Project Engineering & Construction Management

A Complete Manual
of
Project Engineering
&
Construction Management
Far-western University
Department of Civil Engineering
Mahendranagar, Kanchanpur
Compiled by: Er. Mahendra Singh (M.E./M.Sc. in Construction Management)

Project Engineering & Construction Management / Note Managed by: Er. Mahendra Singh (M.E./ M.Sc. in CM)
Unit 1
Introduction (6 Hrs)
1.1 Definition and Characteristics of Project

The word project comes from the Latin word projectum from the Latin verb proicere, "before an
action" which in turn comes from pro-, which denotes precedence, something that comes before
something else in time (paralleling the Greek πρό) and iacere, "to do". The word "project" thus
originally meant "before an action". An individual or collaborative enterprise that is carefully planned
to achieve a particular aim. When the English language initially adopted the word, it referred to a plan
of something, not to the act of actually carrying this plan out. Something performed in accordance
with a project became known as an "object". Every project has certain phases of development.
Project management has become and exciting as well as challenging professional career for result
oriented managers. The governments in developing countries are also developing the projects to
i) Attract donors for financial assistance,
ii) Enhance their developmental programs and
iii) Accelerate economic development.
Therefore, it is important to understand what a project means before entering the concept and aspects
of project management. We have heard of people, agencies and government talking about water
supply projects, roads construction projects, dairy development projects, hydropower projects, higher
education projects, telecommunications projects, human rights and civil liberties projects,
environmental protection projects etc.
A project involves a single definable purpose, end item or result usually specified in terms of costs,
time schedule and performance requirements. It is a process of working together to achieve a goal;
during the process, projects pass through several distinct phases called project life cycle. In other
words, a project is a set of interrelated time bound activities or a time bound tasks carried out to
achieve certain specific objectives. It has a definite beginning and an ending and integrates human
and non-human resources to deliver certain specific goods or services to target the group of
beneficiaries. Every project has two phases: first planning and preparation and second, its operations.
Project planning involves definition of tasks or activities to be performed to achieve specific project
objectives. In order to achieve the objectives, it must be operated within a given set of rules,
regulations, constraints and limitations. The implementation of projects convert the given inputs or
resources into output or result and require various financial and non-financial resources. Every project
idea to be successful must technically feasible, economically viable, politically suitable and socially
acceptable.
Different institutions and thinkers have defined projects in different ways. The following are some of
the definitions presented by some institutions and prominent thinkers:
“Project is a one which starts from scratch with a definite mission, generates activity involving a
variety of human, non-human resources all directed towards fulfillment of the mission and stop once
the mission is fulfilled.” - S. Chaudhary
“A project can be defined as a unique task (however large or small with defined goal, limited in cost
and time and giving some benefits to the users when the task is completed.” – S.K. Bhattacharjee
“Project is a combination of human and non-human resources pulled together into a temporary
organization to achieve a specific purpose.” - Clealand and King
The project management institute in USA (PMI) defines project as “A one-shot, time limited, goal
directed, major undertaking, requiring the commitment of varied skills and resources. It is
combination of human and non-human resources pulled together in a temporary organization to
achieve a specific purpose.”
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“According to Trevor Young, a project is a “collection of limited activities, carried out in an

organized manner with a clearly defined start and finish points, to achieve some specific results that
satisfy the needs of an organization as derived from the current business plans.”
Harold Kerzner defines a project as “any series of activities and tasks that have a specific objective
to be completed within certain specifications, defined start and end points, finding limits and
consume resources.”
All these definitions emphasize that a project is a time bound activity designed to achieve a specific
goal through planning, control and temporary organization to create a product or service by
overcoming time and resources constraints. The success of a project depends on sound planning,
clearly defined objectives, judicious utilization of resources, logical coordination of activities and
effective implementation, periodic comparisons of planned and actual performance and taking
corrective steps to ensure timely completion.
1.2 Classification of project

Projects can be classified as under:
A. According to funding (source of fund)
1.) Private sector project
These projects are the basis of private investment. The private sector bodies are responsible for the
development and sponsor of the project. Example: - Civil homes, Kathmandu Mall, Apartments etc.
2.) Government sector project
These projects are the basis of government development plans. Government is the major sponsor of
projects in developing countries. Example:- water supply project, hospitals, schools etc.
3.) Grant project
These are those projects where the investment in project is not repaid by the government to the donor
agencies.
4.) Loan project
These are those projects where the investment in project is repaid by the government to the donor
agencies.
B. According to the Foreign aided project:

1.) Joint venture project
This project is funded through collaboration of foreign and local investors. They involve transferring
of capital, technology, management. They are based on the ownership sharing. Example: - Maruti-
Suzuki, Everest Bank (JV with bank of Punjab) etc.
2.) Bilateral project

This project is funded from the financial resources of a friendly donor country, generally through
grants under an agreement. Example: - JICA, KOICA, GTZ etc.
3.) Multilateral project
This project is funded from the financial resources of multilateral agencies such as World Bank and
Asian Development Bank. They are generally funded through loans. However subsidy and grant are
also provided by these agencies. All UN agencies are also multilateral.
C. According to Techniques:
1.) Labor intensive project
This project is labor based. Human Labors are extensively used for implementation of the project.
This is used to describe a technology that applies a labor/equipment mix that gives priority to labor,
supplementing it with appropriate equipment where necessary for reasons of quality or cost.
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Advantages:
a. More employment generation
b. Utilization of scarce resources
c. Decentralization
d. Higher level of consumption
e. More production at cheaper rate
f. Saving foreign exchange
g. Scope for employment for women
Disadvantages:
a. lt is static in nature so cannot be applied for long run
b. There is no possibility of improving in skills
c. Low capital formation
2.) Capital intensive project

This project is technology based. Technology represented by machinery, automation, and computeri-
zation is used to implement the project.
Advantages:
a. Ease in capital formation
b. Technology advancement.
c. Skill advancement
d. Technology transfer
e. Applied for long run
Disadvantages:
a. Required huge amount of capital
b. Un-equal payment for workers (imbalance distribution)
c. Negative consequences in saving of social overheads
d. Centralization
e. Adverse effect on distribution of income
D. According to Functions:
1.) Disaster presentation projects
2.) Development projects
3.) Service sector projects
4.) Environment friendly projects etc.
E. According to the Orientation:

1.) Product oriented
The focus is on the technical content of the project. Examples: - building, road, bridge etc.
2.) Process oriented

No consideration is given to technical context. Examples: - person focused training, repair of cement
plant etc.
F. According to Scale and Size

1.) Mega
It is a big size of complex project for 5 to 10 years involving huge investment and high technology.
Upper Karnali hydropower project is the example of mega project of Nepal. These projects required
environmental screening like EIA (Environmental Impact Assessment).
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2.) Major
It is smaller in size than mega project. Middle Marshyangdi hydropower project is the example of
major project in Nepal. These projects also require environmental screening like EIA.
3.) Medium
It is small in size than major project Khimti/Bhotekoshi/Jhimruk hydropower project is an example.
These projects require IEE (Initial Environment Examination).
4.) Small
It is the smallest project of short duration. Manang hydropower is the example.
5.) Micro
It is smaller than small hydropower and is managed by community-based organizations. Ghandruk
Micro hydropower project is one of the example.
G. According to Nature of project

1.) Simple
2.) Complex
3.) Innovative
4.) Emergency
H. According to Time frame and speed

1.) Normal
Scheduled normal time allowed for project implementation.
2.) Crash
Saving in time is achieved by spending extra resources in terms of money, materials and manpower
with compromising quality. Overlapping or shortening of project phases is encouraged.
1.3 Characteristics of Project

A project has the following characteristics:
1.) A defined (specific) goal or objectives

Clearly defined goals are essential go that everyone understands the purpose and vision of the project
team. A project has clearly defined specific objectives or mission. It is focused on end results. It ceas-
es to exist when the objectives have been achieved. For e.g. the goal of a construction project is to
build (facility) something.
2.) Temporary
Temporary means that the every project has definite beginning and end. The end is reached when the
project’s declared objective/goal is achieved. Temporal doesn’t mean short in duration, depending
upon the nature, type and size of the project the duration of the project is determined.
3.) Constraints
All projects have constraints. A project operates within the constraints of time, cost and quality per-
formance. It has a time schedule for various activities and a completion date as deadline. It has clearly
laid down quality specifications. The scope and boundaries of a project are clearly delineated. Project
schedule sets deadlines.
4.) Unique
Projects involve doing something, which has not been done before, and therefore it is unique. There is
only one Tajmahal, one Eiffel tower, one Panama canal etc. No two projects are absolutely similar to
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each other. For example- thousands of buildings have been developed but each facility is unique - dif-
ferent owner, different location, different designs, different contractors etc.
5.) Specific task, not routinely performed

No works are repeated again and again in the project. For example the first; work in the hydropower
project is to build the weir or barrage. After the construction of weir/barrage or after the diversion of
river water, again weir/barrage is not constructed, after those other new structures are constructed.
6.) Team Work

In a project, there are number of people involved and participating, generally called as stakeholders.
Projects work through teamwork. A project consists of multi-functional team. Team members are
temporarily assigned from other functional departments. They come from various disciplines with
varied experiences. The key stakeholders in a project are:
(a) Project manager: the individual responsible for managing the overall project
(b) Customer: the individual or organization that will use the project’s product or services.
(c) Performing organization: the enterprise whose employees are most directly involved in
doing the work of the project.
(d) Sponsor: the individual or group that provides the financial resources in cash or in kind,
for the project.
7.) Rapid Expenditure

The level of expenditure is very high as compared with the other permanent program.
8.) Resource being consumed

Project consumes tremendous quantities of resources, all of which are paid for by the owner. 5M-
Money, Material, Manpower, Machine and Minute are examples of the kinds of resources that are
managed and controlled by the project team. Efficiently managed projects minimize, balance and
forecast resource consumption for the owner.
9.) Risk and Uncertainties

Risk and uncertainty go hand in hand with project. A risk free project cannot be thought of. Even if a
project appears to be risk free, it only means that the risk element is not apparently visible on the sur-
face and it will be hidden underneath. The risk factor will come to surface when conditions become
conducive to it. On the other hand, risk gets managed as the project phase’s proceeds.
10.) Planning and Control

Projects work to a plan. A project requires effective and efficient planning and control systems.
Standards are set for project activities through planning. They serve as yardsticks for measuring pro-
ject performance. Actual performance is compared with standards to find out deviations. Corrective
actions are taken to control deviations.
11.) Defined deliverables

Defined deliverables are what the owner establishes as the program and what is further clarified in the
contract documents by design professionals. A certain quantity of work will be completed in accord-
ance to certain specifications within a certain time frame.
12.) Contracting and subcontracting

Most projects are contract-based. The project work is characterized by high level of contracting and
subcontracting. Complexity increases the need for subcontracting. Contracts can be of various types,
such as lump-sum contract, unit price contract, negotiated cost plus fixed fee contract and turnkey
contract. Proper contract planning and management is the key to effective project management.
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13.) Progressive elaboration:

Progressive means proceeding in step and elaboration means worked out with care and detail thor-
oughly developed.
1.4 Setting project objective and goal

Objectives are the ends towards which the activities of a project are directed. A project has clearly
defined (specific objectives). It is focused on end result. Project exists when the objectives have been
achieved. Hence the first step in any project is to define the objective. We define the project objective
in order to:
1. Make sure that we have identified the right target.
2. Create team commitment and involve all interested parties in achieving the successful pro-
ject outcome.
Goals are purpose and mission for initiating a project, which is set at the start of project. It is the
specification of what is hoped to be achieved at the end of the project, which allows stakeholders to
specify the target then work towards their own objectives. Goal should clearly state what the project
will deliver. Goal setting takes time, energy and dialogue. When we set out to define project objec-
tives there is useful acronym to remember SMART. These are the indicators of objectives which
means
S - Specific & (Clear and well defined)

First, you want to make your goal as specific as possible. You want ensure your goal is detailed and
describe exactly what you want. For example, if you set a goal to own your own home, be specific
about it. Don’t just say “I want to own a house”. Describe what kind of house you want; how big will
it be, how many bedrooms will it have, do you want a house with a yard or not, and where do you
want your new home to be located? Answer the question Who, What, When, Where, Which and
How. The more specific a goal is the clearer target you set for yourself.
M- Measurable so that project outcome can be measured and compared (Evaluated)

Second, when setting goals, make sure you set goals whose progress you can measure. There is a dif-
ference between saying I want so lose weight and I want to lose 30 pounds. When you say, I want to
lose 30 pounds, you can measure that. You can see your progress as you decrease your weight from
30 pounds, down to 25, down to 20 and so on. This will help you see fruits of your labor and motivate
you to keep pushing forward. Now if you merely said I want to lose weight, well, losing even one
pound could constitute you achieving your goal, so you wouldn’t be kept motivated to continue.
A- Achievable / Attainable and Agreed by all the members of the team

Third, you want to set a goal that is attainable. Based on current restrictions, such as your schedule,
workload and knowledge, do you believe you can attain the objective you set? If not, then set a dif-
ferent goal, one that is attainable for you in the present moment. By setting unattainable goals, it will
only make you feel like a failure for not accomplishing the target you set for yourself.
R-Realistic, possible under limited set of resources

This is in line with attainability, set goals that are realistic. If you are 40 pounds overweight and ha-
ven’t exercised in years, it’d be a pretty unrealistic goal to run a triathlon with 2 months of training.
So set a goal you have a realistic chance of achieving. Doing otherwise is setting you up to fail before
you even start.
T-Time framed, if there is not pressure to complete the project it will never get completed
Last and most important, all smart goals must be time-bound. You should have a dead line by which
you plan to have the goal completed. Setting a deadline reinforces the seriousness of the goal in your
mind. It motivates you to take action. When you don’t set a time-line, there is no internal pressure to
accomplish the goal.
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Objective should not only be SMART they also need to be brief and simple to understand.
Examples of SMART goal
1.) Bad example of SMART goal: “I want to write a book”.
Good example of a SMART goal:

“I want to write a work book on “How to add 10 years to your life” that is at least 150 pages in length
and get it completed by December 30th 2019. I will write at least 4 pages every weekday until I com-
plete the book.”
2.) Bad example of a SMART goal: I want to have a lot of money”.
Good example of a SMART goal:

I want to make one million within 10 years by starting an internet marketing business selling personal
development products all over the world and by providing live coaching consultancy and conducting
live seminars.”
1.5 Project Life Cycle & Phases

Project is a temporary job. It cannot continue endlessly. A project depending upon its nature, size and
type, undergoes through different well-defined phases right from its inception to successful comple-
tion. Collectively, the project phases are known as project life cycle phases. The breakdown and ter-
minology of these phases differs depending upon the nature of the project or organization. The fol-
lowing important five phases contribute to develop a project from an idea to reality, basically for in-
frastructure related project.
a)Initiation Phase
This phase includes:
 Conceptual study: projects are born with creative ideas. It includes preliminary evaluation
of ideas, such as project identification, project formulation.
 Feasibility study: the objective of the feasibility study is to have more detailed information
about the location, nature, dimensions, raw material needed, equipment’s, cost-benefit
analysis, and the detail about the users who will be benefitted from the project.
 Market study: it includes the study of the marketing prospects and demand of the product,
considering (a) potential size and composition of the market (b) present and projected de-
mand of the product/services.
After the completion of this phase, a go/no-go decision is made.
b) Planning Phase
 Work breakdown structure: the project is broken down into small elements so that all the
activities to be performed in the project are included.
 Cost and Schedule Planning: after breaking down the project, the time and cost of each ac-
tivity is determined and overall time and cost of the project is determined.
 Contract terms and condition: the contract terms in which the project activities are to ac-
complish is determined in this phase. The contract may be lump sump, fixed price, unit
rate etc.
After the end of this phase time and cost estimate of the project is made and major contracts are let.
c.) Engineering and Design Phase

 Preliminary engineering and design:
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It stresses architectural concepts, evaluation of technological process alternatives, size and capacity
decisions, and comparative economic studies- In designing dam, hydropower, irrigation channel pre-
liminary design requires analysis of hydrological characteristics, geological condition, precise loca-
tion of dam etc.
 Detailed engineering & design:
It involves the process of successively breaking down, analyzing and designing the structure and its
elements. This detailed phase include architects, interior designers, landscape architects and several
engineering disciplines including chemical, civil, electrical, mechanical etc.
d.) Implementation Phase

 Application of the paper works physically in the real field.
 Manufacturing, installation of machines and testing and civil works.
 Controlling is performed to check project performance at any point of time during imple-
mentation.
 The facility is substantially completed at this phase
e.) Divestment/ Phase out/ Termination

 This phase is the end of project and project is brought to its completion.
 In this phase, the final testing and maintenance of the project is done and handed over to the
customer and resources are released to other projects.
 The basic tasks in this phase are evaluation and handover of the project output to the benefi-
ciaries.
 Cost and staffing levels are low at the start, higher towards the end, and drop rapidly as pro-
ject draws to a conclusion as shown in figure below.
 The probability of successfully completing the project is lowest, and hence risk and uncer-
tainties are higher at the start. The probability of successful completion gets progressively
higher as the project continues.
Most project life cycles tend to progress slowly at the start, quicken their momentum towards the
middle and drop their momentum towards the end.
Project life cycle in terms of resources/risk and time
Fig: 1.1 Project Life Cycle

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1.6 Concept of Project Appraisal

Appraisal is the evaluation of the ability of the project to succeed. Project appraisal is the process of
assessing and questioning proposals before resources are committed. This is an evaluation report of
proposed project that is prepared before signing the agreement or memorandum of understanding
(MOU). Project appraisal is a process of detailed examination of several aspects of a given project
before recommending the same. The objective of the project appraisal is to study and compare the
possible feasible project and select the best one.
Project appraisal is systematic analysis of a project’s viability using financial and economic appraisal
tools to determine the cost-benefit of proceeding with the project and its cost-effectiveness in meeting
its intended objectives. A standard criterion is then used to compare several project alternatives.
Appraisal is done systematically to provide an overall assessment of project’s likelihood for success.
The institution that is going to fund the project has to satisfy itself before providing financial assis-
tance for the project. The lending institution has to ensure that the investments on the proposed pro-
ject will generate sufficient returns on the investments made and that loan amount disbursed for the
implementation of the project will be recovered along with interest within a reasonable period of
time.
Project appraisal answers two important questions

1. Will the project meets its objective?
2. How does the project compare with other competing projects? (if more than one project has been
found feasible)
The primary function of appraisal is to evaluate a project’s ability to achieve.

 For private project, profitability is the objective (financial profitability).
 For Public project, socio economic development is objective (economic profitability).
Project Appraisal Document should include the following:

 Project Introduction
 Project Objective and Scope
 Project Description
 Implementation Plan
 Executing Agency
 Project Organization
 Parties Involved in project
 Project Budget and Schedule
 Benefits and Output of Project
 Project Monitoring and Evaluation.
After the completion of project appraisal, the following issues are addressed:
 Whether or not the objective of the project has been successfully achieved?
 Whether or not resources were properly utilized?
 Whether or not project completed within the stipulated time?
 Whether or not decisions taken during project implementation were really useful?
 Whether or not the quality of product and services of the project are according to standards?
Factors to be considered during project appraisal (appraisal factors)

The feasibility study serves as groundwork for appraisal. The aspects covered in feasibility study are
re-examined during appraisal. These aspects are technical, economic, marketing, financial, manageri-
al, and environmental.
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1.7 Project Proposal

Project proposals are documents designed to present a plan of action, outline the reasons why the ac-
tion is necessary, and convince the reader to agree with and approve the implementation of the ac-
tions recommended in the body of the document. It is simply a device used to bring revenue to the
concerned organization. It is extensively used in industrial, governmental and academic circle. From
project management viewpoint, proposal simply means a blue print of project activities. It is a set of
documents needed to evaluate the project, which is under consideration. The set of documents sub-
mitted for evaluation of project is called proposal.
Contents of Project Proposal

Every project is unique and different to each other. For instance, the development of project proposals
relating to establish drinking water supply, to construct school building, conducting detailed feasibil-
ity study of hydropower (DPR), to provide some health facilities, to conduct socioeconomic survey,
to conduct training packages etc. may differ to great extent. Since each project proposal entails its
own uniqueness, it is not possible to get a standard format for developing a project proposal equally
applicable for all types and natures of projects. However, the contents of all types of project proposal
are broadly classified into two parts: technical and financial. Sometime management part is highlight-
ed separately from technical part.
1.7.1 Technical part of project proposal

Technical part of the proposal gives the technical details and descriptions of the project. The contents
of technical part are:
a. Problem statement: description of the project problem
b. Special requirements: any special requirements as specified in TOR by client is described
c. Test and inspection: procedures related to testing, quality assurance, reliability and compliance
along with specifications are prepared
d. Logistics: details of equipment, facilities, skills and administrative aspects are listed
e. Reporting: formats, timing and nature of reporting should be highlighted
f. CV: CV of key persons for the execution of the proposed project is listed along with details
g. Capability statement: organizational capability and past similar work experience is focused in this
part
1.7.2 Financial part of the project proposal

It deals with the financial details of the project. The financial part of proposal covers the aspects like:
 Cost of basic materials
 Statement of work
 Cost summary
 Supporting schedules
 Profit statement
 Elements of cost
 Cost break down and work break down structures
 Cost estimating techniques
In this part generally format of BOQ (provided along with TOR or bid document) is prepared and rate
is quoted for the proposed work.
1.7.3 Management part of the proposal

It incorporates the administrative and management capability of the proposing organization in terms
of:
 Organizational structure
 The financial stability
 Financial litigation history
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 Accounting system
 Employee safety, health & Labor related aspects
 Cost and schedules
 Past work experiences
1.8 Procedure for developing project proposal

Project proposal is a blueprint of project and it should be developed professionally. A project pro-
posal development is logical, systematic and professional activities, which involves various steps.
Step 1: Project brief (Statement of Work)

Statement of work is prepared by the client at the project formulation phase. It is also known as wish
list of the client, which describes the needs and requirements. It is provided by the client in the form
of TOR. The major contents covered in SOW are:
 Need and description of the project
 Scope of the project
 Predetermined objectives and output / outcomes of the project
 Funding constraints and budget
 Specifications, quality assurance and acceptance criteria
 Project schedules
 Reporting system
 Monitoring and evaluation mechanism etc.
Step 2: Pre/Feasibility study

This study is carried to find the implement ability of the proposed project. If the proposed project
work is to carry out the detailed feasibility study (DPR) then client has prepared the pre-feasibility
study report but if the proposed project is the construction of infrastructure client should prepared the
feasibility study. It covers the aspects like technical analysis, economic analysis, financial analysis,
market analysis, management analysis and environmental analysis. Technical feasibility is the main
focus aspect of pre/feasibility study.
Step 3: Preliminary/detailed design

This phase is also known as conceptual design or architectural design. It is the expanded form of pro-
ject idea and is based on pre/feasibility study. The objective of this phase is to create a design that
will correctly and completely implements the requirements shown by study. It includes technical as-
pects like survey, engineering drawings, project schedule, WBS, estimated project cost etc.
Step 4: Proposal Development

This is the final step of the procedures in developing project proposal. According to the SOW,
pre/feasibility study and preliminary design the project proposal is then developed integrating with
the goal and objectives of the proposing organizations. It contains following details.
Executive Summary
It is a short summary statement, which includes fundamental nature of the project proposal in simple
and non-technical language. It should focus on general advantages that can contribute or obtained
from its implementation.
Cover Letter
It is the main document for selling of project ideas. It should be with maximum attention and provide
the total perspectives of project.
Analysis of Technical Issues

It covers the technical problems and the approach to tackle the problem. It describes the project to be
undertaken. It should highlight the general method of resolving the key problem. It should take note
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of test and inspection procedures to assure performance, quality, reliability and compliance with spec-
ification.
Implementation of Project
It contains the estimate of time, cost and materials. It should show the project schedule by preparing
Bar chart CPM/PERT, periodic review of human resources; equipment’s and other resources are es-
timated. Milestones are indicated on the bar chart.
Managerial Analysis of Project

The project should include a detailed description of the ability of the proposer to supply the routine
facilities, equipment and skills needed now and during project implementation. It should explain how
the project would be administered. It should highlight how it will maintain the contact with sub-
contractor, how progress reports, audit and evaluation are covered, and how the final documentation
will be prepared for the users. This also highlights how the project will be terminated.
Profile of Proposing Group Process of Feasibility Analysis of the Project

It should contain the past expe-
Generation of idea
rience of the proposing group
i.e. the list of all ‘key project
personnel together with their
Initial screening
titles and qualification. A full
resume is prepared for each
principal for the outside client. No
Terminate Is the idea promising?
In brief, project proposal should
include project brief, the feasi-
Yes
bility study, preliminary design,
proposal development, execu- Plan feasibility Analysis
tive summary and appendices if
any. When preparing project
proposal, whatever method is
Conduct market Conduct technical
adopted, it should be kept in analysis analysis
mind that the basic purpose of
the document is to convince a
potential funder that the group Conduct Financial analysis
and the project are worth con-

sidering for support. Thus, the
proposal should be written in Conduct economic and
lucid way to appeal the potential ecological analysis
funders or clients.
No
Terminate Is project worthwhile?
Prepare Funding proposal
Fig: 1.2 Process of Feasibility Analysis of the Project
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Unit 2
Project Planning and Scheduling (12 Hrs)
2.1 Introduction of Planning

