T Time - adhere it

C Costs - control it

A Assignments - complete it

R Rates - accept it

T Technical - tackle it

N Negotiation - play it

O Opportunities- avail it

C Challenges - meet it
ENGINEERING CONTRACTS INVOLVES
FIVE STAGES VIZ.

1. TENDERING STAGE AND PRE-
QUALIFICATION STAGE;

2. FORMAL CONTRACT (i.e.) THE ENTIRE
CONTRACT DOCUMENT;
3. POST AWARD OR EXECUTION STAGE;

4. CLOSURE OF CONTRACT ON COMPLETION
AND SETTLEMENT OF DUES ;

5. DISPUTE RESOLUTION, IF ANY.
I. PRE-AWARD STAGE INVOLVES FOLLOWING
ASPECTS :-

ANALYTICAL STUDY - BUSINESS PROSPECTS

- Careful study of NIT conditions.
- Arranging appropriate site investigation.
- Thorough site investigation.
- Preparation of preliminary estimates.
TENDERING :

Tendering is a process in which proposer invites
parties to submit his price/ offer for fulfillment of
proposers requirement.
Offerer provides proposer with his most competitive
price for project.

SOURCES FOR TENDER :

Advertisements in news papers, magazines
Formal invitation from promoters, consultant and
architects
Well wishers
Internet
TENDERING PARAMETERS

- Nature of contract (turnkey/item rate/
lumpsum/cost plus/ BOOT/ BOT/ BOLT)
- Facilities by clients (materials/power/
water/space).
- Statutory req ments/implications.
- Special responsibilities (design/
strict liabilities).
- Contract price.
- Escalations (materials/labour/Others).
- Mobilisation/secured advances
- Invoicing methodology/measurement/
Certification.
- Payment terms
- Recoveries
- Bank guarantees (retentions, performance,
Defects liability).
- Insurance
- Time of performance/cost overruns
- Direct cost
- Interest on overdue payment
- Overheads
PRE-QUALIFICATION

Process of short listing contractors
Helps in proper selection of contractors of proven
capability and expertise
Basis is
Technical capability,
Resources,
Expertise in similar jobs,
Dependability and credentials

ORDER BOOKINGS

- Liaison and negotiations with
clients/consultants and acceptable price.

- Issue of LOI (Letter of intent).

II. FORMAL CONTRACT

This involves besides technical and commercial
aspects, to a great extent, legal aspects. An
agreement to become legally binding, the following
should be noted :-
i) There must be free consent of the parties;
ii) Parties must be competent to contract;
iii) Consideration must be lawful;
iv) Object must be lawful;
v) Agreement must not be expressly declared as
void; And
FORMAL CONTRACT (CONTD.)

Agreement must comply with provisions of any law
requiring to be in writing or attested or registered.

A formal contract on stamp paper is absolutely
necessary while dealing with state owned
corporations, departments of government (like
CPWD/ PWDs), public limited companies. Though
LOIs can be acted upon, formal
FORMAL CONTRACT (CONTD.)

Contract is necessary under certain statutes.
Effort should be taken to ensure that all
understading reached in negotiations are formally
incorporated in the contract.

III. POST AWARD STAGE OR EXECUTION
STAGE

This involves the following material aspects:-

INCEPTION
- Detailed planning;
- Work methods and construction scheme;
- Schedules (Construction, Resource, cost and
invoicing);
- Framing of cost estimates (ACE);
- Invoicing methodology.
Scheduling :
Scheduling is to systematically plan the course of
action for achieving the targets/ objectives within
stipulated time in the most economical manner

For any Engineering project the following
schedules shall be prepared :
Schedule for milestone events
Schedule for construction activities
Schedule for resources
Manpower (Staff, workmen, etc,)
Material (Bulk, consumables, spares, etc)
Plant
Schedule for Invoicing
Schedule for cost (Direct and Indirect)
EXECUTION

