
i. General description of work
ii. Estimated cost.
iii. Earnest money
iv. Security deposit
v. Time allowed for the work from date of written order to
commence.
vi. Columns for signature of contractor before submission of tender,
signature of witness to contractors signature and signature of
officer by whom it is accepted.
 Tender Documents: to seek tenders
i. The Notice Inviting Tenders (N.I.T) is a standard approved form
of a department;
ii. Tender form with standard conditions of contract (printed)
iii. Schedule of quantities of works to be done and materials, tools
and plants to be supplied by department if any;
iv. Special terms and conditions;
v. Complete specifications of works to be executed;
vi. Special specifications and additional conditions of contract.
vii. One set of approved drawing where necessary;
o All the above documents are signed by contractor page by page.
o Necessary entries are made, and forwarding letter with bank
draft are put in a closed cover.
o The name of word and contractor are superscripted on cover.
Documents of tender:
 Invitation for bid
 Instructions to bidder
 standard forms
 Conditions of contract
 Tender form
 Bidding Data
 Contract data
 Specifications- General and special.
 Bill of Quantities (BOQ)
 Drawings
 Additional information
 The notice inviting tender paper is very important document
on which tenders and subsequent agreements with contractors
are made.
 Tender notice should stipulate reasonable time for completion
of work.
 All tender notices should be in standard form of department.
 It is displayed in the notice board of the division and also
circulated to the related sub-divisions and other divisions of
the department.
 For wide publicity, the tender notice is required to be
published in two daily local news-papers.
 In order to minimize heavy advertisement charges, short
tender notice should be given in tabular form which contains
information as below
i. Name of authority inviting tenders.
ii. Particulars of contractors eligible to submit to submit tenders.
iii. name of work and its location
iv. estimated cost of work
v. price of tender form and other tender documents
vi. Earnest money to be deposited.
vii. Time of completion
viii. Last date of sale of tender paper, last date of permission
ix. last date, time limit and place of receipt of tender and also
time of opening tender.
x. Accepting Authority.
Besides above it contains general directions, brief items and
conditions of acceptance and validity of tender etc.,
 It is an assurance or guarantee in the form of cash on the part
of the contractor to keep open the offer for consideration and
to confirm his intentions to take up the work accepted in his
favor for execution as per terms and conditions in the tender.
 In case a tendered fails to commence the work awarded to
him, the earnest money is forfeited to government.
 No interest is payable upon earnest money to contractors.
 If the amount of earnest money is not large it may be
deposited in cash in Divisional or sub-divisional office.
 In other cases, he has to deposit in Treasury/ Bank and to
produce the receipted challan with tender.
 For works upto 5 lakhs, 2.5% of the estimated cost should be
deposited.
 For works above 5 lakhs, 2% of the estimated cost subject to
maximum of Rs.20,000/- has to be deposited.
 A tenderer who holds the requisite fixed security deposit with
the department will be exempted from paying security
deposit.
 Earnest money given by all contractors except the lowest
three tenderer should be returned within a week.
 Earnest money of second and third lowest tenderers should
be returned within 15 days.
 The earnest money shall be given to the contractor only after
he completes the supply or he makes a security deposit.
 After the bid is opened if the bidder refuses to take the
contract then his EMD is forfeited.
 It is an amount of money which shall be deposited by the
contractor whose tender has been accepted.
 If the work is not carried out according to the specification,
time limit and conditions of contract are not followed, then
the part or whole of security deposit is payed as
compensation.
 The security deposit is refundable to a contractor after
prescribed maintenance period is over.
 For e.g. if a bidder gets Rs. 10 cr contract to construct a
bridge within 12 months, then he has to deposit a security
deposit of 10% i.e, 1 crore. If he doesn’t complete the bridge
on time or leaves it incomplete, the department can forfeit his
1 cr as penalty
 Additional amount of security money is deducted from the
progressive bills, so that total amount constitute is 10% on the
first 1 lakh and 7.5 % on the balance.
 In case of works costing more than 2 lakhs, 10% on first one
lakh, 7.5% on the next one lakh and 5% on balance subject to
maximum of 1 lakh is deducted from progressive bills.
 Measurement of all works done and supplies received in
connection with sanctioned estimate are recorded in a special type
of book ( 15cm x 10 cm) known as M.B (form no 23)
 It contains instructions for how to write up the columns for
particulars, details of actual measurements in terms of number,
length, breadth, depth and contents or area.