In the simple sense, planning means thinking ahead of an operation to be performed. It is the primary
function of management. It is the basic requirement and important input of management process. It
helps to decide what is to be done, when, where and how etc? It provides the framework within which
coordinating, motivating and controlling can be undertaken. Planning is in fact the prerequisite of
effective management.
Planning is the most important constituent of the construction management. In the simplest sense
planning is the mental process deciding about the future line of actions. Planning is the course of
action to achieve the desired results taking into consideration the present needs and future
requirements.
2.2 Definition of Planning

According to Stephen P. Robbins: Planning is deciding in advance about what to do, how to do, when
to do and who to do it. It provides the end to be achieved.
According to L.F. Urwick: Planning is fundamentally a mental disposition to do things in an orderly
way, to think before and to act in the light of the facts rather than the guesses.
According to Richard Steers: Planning is the process by which managers define goals and take
necessary steps to ensure that these goals are achieved. Planning is a mental exercise that requires
imagination, foresight, and sound judgment. It is thinking before doing, looking ahead, anticipating
future and deciding the course of action to be taken.
2.3 Objectives of Planning

The main objectives of planning of a work are to execute the project or work most economically in
terms of both money and time. The effective planning depends upon the following factors:
 Proper design of each element of the project
 Proper selection of plant and equipment
 Proper arrangements of repair of plant and equipment at site
 Procurement of required materials well in advance
 Ensure employment of skilled and unskilled employees
 To provide welfare schemes for the workers
 To arrange constant flow of funds in entire project duration
 To provide required level of safety and compensations
 Proper arrangement of communication and mobility in site
2.4 Principles of Planning

Following are the general principles of planning:
 The plan should be readily understandable
 The plan should be realistic (not an optimistic)
 The plan should be flexible
 The plan should be comprehensive
 The plan should incorporate the system of monitoring and controlling
2.5 Steps and Stages of Planning

Steps involved in planning
Following steps are involved in the effective planning:
 Identifying the likely problems to be encountered in the execution of the work and
obtaining necessary information
 Ascertaining alternative feasibility of execution of work and selection of the optimum plan
 Fixing the time of starting the execution of work
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 Deciding the time of delivering the materials at site

 Deciding the quantities and duration of various types of machines and equipment
 Deciding the number of different types of labors for various works and duration of their
employment
 Estimation of financial need
 Estimation of the duration of completion of the work
 Evaluation of the effectiveness of plan adopted
Broadly, planning involves following steps

 Setting objectives
 Determining the alternatives
 Evaluating the alternatives
 Selecting the best alternatives
 Formulating the real plan
Stages of Planning
Usually the stages of planning are as follows:
1. Pre-planning
During this stage, objectives are clearly spelt out. A general framework of the project is
formulated. A cost benefit analysis is to be carried out along with cost analysis of alternative
sites. Thus this stage of planning is before a decision finally is taken to undertake a project.
2. Detailed planning
During this stage detailed design and drawings are carried out. Specifications of materials and
drawings are also prepared in this stage. Quantity calculation along with preparation of WBS
is done. Sequence and scheduling of the activities are done.
3. Monitoring and controlling

In the phase, the progress of construction is monitored as per proposed scheduled. Updating of
schedule can be carried out according to the actual progress of work. Preparation of the
revised forecasts regarding the availability of various resources is done.
2.6 Planning by Contractor and Client in Different Stages

2.6.1 Planning by the Client/Owner/Employer
a) Pre-tender stage planning
 Clients sets clear objectives of the project
 Client communicate the objectives to all the parties and stakeholders
 After proper investigations of the project, client prepares quantity estimates and
determines the quantum of money required for the completion of the work.
 Take respective approval of the project from concerned authority
 Selection of project team and project appraisal
 Select the consultant
 Bidding and contract award (selection of contractor)
b) Construction stage planning

 Revision in objectives in responding unexpected events
 Make site available for the contractor
 Timely payment and settlement of claim
 Keep the changes less
 Update performance bond of the contractor
 Timely decision
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c) Post construction stage planning

 Prepares project operation schedule
 Prepares project maintenance schedule
 Project ownership
2.6.2 Planning by the Contractor

a) Pre tender stage planning
The planning undertaken by the contractor after receipt of tender notice and before submitting the bid
is known as pre tender stage planning. Steps of planning at this stage are as follows:
 Careful Study of tender documents and drawings to find out the quantities of each item of
work
 Study of specifications and workout the detailed quantities of materials required for
different items
 Determine the availability of construction materials at site or nearby site
 Determine the method of work execution i.e. by labor or equipment
 Thorough study of site and site investigations
b) Construction stage planning

After the acceptance of the tender, the contractor further needs in depth planning. This stage of
planning is also known as contract planning. Here are following steps in this stage of planning:
 Studying the alternative methods of construction and to decide about subcontracting
 Working out detailed quantities of materials required and examine and fixing the methods
of procurement and sources of them
 Working out detailed about construction workforce like skilled and unskilled manpower
 Working out details of plants, equipment their layout and repair & maintenance strategy
 Planning for camp facilities, access, accommodations, site offices and layout
Planning for surveillance like proper lighting, ventilation, drinking water, sanitation, first
aid treatment
 Study interdependence of different items of works and fixing the sequence of them
 Finalize the work program of each item of work and to decide the dates of their starting
and completing
c) Post construction stage planning

 Demobilization of plants and equipment
 Demobilization of labors
 Clearance of materials inventory and its stock
 Handover the project to client in targeted date
 Responsible for the defect liability construction within its period
2.6.3 Importance of planning

Sound planning is an essential condition for effective management. The following are some important
benefits of management.
1. Making objectives clear: Planning makes goals clear and specific. This is because goals are to
be achieved and decided before choosing the course of action. Planning focuses attention on the
organizational objectives and serves as a guide for deciding what action to be taken.
2. Helps in coordination: Well defined objectives, policies and procedures helps in coordination
i.e. it avoids duplication of works and inter-departmental conflict.
3. Economy and efficiency in operation: It paves the way for proper utilization of the
organizational resources. It involves the development of one best way of doing things which is
economical too.
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4. Reduces risk and uncertainty: Planning enables to predict future events and prepare to face the
unexpected events. With the help of planning, managers can identify potential dangers and take steps
to overcome them. Thus, planning is helpful in assessing and meeting future challenges.
5. Provide the basis of control: Planning provides the standards against which actual
performance can be measured and evaluated. Comparison of actual performance with the standard
(plan) helps to identify deviation and take corrective actions if necessary.
6. Facilitates decision-making: Planning lays down targets. With the help of these targets
managers can better evaluate alternative course of actions and select the best one. With the help of
planning hasty decisions and random actions can be avoided.
7. Healthcare organization at right path: Planning helps in the organization to keep on the right
path. Employees understand how their action relates to organizational goals. Planning avoids aimless
and adhoc decisions based on impulse and intuition. Planning provides systematic and orderly efforts
towards the goals.
2.6.4 Functions of project planning

 Stating the objectives of the project to be undertaken
 Definition of work requirement
 Definition of resource needed such as funds, materials, machines, human resources,
facilities etc.
 Determining the time frame of the overall project and also scheduling its various stages
 To eliminate or minimize the risk and uncertainty
 It provides a basis for organizing the work on the project and allocating responsibilities to
individuals
2.7 Work Break Down Structure (WBS)

How many tasks does the project have? How much detail should the project plan have? This query is
overcome by work breakdown structure. Most modern day projects are designed, organized and built
by teams of specialized professionals. To organize this process efficiently it is necessary to break
down the project into specific parts that can be coordinated and controlled. The manner in which this
project is structured is termed as a project’s work break down structure (WBS).
A Project (or program) may involve several components. Successful completion of such project (or
program) requires a plan that defines all its components, assigns responsibility to a specially
identified organizational element, and establishes schedules and budgets for its accomplishment.
Thus, the work breakdown structure, as its name suggests, represents a systematic and logical
breakdown of a project into several components. It is constructed by dividing a project into major
components, each of which is further sub-divided into smaller components. The process is continued
till a breakdown accomplishes manageable unit of works for which responsibility can be defined.
Work breakdown is the first major step in planning the execution of the project. WBS acts as a
vehicle for breaking the works in to smaller elements, thus providing a greater responsibility that
every major and minor activity are well accounted for their implementation. Usually, the project
manager is responsible for structuring a project into several components. The level of the smaller
components should be such that each of which should be:
 Manageable so that specific authority, and responsibility can be assigned
 Independent so that there happens to be minimum interfacing with and dependence on
other ongoing elements
 Integral so that the total package can be seen, and
 Measureable in terms of progress
2.7.1 Advantages/ Uses of WBS

The WBS provides a common framework for work from which the following import ant aspects can
be covered:
 Planning can be performed
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 Costs and budgets can be established

 Risk analysis can be done
 Control and contract administration can be done
 Schedules can be established
 Network analysis can be clone
 Responsibility matrix can be established
 Coordination can be established
 When summed up, the total program can be described.
2.7.2 Role of WBS

 Partition of project into smaller component to improve the accuracy of cost estimate
 Provide a mechanism for collecting and organizing actual costs
 Provide a mechanism for performance measurement and control
 Each activities in WBS is a self-contained unit for which responsibility can be assigned to
a person or group for effective management
2.7.3 Levels of WBS

Although a variety of Work Breakdown Structures exist, the most common is the six-level structure
as shown below:
 Total program
 Project
 Task (activity)
 Sub-task
 Work package
 Level of effort
Level 1 is the total program and is composed of a set of projects. The summation of the activities and
costs associated with each project must equal he total program. Each project, however, can be broken
down into tasks, where summation of all tasks equals the summation of all projects, which, in turn,
comprises the total program. The reason for this subdivision of effort is simply ease of control.
The upper three levels of the WBS are normally specified by the project management office
(customer), white the lower levels are generated by the contractor for in-house control. Each level
serves a vital purpose: level 1 is generally used for the authorization and release of all work, budgets
are prepared at level 2, and schedules arc prepared at level 3.
2.7.4 Characteristics of WBS can be generalized as follow:

 Top three levels of the WBS reflect integrated efforts and not department specific.
 The summation of all elements in one level must be the sum of all work in the next lower
level.
 Each element of work should be assigned to one and only one level of effort. For example,
the construction of the foundation of a house should be included in one project (or task),
not extended over two or three.
 The WBS must be accompanied by a description of the scope of effort required. If not,
only those individuals who issue the WBS will have a complete understanding of what
work has to be accomplished.
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Fig 2.1: A typical WBS of a Project
Fig 2.2: A typical WBS of a Building Project
2.7.5 Preparation of WBS

In setting up the WBS, tasks should:
 Have clearly defined start and end dates.
 Be usable as a communications tool in which
results can be compared with expectations.
 Be estimated on a “total” time duration, not when
the task must start or end.
 Be structured so that a minimum of project office
control and documentation (i.e., forms) is
necessary.
For large projects, planning will be time-phased at the work
package level of the WBS. The work package has the following characteristics:
 Represents unit of work at the level where the work is performed.
 Clearly distinguishes one work package from all others assigned to single functional
group.
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 Contains clearly defined start and end dates that are representative of physical
accomplishment.
 Specifies a budget in terms of dollars, man-hours, or other measurable units.
 Limits the work to be performed to relatively short periods of time to minimize the work-
in-process effort.
The preparation of the work breakdown structure is not easy. The WBS is a communication tool,
providing detailed information to different levels of management. If it does not contain enough levels,
then the integration of activities may prove difficult. If too many level of exist, then unproductive
time will be made to have the same number of levels for all projects, tasks, and so on. Each major
work element should be considered by itself. Remember, the WBS establishes the number of required
networks for cost control.
2.7.6 Criteria for developing WBS

 The WBS and work description should be easy to understand.
 All schedules should follow the WBS.
 No attempt should be made to sub-divide work arbitrarily to the lower possible level.
 Since scope of effort can change during a program, every effort should be made to
maintain flexibility in the WBS.
 The WBS can act as tangible milestones.
 The level of the WBS can reflect the “trust” you have in certain line groups.
 The WBS can be used to segregate recurring from non-recurring costs.
 Most WBS elements (at the lowest control level) range from 0.5 to 2% of the total budget.
2.7.7 Tree diagram for WBS

On simple projects, the WBS can also be constructed as a “tree diagram”. The tree diagram can
follow the work or even the organizational structure of the company (i.e. division, department,
section, and unit). In the tree method, lower-level functional units may be assigned to one and only
one work element.
Fig: 2.4 WBS of Banquet Fig: 2.5 WBS of Building
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Fig: 2.6 WBS of Hospital Project
2.8 Scheduling
Projects are growing increasingly complex and costly; therefore attention must be paid to the
control of both time and cost. Improved management and scheduling of projects are imperative
(authoritative/commanding) to the success of any project, particularly large scales one.
Therefore, it is necessary to schedule a project by using proper techniques. A schedule is defined
as “time phased” plan for performing the work necessary to complete the project. A schedule is
graphical representation, which shows the starting, and completion dates of each activity and the
sequential relationship among the various activities.
In another words it is the process of arranging various activities and allotting time to each of
them so that the project may be completed in an orderly manner and in the specified time. It is
concerned with the techniques that can be employed to manage the activities that need to be
undertaken during the development of a project.
2.8.1 Use of scheduling

Following are the use of scheduling
 The quantity of work involved, labor, material, equipment and money required at each
stage of work can be determined by scheduling
 The actual progress of the work can be checked from time to time by scheduling
 The project can be carried out in systematic manner by the use of scheduling
2.8.2 Advantages of scheduling

 By studying the schedule of work, alternative methods of execution can be examined and
the most economical method can be selected. Further, the effect of likely constraints can
be evaluated at the planning stage.
 It gives clear picture of quantity and type of materials, manpower, machines at different
stages of construction
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 As the time of starting of an activity is known, the arrangements of adequate resources can
be in advance
 The resource utilization can be optimized
 The actual progress of each activity can be evaluated with reference to planned program
 Inter-relationship between the activities is known hence their priorities can be set up
 Application of value engineering can be adopted
2.8.3 Scheduling Techniques

 Bar Chart
 Milestone Chart
 Linked Bar chart
 Network Techniques
 CPM
 PERT
2.8.3.1 Gantt Chart/Bar Chart

The oldest formal planning tool is the bar chart. It is developed as a production control tool in
1917 by Henry L. Gantt, an American mechanical engineer, hence also called Gantt chart in his
respect. A Gantt chart provides a graphical illustration of a schedule that helps to plan, coordi-
nate, and track specific tasks in a project. A Gantt chart is constructed with a horizontal axis rep-
resenting the total time span of the project, broken down into increments (for example, days,
weeks, or months) and a vertical axis representing the tasks that make up the project (for exam-
ple, if the project is outfitting your computer with new software, the major tasks involved might
be; conduct research, choose software, install software).
Horizontal bars of varying lengths represent the sequences, timing, and time span for each task.
As the project progresses, secondary bars, arrowheads, or darkened bars may be added to indi-
cate completed tasks, or the portions of tasks that have been completed. A vertical line is used to
represent the report date.
Steps in Preparing Bar Chart

The following are the important steps in developing a bar chart.
1. Identify different activities within the work: Prepare Work Breakdown Structure i.e.
breakdown the project into its various activities or jobs or each operations, each representing
manageable units for planning and control.
2. Estimate time required to complete each activity: Based on resource availability, historical
data, experience and expert opinions, estimate the time required to complete each activity.
3. Develop logical sequence between activities: Activities should be performed or completed
in a definite sequence. So, decide the sequence in which the activities are to be performed.
4. Develop a bar chart: Represent the above information in the Bar chart, indicating the
relative positions of each activity.
How to draw a Bar Chart?

 Listing of work activities
 Estimation of work duration
 Identifying start and completion date in calendar format
 Drawing each activity as a horizontal bar in chronological order according to its start date.
Sample of a Bar Chart
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Fig: 2.7 WBS of Hospital Project
Advantages of Bar chart:

The advantages of Bar chart are:
1. It is simple to understand: Even a person with little education can understand the concept
quite easily. This may be the reason that bar chart is popular in every sector.
2. It is easy to prepare, consume less resources and economical. No sophisticated tools and
special knowledge is not required to prepare the bar chart hence it is easy and economical.
3. It can be used to show progress. Simple “fill in the bar” method is used to show how much of
the project was complete. It can also be shown by the planned bar alongside the progress bar
like.
4. It can be used for resource planning such as manpower planning, budgeting etc.
5. It gives clear pictorial model of the project.
Disadvantages/Limitation of Bar Chart

The Bar chart suffers from some disadvantages which limits its usefulness:
1. There may be physical limit to the size of the bar chart, which may limit the size of the project
that can be planned with this technique or only major activities are shown. Hence, it is not useful
for large and complex projects.
2. There are some activities of a project which are taken up concurrently, while there are others
which can be taken up only after completion of some other activities. Similarly some activities
can be started few days after the other activity starts. The activities whose start and end depend
on other activities are shown serially. In a project, there may be large number of activities which
can start with certain degree of concurrency. By merely depicting them parallel, interrelationship
between them cannot be clearly depicted.
3. Each activity receives equal importance due to the lack of special indication in the chart. Thus
in bar chart, long duration activity may appear most important ones which may not be true. In
building construction, plastering work, may take long time but concreting may be completed in a
single day and concreting is more important activity.
4. It cannot be used as control device for large projects.
5. It is difficult to show critical path, critical activities and floats available.
6. Data is hard to manipulate i.e. it cannot easily cope with frequent changes or updating. The
bar chart is a static representation of the planned activities and does not respond to the dynamic
happening on the construction site of the complex project.
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7. Updating means drawing the entire chart again and again.
2.8.3.2 Milestone Chart

To overcome some of the limitations of Bar chart, Milestone Chart and Linked bar charts are de-
veloped. Milestone chart is a modification over the original Gantt chart (bar chart). Milestones
are the key events i.e. start or end of the activity. A Chart that graphically depicts key events
along a timescale, usually with triangles representing each event, is called milestone chart. It can
mark specific points in the project where checks can be made to see if the project is on time and
where it should be. The best place to locate milestones is at the completion of a major activity.
For a building construction, there are various activities but milestones may be considered as lay-
ing foundation stone, concreting, inauguration etc.
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Fig: 2.8 Milestone Chart
Fig: 2.9 Milestone Chart
2.8.3.3 Linked Bar Chart

One of the main drawbacks of simple bar chart is that it does not show the interrelationship be-
tween activities. The links between tasks are the heart of project scheduling. Linked bar chart
uses the links (arrow) to show the relationship between activities. There are mainly four types of
relationship between activities.
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Finish to Start
Finish to Start is a logical relationship in which a successor
activity cannot start until a predecessor activity has finished.
In simple words we can say that, the start of a successor ac-
tivity is dependent on finish of the predecessor activity.
Finish to Start relationship is the most common among four
logical relationships. Almost any project dependency can be defined by using FS relationship.
Let us consider two activities A and B.
Duration of A – 3 days
Duration of B – 1 day
B has a Finish to Start relationship with A. B cannot start until A
finishes
An example; a watchman is hired to take care of a building during nights and the manager tells
him that his activity can't finish until the building administrator comes in the morning. The arriv-
ing time can vary every day but the watchman cannot finish his activity until the administrator
comes and starts working.
Start to Start
Activity B must start when activity A starts. In simple
words we can say that, the start of a successor activity is
dependent on start of the predecessor activity. If one of
the activities starts other is automatically started. The
most common and most natural relationship is Finish to Start (FS). Start to Start relationship is
sometimes used. The project managers have some flexibility while defining the relationship be-
tween two activities. Usually it is possible for them to transform a SS relationship to a FS rela-
tionship.
 Duration of A – 3 days
 Duration of B – 1 day
 B has a Start to Start relationship with A. B cannot
start until A starts.
In the above example, the Project Team will need a total of
3 days to complete these activities.
Fig 2.11: Bar chart representation
Start to Finish
Start to Finish is a logical relationship in which a suc-
cessor activity cannot finish until a predecessor activi-
ty has started. In simple words we can say that,
the finish of a successor activity is dependent on start
of the predecessor activity.
The most common and natural relationship is Finish to
Start (FS). Some authors (incorrectly) claim that FS
and SF are essentially same. However, it is not true.
Even though it is mathematically possible to transform
SF to FS to achieve the same result, one should not
modify and interfere with natural logic. In real world,
SF is very rarely used.
Fig 2.12: Bar chart representation
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 B has a SF relationship with A
 B’s Finish is dependent on A’s Start. B can Finish (F) as soon as A Starts (S).
In the above example, the project team would need a total of 4 days to complete these activities.
Finish to Finish
Finish to Finish is a logical relationship in which a suc-
cessor activity cannot finish until a predecessor activity
has finished. In simple words we can say that, the finish
of a successor activity is dependent on finish of the pre-
decessor activity. Most project management authors treat
above definition of FF Relationship as standard. Howev-
er, some scheduling software treats FF relationship slight-
ly differently. They treat FF Relationship as “must finish
together” relationship. So, if one of the activities starts oth-
er is automatically started.
The most common and most natural relationship is Finish
to Start (FS). Finish to Finish Relationship is not widely
used. The project managers have some flexibility while de-
fining the relationship between two activities. Usually it is
possible for them to transform a FF Relationship to a FS
relationship.
Let us consider two activities A and B. Fig 2.13: Bar chart representation
 B has a Finish to Finish relationship with A. B cannot finish until A finishes.
In the above example, the Project Team will need a total of 3 days to complete these activities.
2.9 Network Techniques

It is one of the efficient modern tools for planning and scheduling in project management. In a com-
plex projects, there involves large number of activities, hence project scheduling becomes almost im-
possible with the use of conventional method of scheduling like bar charts. Complex projects, if not
correctly scheduled, will most probably result in either under estimation or over estimation of the pro-
ject implementation period. Both of the estimation will have serious consequences in any project. If
the project completion time is underestimated, the actual implementation period will be more than the
estimated period of time resulting in ‘time overrun’ and ultimately leads to cost overrun of the pro-
ject. If the additional cost due to cost overrun is not made available in time, the project completion
will suffer a setback. Network based scheduling of projects come handy in solving complex projects
scheduling problems. There are two popular network based scheduling techniques.
a) Critical Path Method - CPM developed in the year 1957 by Morgan R. Walker of DU Pont and
James E. Kelly of .Remington Rand for preparing shutdown schedule of a chemical plant.
b) Program Evaluation and Review Technique - PERT, developed by US Navy in 1958 for sched-
uling Polaris Missile Project. Though the two methods are conceptually similar except for certain mi-
nor differences, they were developed independently in USA.
Terminologies used in Network Technique

1. Activity (Task): An activity is any identifiable job which requires time, manpower, material, and
other resources to complete. It means the performance of the specific task of project. Arrow in a net-
work diagram represents activity. The following are the examples of activity for a building construc-
tion project.
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 Layout
 Excavation of foundation
 Construction of wall
 Concreting
 Construction of roofing
 Wiring and electrification
 Plastering and painting work
Relationship between activities:

A project is a collection of various activities and those activities are interrelated among themselves.
There are three possible relationships between different activities:
Concurrent (Parallel) Activities: Those activities which can be performed simultaneously and
independently to each other are known as concurrent
activities. In figure below activities A and B are
parallel.
Serial Activities: Those activities which are to be
performed one after the other, in succession are
known as serial activities. Serial activities cannot be
performed independently. In the figure below con-
struction of wall and plastering are serial activities.
Predecessor of B Successor of A
1 2 3
A - Wall construction B - Plastering
In the above figure, activity A i.e. construction of wall is preceding activity (Predecessor) of activity
B i.e. Plastering, or, we can say that Construction of wall (B) is succeeding activity (Successor) of
Earthwork in excavation (A). This means activity A must be completed to start activity B.
For a given activity, the activity that occurs immediately before it is its predecessor whereas for a
given activity, the activity that follows immediately after it, is its successor.
2. Activity Duration: An activity’s duration is the amount of time estimated for its completion. The
time unit for the project can be minutes, hours, work days, calendar days, weeks or months. Most
construction schedule commonly use durations of work days or calendar days. The use of the time
units expressed should be consistent throughout the schedule.
Activity duration = Work quantity / Production rate
The accuracy of duration estimates depends on many factors:
 Methods of construction,
 Resource availability,
 Work quantity,
 Nature or complexity of work,
 Labor and equipment productivity,
 Quality of field management,
 Weather and Site conditions,
 Concurrent activities.
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3. Event (Node):
The beginning or end of the activity is as event. It represents specific point in time and does not
consume time, manpower, material and other resources.
Two conventions can be used for developing networks are: Activity on Arrow (AOA) and Activi-
ty on Node (AON).
A) Activity on Arrow (AOA): Under this convention the following rules apply.
 Activity is represented by a straight arrow with circles at both ends. The direction of the arrow
indicates the direction of flow of the project. Unlike bar chart, length of arrow does not
represent the duration of the activity.
 Events are represented by the circle. The circle at the beginning of the activity (event) is
known as tail event/burst event where as circle at the end of the activity (event) is known as
head event/merge event. Event is symbolically represented by numbers or alphabets written
inside the circle. In a network, some events work as head event for an activity and tail event of
another activity. Such events are known as Dual Role Event.
Generally, the name of the activity (Or symbol of the activity is) is indicated above the arrow while
the duration of the activity is indicated below the arrow.
Earthwork in Excavation Construction of wall

1 2 3
12 days
Event 1 is the tail event of Activity — Earthwork in excavation
Event 2 is the head event of activity — Earthwork in excavation as well as tail event of activity - con-
struction of wall. Hence event 2 is dual role event,
Event 3 is the head event of activity — construction of wall
4. Dummy activity: A dummy activity is an imaginary (hypothetical) activity included in a network.