- Systems & controls
- Project management
- Delays - documentation
- Attributable to clients/consultants.
- Attributable to force majeure
conditions.
- Attributable to government actions.
- Attributable to contractors/sub-
contractors.
- CONSEQUENCES OF DELAYS :

A) Cost overruns - documentation
B) idling of resources
C) acceleration of work to offset delays
D) financing cost due to delays in payment
E) penalties / liquidated damages

- Scope / quantity variation of abnormal nature
- Extra items of work not envisaged in contract
- Claims management
IV. CLOSURE OF CONTRACT :
- Reconciliation of billing;
- Measurements & certification
- Reconciliation of materials
(Free supplies etc.)
- Claims follow up
- Final bill
- Retrieval of BGs, insurances, deposits
- Disposal of installations
- Completion certificate
- Completion of defects liability period

V. DISPUTE RESOLUTION

- By negotiation
- By accord and satisfaction
- By goodwill
- By arbitration, if provided for
- By court action.

Dos and donts Contract management :

1. When contractors are faced with lack of work and idle
overheads they tend to under quote and take up jobs at
cutthroat rates which will land them in a soup.
Contractors are so afraid of dying that they commit
suicide.
2. Better to avoid remarks I never heard of a
contractor who lost money on a job he didnt get.
3. Good-claims-management practice means:
a)Eliminating risks before entering into contract to the
best extent possible, and
b)During the course of work to have, variation orders
settled without elevating them to the status of claims.
Dos and donts Contract management : (Cotnd..,)

4.Be careful how the law of the land interprets No
damages clause in favour of the owner.
5.United States has a civil law system, which has
spawned the highest number of lawyers, which makes
claims settlement difficult.
6.Dont throw good money after bad money in pursuing
bad claims.
7.Dont set up ego-barriers in settling disputes during
the course of work.
8.Negotiated contracts have fewer claims than lump
sum contracts.

Dos and donts Contract management : (Contd.),

9.Most owners engineers tend to assume that the
contractors have covered all risks while quoting.
Enumerate areas not covered in your quotation.
10.Study contract conditions and local laws
thoroughly.
11.Educate your staff to act early at the lower level
so that disputes do not escalate and rise to the
highest decision making level.
12.Do not pile up claims to the end which results in
the owners engineer also getting hemmed in. Have
them settled in the early stages before the amount
locks big.
13. Provide analysis and documentation early and not
at the end.
Dos and donts Contract management : (Contd.)
14. Relate every claim to the project schedule drawn
up in the beginning. This base plan must be prepared
right at the beginning of the contract and this should
not be lost sight of either mentally or physically. Keep
a copy of the original schedule in your cash box or
bank locker so that it is not lost.
15. Concurrent delays cannot be seen from bar chart.
It is better to use CPM network so that the floats are
known. Do the CPM network right in the beginning of
the project. You can build a project without CPM but
you cannot build a delay claim without it. Update the
CPM network by periodical monitoring so that you can
prove delays, as the onus of proof is on the
contractor.
Dos and donts Contract management : (Contd.,)

16. Claim is a three-legged table.
Liability which means contractual facts.
Causation which means connection, and
Damages which means claims presented.
17.Submission of claims should be subject to IRAC
Test as follows:
a) Issue Area we entitled to recovery?
b) Review Contractual and factual right to
recover
c) Analysis If necessary get expert opinion and
judgments available.
d) Chronology Perspective to be drawn up.

Dos and donts Contract management : (Contd.,)

18.Submissions should be understandable by the
arbitrator. If available enclose periodical progress
photographs which can speak volumes.
19.Do not lose credibility by submitting untenable or
exorbitant claims.
20.Have your submissions examined by your own
people, or experts. You never have a second chance to
make the first impression.
21.Have your claims settled during the course of
execution when you have leverage.
Dos and donts Contract management : (Contd.,)

22.While negotiating international contracts, suggests
a formula from outside the country preferably a
neutral country to settle the disputes.
Also, suggest mediator from neutral country to advise
during the course of contract.