 The pages are machine numbered.
 Each book is provided with extra pages for index, for review by
divisional officer accountant and for review by the executive
officers.
 The entries in M.B. are made in a continuous chain in a
chronological order, no blank page is left or torn out.
 At the end of each set of measurements, the officer recording
them has to certify “Measured by me” and put his full
signature with date.
 After completion of detailed measurements an abstract
measurements is drawn up in M.B.
 Entries recorded by sectional officer are always subjected to
test check by sub divisional officer.
 AE enter rates of items of the bills.
 Any correction to calculations or rates is made in red ink by
the sub-divisional or divisional officer.
 The bill after scrutiny is endorsed by “ Pay order” both on
M.B. and Bill forms and signed by Divisional Officer or EE
 The bill has been accepted and receipted by the contractor
and a cross cheque for the net amount is drawn and handed
over to payee by distribution officer.
STANDARD MEASUREMENT BOOKS:
 A set of M.B. containing detailed measurements of specific
buildings and structures maintained by each sub-division.
 To facilitate framing of annual repairs estimate and for
payment to contractors for jobs.
 Their M.B.’s are known as S.M.B.
 The S.M.B. saves time and labour of departmental officers
from repeated work of taking measurements of same building
again and again.
 Shall be written following the sequence of progress of work.
 In case, measurement of concrete work in foundation is
written before measurement of EW in foundation, it is
justified that the measurements are not taken from filed.
 Measurement of reinforcement must be entered before
concrete work.
 Measurements of works shall be taken just after completion
of work.
 Calculations or formulae adopted to find dimensions if any
shall be stated briefly in particular column.
 Too many corrections in M.B. is not desirable.
 Beginners should make entries in the notebook and re write
the same correctly in M.B.
 The standard measurement books shall be written by S.A.E/
Sectional officer under order or A.E.
 Each set of measurements taken by S.A.E. shall be fully
checked by A.E. which shall be further examined by E.E.
Different types of bills:
 Bills may be of three types.
A) Intermediate or running payment
 as Running Account-I shortly known as R.A-1, R.A-2 etc.,
 This is prepared when work is in progress, running payment
is made to contractor in order to give him some relief at
different stages of progress.
 The monthly payment of work as per terms of condition of
contract form-27 is used for preparation of R.A bills.
B) Running and final payment:
 After giving some running account payments, when a
contractor completes a work the last payment known as final
payment stage arises.
 Last payment is a running but final payment accordingly this
is known as Running and final payment viz. R.A.-4 and final
or R.A.-5 and final. Same form -27 is used.
C) First and final Payment:
 There are some types of works where running payments
cannot be provided.
 Usually for small work or supply of materials or for lump-
sum contract this type of bills are prepared for payment after
completion of works.
 The bill form known as P.W. Accounts form-54 is used.
 The categories of skilled and unskilled workers employed,
daily attendance and outturn are recorded for the purpose of
payment in Muster roll.
 The work is executed under direct supervision of the
sectional officer or sub-divisional officer concerned.
 May be inspected by higher officers viz, Executive Engg and
superintending Engg, Depending on its importance.
 The attendance of labourers employed is recorded daily in
Muster Roll ( M.R. Form 21) issued by divisional officer in
Part-I and Quantity of works executed on M.R. is indicated in
Part-III of the Roll.
 The recipie book of M.R is watched through the register of
Muster Roll.
 The employment of labour recruited is made by the Sub-
Divisional officer by issue of a formal letter of appointment.
 The sectional officer/ S.A.E. in-charge of the works should
record the attendance of muster Roll in part-I and check one
during the day.
 The A.E or E.E should conduct surprise checks frequently.
 During marking attendance in muster roll, father’s name/
Husband’s name of labourers and workmen along with their
permanent address should be mentioned.
 The workers who doesn’t have any permanent residences, the
village or locality where they normally reside should be
mentioned.
 The daily attendance, who are absent or fines if any imposed
should be recorded neatly.
 After closing muster roll the sectional officer/ S.A.E. should
complete all entries in the M.B. and payment against it is
made.
 If any wages remained “unpaid”, details thereof should be
recorded in Part-II of the muster roll.
 In Part-III, work done by the labourers and workmen
employed on the Muster Roll should be recorded. Details of
measurements need not be reported in Part-III.
 M.R. forms are valid during the month for which they are
issued.