Since it is not a real activity, it does not consume time, manpower, material and other resources. It is
included in a network to maintain the relationship between activities appropriately. It is represented
by dotted arrow. Dummies serve two purposes in a network.
a) Grammatical purpose
It is used to prevent two arrows having common beginning
and end nodes for two or more activities. For example,
consider the arrows of activities A and B; both starts from
node 1 and end at node 2. Due to this an inconvenience re-
sults when the network is used for computation, i.e.,
uniqueness in the identification is lost. This inconvenience
frequently leads to mistake
b) Logical purpose
Dummies are also used to give logical clear
representations in a network having an activity
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common to two sets of operations running parallel to each other.
A - Wait delivery of new machine

B – Install new machine
C – Remove existing machine
D - Dispose of existing machine
Set I activity A and B are to be performed serially while Set 2 activities C and D are to be performed
serially. Both the sets are performed simultaneously. However, for practical considerations, we find
that activity D of set 2 cannot be performed unless activity A of set 1 is completed. Hence a dummy
is used joining node 5 and 7 indicating that activity D cannot be started unless activity A is complet-
ed.
(Note: Unnecessary dummies makes network messy and creates confusion)
5. Rules of Drawing Network diagram

The process of constructing network consists of following:
a. All activities shall be represented by way of’ straight arrows
pointing from left towards the right. This means flow of net-
work shall be from the left to the right.
b. There must be only single initial node (tail event) as well
as ending node (head event) in a network. Initial node has
only outgoing arrows, whereas ending node has incoming
arrows.
c. An event cannot occur more than once, i.e. there cannot be
any network path looping back to previously occurred
event. Thus network shown in figure below is incorrect.
d. There shall not be any crisscrossing of arrows. Fig. below shows a network in which two ar-
rows cross each other, which is not permitted.
The network following the same logic can be drawn as below.
e. There should be only one arrow for an activity, i.e.
umber of arrows should be equal to number of ac-
tivities.
f. There shall not be unnecessary dummy activities in
the network. Dummy activity shall be introduced
only when it is absolutely necessary and without
which the network diagram cannot be completed.
g. In short, CPM network diagram must answers the
following questions:
 What activity or activities must immediately preceed this activity?
 What activity or activities cannot be started until after the completion of this activity?
 What activity or activities can be performed concurrently with this activity?
6. Numbering the events: Though CPM networks are activity oriented, the events constitute im-
portant control points. The events should be numbered in such a way that they reflect the logical se-
quence of activities. It is essential to number the events or node points correctly. The activities join-
ing the nodes can better be identified on the network by the event numbers at the tail and head of the
activity. This can be done by following the by D.R.Fulkerson’s rule.
 Number the initial event as 1
 Neglect all the arrows emerging out of the initial event numbered 1
 Doing so will apparently provide one or more new initial events. Number these appar-
ently produced new initial events as 2, 3, 4 etc.
30 | P a g e
 Again neglect all emerging arrows from these numbered events; will create few more
initial events.
 Follow step 3 such that tail event have lower number than the head event.
 Continue this operation until the last event, which has no emerging arrows.
7. Activity time: CPM is activity oriented, CPM consist of following activity times which are useful
for network computations.
a. EST (Earliest Start Time): It is the earliest possible time an activity or operation can be
started. It is equal to earliest occurrence time of tail event of that activity.
EST = Earliest event time at its tail = (TE)i
b. EFT (Earliest Finish Time): It is the earliest possible time for completion of an activity or
operation without delaying the project completion time. It can be computed by adding activity
duration by EST.
EFT = (EST +D).
c. LFT (Latest Finish Time): It is the latest time the activity or operation must be completed so
that scheduled completion date of the work can be achieved. It is equal to latest occurrence
time of head event.
LFT = Latest event time at its head = (T L)j
d. LST (Latest Start Time): It is the latest possible time an activity can be started without de-
laying the project.
LST = (LFT-D).
B) Activity on Node (AON):

It uses circle to represent the project activities, with arrows linking them together to show the se-
quence in which they are to be performed. The main advantages of AON techniques are that it does
not require dummy activity and show EST and LST directly in the network. In AOA there can be on-
ly one type of relationship between activities i.e. Finish to Start however in AON it is possible to es-
tablish four types of relationship as mentioned in linked bar. This is also known as Precedence Dia-
gramming Method.
2.9.1 Critical Path Method (CPM)

A network represents the logical sequence of
activities contained in the project. The activities
are represented by arrows and arrows flow from
left to right. In a network, there may be many
paths starting from the initial event and leading
to the last event. If the duration of all the activi-
ties that lie on particular paths is added, it gives
the duration of the path. Each path in a network
will have a different duration. The path that has
the longest duration is called the critical path
and the activities lying on the critical path are
critical activities. It is the critical path that sets
the overall duration of the project. In a following network, there are seven activities and from event 1
to event 6 there are three paths.
Characteristics of Critical Path:

 Critical path is the longest path (time wise) connecting the initial and final events.
 Critical activity may run through dummy activity/activities also.
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 The number of activities lying on critical path may by less than the number of activities in
other non-critical activities.
 It is possible that a network may have more than one critical path i.e. if two or more paths
have the same time duration which is maximum, then all such paths will be critical paths.
Finding Critical Path

The method of finding out the number of paths available in a given network connecting the initial and
final events, finding the time duration of all the available paths and identifying the critical paths is
suitable for small networks. If the network is relatively larger in size, there will be larger number of
paths available connecting the initial and final events. In such cases, it would be cumbersome to find
out all the possible paths. Hence in the case of large networks, a more systematic procedure is fol-
lowed to identify the critical path. The method uses two series of computations viz., Forward pass
computation and Backward pass computation.
Forward pass computation:

 In the forward pass calculation, all activities in the network are assumed to start as early as
possible.
 The calculation begins from the left to the right side of the network.
 When two or more activities merge into an event, the largest value is taken as an earliest oc-
currence time of that event.
 Forward pass calculation gives the EST and EFT of each activity.
Backward pass computation:

 In the backward pass calculation, all activities in the network are assumed to start as late as
possible.
 The calculation begins from the right to the left side of the network.
 When two or more activity merges at a node, the smallest value is taken as a
latest occurrence time of that event.
 Backward pass calculation gives the LST and LFT of each activity.
What does the critical path signify?

In the network, activities A, C, E and G are critical
activities. Since the two time estimates of all the
critical activities are same, it means that succeeding
activity in a critical path shall commence immediate-
ly after preceding activity is completed so that pro-
ject will be completed in time (19 days). Activity G
shall start immediately after activity E is completed;
activity E shall start immediately after activity C is
completed; Activity C shall start immediately after activity A is completed. If there is any delay in
either starting a critical activity or if time taken to complete the critical activity exceeds the estimated
time, project implementation period will get extended. Thus it is obvious that only the critical activi-
ties get more attention from the management. Any delay in critical activities lead to time overrun of
the project which ultimately results in cost overrun. All paths in the network other than critical path
are called non critical path. A non-critical path may have only non-critical activities or a combination
of both critical and non-critical activities.
Activity Float Analysis:

Floats means the available free time for an activity, which is useful for managers to manage the lim-
ited resources. There are four types of activity floats (slacks) in network problem. A detailed study of
non-critical activities with regard to the ‘free time’ available is worth doing since it will help in better
32 | P a g e
control of the project implementation and better allocation of resources. This study is known as activ-
ity float analysis.
a. Total Float (TF): Total float represents the maximum time by which the completion of the ac-
tivity can be delayed without affecting the project completion time. If an activity is delayed by a
time equal to its total float, that activity and all other subsequent activities in that path become
critical. Mathematically, TF of an activity = LST-EST or LFT – EFT
b. Free Float (FF): it is the delay that can be permitted i.e. the spare time allowable
for an activity so that succeeding activities in the path arc not affected. If the succeeding activities
are to remain un-affected by the delay in a particular activity the earliest start Time of the head
event of that activity shall not be exceeded. Mathematically, FF of an activity = EST of succeed-
ing activity - EFT of that activity
c. Independent Float (IF): It is the spare time available for the activity, if preceding
activity is started as late as possible and succeeding activities are finished as early as possible. It
is maximum delay allowable for an activity so that the start time of succeeding activities are not
affected. It may come negative (super critical activities) but should be taken as zero. Mathemati-
cally, IF of an activity = EST of succeeding activity - LFT of that activity
d. Interfering Float (IF1): It is the name given to head event slack. It is the difference between
total float and free float. It is the excess of minimum available time over activity time. All the
floats are equal to zero for critical activities. Critical path is that path connecting activities having
Total Float equal to zero.
Use of different floats for management decisions

a. Total float belongs to the path. If the total float is used entirely for an activity, it would make
that activity and all other activities in that path critical. Hence it is not advisable to use the total
float completely in an activity as there will be no cushion available if subsequent activities need
additional time for completion than originally as planned.
b. Free float can be used completely for the activity since this does not disturb the succeeding ac-
tivities. However the preceding activity should have been completed as planned.
c. Independent float of an activity does not depend on preceding activities and it also does not dis-
turb succeeding activities. Hence independent float can be used without any constraint.
Steps in Critical Path Analysis

 Develop a list of tasks using work breakdown structure.
 Order and determine immediate predecessor for each task
 Estimate completion time for tasks.
 Layout a project network using tasks and their predecessors.
 Determine earliest start and finishing times using a forward pass through the network.
Equations: forward pass EST of the activity is early occurrence time of tail event and EFT =
EST + D
 Determine the latest start and finish times for each task. LFT is equal to the latest occurrence
time of the head event and LST= LFT - D.
 Determine slack/float for each task using difference between latest and earliest start times.
 Find tasks with zero slack. These are critical tasks lying on the critical path.
Computing the forward pass from left hand side to right hand side i.e. from tail event to the head
event. We have to add the given duration (t ij) to compute the forward pass. This will give the earliest
start time (EST) of an activity. The higher values will the taken while computing forward pass. Simi-
33 | P a g e
larly, the backward pass is computed from head event towards tail event. The lowest value is taken to
compute LST.
Advantages of the Critical Path Method

There many pros of using the critical path method during project planning and execution. The critical
path method:
 Makes dependencies visible between the project activities; this is done by constructing pro-
ject network diagrams or precedence diagrams
 Organizes large and complex projects, hence allowing a more systematic approach to pro-
ject planning and scheduling, project execution, and risk management
 Enables the calculation of the float (slack) of each activity. The float tells you exactly how
long an activity can come in late without it impacting the project schedule
 Encourages the Project Manager to reduce the project duration by optimizing the critical
path and using compression techniques as applicable
 Increases visibility of impact of schedule revisions, which are usually necessary when ma-
jor milestones have been missed or when the risk of missing a major milestone appears large
 Enables the Project Manager to optimize efficiency by allocating resources appropriately,
consequently the overall cost can be reduced
 Provides opportunities to schedule by identifying the activities that are most
critical
For large and complex projects, it is best to use specialized software like MS-Project and Primavera.
This software generates data, such as activity float, automatically for you. Next, let’s take a look at
some Critical Path Method disadvantages.
Disadvantages of Critical Path Method

There aren’t many disadvantages to Critical Path Method. Mentioned below are the cons of Critical
Path Method.
 For large and complex projects, there’ll be thousands of activities and dependency rela-
tionships. Without software it can be mighty difficult managing this. To make matters worse,
if the plan changes during project execution then the precedence diagram will have to be re-
drawn. Fortunately, we do have relatively cheap software that can handle this with ease.
 One of the advantages of drawing a project precedence diagram is that you can print and stick
in the project area. The precedence diagram enables the team to stay focused on project activi-
ties. Project team members are always conscious of the critical path since it is visible every
day. However, for large projects with thousands of activities, it may be difficult to print
the project network diagram. You would most definitely need a plotter.
 The Critical Path Method does not account for resource and resource allocation. Critical
Chain will be handy in these situations.
2.9.2 Introduction to Program Evaluation and Review Technique (PERT)

Project manager would be interested in completing the project at the minimum possible time but it is
not entirely in his/her hand to do so. There are many factors, both internal and external to the organi-
zations which have influence on the completion time of each activity in the project. It is a probabilis-
tic approach for estimating the duration of an activity and event oriented network diagram. PERT is
used in the completely newly developed project such as Research and design, new industries product
design and there may not be record of past experiences in the particular field. PERT system is pre-
ferred for those projects in which correct time determination for various activities cannot be made.
PERT uses three time estimates for each activity with a view to overcome uncertainty in time esti-
mates,
34 | P a g e
a. Optimistic time Estimate (to): It is the shortest possible time in which an activity can be com-
pleted under ideal conditions. In arriving at the optimistic time estimate, it is assumed that every-
thing is favorable in completing the activity in the shortest possible time.
b. Pessimistic time estimate (tp): It is the maximum possible time it would take to complete an
activity under worst conditions. In arriving at the pessimistic time, it is assumed that everything is
unfavorable for completing the activity in time and every possible delay and difficult situation is
encountered.
c. Most likely time estimates (tm): It lies between optimistic and pessimistic time estimates. It is
the time in which an activity can be completed under normal conditions. In arriving at the most
likely time, it is assumed that conditions are neither favorable nor unfavorable, but normal.
Expected time estimate (te): PERT assumes that the optimistic time (t o) and the pessimistic time (t p)
are equally likely to occur while the most likely time (t m) is four times more likely to occur than the
others. Hence for arriving at the expected time (te) we use following formula
𝑡𝑜 + 4𝑡𝑚 + 𝑡𝑝
𝑡𝑒 =
6
To arrive at this formula we must assume some functional form of the activity time as shown in the
figure below. It was observed that beta distribution suits well for the purpose and hence same was
accepted as a mathematical model for arriving at the mean (te). The formula is a linear approximation
of beta distribution whose accuracy is considered reasonably sufficient.
After having arrived at the expected time (t e) for each activity, the critical path is found out by mak-
ing forward pass computation and backward pass computation as in CPM. Variance in activity times:
Consider the following two time estimates.
For the activities A & B the ex-

pected time arrived at is the same.
However as seen, the difference be-
tween to and tp is more for activity B
than for activity A. Thus, though the
estimated expected time (t e) is the
same for both the activities, there is
greater extent of uncertainty in the same estimate for activity B. Thus the reliability of the expected
time (te) depend upon the variability of two time estimates to and tp,
There are two measures of variability of possible activity times viz.
1. Variance and
2. Standard deviation.
PERT uses the following simplified
formula for arriving at the variance
and standard deviation of activity
times. PERT is more of an event-
oriented technique rather than start
and completion oriented, and is
used more in projects where time,
rather than cost, is the major factor.
It is applied to very large-scale,
one-time, complex, non-routine in-
frastructure and Research and De-
velopment projects.
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Difference between CPM and PERT

CPM originated from construction project whereas PERT is originated from Research & Develop-
ment projects. Both CPM and PERT share same approach for constructing the project network and
for determining the critical path of the network. However there are some basic differences between
CPM and PERT.
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Unit 3
Risk Analysis & Management (5 Hrs)
3.1 Introduction to Project Risk

Every project is risky, meaning there is a chance things won’t turn out exactly as planned. Project
outcomes are determined by many things, some that are unpredictable and over which project
managers have little control. Risk level is associated with the certainty level about technical, schedule
and cost outcomes. High certainty outcomes have low-risk; low- certainty outcomes have high risks.
Certainty derives from knowledge and experience gained in prior projects, as well as from
management’s ability to control project outcomes and respond to control project outcomes. Risk is a
combination of the probability of a negative event and its consequences. If an event is inevitable but
inconsequential, it does not represent a risk, because it has no impact. Alternatively, an improbable
event with significant consequences may not be a high risk. These two factors are combined in what
we experience as the possibility of loss, failure, danger, or peril.
Project Risk = ∑ (Events * Probabilities * Consequences)
Project risk is an uncertain event or condition that, if it occurs, has a positive or a negative effect on a
project objective. A risk has a cause mid, if it occurs, a consequence. Risk means uncertainty and the
results of uncertainty. Risk refers to a lack of predictability about problem structure, outcomes or
consequences in a decision or planning situation. Project risk includes both threats to the project’s
objectives and opportunities to improve on those objectives.
Risk management is the systematic process of planning for, identifying, analyzing, responding to, and
monitoring project risk. Project Risk Management is the art and science of identify assigning, and
responding to risk throughout the life of a project in the best interests of meeting project objectives.
It includes:
Risk identification: determining which risks are likely to affect a project
Risk qualification: evaluating risks to assess the range of possible project outcomes
Risk response development: taking steps to enhance opportunities and developing responses to threats
Risk response control: responding to risks over the course of the project
Risk management involves processes, tools, and techniques that will help the project manager
maximize the probability and consequences of positive events and minimize the probability and
consequences of adverse events. Project risk management is most effective when first performed
early in the life of the project and is a continuing responsibility throughout the project. The project
risk management process helps project sponsors and project teams to make informed decisions
regarding project alternatives. Risk management encourages the project team to take appropriate
measures to minimize adverse impacts to project scope, cost, and schedule, management by crisis.
Project Risk Management is a subset of project management that includes the processes concerned
with identifying, analyzing, and responding to project risk. It consists of risk identification, risk quan-
tification, risk response development, and risk response control. Project Risk Management is the con-
tinuous identification, reporting, analysis, prioritization, monitoring, and control of internal and ex-
ternal activities, conditions and/or events that can cause an undesirable project impact. Project Risk
Management is an independent process that reviews the health and viability of a project.
Why Do Project Risk Management?
Project Risk Management is an essential best practice that supports sound business, program man-
agement and engineering processes. Project Risk Management allows management to be PROAC-
TIVE rather than REACTIVE and enables open and honest communication among all stakeholders,
both internal and external to an organization. Project Risk Management is a continuous process that
37 | P a g e
requires a sponsor to champion the cause and a facilitator to coordinate and execute the process. Pro-
ject Risk Management must involve all members of the team and must become integral part of your
daily business and engineering activities.
Project Risk Management is the art and science of identifying, assigning, and responding to risk
throughout the life of a project and in the best interests of meeting project objectives. Project Risk
Management is often overlooked on projects, but it can help improve project success by helping se-
lect good projects, determining project scope, and developing realistic estimates. The goal of project
risk management is to minimize potential risks while maximizing potential opportunities. Project
Risk Management (PRM) is a means of improving the likelihood that a project will be completed on
time and on budget, combined with mechanisms for mitigating risks uncovered during the risk as-
sessment.
Benefits of Project Risk Management:

 Project completion date and cost are reported as probability distributions, rather than single
values, enabling the project manager to assess the likelihood of completing the project on time
and on budget;
 Major risks to the project are identified, assessed in terms of the potential impact on the pro-
ject & mitigate actions developed where necessary;
 Facilitated risk identification workshops aid in team building and communication among pro-
ject groups;
 Project Risk Management is a mean of demonstrating due diligence on the part of the project
team to the stakeholder;
 The Project Risk Management is performed by impartial third party experts.
Project Risk Management seeks to anticipate and address uncertainties that threaten the goals and
timetables of a project. The uncertainties may include questions of material and parts quality; de-
lays in delivery of sufficient materials to meet project needs, budgetary and personnel changes;
and, incomplete knowledge or research. These risks lead rapidly to delays in delivery dates and
budget overages that can severely undermine confidence in the project and in the project manager.
There are two stages in the process of Project Risk Management, Risk Assessment and Risk Con-
trol. Risk Assessment can take place at any time during the project, though the sooner the better.
However, Risk Control cannot be effective without a previous Risk Assessment. Similarly, most
people tend to think that have performed a Risk Assessment; they have done all that is needed.
Far too many projects spend a great deal of effort on Risk Assessment and then ignore Risk Con-
trol completely.
3.2 Nature of Project Risks

1. Nation/Region
Political situation: War revolution, civil disorders, inconsistency of government policy.
Economical and Financial Situation: GNP (Gross National Product- broad measure of a nation’s total
economic activity. It is the value of all finished goods and services produced in a country in one year
by its nation) decreases, incompatible GNP, per capita, interest rate fluctuation, Inflation rate
increasing, Currency exchange rate fluctuation, tax rate increasing.
Social Environment: Language barrier, Religious inconsistency, Culture tradition differences, insecu-
rity and crime, Pestilence (a fatal epidemic disease), Bribe and corruption, Popular in informal rela-
tionships, brotherhood.
2. Construction industry
Market fluctuations: demanding decreasing structure changes
Law and Regulations: Incompatible arbitration system planning approval and permit procedures. Im-
port/export restrictions constraints on employment and materials availabilities, monetary restrictions.
38 | P a g e
Standards and codes: inconsistencies in design/construction, differences in safety and health care,
pollutions and nuisance.
Contract system: Nonstandard contract form, difference relationship between partners, Unfamiliar
with contract conditions for claims and litigations, differences in defective liabilities, special local
requirements.
3. Company
Employer/Owner: Unclear requirements, funding shortages, disadvantaged contracts
Architect: Unclear detail design or specifications, unfamiliar local standards and codes, Lack of inter-
action with construction method
Labor and Sub contractors: Direct labor disturbances, unfavorable sub-contractors.
4. Internal
Cash flow unbalance, Human resources shortages, affecting other projects productivity decreases.
5. Materials and Equipments

Unfavorable sub-suppliers, default supply of materials, equipment and plants.
6. Project
Defective physical works: natural force, poor design, lack of proper construction techniques, damages
by human errors, defective materials, difficulty in quality control.
Schedule delay: incomplete design, late construction site possession, bad weather, unforeseen ground
conditions, disturbances in labor, materials supplying, inefficient communications/ coordination’s
Cost overruns: unclear boundaries of works, inaccurate estimation, inadequate insurances, la-
bor/materials/price fluctuations.
7. Force Majeure
Earthquake, fire, flood, bad weather and other events which are very difficult to predict termed as
force majeure.
3.3 Types of Project Risk
Of course, every project is differ-
ent and it is not possible to com-
pile an exhaustive list of risks or
to rank them in order of priority.
What is a major risk for one pro-
ject may be quite minor for anoth-
er. In a vacuum, one can just dis-
cuss the risks that are common to
most projects and possible ave-
nues (ways) for minimizing them.
However, it is helpful to catego-
rize the risks in construction site
within which they may arise:
a) Acts of God
 Flood
 Earthquake
 Landslide
 Fire
 Wind damage
b) Physical
 Damage to structure
39 | P a g e
 Damage to equipment
 Labor injuries
 Fire
 Theft
c) Financial and economic
 Inflation
 Availability of funds
 Exchange rate fluctuations
 Financial default
d) Political and environment
 Changes in laws and regulations
 Requirement for permits
 Law and order
 Pollution and safety rules
e) Design and
 Incomplete design scope
 Defective design
 Errors and omissions
 Inadequate specifications
f) Construction related
 Labor disputes
 Labor productivity
 Different site conditions
 Design changes
 Equipment failure
3.4 Analysis of major source of risk

A typical project is always associated with risks. It is important to understand the source of project
before identifying and analysis of risk because it is easier for a project team to realize the root of the
problem before solving it. There are seven main sources of project risk. Those sources include:
1. Change in project scope and requirements

 As a project progresses, a project team may later find that a planned project scope and re-
quirements need to be revised due to changes in user requirements, more information gath-
ered, and technical feasibility.
 As the project needs to be revised according to new scope and requirements, the impacts are
typically in form of inefficiency, disruption, delay and increased cost.
 For example, if the client adds additional system to the project, the project team needs to at
least conduct feasibility of the project. This source of project risk often occurs in later stage of
the project.
2. Design errors and omissions

 In any project, it is possible that someone does unintentional errors or omits to implement the
project as planned.
 Due to the complex of the project and tight time frame, a project team may misunderstand due
to ineffective communication.
 The examples of this source of risk are deficiency document, improperly sized equipment, de-
sign calculation errors. Therefore, the impact includes delay of the project additional costs.
40 | P a g e
3. Inadequately defined roles and responsibilities

 This source of project risk is deemed a common source typical project because of changes in
project management structure and ambiguous roles and responsibility.
 Inadequately defined roles and responsibilities can cause substantial and various project risks
at any stage from the starting of the project to the ending of the project.
 The noticeable examples of this source of risk are ineffective project communication, different
expectation, and common direction. The impact includes overall inefficiency, disruption and
delay.
4. Inaccurate cost and schedule estimates

 This source of risk results from ineffective project planning at the early stage of the project.
 If the cost and schedule of the project are not accurately planned and estimated, the entire pro-
ject will be in the wrong direction and many issues will be escalated.
 In addition, objectives and priorities must be clearly defined. As attempt to execute a project
with uncertainty about objectives and priorities is complete waste of time and resources.
 The example of risk resulting from inaccurate cost and schedule estimates includes incorrect
from project timeline and budget.
 The impact includes poor coordination, ineffective use of resources, delay of the project and
increased project cost.
5. Insufficient skilled staff

 A manager must ensure that a project team has enough skilled staff to execute the project ac-
cording to its objectives.
 Lack of skilled staff potentially causes many problems in foreseeable future.
 This source of risk significantly affects the project at the implementation stage since this stage
requires considerable technical knowledge, effective project management expertise and prob-
lem solving skill.
 The impact of this source of risk is in the form of inefficiency as work cannot be completed
according to the schedule.
6. Force majeure
 This is the source of risk that is uncontrollable. Force majeure includes Acts of God, insurrec-
tion or civil disorder, war or military operations, national or local emergency, acts or omis-
sions of Government or any competent authority, industrial disputes of any kind, fire, light-
ning, explosion, flood, subsidence, and inclement weather.
 All of these will adversely affect that project. In worst case, the impact is the complete stop-
page of work.
7. New technology
 New technology often plays an important role in risk analysis, since it can force project team
to change the strategy of the project or revise technology used in the project.
 New and unproven technology is a major concern in the project since it is hard for a project
team to predict potential risks. The impact of this source of risk includes significantly in-
creased project costs and time.
3.5 Management of Project Risk

A systematic approach to control the level of risk to mitigate its effects. Risk management is the sys-
tematic application of the risk management processes on a project. The processes consist of risk man-
agement planning, identification, analysis, responding, and monitoring & control. The objective of
risk management is to maximize the probability and impact of positive events and minimize the prob-
ability and consequences of events adverse to project objectives.
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The processes of risk management are updated throughout the project life. It involves following steps:
1. Risk Management Planning

As part of work plan development, project development team (PDT) members assign project team
members to create a project risk management plan. At this point, the assigned project team members
begin to create the risk management plan. The risk management plan identifies and establishes ¡n the
project plan the activities of risk management for the project. To prepare the risk management plan,
the assigned project team members use a spreadsheet that shows the risks and responses in an abbre-
viated form.
2. Risk identification
Risk identification involves identifying potential project risks and documenting their characteristics.
Risk identification results in a deliverable the project risk list. The assigned team members identify
the potential risks and opportunities, using:
 The sample risk list
 Their own knowledge of the project
 Consultation with others who have significant knowledge of the project or its environment
The team considers:
 Risks - what might go wrong
 Opportunities - better methods of achieving the project’s purpose and need
 Triggers - symptoms and warning signs that indicate whether each risk is likely to occur
3. Qualitative and Quantitative Risk Analysis

Qualitative risk analysis assesses the importance of the identified risks and develops prioritized lists
of these risks for further analysis or direct mitigation. The team assesses each identified risk for its
probability of occurring and its impact on project objectives. Team members sort the identified risks
into high, moderate, and low risk categories for each project objective (time, cost, scope).
Quantitative risk analysis is a way of numerically estimating the probability that a project will meet
its cost and time objectives. Quantitative analysis is based on a simultaneous evaluation of impact of
all identified and quantified risks. Quantitative risk analysis involves statistical techniques that are
most easily used with specialized software.
4. Risk Response Planning

Risk response planning focuses on the high-risk items evaluated in the qualitative and/or quantitative
risk analysis. It identifies and assigns parties to take responsibility for each risk response. This pro-
cess ensures that each risk requiring a response has an owner. The project manager identifies which
strategy is best for each risk, and then designs specific actions to implement that strategy. These strat-
egies and actions include:
Elimination: The team changes the project plan to eliminate the risk or to protect the project objec-
tives from its impact. The team might achieve this by changing scope, adding time, or adding re-
sources. Risk elimination practices
 Tendering a high bid
 Placing conditions on the bid
 Pre-contract negotiations as to which party takes certain risks
 Not bidding on the high risk portion of the contract
Transfer: The team transfers the financial impact of risk by contracting out some aspect of the work.
Transference reduces the risk only if the contractor is more capable of taking steps to reduce the risk
and does so.
 Two basic forms
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a) The activity responsible for the risk may be transferred, i.e. hire a subcontractor to work
on a hazardous process
b) The activity may be retained, but the financial risk transferred, i.e. methods such as insur-
ance
Retention/Acceptance: The project manager and the project team decide to accept certain risks.
They do not change the project plan to deal with a risk, or identify any response strategy other than
agreeing to address the risk if and when it occurs. Handling risks by the company who is undertaking
the project.
 Two retention methods, active and passive
 Active retention is a deliberate management strategy after a conscious evaluation of the
possible losses and costs of alternative ways of handling risks
 Passive retention occurs through negligence, ignorance or absence of decision
Reduction: The team seeks to reduce the probability or consequences of a risk event to an acceptable
threshold. They accomplish this via many different means that are specific to the project and the risk.
 Continuous effort
 Related with improvements of a company’s physical, procedural, educational, and training
devices
 Improving housekeeping, maintenance, first aid procedures and security
 Education and training within every department
5. Risk Monitoring and Control

Risk monitoring and control keeps track of the identified risks, residual risks, and new risks. It also
ensures the execution of risk response plans, and evaluates their effectiveness. Risk monitoring and
control continues for the life of the project. The list of project risks changes as the project matures,
new risks develop, or anticipated risks disappear.
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Unit 4
Construction Site Management (8 Hrs)
4.1 Construction Site Planning

Construction work involves huge amount of money, different type of human resources and time peri-
od. Also construction work is different from each other because of construction site even its design
and drawing are same. Multi stakeholder’s involvement cause different issues as their objectives are
different; hence construction work has to fulfill the objectives of all involved stakeholders. Tempo-
rary services are necessary to execute the construction work. It includes temporary offices, electricity,
telecommunication, roadways (access road), drinking water, sanitation system etc. Also, spaces
should be allocated for heavy and costly equipment in and around the site for their safety. The dis-
posal of debris generated from the work should also be taken in to due consideration.
Construction site planning (CSP) is one of the important aspects to be considered by a project engi-
neer or a supervisor. Construction site planning helps in effective and efficient execution of construc-
tion works. Construction site planning helps in minimizing the chances of wastages, deteriorations,
and losses and also minimizes the chances of accidents in construction site. Since each and every pro-
ject differs from one to another, there is not a ready-made solution for CSP. However, we can say that
construction sites are needed to be planned logically and orderly. Well-planned construction site will
have positive impact on construction cost and safety.
4.1.1 Arrangement of facilities and shops/ job layout/ construction site planning
Facility layout refers to the arrangement of machines, departments, workstations, storage areas, and
common areas within an existing or proposed facility. Before starting a construction, a job layout plan
is prepared which indicates the site arrangements to facilitate the work to proceed in a smooth and
ordinary manner. Layout decisions significantly affect how efficiently workers can do their jobs, how
fast goods can be produced, how difficult it is to automate a system, and how responsive the system
can be to changes in product or service design, product mix and demand volume. Facility Layout is
simply the way a facility is arranged in order to maximize processes that are not only efficient but
effective towards the overall organizational goal. The basic requirements of construction job mainly
man, material, machine must be controlled and placed at a site in such manner that
 Machines are placed in most advantageous position
 Materials are placed/stored near the place of their utilization
 General site circulation so manpower is orderly and their site accommodation is available
The basic objective of the layout decision is to ensure a smooth flow of work, material, people, and
information through the system.
Effective layouts also:

 Minimize material handling costs
 Utilize space efficiently
 Utilize labor efficiently
 Eliminate bottlenecks
 Facilitate communication and interaction between workers, between workers and their super-
visors, or between workers and customers
 Reduce manufacturing cycle time and customer service time
 Eliminate wasted or redundant movement
 Facilitate the entry, exit, and placement of material, products, and people
 Incorporate safety and security measures
 Promote product and service quality
 Encourage proper maintenance activities
 Provide a visual control of operations or activities
 Provide flexibility to adapt to changing conditions
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4.1.2 Factors affecting construction site planning/job layout plan

There are various factors which affects the job layout plan of a construction project. However, we can
categorize the factors as primary and secondary.
The primary factors affecting job layout are as follows:
1. Nature and type of work: nature and type of work plays a crucial role in job layout plan. Every
construction projects are unique in nature. For example, the job layout plan for the construction of the
head works in hydropower project is definitely different from the job layout plan for the construction
of building project.
2. Access to site: the access to site does facilitate the transportation of the construction materials and
equipment at minimum cost.
3. Nature of ground: for the equipment fixing and movement. We need the solid ground.
4. Temporary roads: the temporary road from the nearest road head to the site must be constructed
before starting the construction activity for the efficient transportation.
5. Construction methods: the method of construction is essential for job layout. For example job
layout in pre-cast or pre-fab needs extra casting yard where as cast in situ does not need it.
6. Construction material: if the construction materials are available naturally nearest the site, then
no need to worry for the storage otherwise the storage of construction material should be carry out in
job layout plan.
Secondary factors affecting construction site planning/ job layout are as follows:
a. Accommodation for administration and residences block
b. Medical facilities
c. Communication facilities
d. Availability of services
e. Opportunity of expansion
f. Other external factors like: political, cultural, socio economic situations
4.1.3 Factors to be considered in construction site planning/ job layout

Construction site planning is a planning of construction site to ease construction work at site, to max-
imize site safety and achieve construction economy. In planning a construction site following consid-
erations are made:
a. Access to the site
There should be an entrance to enter the site. Besides this entry/exit, there should be a track on the
site for easy and efficient movement of all site traffic with an economy of distance,
b. Storage of material
Storage for materials shall also be planned on site. All the materials stored at site should be prevented
from wastages, deteriorations and losses. Position of the materials should be planned to avoid double
handling and duplication of movement. While storing materials at site following points are to be con-
sidered;
 Cement bags should be stacked on a raised platform covering with water proofing materials.
Cement bags should be kept 30cm apart from the walls and a stack shall normally contain
about 12 bags.
 Bricks and tiles should be stacked on a leveled ground. Height of a stack should usually be 1
to 1.5m or should not exceed 2m.
 Fine and coarse aggregate should be kept on hard surface. No vegetable particles and other
materials should present there. Normal stacking size for fine and coarse aggregate is 2 x 2 x
0.5 m.
 Materials or items susceptible to fire need great care in their storing and handling.
 Spaces for storage of materials like reinforcement, pipes, wood etc. and working space for
them are also required to be worked out.
 Re-bars should be kept away from moisture to prevent rusting.
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 Materials such as lime, cement should be kept constantly moving so that the first come shall
be consumed earlier.
 Heavy items must be stacked away from trenches, soft ground or unsure support.
 Adequate precaution against fire should be provided.
 Explosives are kept in safe place.
c. Plants
Plant handling is another important aspect to be considered in construction site. Mishandling, misuse
and over use of plants should be avoided. Plants such as tower crane, concrete mixer, power bender,
circular saw, etc. are to be located in such a manner that they can cover wide area from one station. If
the construction is of capital-intensive type then workshop as well as space for spare parts storage
should also be planned accordingly.
Location of machinery and equipment:
 Equipments should be kept near the material it utilizes and as well as near the place of its use.
 For costly equipment temporary shed should be provided for weather protection.
 Provision should be made for essential fuel and lubrication.
 Adequate space should be left for scaffolding as well erection, removal and shifting.
 Adequate parking facility should be provided.
 Main office should be located near the entrance.
 Location of security check points should be in such a place so that materials/equipments could
not pass in or out without proper authorization.
 Accommodation should be provided to site manager, technical personnel, guards, labors are
essential.
 Miscellaneous facilities such as drinking water, telephone, fencing, hoarding board shall be
located properly.
d. Temporary buildings
In construction site, site office will be essential. Similarly, temporary accommodations for site man-
ager, resident engineer, engineers, guards, and laborers will also be essential. However, it depends,
upon the nature and size of the construction, location of the site and availability of the space, con-
struction materials and laborers near the site. By reviewing all these factors, minimum number of
temporary buildings at site should be planned.
e. Miscellaneous
While planning for construction site, considerations shall also be made for drinking water, electricity,
telephones, fencing, hoarding boards etc.
For preparing a good construction site planning/ job layout following records should be studied care-
fully.
 Site plan
 Working drawings
 Specifications
Given figure gives an idea of construction site

planning.
Note:
1- Main entrance
2- Guardhouse
3- Site office
4- Workshop
5- Materials storage and fabrication yards
6- Labor huts
7- Toilets
8- Proposed construction
9- Bricks stacking
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10- Aggregates
11- Mixing platform/mixer
Fig: 4.1 Construction site planning Job Layout
4.2 Relation between Owner, Consultant and Contractor

Owner, contractor and consultant (engineer) are the three parties invo1ved in a construction
work. Owner contracts the work, contractor executes the work and the consultant employed by the
owner provides advice and prepare all the necessary drawings, estimates, specifications required and
also helps in contracting procedures. Consultant is a person who ensures the execution of work as per
drawings and specifications for the owner.
Owner hardly possesses the technical skill and knowledge and also has very little time to
engage in a project. To bridge this gap the owner employs consultant (engineer/architect). The owner
delegates all the authority for the execution of the construction work to the consultant. Therefore con-
tractor has to work with the consultant.
Relations among owner, contractor, and consultant depend on the nature of the work they
are supposed to perform. The owner gets assurance of the work progress and the quality of work per-
formed from the consultant. Since the contractor is the legal representative of the owner, contractors
always try to satisfy the consultant. Thus, a relation of supervisory nature is to be maintained at con-
struction site by the consultant. He has to act as a supervisor.
After awarding the contract, owner has a very little role to play directly. Contractor and
consultant have to play effective role directly. Consultant shall work following his professional duties
and responsibilities, and contractor shall work as per the terms and conditions mentioned in the con-
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tract document. However, all the three parties should maintain good relationships between them by
promoting better co-ordination and co-operation for successful execution of the work.
4.3 Responsibility of Site Engineer

Site engineers perform a technical, organizational and supervisory role on construction projects
setting out and determining the location for above and underground infrastructural installations
involved in construction operations. An engineer can be liable for failure to exercise their duty of care
to all persons lawfully on the premises they have designed or constructed. The engineer should
function in their duties, diligently with technical soundness, contractual fairness, promptly
coordinating with employer and contractor. A site engineer works as part of the site management
team liaising with and working alongside architects, engineers, construction managers, supervisors,
planners, surveyors and subcontractors. They share responsibility for site security, health and safety,
and the organization and supervision of material and human resources.
Roles and responsibilities of site engineers are

 Studying the work plan submitted by the contactor and suggests any modifications.
 To watch and inspect the construction work and assure that it is done in full accordance with
the drawings, technical specifications and bills of quantities.
 Supervising the works on site in accordance with the contract documents and using the
template and procedure established by the consultant.
 Inspecting and testing materials prior to their use at site as per sample approved by the
consultant and ensuring removal of rejected material out from site.
 Ensuring the correct implementation of the works according to technical specifications, to
designs and quality of materials.
 Checking of layout and setting out of buildings with respect to existing structures and site
levels.
 Preparing of tests that may be required and following these tests to be carried out at site.
Keeping a log of all test conducted at site.
 Checking and testing of completed works before they are covered by the contractor, taking
photos on a regular basis and also on account of defective work.
 Checking and ensuring that the site is arranged as per the site management plan and that all
measures are taken for site safety and the safety of the third parties in the vicinity of the site.
 Ensuring that health and safety measures are adopted and followed to the full extent and
prepare weekly report and suggest and instruct additional safety measures if needed.
 Preparation of list of critical items and its close monitoring.
 Maintain a filing system for all site memos and instructions, measured quantities of work and
materials on site, reports and other documents and correspondence pertaining to the
construction activities.
 Maintain a site order book to be made available for the consultants and senior officers to write
comments or defects in construction noticed during site visits and carrying out compliance at
site.
Administrative Functions
 He/she will be required from time to time to assist the administrative head/consultants.
 Interacting with local authorities/ departments for statutory (legal) approval/certificates as and
when instructed.
 Performing other relevant duties as assigned administrative head/ consultants.
Deliverables
 Weekly progress reports for each project/ contract assigned
 Compliance of comments on defective or rejected work in the site order book
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 Update of work plan of the contracts – monthly

 Duly maintain an electronic library of photos of the progress of the works
Monitoring and progress controls

 Monitoring daily progress of site
 Preparing weekly progress report to be submitted to the project director and consultants
 Keeping track of the days worked in line with the days in the contract
Required Qualities of an engineer

Following are the required qualities of site engineer
 Knowledge and technology
 Social understanding
 Economical realities
 Legal awareness
 Environmental skills
 Management
 Leadership and innovation
4.4 Supervising Works of Contractor

To ensure the works are carried out to an acceptable level of quality, the supervision is very
important. Supervision of contractors is difficult. It is often found that contractor tried to save money.
More over contractor does not hesitate to use inferior materials instead of superior if found cheaper in
order to maximize his overhead and profit compromising the quality of works.
Any site supervisor deputed at the site should thoroughly supervise the work of a contractor. In order
to ensure the use of quality materials, good workmanships and quality of work, all the works shall be
done in the presence of the site supervisor and only in the confidence of the site supervisor further
works shall be carried out. Each and every hidden work shall be supervised carefully. If, needed for
checking the work done - excavation, drilling, laboratory test, or other appropriate procedures shall be
followed. A great care and effective supervision is necessary until the whole work is completed.
Supervision Team
a) Chief Engineer
b) Deputy Engineer
c) Inspector of Work (IOW)
d) Clerk/Typist
The following works should be followed for the supervision of works of a contractor:
Progress of work
 Regular monitoring and Supervision
 Checking schedule periodically
 Periodic discussions and meeting
Testing
 Works, Materials, Equipments
 Testing as per specification and contract
 Field Supervision
Regular Supervision of works
 Level work, plumb line
 Safety procedures, workers, equipments etc.
4.5 Record Keeping

Every activities relating to the work execution and procurement should be recorded and documented
separately. There are various steps in which the activities must be documented as a record. A separate
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file index is necessary for every action regarding the execution of the works. Documentation is a toll
to reduce and resolve contract disputes. It also maintains proper communication. Appropriate records
should be compiled and maintained throughout the duration of construction projects. This creates a
simultaneous history of what happened at what point during the course of the project that can be re-
ferred to if necessary.
This not only establishes a ‘memory’ or ‘paper trail’ for the project through which activities and deci-
sions can be reviewed, it allows for the reconstruction, review and analysis of events and timelines
should a dispute arise. Disputes are often determined by the available records, rather than by the facts,
and so it is commercially very important to the parties involved that good records are kept.
There are a number of reasons for record keeping:
 Legal requirements.
 Contractual requirements.
 To control work.
 To provide data for future work.
The extent of the record keeping required will depend on the type of project. A balance must be
maintained between keeping adequate records in preparation for a dispute arising, and attempting to
record everything, which is can be difficult, time consuming and costly.
Some record-keeping requirements, such as recording the minutes of meetings for example, may be
carried out at the discretion of the individual organization, with different frequency rates, levels of
detail, and time for which records must be kept, appropriate for different situations. Other records
may be a legal or contractual requirement, following prescribed rules. Ultimately, when the complet-
ed building is handed over to the client, a set of record information should be passed to them so they
are able to operate the building. It is important that the standard of records kept is high, or they may
not provide the expected information when they are actually required. In particular, records should be
dated (including incoming records) and where appropriate, signed, and a document management sys-
tem should be in place to allow efficient storage and retrieval.
Information is now generally managed using specialist software, and apps that make the preparation
of records easier and more reliable are also available. This can, for example allow records to be made
on site using a mobile phone, which are then automatically uploaded to a project document manage-
ment system. An as-built or as-constructed building information model might be prepared
on completion of construction works, consisting of documentation, non- graphical information and
graphical information defining the delivered project.
List of records
A range of records that might be kept on construction projects is presented below.
a) Tenders and contracts:

 Original contract tender documents.
 Tender negotiations and revisions.
 Sub-contractor tenders, contracts, purchase orders and correspondence.
b) Contract administration:
 Instructions.
 Variations and estimates.
 Contractual certificates.
 Contract notices.
 Requests for information.
c) Resources:
 Daily time records.
 Daily equipment use.
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 Daily production logs.

 Material delivery and use.
 Labor use.
 Inventories of tools, plant and equipment.
d) Project management:
 Cost reports.
 Forecast-to-complete estimate updates.
 Productivity reports.
 Accounting records (e.g. pay-roll, accounts payable and receivable).
 Correspondence.
 Minutes of meetings.
 Progress reports.
e) Site management:
 Site diary.
 Progress reports.
 Progress photographs.
 Weather conditions.
 Site visitors.
 Accidents, injuries and health.
f) Assessment:
 Surveys.
 Commissioning.
 Testing.
 Inspection.
 Defects.
g) Operation:
 Health and safety file.
 Building owner's manual.
 Building log book.
 Building user's guide.
 Testing and commissioning data.
 Certificates and warranties.
 As-built drawings or an as-constructed building information model.
 Statutory approvals, consents and conditions.
 Equipment test certificates.
Few Situations of Documentation:

a) Bidding and Negotiation
 Delay in supplying bid documents (Correspondence, prebid meetings)
 Findings of site inspection
 Rate analysis of a major items
 Construction schedule with critical activities
 Negotiation during finalization of award
b) During Signing of Contract Agreement and mobilization Period

 Extension of validity of tender documents
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 Delay in payment of mobilization amount

 Delay in supply of necessary drawings and documents
 Site position date should be recorded
 Site order book, MB
c) During Construction period for Delays and Extra Costs:

Contractor should be aware to maintain proper documents to establish facts that caused delay.
 Changes in contract work
 Variation in quantities
 Unusual site conditions
 Force majeure
 Unusual inflation
4.6 Progress Report

An assessment that takes place during a project or process, that conveys details such as what sub-
goals have been accomplished, what resources have been expended, what problems have been en-
countered, and whether the project or process is expected to be completed on time and within budget.
Progress reports are used by management to determine whether changes are necessary to an ongoing
effort.
You write a progress report to inform a supervisor, associate, or customer about progress you've made
on a project over a certain period of time. The project can be the design, construction, or repair of
something, the study or research of a problem or question, or the gathering of information on a tech-
nical subject. You write progress reports when it takes well over three or four months to complete a
project. In the progress report, you explain any or all of the following:
 How much of the work is complete
 What part of the work is currently in progress
 What work remains to be done
 What problems or unexpected things, if any, have arisen
 How the project is going in general
Progress reports have several important functions; they:

 Reassure recipients that you are making progress, that the project is going smoothly, and that
it will be complete by the expected date.
 Provide their recipients with a brief look at some of the findings or some of the work of the
project.
 Give their recipients a chance to evaluate your work on the project and to request changes.
 Give you a chance to discuss problems in the project and thus to warn recipients.
 Force you to establish a work schedule so that you'll complete the project on time.
 Project a sense of professionalism to your work and your organization.
Timing and Format of Progress Reports

In a year-long project, there are customarily three progress reports, one after three, six, and nine
months. Depending on the size of the progress report, the length and importance of the project, and
the recipient, the progress report can take the following forms:
 Memo--A short, informal report to someone within your organization
 Letter--A short, informal report sent to someone outside your organization
 Formal report--A long, formal report sent to someone outside your organization
Organizational Patterns for Progress Reports

The recipient of a progress report wants to see what you've accomplished on the project, what you are
working on now, what you plan to work on next, and how the project is going in general. To report
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this information, you combine two of these organizational strategies: time periods, project tasks, or
report topics.
a) Time periods: A progress report usually summarizes work within each of the following:
 Work accomplished in the preceding period(s)
 Work currently being performed
 Work planned for the next period(s)
b) Project tasks: Practically every project breaks down into individual tasks:
Project Individual tasks
Building municipal Measuring community interest

ball parks on city- Locating suitable property
owned land Clearing the property
Designing the bleachers (benches), fences, etc.
Writing a report Studying the assignment

Selecting a topic
Identifying the audience of the report
Narrowing the topic
Developing a rough outline
Gathering information
Writing one or more rough drafts
Documenting the report
Revising and editing the report draft
Typing and proofreading (correcting/Checking) the report,
Putting the report in its final package
c) Report topics: You can also organize your progress report according to the work done on the
sections of the final report. In a report project on combusting municipal solid waste, you
would need information on these topics:
Topics to be covered in the final report
1. The total amount of MSW (Municipal Solid Waste) produced
- locally
- nationally
2. The energy potential of MSW, factors affecting its energy potential
3. Costs to modify city utilities in order to change to combustion
For each of these topics, you'd explain the work you have done, the work you are currently doing, and
the work you have planned. A progress report is a combination of two of these organizational strate-
gies. The following outline selections give you an idea of how they combine:
Progress report A Progress report B Progress report C
Task 1 Work Completed Topic 1

Work completed Task 1 Work completed
Current work Task 2 Current work
Planned work Task 3 Planned work
Task 2 Current Work Topic 2

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Task 3 Current Work Topic 3

Other Parts of Progress Reports

In your progress report, you also need (a) an introduction that reviews the history of the project's
beginnings as well as the purpose and scope of the work, (b) a detailed description of your project,
and (c) an overall appraisal of the project to date, which usually acts as the conclusion.
a) Introduction: Review the details of your project's purpose, scope, and activities. This will
aid recipients who are unfamiliar with the project, who do not remember certain details, or
who want to double check your approach to the project. The introduction can contain the
following:
 Purpose of the project
 Specific objectives of the project
 Scope, or limits, of the project
 Date the project began; date the project is scheduled to be completed
 People or organization working on the project
 People or organization for whom the project is being done
 Overview of the contents of the progress report
b) Project description: In most progress reports, include a project description to review the
details of your project for the recipients.
c) Conclusion: The final paragraph or section usually reassures audiences that all is going
well and on schedule. It can also alert recipients to unexpected changes or problems in the
project.
Revision Checklist for Progress Reports

As you reread and revise your progress report, watch out for problems such as the following:
 Make sure you use the right format.
 Write a good introduction-in it, state that this is a progress report, and provide an overview of
the contents of the progress report.
 Make sure to include a description of the final report project.
 Use one or a combination of the organizational patterns in the discussion of your work on the
final report.
 Use headings to mark off the different parts of your progress report, particularly the different
parts of your summary of work done on the project.
 Use lists as appropriate.
 Provide specifics-avoid relying on vague, overly general statements about the work you've
done on the final report project.
 Be sure and address the progress report to the real or realistic audience
 Assume there will non-specialist reading your progress report. But don't avoid discussion of
technical aspects of the project-just bring them down to a level that non-specialists can under-
stand.
4.7 Site Order Book

A Site Order Book is a register duly certified by the client regarding number of pages it contains,
each page being numbered, name of work, name of contractor, reference of contract/work order etc.
Site Order Books shall be maintained on the sites of works and should never be removed there from
under any circumstances. The Engineer-in-Charge or his authorized representative shall duly record
his observations regarding any work which needs action on the part of the contractor like improve-
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ment in the quality of work failure to adhere to the scheduled program etc. as per contract agree-
ment/work order. The contractor shall promptly sign the Site Order Book and note the orders given
therein by the Engineer-in-Charge or his representative and comply with them. The compliance
(agreement/obedience) shall be reported by the contractor to the Engineer in Charge or his authorized
representative in time so that it can be checked and recorded.
Fig: 4.2 Site Order Book
4.8 Procedures to Prepare Bills

Usually the payment to the contractor is made on the basis of statement of work done, these are called
running bills. It is also called Interim Payment Certificate (IPC). The bills are prepared and submitted
by contractor to the client for the payment by following the below listed steps:
 Measurement of book
 Entry in Measurement Book
 Preparing a bill
A Sample of Running Bill
Name of Project: Description of Works:

Name of Budget Head: Date of measurement:
Name of Contractor/ UC: Date of Running Bill:
Date of Agreement:
1st / 2nd /3rd Running Bill

S.No Measurement Total Unit
Items Unit Amount Remarks
. L B H or D Quantity Rate
Amount In words:
Bills Prepared By: Checked By: Approved By:
………………….
4.9 Measurement Book (MB) ………………….. …………………
MB is a book showing original record of work done or supply of materials received duly weighed,
measured or counted. It includes finance, so record should be lucid (simple/well-spoken), clear such
that if necessary it can be checked with the entries made. It is an evidence of work done and meas-
urement, so act as valid documents.
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A Sample of Measurement Book
Location: Item number: Description of Works:

Date of start: Date of completion: Date of measurement:
Drawing number: Reference date:
Measurement Total
S.No. Items Unit Remarks
L B H or D Quantity
Measurement taken By………………… Contractor’s representative………………

Checked By: Approved By:
…………………. …………………
4.10 Muster Roll

Muster Rolls actually the register of employee data which is usually kept in the factory or establish-
ment. Muster Roll is commonly used in the department to make payment to the labor engaged in dai-
ly wages. It should be clearly maintained as payment to the labor is done on the basis of this roll. It
usually consists of the following:
 Name of employee
 Age
 Sex
 Date of joining
 Roll/Employee number
 Type of employment: Regular/Contract/Casual/Badli etc.
 Category (Designation):
 Management/Supervisor/Skilled/Semi Skilled/Unskilled
 Rate of payment
 Shift (if applicable)
 Attendance
The Muster
Roll has statu-
tory im-
portance and is
generally kept
in the custody
of personnel
department
and is regarded
as a valid doc-
ument for in-
spection by
statutory au-
thorities like
factory Inspec-
tor, Labor in-
spector etc. The total number of employees for application of any Statute is based on this record. It
has three parts:
 Part I: Detailed information of labor engaged, attendance, rate, total amount to be paid, signa-
ture columns etc.
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 Part II: Record of unpaid Wages

 Part III: Record of completed works for which payment is to be made
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Unit 5
Contract Management (8 Hrs)
5.1 Definition of Contract

According to Contract Act 2056 “Contract is an agreement between two or more than two persons to
do or not to do something, which can be enforceable by law”. An Engineering Contract is a mutual
agreement negotiated between two parties for the purpose of undertaking, on a commercial basis, cer-
tain clearly specified engineering work. The main objective entering to contract is to seek legal ac-
tion/remedies if any party breaches the contract.
An agreement between two or more parties to do something for a consideration establishes the basis
for a contract. “A contract is a promise or a set of promises for the breach (break) of which the law
recognizes duty.” This amounts to saying that a contract is a legally enforceable promise (Jackson
1973).
“All contracts are agreements but all agreements are not contracts.”
Agreement + legality = Contract
Agreement is the acceptance of the offer (proposal) with or without any condition. It may not have
legal obligation. But contract is an agreement concluded between two or more parties for performing
or not performing any work. The main objects or entering into contract is to seek legal action/ reme-
dies if any party breached the contract. An agreement is the consent (सहमति) between owner and the
contractor for a meaningful undertaking. It includes all the terms and reforms to executed the job.
An Engineering Contract is a mutual agreement negotiated between two parties for the purpose of
undertaking, on a commercial basis, certain clearly specified engineering work.
Construction is a service activity with business side as one of its dimension. The business world is
structured by contractual relationships with a wide range of parties. The construction industry is al-
most unique amongst commercial endeavors (activities/action) where the “Project is sold before it is
made”. In other words, the facility is purchased before it is “manufactured” based on a set of draw-
ings and work descriptors. Also the end item requires the purchaser to coordinate many entities to in-
clude designer(s), contractor(s), specialty subcontractor(s) and vendors. Project delivery systems have
been developed to provide the construction buyer (i.e., the client) with a single point of contact or
source of purchase. These contract formats have gained popularity over the past 30 years and are still
evolving.
5.2 Essential Elements of Valid Contract

There is a saying that all contracts are agreements, but all agreements are not contracts because,
the fulfillment of certain requirements only give an agreement a status of contract. Therefore, we call
such requirements as essentials of a valid contract. The primary aim of entering into a contract is to
seek legal remedies. Therefore contract must be legally strong so that in case if a party does not fulfill
contractual obligations then necessary legal measures can be taken. Followings are the essentials of a
valid contract:
i. Offer and Acceptance: First a party should make an offer and then the other party should
accept the offer made by the first party.
 If a person advances a proposal to a person, who gives his acceptance, contract ex-
ists. Offer can be specific or general.
 If a person making proposal states that s/he should be given notice or acceptance
of a proposal within specified period, but doesn’t receive such notice within such
period then no contract exists.
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 If no time limit is specified in the proposal, then it must be accepted within reason-
able time.
An offerer cannot bind the offeree by a stipulation (demand/requirement) that if
the offerer is not given notice of rejection then s/he shall be deemed to have ac-
cepted the offer.
 If the offerer dies or become insane (senseless) before his proposal is being accept-
ed, then no contract exists.
 If the offerer offers proposal with condition to be fulfilled by the offeree before ac-
cepting the proposal and the latter does not do so then no contract exists.
ii. Free consent (सहमति): Offer must have been accepted freely without any coercion
(जबरजतति), fraud (ठगी), deceit (छल). Otherwise, contract is invalid.
iii. Legal relationship: The intention behind entering into a contract should be creating legal
relationship between the parties involved. There should be a clear intention of parties to
enter into contract i.e. all the necessary documents should be fulfilled.
iv. Two or more competent Parties: The parties into a contract shall be legally competent.
As per the Contract act 2056, except a person whose age is below 16 years and who is out
of self-control, all other persons can enter into a contract.
v. Legal objective: The objective of an agreement shall not be illegal.
vi. Lawful consideration: Both parties involved in a contract must be benefited from the
contract.
vii. Possibility of performance: The agreement made shall have possibility of performance.
Impossible contract is invalid. If two parties agree to build a house on air, which is impos-
sible, contract is invalid.
viii. Certainty: There must be certainty. Agreement should not be ambiguous, vague and un-
limited.
ix. Writing and registration: To have legal status, writing and registration of an agreement
is very often needed. Verbal agreement cannot be a contract.
Contract as per enforceability

1. Valid Contract - If all the elements of contract are present, the contract is valid.
2. Voidable Contract - As per contract act, following contracts are voidable, i.e. if the party desires to
make it void (invalid).
 Forceful contract or contract against free consent or contract involving fraud
 Entered due to undue influence (अनावश्यक प्रभाव)
 Contract involving fraud or misstatement
3. Void Contract (invalid/शन्ु य सम्झौिा) - As per contract act the following contracts become null and
void.
 Contrary to statutory law (वैधातनक व्यवतथा)
 Ambiguous vague and unlimited Contract
 Not possibility of performance
 Contrary to public policy and welfare
 Signed by incompetent parties
Significance/ Importance of contracts

Contract is necessary:
 to make agreement legally enforceable
 to specify what the contractor must do and what the owner must pay
 to specify what will be done if either party fails to perform
 to specify the quantity and quality of work to be done
 to specify the time frame within which the work is to be completed and payment to be made
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 to set out in advance the courses of action that will be taken in different possible situations
 to define words and establish common meanings
 to specify what is and what is not included in contract
 to specify how the contract will be terminated
 to specify the responsibilities of the parties not just to each but also to third parties such as:
government, community in which work is to be done, workers, sub-contractors, material, sup-
pliers, unions etc.
5.3 Types of Contract

When two parties mutually agree to transaction, a contract is formed. Negotiation for a contract is be-
gun by the Principle inviting an offer or a proposal to undertake the work under a contract from one
or more suitably qualified individuals or corporations. The formal offer made by a contractor in re-
sponse to such an invitation is referred to as tender. Where one party only is invited to submit a ten-
der, the agreement may be reached by direct negotiation. Where two or more parties are invited, the
agreement is usually reached by a competitive tendering process in which tenders are invited and
evaluated in accordance with clearly defined provisions.
Reaching the final agreement may be a lengthy procedure during which the negotiating parties pre-
pare and exchange documents setting out their respective requirements, offer and counter offers.
These documents must be carefully prepared so as to avoid misunderstandings and misinterpretations
that could lead to disputes during the contract stage. To ensure that the finally negotiated agreement is
enforceable at law, the contract should be clearly evidenced by writing down the agreed terms and
conditions under an instrument of Agreement to be signed by the parties to the contract. Thus, by ex-
tension, the term “Contract” has also come to refer to the written document in which terms of the
promise are written down. By implication, both parties thereby accept certain responsibilities and in
return receive certain benefits.
Depending upon the magnitude and nature of the work, its special design needs, funding require-
ments, complexities of the job and owner’s own preference, different types of contracts are entered
into. Contracts for any particular engineering project can be classified in the first instance as either
Main Contracts (sometimes referred to as Head Contracts) or Subcontracts. The essential difference
is that a Main Contract is directly between the Principle (owner) and a Main Contractor, where as a
Subcontract is between a Main Contractor and another contractor referred to as a Subcontractor.
Engineering contracts, whether Main Contracts or Subcontracts, can further be classified in a number
of ways, each of which depends upon a particular characteristic or feature. The Three most commonly
used characteristics for this purpose are:
 The method by which payment for the work under the contract is evaluated.
 The method by which the contractor is selected.
 The method by which the responsibility for the technical and administrative aspects of the
work is allocated.
There are a number of options under each of these headings, which can apply to any contract, and the
contract can be defined by selecting the appropriate option from each. Each has its advantages and
disadvantages for a particular application, and each has developed a certain degree of flexibility so
that, in reality, many of the individual alternatives overlap one another; in practice, it is sometimes
difficult to categories any one particular project’s contractual agreement precisely.
A brief description of different contract types under above mentioned categories are as summarized
below.
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5.3.1 Classification by the method of payment for the work

The method of payment is of such importance, particularly to the Contractor, that contracts are often
classified solely by the method of payment. There are three basic methods of payment used in Engi-
neering Contracts:
 Lump sum contracts
 Schedule of rates or unit-price contracts
 Cost plus contracts
a) Lump Sum or Stipulated Sum Contracts

This type of contract is the one in which the contractor based on the available complete set of plans
and specifications quotes one single price which covers all works and services required by the con-
tract plans and specifications. The lump sum price includes all direct costs of the contractor for la-
bour, machines, materials and indirect costs such as field and front office supervision, secretarial sup-
port and equipment maintenance and support costs and also includes profit of the contractor.
In lump sum contracts, the contractor is paid the amount nominated in the contract for the work as
agreed with the Principal when negotiating the contract. This amount may, of course, be increased or
decreased owing to additions or deletions from the scope of the work under the contract in accordance
with the terms of agreement. This type of contract is commonly used where the nature and extent of
the work can be accurately defined but the quantity of work cannot. This type of contract is used pri-
marily in building construction where detailed plans and specifications requiring little or no modifica-
tion can be developed. Contracts with large quantities of earthwork or sub surface work are not nor-
mally handled on a lump sum basis.
Advantages:
1. From owner’s Point of View
 As the price quoted is a guaranteed price for the work specified in the plans and supporting
documents, it is helpful for the owner since s/he knows the exact amount of money that must
be budgeted for the project, barring any contingencies or change orders.
 The contractor receives monthly progress payments based on the estimated percent of the total
job that has been completed, which reduces the extra burden of accurate measurement for pay-
ing running bills as in other types of contract.
 Minimal involvement of owner.
 The contractor takes all of the construction risks in the absence of changes or impacts unfore-
seen by either party.
2. From Contractor’s Point of View

 There is minimum interference from the owner and his Engineer other than for quality and
schedule.
 An innovative contractor may obtain an opportunity to maximize profit through innovation.
 The contractor may pass on much of the risks to the sub-contractors.
Disadvantages:
 Requirement to have detailed plans and specifications complete before bidding and construc-
tion can begin leads to the difficulties in changing design or modifying the contract.
 Design usually does not benefit from construction expertise through Value Engineering (the
modification of designs and systems according to value analysis/ a systematic method to im-
prove the "value" of goods or products and services by using an examination of function. Val-
ue, as defined, is the ratio of function to cost).
 Overall design-construct time is usually the longest.
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 Changes to the work or unforeseen difficulties will often end in disputes and litigation that can
drive up costs.
 The owner has minimal control over the performance of the work.

 The owner controls the funding on disputed extra work or changed conditions and the contrac-
tor must often resort to expensive arbitration or litigation with no assurance that it will recover
for the additional costs.
 The contractor usually bears the economic risks of unusual weather conditions, strikes or oth-
er external factors that influence a contractor’s cost.
b) Schedule of Rates or Unit- Price Contracts

In this type of contract, the project is broken down into the work items that can be characterized by
units such as Cu.m, Sq.m, R.m, and Nos. etc. The contractor quotes the price by units rather than as a
single total contract price. A guide quantity is given for each work item. Based on this guide quantity,
the contractor quotes a unit price for each item of the project work. The total price is computed by
multiplying the unit price by guide quantity and summing up the cost of whole the items. The lowest
reasonable bidder is determined and the contract is awarded. In this type of contract, it is important
that the items in the Schedule of rates or the Priced Bill of Quantities cover the whole of the work and
the method of measurement of quantities is clearly defined. This type of contract is generally used
where the nature and extent of the work can be accurately defined but the quantities are subject to
variation within reasonable limits. If the deviation in guide quantity exceeds by more than 10%, the
unit price is normally renegotiated. In unit price contracts, the progress payments for the contractors
are based on precise measurement of the field quantities placed.
Advantages:
 The unit price type permits variable amounts of work to be paid for in a fair and equitable
manner.
 The owner may benefit from price competition in a competitive situation.
 Minimal involvement of owner.
 The contractor takes all of the construction risks in the absence of changes or impacts unfore-
seen by either party.
 Flexibility in accommodating the variations.

 There is minimum interference from the owner and his Engineer other than for quality and
schedule.
 The contractor may pass on much of the risks to the sub-contractors.
 Quantity estimates developed as part of the bidding process need only verify the guide quanti-
ties given in the bid item list. Therefore the precision of the quantity takeoff need not to be as
exact as that developed for a fixed price contract.
 The contractor can maximize the profit by manipulating the bid by unbalancing the bid.
Disadvantages:
 Requirement to have detailed plans and specifications complete before bidding and construc-
tion.
 Design usually does not benefit from construction expertise through Value Engineering.
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 Overall design-construct time is usually the longest.

 Changes to the work or unforeseen difficulties will often end in disputes and litigation that can
drive up costs.
 The owner has minimal control over the performance of the work.
 The owner does not have a precise final price for the work until the project is complete. In
other words allowances in the budget for deviation must be made.
 The contractors can manipulate the unit price contract by using the technique called Unbal-
ancing the Bid.
 Cartelling (संयोतजि) or round formation by the bidders may negate (उलंघन/काट्न) the fair price
competition.

 To be competitive, the builder must often use marginal sub-contractors who may have prob-
lems in performing the works.
 The owner controls the funding on disputed extra work or changed conditions and the contrac-
tor must often resort to expensive arbitration or litigation with no assurance that it will recover
for the additional costs.
 The contractor usually bears the economic risks of unusual weather conditions, strikes or oth-
er external factors that influence a contractor’s cost.
Some contracts combine the two methods of payment. Part of the work under the contract may be
covered by a lump sum and part of it paid for under a schedule of rates. This type of contract is re-
ferred to as Part Lump Sum and Part Schedule of Rates Contract.
c) Cost plus Contracts
In a Cost plus Contract, the contractor is reimbursed the actual costs incurred in carrying out the work
under the Contract plus a fixed or variable fee to cover overhead costs and profit.
Four types of fee structure are common. They lead to the following cost plus types of reimbursement
schemes:
 Cost + Percent of Cost
 Cost+ Fixed Fee
 Cost + Fixed Fee +Profit Sharing
 Cost+ Sliding Fee
i. Cost + Percent of Cost

This is the oldest form of fee structure. This form is very lucrative (beneficial/profitable) for the con-
tractor but is subject to abuse. There is little incentive to be efficient and economical in the construc-
tion of the project. Just to the contrary, the larger the cost of the job, the higher the amount of fee that
is paid by the owner. If the cost of the job is $40 million and fee is 2%, then the contractor’s fee is
$800,000. If the cost increases to $42 Million, the contractor’s fee increases by $ 40,000. Abuse of
this form of contract has been referred to as the “killing of the goose (हांस) that laid the golden egg.”
ii. Cost+ Fixed Fee

In order to offset the abuse of cost plus percent approach, the fixed fee formula was developed. In this
form of contract, a fixed amount of fee is paid regardless of the fluctuation of the reimbursable cost
component. This is usually established as a percent of an originally estimated total cost figure. The
contractor’s fee is fixed and does not change due to variation of the project cost from the original es-
timated cost. This form gives the contractor an incentive to get the job done as quickly as possible in
order to recover his fee over the shortest time frame. Because of the desire to move the job as quickly
as possible, however, the contractor may tend to use expensive reimbursable materials and methods
to expedite (speed up/accelerate/rush) completion of the project.
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iii. Cost + Fixed Fee +Profit Sharing

The fixed- fee plus profit sharing formula provides a reward to the contractor who controls costs,
keeping them at a minimum. In this formula, it is common to specify a target price for the total con-
tract. If the contractor brings the job in under the target, the savings are divided or shared between
owner and contractor. A common sharing formula provides that the contractor shares by getting 25%
of this under run of the target. If for instance, the target is $10 Million and the contractor completes
the job in $9.5 Million, he receives a bonus of $125,000 (25% of $0.5 Million).
iv. Cost + Sliding Fee

A variation of the profit sharing approach is the sliding fee, which not only provides a bonus for un-
der-run but also penalizes the contractor for overrunning the target value. The amount of fee increases
as the contractor falls below the target and decreases as he overruns the target value. One formula for
calculating the contractor’s fee based on sliding scale is,
Fee=R (2T-A)
Where,
T=Target price
R=Base percent value
A=Actual cost of the construction.
Advantages:
1. From Owner’s Position
 Permits reduction of design-construct time by utilizing phased construction.
 Quick reaction by the contractor to major design changes and minimizes the adversary posi-
tion.
 Opportunity to utilize contractor expertise during the design phase to help minimize overall
costs.
 The owner may participate fully in the management and control of the project. S/he may par-
ticipate in major decisions, or actually supply certain services or materials to the contractors.
 Under the guaranteed maximum price option, the owner may pass on some portion of the con-
struction risk to the contractor.
 The owner may achieve the advantage of eliminating marginal subcontractors as well as
achieving fixed prices for specialty work by letting a substantial portion of the work to
prequalified subcontractors.
2. Advantages from Contractor’s Position

 Elimination of the risk inherent in fixed price contracting as a trade-off (व्यापार बन्द) for a lower
guaranteed fee.
 The contractor is paid for the preparation of his initial planning, including development of
cost-estimates, schedule and other work plan items which s/he most absorb in competitively
bid contract.
 Opportunity to obtain future work from the owner due to harmonious relationship.
 Job site can be staffed and managed efficiently with owner’s cost.
Disadvantages:
1. From Owner’s Position
 Cost plus fixed fee may not be the most economical in a competitive market.
 Disreputable, unskilled contractor can abuse this arrangement if the owner is not careful in se-
lection.
 Owner’s involvement is increased.
 Definition of reimbursable (तलनतु दन)ु items of cost, particularly those for contractor’s tools and
equipments, overhead expenses etc. may be the sources of disputes and adversial relationship.
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2. Disadvantages from Contractor’s Position

 Fees may be minimal in comparison to profit potential in areas of known performance with a
favorable risk/reward ratio.
 Planning and control functions and assignment of personnel are made increasingly difficult
because of the simultaneous nature of construction and design.
 Contractor supervision and management may resent (dislike/hate) major decisions being
made or questioned by the client where they would normally have full responsibility.
 The contractor’s reputation may suffer in the event of significant delays, cost overruns or per-
sonal clashes with owner personnel.
5.3.2 Classification by the method of selecting the Contractor

Depending upon how the contractors are selected by the owner, the contracts can be classified into
two major categories. These are:
 Competitively Tendered Contracts and
 Negotiated Contracts with the selected contractors.
a) Competitively Tendered Contracts

A competitively Tendered Contract is one where the owner invites a quote for the works to be
performed following a formal competitive tendering procedure in which a number of tenderers submit
bids based on complete plans and specifications. The award of contract is generally made to the
lowest responsible bidder and an agreement is reached between the Principle and the Contractor.
The word responsible is very important since the contractor submitting the lowest bid may not, in
fact, be competent to carry-out the work. This is most widely used form of engineering contract and is
suitable for engineering projects where the nature and extent of the work under the Contract can be
clearly identified.
Advantages:
 Because of the competitive nature of the contract, selection of the low bidder ensures that the
lowest responsible price is obtained.
 The major advantage, which is essential for public work, is that all bidders are treated equally
and there are no favorites
Disadvantages:
 The plans and specifications must be totally completed prior to bid advertisement. This breaks
down feedback from the field regarding the appropriateness of the design.
 Design usually does not benefit from construction expertise through Value Engineering or
Constructability Analysis prior to contract award.
 Overall design-construct time is usually the longest since the shortening of time available by
designing and constructing in parallel is not possible.
Competitively Tendered Contracts are of two types: Single Fixed-Price or Lump-Sum Contracts and
Unit Price Contracts, which had discussed earlier in detail.
b) Negotiated Contracts
A Negotiated Contract is one where the Principal negotiates directly with a contractor to arrive at a
mutually satisfactory agreement to undertake the work. An owner can enter into contract with a
constructor by negotiating the price and method of reimbursement. A number of formats of contract
can be concluded based on negotiation between owner and contractors. It is possible, for example, to
enter into a fixed-price or unit-price contract after a period of negotiation. It implies flexibility on the
part of the owner to select the contractor on a basis other than low bid. The owner invites selected
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contractors to review the project documentation available at the time of negotiation. The
documentation may be total and complete design documentation as in the case of competitively bid
contracts or only concept level documentation. Based on the documentation provided, the contractor
is invited to present his qualifications to perform the work and to indicate his/her projected cost and
fee for completing the work. Within this presentation format, the owner evaluates the experiences,
reputation, facilities, staff available, charge rates and fee structures of the various bidders
participating. Based on this evaluation, the field is reduced to two or three contractors and
negotiations are opened regarding actual contract form and methods of reimbursement. In this type of
contract, the contractor is reimbursed for expenses incurred in the construction of the constructed
facility which includes all direct expenses for labour, equipments and materials as well as overhead
charges and a fee (essentially a profit or make up) in addition to the cost reimbursement.
Major items of negotiation are:
 Level and amount of fee in addition to the charge schedule.
 Quality of the works to be performed.
 Projected time for completion etc.
Although almost all types of contracts like fixed- price, unit-rate and cost plus fee can be adopted, the
most common form of contract concluded is the COST+FEE, since in most cases, the design
documentation is not complete at the time of negotiation.
The advantages and disadvantages of this form of contract are the same as that of Cost Plus Fee
Contract as described above.
5.3.3 Classification by Technical & Administrative Responsibility

The implementation of an Engineering Project involves a number of separate tasks, the responsibility
for which must be established clearly from the outset.
The several tasks are:
 Project Management and Co-ordination
 Engineering Design (Conceptual and Detail)
 Procurement
 Construction/Installation/Supply
 Supervision
 Contract Administration.
Engineering contracts can be classified by the manner in which these responsibilities are allocated.
There are a number of classifications under this method, the principal ones being:
 Traditional
 Owner-Builder Approach
 Design–Build (D & B) Contract
 EPC Contract
 Turnkey Contract
 Build-Own-Operate-Transfer (BOOT)
 Construction Management Contract
a) Traditional Approach
A traditional procurement approach may be adopted where the clients design team is appointed to
prepare a detail engineering design, cost-estimates and specifications before the choice of contractor
is considered. This type of contract is considered to be a sequential or “end-on” process where design
and construction is separated by an intervening tendering period. The owner employs a designer who
first prepares the plans and specifications, then exercises some degree of inspection, monitoring or
control during construction. Construction itself is the responsibility of single general contractor under
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contract to the owner. Much of the work may actually be performed by individual trade contractors
under the subcontract to the general contractor. Lump sum contracts, unit-price contracts, negotiated
cost plus fee contracts can be adopted under traditional approach.
The traditional approach of contract has the advantage of price competition and ideally the procedure
should work provided that:
 The design is complete before the tender stage (Price certainty)
 The designer understands how the construction will be Undertaken (build ability)
 The design does not change substantially during Construction (avoiding delay and disruption)
b) Owner-Builder Approach
In this approach, owners perform both their own design work and some or all of the actual construc-
tion with their own forces. This approach is often referred to as “force account”. Owner may utilize,
while retaining many of the management and conceptual design responsibilities themselves, consult-
ants for some or all of the detail design and can depend upon construction contractor for the actual
hiring and supervision of the labor.
Advantages
 The circumstances of each individual owner determine the advantages and disadvantages of
the owner-builder approach. However it appears that this method can be best justified when
the volume of work is relatively large and relatively constant over a long period of time.
 The owner-builder can employ all the techniques of the design constructor, the professional
construction manager and the traditional approach.
Disadvantages
 Their success as developers has minimized or eliminated the general contracting or design
construct companies.
Examples:
 Army Corps of Engineers
 Bureau of Reclamation
 Procter and Gamble
c) Design and Build (D & B) Contract

Design and Build procurement works on the basis that the main contractor is responsible for under-
taking both the design and construction work on a project, for an agreed lump-sum price. Design and
build projects can vary depending on the extent of the contractor’s design responsibility and how
much initial design is included in the employer’s requirements. Nevertheless, the level of design re-
sponsibility and input from the contractor is much greater on design and build projects than a tradi-
tional contract with a contractor’s designed portion. The employer has control over any design ele-
ments of the project that are included in their requirements, but once the contract is let responsibility
over design passes to the contractor, so the employer has no direct control over the contractor’s de-
tailed design. The contractor can carry out the design in a number of ways. Often they will appoint
their own consultants or use their own in-house team.
(d) EPC Contract

The EPC contract stands for ‘Engineering, Procurement and Construction’ contract. Tender an EPC
contract, the contractor designs, procures the necessary materials and builds the project, either direct-
ly or by subcontracting part of the work. In some cases, the contractor carries the project risk for
schedule as well as budget in return for a fixed price depending on the agreed scope of work. The cost
is negotiated and finalized and paid in mutually agreed installments. It is a prominent form of con-
tracting agreement in the construction industry. Companies that deliver EPC Projects are commonly
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referred to as EPC Contractors. Normally the EPC Contractor has to execute and deliver the project
within an agreed time and budget, commonly known as a Lump Sum Turn Key (LSTK) Contract.
(e) Turn Key Contract

A turnkey is a type of project that is constructed so that it could be sold to any buyer as a completed
product. Turnkey is often used to describe a home built on the developer’s land with the developer’s
financing ready for the customer to move in. It is just turn a key in the door. In turn-key contract, the
contractor is entrusted to design, construct, commission & handover the project to the employer. The
employer will make the lump-sump payment to the contractor at the different stages of work as per
the agreement. This type of contract is useful when the work has to be completed at a very short peri-
od. Whole risk is borne by the contractor.
Literally all the promoter would have to do would be to ‘turn a key in the door’ and project will be
operational. Sometimes, the contractor continues to operate the facility for the customer; in other cas-
es the customer assumes operational control. A turnkey contractor is compensated either through sur-
charges on each item or service procured for the facility or by a commitment in advance to a fixed
price.
Advantages
 The responsibility for the contract lies with a single firm and the promoter is relieved from re-
sponsibilities for the equipment or plant and performance.
 The project is put into operation more rapidly than other contracts.
 Minimal owner coordination is required between construction, design, and other project ele-
ments. This can be of great benefit to an unknowledgeable owner.
 Considerable opportunity for construction expertise to be incorporated during the design
phase.
 Implementation of changes is simplified throughout the construction program.
Disadvantages
 Usually no firm project cost is established until construction is well underway.
 If performed under a lump sum or guaranteed maximum price contract, overall quality and
performance may be subordinated to ensure profitability.
 Very few checks and balances and the owner is sometimes not advised or aware of design or
construction problems that may greatly affect cost or schedule.
 Due to minimal involvement of owner, the final result may not fully comply with expecta-
tions.
 Successful integration of design and construction functions and avoidance of changes are
largely left up to the design construct firm.
f) Build-Own-Operate-Transfer (BOOT)
A build-own-operate-transfer (BOOT) project, sometimes referred to as a Concession Contract may
be defined as
“A project based on the granting of a concession by a principle, usually a government, to a promoter,
sometimes known as the concessionaire, who is responsible for the construction, financing, operation
and maintenance of a facility over the period of the concession before finally transferring the facility,
at no cost to the principal, as a fully operational facility.”
(Smith and Merna, 1992)
The major components of a BOOT Project include:
Build: design, manage, project implementation, procurement, construct and finance
Own: own the asset for the concession period and the license for the equipment used.
Operate: manage and operate plant, carryout maintenance, deliver product or service and receive off
take Payments.
Transfer: handover plant in operating condition at the end of the concession period.
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Advantages
 Promotion of private investment.
 Completion of projects on time without cost overruns.
 Good management and efficient operation.
 Transfer of new and advanced technology.
 Utilization of foreign companies’ resources.
 Additional financial sources for priority projects.
 No burden on public budget for infrastructure development.
 Positive effect on the credibility of the host country.
Disadvantages
A review of BOOT schemes by an EU Commission concluded that there were three key problems
associated with BOOT projects:
 Availability of experienced developers and equity investors.
 The ability of governments to provide necessary supports.
 The workability of corporate and financial structures.
Comparison of “Turn-key” and BOOT Projects

 BOOT projects are contractor financed turnkey contracts.
 BOOT project strategies grew out of turnkey contracting.
 In conventional turnkey contracts, governments have attempted to shift the risk for the project
construction to the private sector while still bearing the risk of financing and operating the
project. In a concession project i.e. BOOT project, the major risks of finance and operation,
however, borne by the promoter.
 In turnkey contracts, feasibility studies are often carried out by the principal while in BOOT
project, the promoter will be responsible for feasibility studies.
 Commercialization of a turnkey contract is normally the responsibility of the principal, who
will often pay the contractor a mobilization fee and monthly payments for the work carried
out. In BOOT projects, the promoter will carry out commercialization.
 In turnkey contracts, operation of the facility is carried out by the principal after one or two
years of commissioning while in BOOT projects, the promoter will operate the facility over
the concession period before finally transferring the facility to the principal.
g) Construction Management Contracts

In construction management type contract, one form is retained to co-ordinate all activities from con-
cept design through acceptance of the facility. The firm represents the owner in all construction man-
agement activities.
Construction management is defined as- “ that group of management activities related to a construc-
tion program, carried out during the pre-design, design, and construction phases, that contributes to
the control of time and cost in the construction of a new facility. This approach unites a three party
team consisting of owner, designer and CM in a non- adversary relationship. The CM establishes the
procedures for award of all contracts to architects/engineers, principle vendors and the so-called trade
contractors. Once contractual relationships are established, the CM controls not only the prime or ma-
jor contractor but all sub-contractors as well as major vendors and off site fabricators.
Construction management contracts are particularly attractive to organizations that periodically build
complex structures (e.g., hospital authorities, municipalities etc.) but do not desire to maintain a full
time construction staff to supervise projects on recurring basis. In such cases, an owner can retain a
firm as construction manager to plan, develop and co-ordinate the activities of one or more design
professionals, trade contractors, vendors and other interested parties such as licensing and control
bodies.
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Usually CM Contracts with owner will provide for full reimbursement of field costs plus fixed fee to
cover home-office costs and profit.
Advantages
 Special construction skills may be utilized at all stages of the project with no conflicts of in-
terest between the owner and the designer.
 Independent evaluation of costs, schedules and overall construction performance, including
similar evaluation for changes or modifications help assure decisions in the best interest of the
owner.
 Full time co-ordination between design and construction contractors is available.
 Minimum design construction time due to phased construction
 Significant opportunities are provided for Value Engineering.
Disadvantages
 The owner begins the project before the total price is established. If the owner has only fixed
amounts to spend, the traditional method would be preferable in such a go/no go situation.
 Success of the project depends upon the skills of CM.
 The CM does not guarantee either the overall price or the quality of the work.
5.4 Tendering (Bidding) Process

Tender is an offer in written by the tenderer (the person who offers the tender) to execute some speci-
fied work or to supply some specified goods at a certain rate/amount within a fixed time frame under
certain condition of agreement. It is the first step in the formulation of contract. In making procure-
ment by bidding, an invitation to bid can be made by the following process:
 Inviting open bids by determining prequalification,
 Inviting open bids without determining prequalification.
Bidding Stages
a) Single stage Single-Envelope Bidding Procedure
In the single-stage one-envelope bidding procedure, bidders submit bids in one envelope containing
both the Financial Proposal and the Technical Proposal.
b) Single stage Double-Envelope Bidding Procedure

In the single-stage, double-envelope bidding procedure, bidders submit two sealed envelopes simul-
taneously, one containing the Technical Proposal and the other the Price Proposal, enclosed together
in an outer single envelope.
c) Two-Stage Double Envelope Bidding Procedure

In the two-stage, double-envelope bidding procedure, at the first stage, Bidders submit two sealed en-
velopes simultaneously, one containing the Technical Proposal and the other the Price Proposal en-
closed together in an outer single envelope.
Only the Technical Proposals are opened at the date and time advised in the Bidding Document, and
the Price Proposals remain sealed and are held in custody by the Purchaser. The Technical Proposals
are evaluated and if the Purchaser requires amendments or changes to the Technical Proposals, such
amendments and changes are discussed with the Bidders. The Bidders are allowed to revise or adjust
their Technical Proposals to meet the requirements of the Purchaser. The objective of the exercise is
to ensure that all Technical Proposals conform to the same acceptable technical standard and meet the
technical solution required by the Purchaser. Bids of Bidders who are unable or unwilling to bring
their Technical Proposals to conform to the acceptable technical standard will be rejected as deficient
Bids. Bidders are invited, at the second stage, to submit Modified Bid Proposals consisting of Re-
vised Technical Proposals and Supplementary Price Proposals based on the technical standard agreed.
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The original Price Proposals and the Modified Bid Proposals are opened at a date and time advised by
the Purchaser. In setting the date the Purchaser will allow sufficient time for the Bidders to incorpo-
rate the changes in the Revised Technical Proposals that are needed to meet the agreed technical
standard and to prepare the Supplementary Price Proposals that reflect these changes. The Price Pro-
posals, Supplementary Price Proposals, and Revised Technical Proposals are evaluated, and the Con-
tract is awarded to the Bidder whose Bid is determined to be the lowest evaluated substantially re-
sponsive Bid.
Why tendering?
 To get quality work
 To get work at competitive price
 To maintain transparency
 Public private partnership (encourage contracting procedure)
5.4.1 Tender Notice

Tender notice is the information inviting bids from competent contractors. It should be widely pub-
lished in important daily newspaper. When all the preliminaries i.e. development of project have been
completed and owner has decided to proceed with the work, tenders are invited. Legally this is an at-
tempt to ascertain if an offer can be received from interested contractors to execute the work in the
estimated limit of time and finance.
Detail information in Tender Notice

 The name and address of the Public Entity inviting bid
 Nature of work and its location
 The place of delivery of the goods to be supplied, the services to be delivered and the con-
struction work to be performed
 The amount of bid security and validity period of the bid
 Date, time and place where and when the tender document is available
 Cost of tender document
 The place, manner, deadline for the submission of the bidding documents
 Provision of e-bidding and its process
 The place, date and time for the opening of bids
 Expected date of acceptance of successful bids etc.
In publishing a notice for invitation of national level bidding, a period of at least 30 days shall be giv-
en and at least 45 days shall be given in the case of international level bidding. The bidding docu-
ments shall have to be made for obtaining from two or more than two public entities. In making pro-
curement through an international level bidding, the Public Entity may give domestic preference to
the Nepalese entrepreneurs and business persons as prescribed, and where domestic preference is to
be so given, that matter shall be set forth in the notice on invitation to bid and the bidding documents.
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5.4.2 Preparation before Inviting Tenders

 Project Preparation: The scheme of the project is prepared with the detail feasibility study.
 Estimating of Quantities: The quantities of all the terms involved in the project are to be esti-
mated.
 Cost Estimate: Tentative cost is derived with prevailing rates of items involved in work.
 Approval of estimate: Estimated cost should be approved by the concerning authority.
 Resource Planning: The owner should allocate the necessary resources basically; the budget
should be arranged for the construction at different stages.
 Tender document preparation: All the documents required during the tender (Bill of Quanti-
ties, Specifications, and Drawing etc.) should be prepared and should be approved by the au-
thority.
5.4.3 Bidding document/ Tender document

Bidding Document is a document prepared by the concerned firm making invitation to bid for sub-
mission by bidders by filling up the price or rate. This includes instructions to bidders, specifications,
drawing, design, terms of reference, schedule of work, evaluation criteria, bill of quantities, condi-
tions of contract and similar other documents. Matters to be stated in Bidding Documents:
 Instruction to bidders (ITB)
 Tender notice
 Bid data sheet
 Plan, drawing of the proposed work
 Bill of quantities
 Quantity of goods
 Work to be done by the bidder
 Time of supplying goods, completing construction work
 Provision regarding warranty and repair and maintenance
 Type and quantity of necessary training and supervision to be provided by the bidder
 Provision that the goods or spare parts to be supplied must new and original
 Source of financing required for proposed procurement
5.4.4 Earnest money/ Bid bond/ Bid security (बोलपत्र जमानत)

It is the amount of money deposited while bidding a tender as guarantee of the party’s willingness of
carrying out the work award to him. Bidder shall have to submit the bid along with bid security 2 to 3
% of the estimated amount of the bid in cash or a bid security, of equivalent to that amount, issued by
a commercial bank. This is refunded to unsuccessful bidder. If a successful bidder fails to carry out
the contract, this amount is forfeited. Bid security shall be forfeited (जफत) in the following condi-
tions:
 If the bidder requests for modification or withdrawal of bid during the validity period of bid,
after the deadline for the submission of bids (af]nkq k]z ug]{ clGtd ldlt / ;do kl5 af]nkq
dfGo x'g] cjlw leq af]nkqbftfn] af]]nkq ;+zf]wg ug{ jf lkmtf{ ug{ dfu u/]df),
 If the bidder refuses to accept the correction of arithmetical errors found in the bid (af]nkqdf
b]lvPsf] c+sul0ftLo q'6L ;RofOPsf] s'/f af]nkqbftfn] :jLsf/ gu/]df),
 If the selected bidder fails to sign the procurement contract in accordance with the terms and
conditions set forth in the bidding documents,
 Where the bidder fails to furnish the performance security as set forth in the bidding docu-
ments within the time for signing the procurement contract, etc.
5.4.5 Performance Security/Performance Bond/Security Money (sfo{;Dkfbg hdfgt)

It is guarantee money of the tenderer for the fulfillment of his/her contract as agreed upon. This
amount is deposited after the acceptance of the tender. This amount is kept as a check so that the
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contractor fulfills all the terms and conditions of the contract and carries out the work satisfactorily
according to the specifications and maintain progress and completes the work in time. If the
contractor fails to fulfill the terms of contract his/her whole or part of the security money is forfeited
by the department. The security money is refunded to the contractor after the satisfactory completion
of the whole work after defective liability period.
Within seven days of the selection of the bid, the Public Entity shall serve a notice of the intent of
acceptance of his/her bid to the concerned bidder. Information regarding the name, address of the
bidder whose bid has been so selected and the price of the bid shall also be communicated to the other
bidders. If no bidder makes an application within a period of seven days of providing the notice, the
bid of the bidder shall be accepted and a notice shall be communicated to the bidder to furnish the
performance security to conclude the procurement contract within fifteen days. The concerned bidder
shall have to furnish the performance security and sign the procurement contract within the fifteen
days.
(Source: PPA 2063 and 4th amended PPR 2064)
A bidder whose bid is accepted shall submit the performance security issued by a commercial bank in
the format as specified in the bidding documents within fifteen days. The amount of the performance
security shall be five percent of the procurement contract amount. In the case of a procurement
contract which does not disclose the amount, the performance security shall be submitted as
stipulated in the bidding documents by the Public Entity. Unless otherwise provided in the
procurement contract, the validity period of the performance security shall have to exceed at least
more than one month's period to the last period for supply or delivery of the goods or warranty period
or defects liability period of construction works as referred to in such contract (vl/b ;Demf}tfdf cGoyf
Joj:yf ePsf]df afx]s sfo{;Dkfbg hdfgtsf] dfGo cjlw To:tf] ;Demf}tfdf plNnlvt dfn;fdfg cfk"lt{ jf
x:tfGt/0f ug{' kg]{] clGtd cjlw jf k|Tofe"lt -jf/]G6L_ sf] cjlw jf lgdf{0f sfo{sf] q'6L ;Rrfpg] bfloTj -l8km]S6
nfolalnl6h_ sf] cjlw eGbf sDtLdf Ps dlxgf a9L cjlwsf] x'g' kg]{5). The performance security issued by
a foreign bank shall be valid only if it is counter-guaranteed by a commercial bank established in
Nepal (ljb]zL a}Ín] hf/L u/]sf] sfo{;Dkfbg hdfgt g]kfndf :yfkgf ePsf] s'g} jfl0fHo a}Ín] k|lt k|Tofe"lt -
sfp06/ Uof/]G6L_ u/]sf] ePdf dfq dfGo x'g]5).
(Source: PPA 2063 and 4th amended PPR 2064)
5.5 Conditions of Contract

Whatever agreement is reached between different parties, it is followed by certain terms and
reference that bind all the parties reaching the agreement. These terms and reference are called
conditions of contract. Its purpose is for the easy and smooth functioning of work and minimizing
disputes. It contains two parts:
a) General condition of contract (GCC)
b) Special condition of contract (SCC)
General condition of contract

1. Definition & interpretations
2. Time for completion and delays
3. Payment to contractor
4. Execution of work and measurement of completed work
5. Breach of contract
6. Arbitration - settlement of disputes
7. Suspension of work
8. General obligation of contractor
9. Labor and labor welfare
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Special condition of contract

Some conditions may be changed by mutual agreement between the parties, which may be based on
law of the country, nature of work etc.
5.6 Prequalification
The successful execution of contracts for large and complex buildings, civil engineering, supply and
installation, turnkey, design and build projects requires that contracts are awarded only to those firms,
or combinations of firms, that are suitably experienced in the type of work and construction
technology involved, that are financially and managerially sound, and that can provide all the
equipment required in a timely manner. The assessment by an implementing agency of the suitability
of firms to carry out a particular contract prior to being invited to submit a bid is a process called Pre-
Qualification. It is a kind of short listing of eligible bidder to avoid crowding of bidder. It ensures that
the invitation to bids extended only to those perspective bidders who have adequate capability and
resources to perform the particular contract satisfactory taking in to account their
 Experience and past performance on similar contract
 Capabilities w.r.t. personnel, equipment and construction facilities
 Financial position
 Litigation (मुद्दा तदन,ु तवरुद्ध अगाति बढ्नुु) history
Matters to be stated in the Pre-qualification Documents
 Qualification required for the proposed work and in the case of a joint venture the qualifica-
tion of the partners
 Documents and information to be submitted by bidders to prove their qualifications and eligi-
bility.
 If procurement requires to be made by making separate lots or package of goods or construc-
tion work such lots or packages
 Method of preparing proposal
 Procedure of evaluating pre-qualification proposal
 Major terms and conditions of procurement contract
 Method, place, deadline for submitting pre-qualification proposals.
The Requirement for Prequalification of bidders

GON and most multilateral Financing Agencies require prequalification of firms for the construction
of large or complex works contracts, followed by a closed competitive bidding procedure in which
only those firms meeting specified prequalification criteria are invited to submit a bid. All applicants
meeting the specified criteria should be allowed to bid. Therefore, prequalification should not be used
for limiting competition to a predetermined number of potential bidders. The decision whether to car-
ry out prequalification is a matter of professional judgment based upon a number of considerations
about the contract itself, and about the actual process of prequalification. Contract considerations in-
clude size, complexity, limitations on completion time, the critical nature of the works, environmental
impact, associated risks, legal provisions of the country etc.
Benefits of Prequalification
The prequalification process may be of benefit to both bidders and the Employer alike, in that:
(a) The process enables prospective bidders, who may be insufficiently qualified on their own, to
avoid the expense of bidding, or to form a joint venture that may give a better chance of success.
(b) With prequalification, well-qualified firms will price their bids with the knowledge that they
are competing against other qualified bidders meeting realistic minimum competence criteria, it
assures that an inadequately qualified competitors will be excluded from submitting unrealistical-
ly low bids which encourage the qualified and leading contractors to bid.
(c) Prequalification enables the Employer to assess the interest from qualified firms generated by
the contract and, in the event that only a limited number of applications are received, to make any
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necessary adjustments in the procurement process (including, in particular, the special conditions
of contract-sharing of risk, payment terms, liquidated damages, or completion times, which may
be perceived as difficult/tedoius by potential bidders).
(d) It helps to expose potential conflicts of interest by identifying contractors who may have a
business association with consultants to the project.
(e) It reduces the amount of work and time involved by the Employer in evaluating bids from un-
qualified contractors.
(f) It encourages local firms to form joint ventures with other local or international firms, thereby
benefiting from their resources and experience.
(g) It enables the Employer to assess the likelihood of contractor’s eligibility for domestic bidder
price preference.
(h) It reduces significantly, if not eliminates, problems of rejection associated with low-priced
bids submitted by bidders of doubtful capability; and
(i) It gives Financing Agencies some indication of the Employers ability to manage an important,
early procurement function.
Disadvantages of Prequalification
On the negative side, prequalification has some potential disadvantages:
(a) It may increase procurement lead time, although this can be minimized by good procurement
scheduling e.g., undertaking the prequalification process while bid documents are being prepared.
(b) The Employer is required to review all prequalification applications, whereas post-
qualification requires the review of the qualifications of, normally, only one (the lowest evaluat-
ed) bidder.
(c) Collusion (the possibility of price-rigging) is easier among a limited number of identified bid-
ders, particularly if they are of the same nationality.
(d) The element of subjective judgment required by evaluators when applying the prequalification
criteria to a number of applicants, and the discretionary (optional/flexible) rights reserved to the
Employer, provide opportunities for externally influenced deviations from the expected high
standards of ethics and impartiality in prequalifying applicants.
5.7 Post Qualification

For the procurement of simple and unsophisticated works contracts the Employer may apply post-
qualification by requiring bidders to submit the information pertaining to their qualification together
with their bids. For that purpose, clear-cut, fail-pass qualification criteria need to be specified by the
Executing Agency in both the Invitation for Bids as well as the Bidding Document in order to enable
bidders to make an informed decision whether to pursue a specific contract and, if so, either as a sin-
gle entity or in joint venture. No prequalification process is adopted. All the eligible bidders partici-
pate in the bidding process. It may be include:
a) Single envelope system (Financial & technical proposal in a single envelope)
b) Double envelope system (Financial & technical proposal in separate envelope)
In double envelope system successful bidders are selected by adopting one of the following three
methods:
 Short list from technical proposal
 Select the lowest bidder first and check the technical proposal. If technical proposal is ok, se-
lect the party. If technical proposal is not ok, select the second lowest bidder and check the
technical proposal.
 Give weightage to both technical & financial proposal. Select the bidder getting highest mark.
5.8 Pre-bid Meeting

In case of big projects and complex works pre-tender meeting should be conducted to cause appraisal
of the project: appreciate the views of prospective bidders, their comments and suggestions are given
cognizance (तवीकृ ति). The tenderer should also make use of the opportunity and put forth their view-
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points of tender after thorough study of tender conditions and site conditions/ deficiencies, which
cause difficulties in quoting/ execution. Many times the tenderers do not use this facility and grumble
(complaint) afterwards that the tender has one-sided conditions. The questions and the replies should
form part and parcel of the tender. Employers should not hesitate to relax some of their rigid condi-
tions to get a better offer. These are the pointers for proactive and effective dealing. In the meeting, a
bidder may raise any question or curiosity concerning procurement proceedings to the Public Entity
and such Entity shall be required to make available as soon as possible the answer to such question or
curiosity without divulging the source of questioners and the minute of the meeting to all bidders.
A Public Entity organize a meeting of bidders in the case of a notice for invitation to national
level bidding, at least ten days before and in the case of a notice for invitation to international level
bidding, at least fifteen days before the deadline for submission of bid. If, from the meeting, any
technical or commercial aspects of the bidding documents require to be changed, the Public Entity
shall, after changing the documents accordingly, send within five days of such a meeting a notice of
such a change to all the bidders who have purchased bidding documents.
The purpose of pre-bid meeting is to clarify any concerns bidders may have with the
solicitation (माग गने) documents, scope of work and other details of the requirement. These meetings
are formal and the results are made available in writing to all prospective bidders that registered
interest in the requirement, by it through requesting, buying or downloading the solicitation
documents from an official website. Prospective bidders are permitted to request clarifications by a
date and time stipulated in the solicitation (माग गने) documents. Although prospective bidders should be
encouraged to get as much information as possible (including visiting the site) on a specific or
upcoming requirement of a procuring entity, formal site visits are usually planned and carried out for
works procurement and more complex goods requirements. When a site visit is planned, the details of
the date and time must be stated in the solicitation documents. And the site visit should take place
before (but not too far in advance of) the pre-bid meeting. The pre-bid meeting is usually open to all
interested prospective bidders; however, in cases where pre-qualification or short-listing is carried
out, only pre-qualified or short-listed bidders are invited to attend the pre-bid meeting. Site visits, as
mentioned above, can and should preferable be held prior to the pre-bid meeting. The reason for this
preference is because after the site visit, bidders may have additional queries and these can be
addressed at the pre-bid meeting and formally sent (with the minutes) to all prospective bidders that
expressed interest in the requirement, or those that were short-listed through a pre-qualification
exercise or restricted bidding process. The time and venue of these meetings are addressed in the
solicitation documents, and attendance is usually not obligatory (जरुरी). During the site visit the
prospective bidders survey the site and ask questions to clarify any doubts or information provided in
the solicitation documents.
5.9 Opening & Evaluation of Bids

Opening of Bid
Public Entity shall have to open a bid in the presence of the bidder his/her representative. Provided
that there shall be no constraint for opening bid only for the reason of absence of bidder or his/her
representative.
Preliminary Examinations of Bids

The purpose is to identify and reject bids that are complete as required by the bidding documents
before further detailed evaluation. The principal areas to be covered are: Verification of signature,
registration, J/V agreement; Eligibility of bidders; Bid Security; Completeness and qualifications. The
purpose of the bid evaluation process is to determine the lowest evaluated substantially responsive
bid (Go"gtd d"Nof+lÍt ;f/e"t?kdf k|efju|fxL af]nkq) in accordance with the terms and conditions of the
bidding documents. The Bid Evaluation Committee established by the implementing agency shall
evaluate bids. Evaluation of bids shall be on the basis of the information in the bids alone.
In evaluating and comparing a bid, comparison shall have to be made by fixing the quoted price
excluding Value Added Tax. The evaluation committee shall have to evaluate the bid included
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evaluation in accordance with the criteria and method set forth in bidding documents of such bid.
While evaluating a bid, the technical, commercial and financial aspect of such a bid shall be
evaluated.
 If any arithmetical error is found in a bid, the Public Entity may correct such an error, and
where, in making such correction, there exists a discrepancy between unit rate and total
amount, the unit rate shall prevail, and the total amount shall be corrected as per the same rate.
 Where there is a discrepancy between figures and words bid submitted by a bidder, the
amount in words shall prevail.
 Where on examination, the qualification of the bidder of the bid having the lowest bid price is
in conformity with the qualification evaluation criteria set forth in the bidding documents,
such bid shall be the Lowest Eva1uated Substantively Responsive Bid. The Public Entity shall
select for acceptance only the lowest evaluated substantially responsive bid.
 Within seven days of the selection of the bid, Public Entity shall serve a notice of the intent of
acceptance of his or her bid to the concerned bidder.
Determination of Substantial Responsiveness of Bids

A bid is considered substantially responsive if it does not contain any major deviations (ठुलो फरक) from
the bidding documents or conditions which cannot be determined reasonably in terms of monetary
value for financial adjustment. The purpose is to reject bids which are not substantially responsive to
major commercial and technical requirements.
Commercial (af]nkqsf] Jofkfl/s kIf ) reasons for rejecting bids are:

 Bid security/bid validity period not in accordance with bidding documents.
 Inability to meet critical work schedule.
 Failure to comply with minimum experience/ financial capability.
 Conditional bids.
Technical reasons for rejecting bids are:

 Failure to bid for the required scope of work
 Failure to quote for each item in BoQ
 Failure to satisfy major requirements in the Specifications
Detail evaluations of Bids

The detailed evaluation shall be based on the evaluation criteria as specified in the bidding
documents. The purpose is to determine the evaluated cost of each bid. The basis for award of
contract shall be the bidder with the lowest evaluated substantially responsive bid subject to:
 If bidders are pre-qualified,
 If the bid contains no substantial deviations from the specifications (Technical Responsive-
ness),
 If the lowest evaluated cost is well within the cost estimate,
 If rate analysis submitted by the bidder is logical and realistic.
Bid Evaluation report

The bid evaluations Committee shall prepare a Bid Evaluation Report, within 15 days of starting of
bid evaluation, in the format contained in the Standard Guide for Bid Evaluation and submit to the
Competent Authority (means an authority authorized under Public Procurement Act or the rules
made thereunder to approve proceedings regarding procurement) for further considerations and
actions. If there is no donor involvement or the donor does not require no objection, the Project
Manager or Competent Authority may enter into negotiation/agreement process.
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5.10 Award of Contract
Letter of Intent (आशयपत्र) to Accept the Bid/ Contract

Within 7 days of the approval
of the recommendations of the
Bid Evaluation Committee, the
Employer may issue the letter
of intent (cfzosf] ;"rgf-af]nkq
5gf}6 ePsf] ;ft lbg leq ;fj{hlgs
lgsfon] ;DalGwt af]nkqbftfnfO{
lghsf] af]nkq :jLs[t ug]{ cfzosf]
;"rgf lbg' kg]{5 . To;/L 5gf}6
ePsf] af]nkqsf] af]nkqbftfsf] gfd,
7]ufgf / /sdsf] hfgsf/L cGo
af]nkqbftfnfO{ ;d]t lbg' kg]{5) to accept the lowest evaluated responsive bidder. This information is to
be given to all bidders through public notice in newspaper. If no other bidders/concerned persons
submitted any complain about this selection, the contract is awarded to the selected bidder and called
for agreement with required performance bond within 15 days.
Contract Agreement
The project Manager/Division Chief shall ensure that all provisions in the bidding documents and any
additional provisions agreed upon with the bidder are complied (observed/confirmed) with before
signing the agreement. A contract may consist of number of document which contain collectively all
the essentials of contract and which are usually linked together by cross-reference. Engineering
contract document usually contains the following:
 Tender notice
 Instruction to bidders (General rules and direction for the use of the contractors)
 Letters of submission of tender
 Letter of acceptance of tender
 The addenda- The final contract is obviously subject to the addition, or alternations agreed to
by parties and such it is necessary that the correspondence exchanged and conditions modi-
fied. This is called addenda. They are also made part of the contract document.
 Form of contract
 Condition of contract
- Special conditions of contract (SCC)
- General conditions of contract (GCC)
 Schedule A - Showing the details of materials if any, to be supplied by the owner to the con-
tractor.
 Schedule B-BOQ
 Specification
 Drawings
Priority of Document
The documents forming the contract shall be interpreted in the following order of priority:
(1) Contract Agreement.
(2) Letter of Acceptance,
(3) Contractor’s bid,
(4) Special Conditions of Contract,
(5) General Conditions of Contract,
(6) Specifications,
(7) Drawings,
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(8) Bill of Quantities

(9) Addenda
Factors to be considered in preparing the contract document

 The contract must be fair
 Contract must be clear
 Contract language must be consistent
 No repetition (say it once, say it in proper place)
 Use each part of contract for its proper purpose
 Contract information must be retrievable (to recover or regain)
 Use foresight (try to foresee any possible area of confusion and clear them up in advance)
 If you want it get it in the contract
5.11 Selection Method of Consulting Services

Consulting Services consist of activities of intellectual and advisory nature that does not lead to
measurable physical output and other than goods or civil works. Consulting service can be procured
by following method.
i) Quality Based Selection (QBS- u'0f:t/ ljlw)

 Appropriate for complex or highly specialized assignments for which it is difficult to define
precise TOR (Terms of Reference) and required inputs from consultants
 Selection procedure similar to QCBS except that Financial Proposal, the highest ranked firm
in Technical Proposal only is opened Or where quality method is applied to select proposal,
only the proposal of the proponent obtaining the highest marks in the technical proposal shall
have to be selected (k|:tfjsf] 5gf}6 ug{ u'0f:t/ ljlw ckgfO{Psf]df k|fljlws k|:tfjdf pRrtdc+s
k|fKt ug]{ k|:tfjbftfsf] dfq k|:tfj5gf}6 ug'{ kg]{5).
 Negotiations with the consultant on the Financial Proposal and Contract
 Such as the economic and sectoral study of the country, multi-sector feasibility study, design
of a mechanism of managing and disposing hazardous wastes, design of urban master plan
(b]zsf] cfly{s jf If]qut cWoog, jx'If]]qLo-dN6L ;]S6/n ;DefJotf cWoog, 3fts kmf]x/d}nf Jojl:yt ug]{ Pj+
tx nufpg] ;+oGqsf] l8hfOg, zx/L u'?of]hgfsf] l8hfOg, ljQLo If]q ;'wf/ h:tf k/fdz{bftfaf6 ck]lIft sfo{
:ki6?kdf olsg ug{ g;lsg] k|s[ltsf] / ;fj{hlgs lgsfon] k/fdz{bftfaf6 vf]hk"0f{ k|:tfjsf] ck]Iff u/]sf] sfd)
 An assignment of a type that requires higher expertise and that causes serious and long term
impact in future, such as feasibility study or structural engineering design of large dams or
major infrastructure construction or policy studies of national importance, management study
of large governmental bodies (7"nf afFw jf k|d'v k"jf{wf/ lgdf{0fsf] ;DefJotf cWoog jf ;+/rgfTds Ol-
Ghlgol/ङ l8hfOg, /fli6«o dxTjsf gLlt ;DaGwL cWoog, 7"nf ;/sf/L lgsfosf] Joj:yfkg cWoog h:tf pRr
bIftf cfjZos kg{] / eljiodf uDeL/ tyf b"/ufdL k|efj kfg]{ lsl;dsf] sfd )
ii) Quality and Cost Based Selection (QCBS-u'0f:t/ / nfut ljlw)

 It is a method where both quality (Technical Proposal) and Costs of consulting services are
considered
 Technical and Financial Proposals are submitted separately sealed in two envelopes and then
put in an outer sealed envelope
 Where quality and cost method is applied to select the proposal, the technical and financial
proposals shall be evaluated in a combined form and the proposal of the proponent who ob-
tains the highest marks in such evaluation shall have to be selected as prescribed (k|:tfjsf]
5gf}6 ug{ u'0f:t/ / nfut ljlw ckgfO{Psf]df k|fljlws k|:tfj / cfly{s k|:tfjsf] ;+o'Qm d"Nof+sg u/L
;a} eGbf a9Lc+s k|fKt ug]{ k|:tfjbftfsf] k|:tfj tf]lsP adf]lhd 5gf}6 ug'{ kg]{5).
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(3) Details of the total marks to be obtained from the joint evaluation of technical and financial
proposals:-
Net score of the Net score of the Total

Proponent Remarks
technical proposal financial proposal marks
Proponent ‘a’ who has
a 72 18.66 90.66 scored highest marks shall
be selected
b 68 19.53 87.53
c 64 20.00 84.00
iii) Fixed Budget Selection (FBS-lglZrt ah]6 ljlw )

 Where fixed budget method is applied to select proposal, a proposal having cost above such
budget ceiling shall be rejected and the proposal of the proponent who obtains the highest
technical marks after falling within such budget ceiling shall have to be selected (k|:tfjsf]
5gf}6 ug{ lglZrt ah]6 ljlw ckgfO{Psf]df To:tf] ah]6sf] ;Ldf eGbf a9L nfut ePsf]] k|:tfj /2
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ul/g]5 / To:tf] ah]6sf] ;Ldf leq k/L k|fljlws k|:tfjdf pRrtd c+s k|fKt ug]{ k|:tfjbftfsf] k|:tfj
5gf}6 ug'{ kg]{5).
iv) Least Cost Based Selection (Go"g nfut ljlw )

 More appropriate for assignments of a standard or routine nature, assignment small
 Financial Proposal of all consultants passing minimum Technical Proposal opened
 Where least cost method is applied to select proposal, the proposal of a proponent having the
lowest cost out of the proponents having obtained minimum marks prescribed for being suc-
cessful in the technical proposal shall have to be selected (k|:tfjsf] 5gf}6 ug{ Go"g nfut ljlw
ckgfO{Psf]df k|fljlws k|:tfjdf ;kmn x'g tf]lsPsf] Go"gtd c+s k|fKt ug] { k|:tfabftfx? dWo] ;a} eGbf
sd nfut ePsf] k|:tfjbftfsf] k|:tfj 5gf}6 ug'{kg]{5).
Expression of Interest (EOI-cfzokq)

It is the process of short listing of the consulting firms. To procure a consultancy service valuing more
than Rupees 20 Lakh, a Public Entity shall have to invite a expression of interest by publishing a no-
tice. If a consultancy service of an amount valuing more than Rupees 10 Crore requires to be pro-
cured, generally an international level expression of interest shall be invited. The notice inviting the
letters of intent shall indicate the following matters:
(a) The name and address of the public entity,
(b) General description of the proposed assignment and project.
(c) The source of funding for the proposed assignment (k|:tfljt sfdsf] vr{ Joxf]ने ;|f]t).
(d) The qualification of the consultant submitting the letter of intent,
(e) If the consultant submitting the letter of intent is a firm or company:
 A profile of the firm or company.
 Status of joint venture (If two or more firms or companies are to provide consultancy
service as a group, organization or a joint venture, the name, address, profile of such
firm or company and the name of lead firm or company),
 Details of experience of similar assignments
 Bio-data of key human resources to be involved in the proposed assignment.
Request for Proposals (RFP)

After a short list has been prepared, the Public Entity shall request for proposals from intending pro-
ponents, by giving a period of at least thirty days, sending the documents relating to proposal, as pre-
scribed to the intending proponents who are short listed. The following matters should be included;
(a) Letter of invitation to proposals,
(b) Requirement that the key human resources proposed by the proponent certify that their re-
spective updated bio-data are accurate and complete,
(c) Matter that financial proposals shall be opened only after the evaluation of technical pro-
posals,
(d) Minimum pass score to be obtained by the proponent on the technical proposal,
(e) Whether the proponent is allowed to propose a separate action plan of its own and human
resources for the concerned assignment,
(f) Whether the proponent is allowed to comment on the terms of reference, and
(g) Source of finance required for the proposed assignment.
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5.12 Miscellaneous Terms

a) E-Bidding
Electronic bidding, also known as online bidding, is a rising trend in public and private sectors across
the globe. It is the concept wherein an online marketplace or website allows buyers to post their re-
quirements in real time bidding events and potential suppliers and service providers can compete to
sell their products or services to the buyer. This has substantially reduced cartels, collusions and rig-
gings among the bidders where public procurement often gets politically influenced and defamed (in-
sulted) in counties like Nepal. Bidders using goons and acting in close cahoots while submitting ten-
ders are usual stories and sights in Nepal. E-bidding provides significant benefits to both government
agencies and suppliers. For government agencies, electronic bidding expedites the decision-making
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process. The selection of suppliers is based on the lowest bid price offered during the set bidding pe-
riod. The process can be simplified further (by auto- filtering in the system. The use of government
resources is more efficient as time spent on procurement management administration is optimized,
thus allowing the government users to focus on more productive service deliveries.
b) Liquidated Damages (पूर्व ननर्ावरित क्षनतपूनतव )

Liquidated (delay) Damages are remedies available to any contracting party to compensate for the
financial loss suffered as the result of a proven breach of contract. In Common Law Countries, it is
known as Liquidated damages. In Civil Law Countries, it is known as Contractual Penalties. Its
amount is designate during the formation of a contract for the injured party to collect as compensation
upon a specific breach. If the works under the procurement contract fail to be completed within the
time specified in the contract due to the delay of the supplier, consultant, service provider or construc-
tion entrepreneur shall have to pay liquidated damages, generally of zero decimal zero five percent
(0.05%) of the contract price per day not exceeding ten percent of the contract price. Liquidated
Damages are not applicable if:
 Delay in giving possession of site
 Interfering in carrying out works
 Ordering extra items/ increase in scope of works
A procurement contract may provide the following provision in respect of liquidated damages:-
(a) If the work under the procurement contract could not be completed within the time specified in the
contract due to the delay of the supplier, consultant, service provider or construction entrepreneur, as
the case may be, he/she shall have to pay to the Public Entity liquidated damages, generally of zero
decimal zero five (0.05) percent of the contract price per day not exceeding ten percent of the contract
price; however, he/she does not need not to pay liquidated damages if the performance of work or de-
livery of goods is delayed due to occurrence of force majeure or without any fault or negligence on
his/her part (cfk"lt{stf{, k/fdz{bftf, ;]jf k|bfos jf lgdf{0f Joj;foLsf] l9nfO{sf] sf/0fn] vl/b ;Demf}tf
adf]lhdsf] sfd ;f] ;Demf}tfdf tf]lsPsf] Dofbdf ;DkGg x'g g;s]df lghn] ;fj{hlgs lgsfonfO{ ;Demf}tf /sdsf]
bz k|ltztdf ga9\g] u/L ;fwf/0ftof k|lt lbg ;Demf}tf /sdsf] z'Ggf bzdna z'Ggf kfFr k|ltzt k"j{ lgwf{l/t
Ifltk"lt{ lbg' kg]{ t/ lghsf] sfa' aflx/sf] kl/l:ylt k/L jf s'g} ulNt jf x]nr]qm¥ofO{ geO{ sfo{;Dkfbg jf cfk"lt{
ug{ l9nf ePdf To:tf] Ifltk"lt{ ltg{ gkg]{)
(b) The concerned construction entrepreneur, supplier, service provider or consultant, as the case may
be, shall not be relieved of the obligation of performing the work under the procurement contract
even upon payment of the liquidated damages under clause (a). (v08 - a adf]lhdsf] k"j{ lgwf{l/t Ifltk"lt{
ltb{}df ;DalGwt cfk"lt{stf{, k/fdz{bftf, ;]jf k|bfos jf lgdf{0f Joj;foL vl/b ;Demf}tf adf]lhdsf] sfo{;Dkfbg
ug]{ bfloTjaf6 d'Qm x'g g;Sg] .
c) Price Adjustment (d"No ;dfof]hg)

Unless otherwise provided in procurement contract, if price needs to be adjusted in the course of im-
plementation of a procurement contract having duration exceeding fifteen months the competent au-
thority may adjust price. Unless otherwise provided in procurement contract, if price needs to be ad-
justed in the course of implementation of a procurement contract having duration exceeding 15
months the competent authority may adjust price. The maximum amount of price adjustment to be
made pursuant to this Rule shall not, generally be more than 25 percent of the initial contract prices.
Adjustment formula
Pn is a price adjustment factor, A is a constant factor, b, c, d, etc., coefficients representing the esti-
mated proportion of each cost element (labour, materials, equipment usage etc.). Ln, Mn, En, etc, are
the current cost indices or reference prices of the cost elements. Lo, Mo, Eo, etc., are the base cost in-
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dices or reference prices corresponding to the above cost elements. The base cost indices or prices
shall be those prevailing on the day 30 days prior to the latest date for submission of bids. Current
indices or prices shall be those prevailing on the day 30 days prior to the last day of the period to
which a particular Interim Payment Certificate is related.
d) Bid Validity Period (af]nkq dfGo x'g] cjlw)

In setting out the bid validity period of the bids or the proposals of consultancy services in the bid-
ding documents or documents relating to request for proposals, the Public Entity shall set out the pe-
riod as follows (;fj{hlgs lgsfon] af]nkq ;DaGwL sfuhft jf k|:tfj cfXjfg ;DaGwL sfuhftdf af]nkq jf
k/fdz{ ;]jfsf] k|:tfjsf] dfGo x'g] cjlw pNn]v ubf{ b]xfo adf]lhdsf] cjlw pNn]v ug'{ kg]{5 ):
a For a bid or proposal of consultancy service with cost Ninety days
estimate of up to Rupees 10 Crore,
b For a bid or proposal of a consultancy service with cost One hundred
estimate whatsoever (hlt ;'s}) above Rupees 10 Crore and twenty
days
Note: Bid security period must be sufficient to cover the bid validity period plus 30 days allowed for
successful bidder.
e) Provisional Sum
Generally provisional sum is an amount allocated for a specialized work by a specialized firm; for
which the details are not available at the time of tender. The provisional sum amount will be a best
guess at the time of tender by the employer or contractor depending upon the type of provisional sum.
Hence claim made by the contractor need not necessarily be the exact amount mentioned in the con-
tract. Provisional sum need not be always allocated specifically for a single task. Sometimes part of
contract itself may be made a provisional sum. There can be one or more than one provisional sum
item in a contract. To elaborate, let us take the example of site clearance. There may be so many un-
predictable items in site clearance. Consider an infrastructure project involving flyover, roads etc.
wherein the regular items of clearance include asphalt road, paving blocks, kerb, signal poles, crash
barriers, guard rails, sign boards, storm water drainage pipe lines, sewerage pipe lines, manholes,
catch pits, gullies, trees, bushes, shrubs, buildings, fencing, compound walls, sculptures (मतू ििकला) and
monuments (तमारक), concrete structures etc. In addition there will be items specific to the site as well.
Many items will be measurable at the time of tender but some of the turn out to be uncertain. For ex-
ample, quantum of work involved in removal of a site specific item like sculpture or monument may
become difficult to ascertain. One way to overcome this difficulty is to allocate these as a separate
provisional sum item in the BOQ. In respect of every Provisional Sum the Engineer shall have au-
thority to issue instructions for the execution of work or for the supply of goods, materials, Plant or
services.
f) Contingency
When estimating the cost for a project, there is always uncertainty as to the precise content of all
items in the estimate, how work will be performed, what work conditions will be like when the pro-
ject is executed and so on. These uncertainties are risks to the project. Some refer to these risks as
“known-unknowns” because the estimator is aware of them, and based on past experience, can even
estimate their probable costs. The estimated costs of the known-unknowns are referred to by cost es-
timators as cost contingency. Contingency refers to costs that will probably occur based on past expe-
rience, but with some uncertainty regarding the amount. It is poor engineering and poor philosophy to
make second-rate estimates and then try to satisfy them by using a large contingency account. The
contingency allowance is designed to cover items of cost which are not known exactly at the time of
the estimate but which will occur on a statistical basis.
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Contingencies are clauses in a contract that give either the buyer or seller a way to get out of the con-
tract if certain conditions or timelines are not met. A commonly used example is that of a buyer mak-
ing an offer on a new home before selling his existing home. The buyer needs to sell his present home
before being able to get financing on the new one. Therefore, he makes his offer contingent upon the
sale of his existing home. There will always be a time period associated with such a contingency. If
the buyer is able to get his present home sold within that time period, the deal can go forward. But if
he fails to sell within the specified time period, the seller has the option of getting out of the deal. In
most cases, sellers will not accept this kind of contingency, because they will most likely feel that
they can find another buyer capable of closing the deal without needing to sell another home first. But
new home builders are often willing to accept an offer contingent upon the sale of an existing home.
g) Joint Venture (JV)

A joint venture is a business arrangement in which two or more parties agree to pool their resources
for accomplishing a specific task. This task can be a new project or any other business activity. In a
joint venture (JV), each of the participants is responsible for profits, losses, and costs associated with
it. However, the venture is its own entity, separate and apart from the participants other business in-
terests. A joint venture takes place when two parties come together to take on one project. In a joint
venture, both parties are equally invested in the project in terms of money, time, and effort to build on
the original concept. While joint ventures are generally small projects, major corporations also use
this method in order to diversify (expand). A joint venture can ensure the success of smaller projects
for those that are just starting in the business world or for established corporations. Since the cost of
starting new projects is generally high, a joint venture allows both parties to share the burden of the
project, as well as the resulting profits.
h) Value Added Tax (VAT)

Value-Added Tax (VAT) is a tax on consumer spending. It is collected by VAT-registered traders on
their supplies of goods and services effected within the State, for consideration, to their customers. A
type of consumption tax that is placed on a product whenever value is added at a stage of production
and at final sale. The amount of value-added tax that the user pays is the cost of the product, less any
of the costs of materials used in the product that have already been taxed. The purpose of VAT is to
generate tax revenues to the government similar to the corporate income tax or the personal income
tax.
i) Line of Credit (LC)

A line of credit is basically a flexible loan from a bank or financial institution to an individual or
business. Not unlike how a credit card offers you a limited amount of funds that you can use when, if,
and how you wish, a line of credit is a limited/specified amount of money that an individual can ac-
cess as needed and then repay immediately or over a pre-specified period of time. As a loan, a line of
credit will charge interest as soon as money is borrowed, and borrowers must be approved by the
bank (and such approval is a byproduct of the borrower’s credit rating and/or relationship with the
bank). A line of credit is any credit source extended to a government, business or individual by a bank
or other financial institution. A line of credit may take several forms, such as overdraft protection,
demand loan, special purpose, term loan (अवतध ऋण), discounting, purchase of commercial bills, etc. It
is effectively a source of funds that can readily be tapped at the borrower’s discretion (तववेक, अनभ ु व,
तवचार, मन). Interest is paid only on money actually withdrawn.
j) Variation Order (VO)

After having started the work in accordance with the procurement contract, if there is required addi-
tion to and reduction in the quantity or addition of new item to or substitution in such work due to
technical reasons, the competent authority may issue a variation order for a variation of up to fifteen
percent.
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k) Advance Payment /Mobilization amount (k]ZsL e'QmfgL)

Advance payment may be made to a supplier, construction entrepreneur, service provider or consult-
ant as provided in the procurement contract. In making advance payment, the Public Entity shall not
so make an advance as to exceed 20 % of the procurement contract price. The Public Entity shall de-
duct the advance given from every running bill or other bill/invoice.
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Unit 6
Monitoring & Quality Control (6 Hrs)
6.1 Introduction to Monitoring

Monitoring and Evaluation are essential tools, which help improve the efficiency of on-going projects
and the selection and design of future projects. It also helps the project team to make a rational and
improved decision about the project performance. It is must for achieving the objective of the project.
During planning stage, various resources are planned based upon the analysis and assumptions made
for time and costs. In many cases, such plans may not be precise due to uniqueness of the project.
Further, the assumptions made may not turnout into reality. In such a situation, if the project is con-
tinued, there is every chance that the estimated resources fall short, and the project requirement goes
on increasing in terms of both the time and cost. Therefore, a regular monitoring and evaluation is
essential to note deviations between what was planned and what is being achieved. When such devia-
tions exceed certain limits, it is important to apply remedial measures so that the deviations are
brought back to the accepted track, which is called controlling.
Monitoring is the regular observation and recording of activities taking place in a project or
programme. It is a process of routinely gathering information on all aspects of the project. To monitor
is to check on how project activities are progressing. It is observation; systematic and purposeful ob-
servation. Monitoring also involves giving feedback about the progress of the project to the donors,
implementors and beneficiaries of the project. Reporting enables the gathered information to be used
in making decisions for improving project performance.
Monitoring is the systematic and routine collection of data during project implementation for
the purpose of establishing whether an intervention is moving towards the set objectives or project
goals. In this case, data is collected throughout the life cycle of the project. The data collection tools
are usually embedded into the project activities in order to ensure that the process is seamless.
Monitoring is the systematic, regular collection and occasional analysis of information to
identify and possibly measure changes over a period of time. Evaluation is the analysis of the effec-
tiveness and direction of an activity and involves making a judgment about progress and impact. The
main differences between monitoring and evaluation are the timing and frequency of observations
and the types of questions asked.
Projects even with a good planning, adequate organizational machinery and sufficient flow of
resources cannot automatically achieve the desired result. There must be some warning mechanism,
which can alert the organization about its possible success and failures, off and on. Constant watching
not only saves wastage of scarce resources but also ensure speedy execution of the project. Thus
monitoring enables a continuing critique of the project implementation. Monitoring means keeping a
track of implementation process. Monitoring involves watching the progress of a project against time,
resources and performance schedules during the execution of the project and identifying lagging areas
requiring timely attention and action. Monitoring is defined as a management function to guide in the
intended direction and to check performance against pre-determined plans. Monitoring means period-
ic checking of progress of works against the targets laid down in order to ensure timely completion of
the project.
6.2 Objectives of Monitoring

Monitoring is very important in project planning and implementation. It is like watching where you
are going while riding a bicycle; you can adjust as you go along and ensure that you are on the right
track. In general, the purpose of monitoring & evaluation can be:
 To assess project results: to find out if and how objectives are being met and are resulting in
desired changes.
 To improve project management and process planning: to better adapt to contextual and risk
factors such as social and power dynamics that affect the research process.
 To ensure accountability: to assess whether the project is effectively, appropriately, and effi-
ciently executed to be accountable to the key agencies supporting the work.
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 To provide constructive suggestions like rescheduling the project (if the project run behind the
schedule), re-budgeting the project (appropriating funds from one head to another; avoiding
expenses under unnecessary heading), re-assigning the staff (shifting the staff from one area
to other; recruiting temporary staff to meet the time schedule)
 To promote learning: to identify lessons of general applicability, to learn how different ap-
proaches to participation affect outcomes, impact, and reach, to learn what works and what
does not, and to identify what contextual factors enable or constrain the participatory research.
 To understand different stakeholders perspectives: to allow, through direct participation in the
monitoring and evaluation process, the various people involved in a research project to better
understand each others views and values and to design ways to resolve competing or conflict-
ing views and interests.
What to Monitor and Evaluate?

Understanding the condition of the community /target group before the project was initiated is useful
in order to provide a point of comparison for monitor and evaluating changes that occur during the
project. Baseline survey conducted at the beginning of the project can provide a point of reference for
comparison and for understanding change in the community /target group. It is useful to distinguish
between the different kinds of results generated from the project: outputs, processes, outcomes, im-
pact and reach. These can be briefly defined as follows:
 Outputs describe the concrete and tangible products of the research as well as the occurrence
of the research activities themselves
 Processes describe the methods and approaches used for the project.
 Outcomes describe the changes that occur within the community or with the project managers
that can be attributed, at least in part, to the project process and outputs.
 Impact describes overall changes that occur in the community to which the project is one of
many contributing factors. One such impact often expected from project is positive transfor-
mation of the community /target group.
 Reach describes who is influenced by the project and who acts because of this influence.
Monitoring provides information that will be useful in:

 Analyzing the situation in the community and its project;
 Determining whether the inputs in the project are well utilized;
 Identifying problems facing the community or project and finding solutions;
 Ensuring all activities are carried out properly by the right people and in time;
 Using lessons from one project experience on to another; and
 Determining whether the way the project was planned is the most appropriate way of solving
the problem at hand.
Steps in Monitoring:
 Identifying the different units involved in planning & implementation
 Identifying items on which feedback is required.
 Developing proforma for reporting.
 Determining the periodicity of reporting.
 Fixing the responsibility of reporting at different levels.
 Processing and analyzing the reports.
 Identifying the critical / unreliable areas in implementation.
 Providing feedback to corrective measures.
6.3 Areas of Control

While managing a project three important resource parameters – quality (performances), cost, and
progress (time) – need control. So the areas of control are:
a) Progress (time) control
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b) Cost control, and

c) Quality (performance) control
Management must control these three resource parameters – progress (time), cost and quality (per-
formance) in an integrated manner, not in isolation. The effective control system must monitor quali-
ty, cost, and time (schedule) in an integrated manner and perform their control as a group.
Cost control must start right from the inception of the project. This is because, as the project advanc-
es, the chance of controlling cost through various cost control measures reduces. Cost control can be
achieved by appropriate decision-making process and financial control system. Delay in decision
making incurs more cost. So, prompt decision is prerequisite for better cost control.
6.4 Quality Control

Quality is about doing thing right. The totality of features and characteristics of product, service and
process, which bears on its ability to satisfy a given needs.
(British Standard Definition)
The total composite product and service characteristics of marketing, engineering, manufacturing and
maintenance through which the product or service in use will meet expectations of the customers.
(Armand Feigenbaum)
6.4.1 Quality attributes for products and services
 Performance: such as color and clarity of picture on a television.
 Features: such as whether the TV has remote control.
 Reliability: probability to run without repair.
 Serviceability: how difficult and expensive it is to repair and how long it will take. Good
maintainability offsets reliability criteria.
 Durability: how long it will last.
 Conformance: it measures how well the product meets the specifications or target set by its
designer.
 Aesthetic characteristics: how an item looks, feels, tastes or smells. These arc more subjec-
tive and sometimes more difficult to measure objectively.
 Perceived quality: feeling of confidence in the level of quality that customers develop on the
basis of what they do see, their prior experiences and reputation of the company.
6.4.2 Cost of quality

Cost of quality is a combination of following costs:
 Costs to control quality (prevention and appraisal)
 Costs of failure to control quality (internal and external failures)
Cost of quality becomes the cost to the company of doing things wrong, of not conforming to the
specification. Qualities costs can be divided into four major categories the first two include the costs
to try to control quality and the second two include the costs that result from failure to control quality.
a) Prevention costs: The cost of preventing defective work is usually extended before the prod-
uct is made or service rendered. These costs include:
 Design reviews and drawing checks
 Quality orientation program, education and training
 Process control
 Process orientations
 Suppliers evaluation and presentation
b) Appraisal costs: The cost of appraisal is incurred for auditing service procedure to make sure
they conform to prescribed work practices. These include
 Process capability measurement (e.g. control charts)
 Tests, gauges and test equipment
 Prototype inspection and tests
 In process and final inspection and tests
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 Checking material furnished by supplier

 Work in process goods testing and inspections
c) Internal failure costs: Internal failure cost is applicable when the product is in factors and
not been sold. These costs include:
 Expenses for producing items that are scrapped
 Redesign
 Reworking and downtime
 Retesting defective items
 Lost value of items sold as seconds
 Cost of delays
 Administration time to review non-conforming materials for disposition
 Scrap
d) External failure costs: These costs are applicable to goods when product has been sold.
These costs include:
 Warranty cost
 Product liability (insurance and settlements)
 Consumers affairs (dealing primarily with customer complaints about quality)
 Field service (mostly repairs of what should have worked)
 Product returns, recalls.
6.4.3 Levels in evolution of quality management

a) Inspection: Under a simple inspection based system one or more characteristic of a product
is/are examined measured or tested and compared with specified requirement to assess its con-
formity. The system is applied to the incoming goods manufacturing components and assem-
blies at appropriate point in manufacturing process. Goods or products, which do not confirm
to specification, may be scrapped, reworked or passed on concessions. The system is of the
fact; screening process with no prevention, content with identification of supplies operations
or workers producing non-conforming product.
b) Quality control (QC):

Quality control (QC) is another matter, although many people use the terms QA and QC inter-
changeably or together. Quality control is about the inspection of work to ensure it meets the
quality standards specified in the contract. All government highway construction projects have
“inspectors.” Their job is quality control. They perform that function by accepting work that
meets the specifications and rejecting work that does not. They perform such tests as the den-
sity of soils, the slump and compressive strength of concrete, and the temperature of asphalt
delivered to the site. These are all quality control functions. Under the quality control follow-
ing things are used:
 Raw materials and intermediate stage product testing
 Some self-inspection by operator
 Lagging process performance data
 Feedback process information to operators, setters and production supervisors
 Use of basic statistics
 Process control
c) Quality assurance (QA):

It contains all those plan and systematic actions required to provide adequate confidence that a
product or service will satisfy given requirement for quality. (ISO 8402-1986)
 Statistical process control (SPC)
 Failure mode and effect analysis
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 Involvement of non-production operations

 Use of quality cost
 Comprehensive quality manuals
 Advance quality planning
 System audits and third party approval
Quality assurance (QA) refers to the management systems employed by construction compa-
nies to produce high-quality work consistently. Those systems consist of many programs such
as hiring highly qualified employees, safety programs (safety is an integral part of any quality
assurance program), training programs, incentives and recognition programs that reward high-
quality performance, procurement systems designed to identify the best-quality suppliers, and
personnel policies designed to reduce turnover and promote retention. All of those procedures
should be institutionalized in a company QA manual. In manufacturing, QA also includes sta-
tistical control of processes, but in construction there are so few repetitious processes that we
do not normally include statistical control in the QA procedures of a construction company.
One exception is concrete and asphalt paving. Statistical analysis of these two construction ac-
tivities is sometimes undertaken.
QA/QC is a common abbreviation used by engineers and contractors. It ought not to be used
because QA and QC are different. QA is made up of good management practices. QC is an in-
spection or sampling process. Consider the implications of a contractor with a reputation for
producing low-qua1ity construction, which would be the obvious result of ignoring QA, or cut-
ting too many corners, or using only untrained low-paid workers. Not all contractors intend to
be the highest quality contractor in town. Some believe they can make a better profit by work-
ing fast with untrained crews and moving on to the next job as soon as possible. Such contrac-
tors ignore the complaints of their customers because they intend to get the next job by being
the lowest bidder. The low bid system does not usually contain incentives for contractors to
produce high-quality work.
Too many owners consider construction to be a commodity distinguished only by price.
Gasoline is an example of a commodity. Drivers look for the lowest price gas in their area be-
cause they believe price is the only difference. There is essentially no brand loyalty. Contrac-
tors work very hard to establish a reputation for quality-and to avoid being tagged with the
commodity label. Contractors simply do not agree that they produce a commodity, but many
owners believe that any contractor will produce the same facility, given the same set of plans
and specifications. It is an attitude that is fed by the low bid system. It is in the best interests of
all good contractors to produce high-quality work and to make it known that their work is in
fact of higher quality than the competition. This is not easy. Good contractors prefer to negoti-
ate for work because it is difficult to distinguish themselves on low bid projects.
d) Total quality management: The fourth and highest level involves the application of quality
management principles to all aspects of the business. Quality management is defined in ISO
8402 (1986) as that aspect of the overall management function that determines and implements
the quality policy and as such is the responsibility of top management. Individual departmental
system and requirements to meet this standard may not higher than for a quality assurance lev-
el of quality management but they will pervade the whole organization improving sales, fi-
nance, personnel and other functions. It would also expect the spread of total quality manage-
ment philosophy to extend beyond the organization itself to include partnership with suppliers
and consumers. Total quality is quality in entirety taking care of all important aspects viz: cost,
safety, prompt service, design, environment protection etc.
6.4.4 Functions of QC/QA

Since main objective of QC/QA is to ensure safe, reliable and durable products or structures, it
serves following functions:
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 Regulatory bodies requirements by meeting quality standards concerned with the public
health, safety and environment.
 Designers requirements by ensuring the designers that the design will be implemented as
per design.
 Manufacturers or contractors requirements by establishing proper QC/QA process so
that defective products can be minimized.
 Customers or owners requirements of achieving safe, reliable durable products or out-
puts.
6.4.5 Elements of QC/QA

The basic elements of QC/QA are:
 Quality characteristics: It defines the basic features of a product as dimensions, color, taste,
strength, temperature, compositions etc.
 Quality design: It defines the ranges of deviations or a tolerance level within which the prod-
ucts are acceptable to use otherwise they are rejected.
 Quality conformance: It refers to the assurance of that the products produced do confirm the
standard. It tries to minimize rejection rate. For example, in a lot of 100-unit production, two-
rejection rate is better than seven or eight.
6.4.6 Factors influencing construction quality

Following factors will have influence on construction quality:
 Design
 Drawings
 Specifications
 Bid preparation and selection of a contractor
 Socio-economic factors
 Environmental factors
6.4.7 Techniques for QC/QA

For control/assurance of quality following techniques shall be applied:
 Preparation of quality control/assurance plan
 Regular inspection/supervision
 Testing destructive or non-destructive; field or lab
 Sampling
 Identifying deviations or discrepancies
 Adopting necessary corrective measures
6.4.8 Stages of quality control

 Incoming goods, services, and information (Input)
 In-process (Process)
 End product (Output)
6.4.9 Tools for quality control

 Well written specification
 National and international standards (Codes): NS (Nepal Standard), ISI (Indian Standard of
Institute), BSI (British Standards Institute), ISO (International Organization for Standardiza-
tion)
 Other international organizations: WHO, UNO, FAO (Food and Agriculture Organization) etc
 Procedural guidelines
 Training
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6.4.10 Some Quality Related term and its definitions

a) Quality System
The provision made by management to ensure that quality is protected and promoted throughout all
an organization’s activities is referred to as the ‘Quality System’ or Quality Management System’.
b) Quality Plan
A Quality Plan (QP) is a document setting out the specific quality practices, resources, and sequences
of activities relevant to a particular product, service, contract or project. It should define:
 The quality objectives to be attained
 The specific allocation of responsibilities/authority during the different phases of the project
 The specific procedures, methods and work instructions to be applied
 Suitable testing, inspection and audit programs at appropriate stages
 A method of modification for the quality plan as the project proceeds
 Other measures necessary to meet the objectives
c) Quality Circle
Quality circle is a small group of employees in the same work area of doing a similar type of work
who voluntarily meet regularly for about an hour every week to identify, analyze and resolve work
related problems, & leading to improvement in their total performance and enrichment of their work
life. QC is a technique of participative management for continuously improving quality, quantity, ef-
ficiency and safety.
QC is a work group of employees, who meet regularly to discuss their quality problems, investigate
causes, recommend solutions and take corrective actions.
6.4.11 Quality Management Tools

 Brain Storming: Brainstorming is an idea-generating process. Alternatives are generated
spontaneously through group creativity.
 Cause and Effect Analysis: Cause and effect analysis is very useful for investigating root
causes of problems. A solution applied after finding root causes of problem will have chance
of lasting success in eradicating the problem.
 Process Flow Chart: A process is anything, which converts an input into an output by doing
work. Flow chart provides substantial help to picture a process where overlaps, duplication
and iterative loops are easily identified.
 Check List: Check list is the collection of different activities accompanied with required
quality standards in each activity expressed in a sequential order so that each item is checked
with the stipulated performance standard.
6.5 Project control cycle

The project control cycle begins with the initial project plan.
Item 1: Project plan includes a budget, schedule and other planning information such as staffing and
administrative procedures. It identifies the resources such as equipment, people and materials that are
needed at job site.
Item 2: The project plan is used to initiate the field operations. The field supervisors are responsible
for the productive utilization of resources.
Item 3: It represents the impact of external factors such as labor strike, vandalism, bad weather or
other events that are difficult to predict and affect the field operations. The arrow between field opera-
tion and cost/schedule engineers block represents the processing of the actual information from the
field.
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Item 4: The cost/schedule engineer block repre-

sents the coordination of data from the field and
comparison with the initial plan. The technical
people who established the initial work plan are
responsible for recommending the adjustment to
plans based on their analysis of actual field opera-
tions.
Item 5: It represents the permanent storage of in-

formation for use by the company in future job
planning. The arrow between the cost/schedule
engineers and project manager block represents
the distribution (spreading) of status reports to the
project team. For the reporting process to be use-
ful, it must deliver accurate
information to the right people on time. The re-
ports should also be sorted to indicate the more
important activities first with key variances noted. Fig 6.1: Project control cycle
Item 6: It represents the final decision point in the

control process. The goal of the project control
system is to deliver to the decision makers accu-
rate and timely project status information so that
intelligent decisions can be made. A plan has been set and actual progress has been measured. Man-
agement must now decide the best course of action to take. Outside input should come in the form of
technical staff or consultant support.
The arrow from the project manager back to field operation represents the completion of project con-
trol cycle. Management has made a decision and final instructions are now being given to the field.
Adjustment may be made in a project plan, or the instruction may be continue on as originally sched-
uled. For these instructions to be effective, they must be delivered soon enough to be smoothly im-
plemented.
The project control cycle is a feedback loop providing all the participants with a measure as to the
success of their past decision. Considering the project control cycle as three step process of measur-
ing, evaluating and correcting, the project control cycle may also be presented as follow:
Fig 6.2: Project control cycle
6.6 Feedback control system

Feedback is the process of extracting information from the output level and then feeding it back to the
input. Hence the results of the execution process are feedback. In the perfect world, the tangible re-
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sults of the execution process i.e. output / performance can be estimated accurately. Once the re-
sources and the control strategy are fixed, the planning
process will give the exact output such as exact cost,
exact time of completion etc. However, in a project
there may be unpredictable events that act on the pro-
cess as disturbances i.e. in these cases the feedback
control system is necessary. In feedback control system,
direct variance is obtained by subtracting plan data
from implementation data to be given a positive or neg-
ative variance. It can be used to show differences between actual progress and planned target, the re-
sources use against estimated quantities or budget. In feedback control system, information about the
results of the activity is fed back to the persons who are the actors themselves. In a system control,
the communication network is set up in such a way that information about deviations is at once
transmitted to the person, who can take the corrective actions such as adjustment on resources. Hence
the control process of the project can be supported by introducing elements of feedback control theo-
ry. A perfect leader should develop a system for performance revision, and at each revision control
action is taken. In this system, with the data obtained, comparison is made between:
 Schedules and actual start dates
 Scheduled and actual time of an activity
 Scheduled and actual milestones
 Estimated and actually spent quantity of specific materials
 Budgeted and actual cost
 Budgeted and actual man hours
 Budgeted and actual unit cost
Fig: 6.3 Feedback control for a system

Feedback control system uses data obtained from the project implementation and not historical data.
Since performance is not indicated clearly, it is often called backward looking method of analysis and
is more useful for typical projects to be implemented in future.
6.7 Cost Control

Cost control may be broadly defined as the process of controlling the expenditure in a project at all
stages from its inception through its development. Cost control means controlling changes to project
budget. Cost control is equally important to all firms, regardless of size. Small firms generally have
tighter monitory control, mainly because they have fewer project and the risks of failure of project are
high. Unlike this, larger firms usually have several projects and even if one project fails, they have the
luxury to spread project losses over several projects. So, larger firms may have less sophisticated con-
trol techniques. Cost control is mainly concerned with:
 Influencing the factors which create changes to the cost baseline to ensure that changes are
beneficial
 Determining that the cost baseline has changed and
 Managing the actual changes as and when they occur.
6.7.1 Cost control and time

As mentioned above, as the project advances, chance of reducing cost through various cost control
measure reduces. Possible cost reductions in different items are usually available more readily in the
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early phase of project, but are reduces as we go further, into the project and life cycle phases. This is
clearly shown in figure given below.
Fig: 6.4 Cost Reduction Analysis
6.7.2 Elements of cost control

Table 1 presents elements of cost control – observations, comparisons, reason for variance, and
correction – and their descriptions.
Table 1: Elements of cost control and their descriptions

Elements of cost
S.no. Description
control
Regular observation should be made on: material consumed,
1 Observation
manpower and equipment employed, other direct costs etc.
The observed data must be compared with design standard by
2 Comparison
calculating variances
If the variance is large, it is important to know the reasons for the
Identify reasons for
3 variance. For this it is important to check the purchase price of
variance
materials, quality, wastage, work condition etc
If the variance cannot be justified then the middle level or higher
level management takes the necessary action for bringing the cost
4 Corrective action of the project in to the track. Corrective action should be worked
out and implemented, which may include re-scheduling of the
project.
6.7.3 Methods of cost control

 Short term planning and control
 Accounting method of control
 Overall profit and loss account
 Profit-Loss on valuation date
 Unit costing
 Project cost models- S curve and EVA
6.7.3.1 Short term planning and control

In this method, the project is broken down in much smaller components and short terms plans for
weeks and days are prepared. Such plans are easy to evaluate and monitor. Also since the short terms
plans have less degree of uncertainties, there is an every chance of project being controlled
effectively.
6.7.3.2 Accounting method of cost control

a) Overall profit/loss account:
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Profit/loss account is prepared after the project is completed. Profit / loss are determined and the
reasons are analyzed. This information is used for the next project. This system is generally used for
small projects only.
b) Profit/loss on the valuation date:

In this method profit/loss accounts are prepared for various periods after the project is started. This
principle is used for large projects. For any month, total value of work done is R.s 1 Crore and a total
direct expense is Rs. 80 Lakh and indirect cost is Rs. 10 Lakh. Thus, the net profit for the period is
Rs. 10 Lakh. Profit and loss for every month is calculated and plotted against time to note trend. This
helps to access profitability of the project.
c) Unit costing:
In this method, unit cost of each item is checked and compared with planned (or quoted by the
contractor) cost of item, to determine if the items yield profit or not.
Example:
Items of works Unit Tender Cost Actual Cost Variance
Gabion works Cu.m 3000 2500 +500 (profit)
Stone wall Cu.m. 5000 5200 -200 (loss)
6.7.3.3 Project cost method: (Earned Value Analysis)

EVA is a standard method of measuring a projcet’s progress (performance) at any given point in time,
forecasting its completion date and final cost and analyzing variances in the schedule and budget as
the project proceeds. It compares the planned amount of work with what has actually been completed,
to determine if the cost, schedule and work accomplished are progressing in accordance with the plan.
Figure below presents graphical presentation of Earned Value Analysis (EVA). If a bottleneck (बाधाहरु)
appears at any point in the production line, the affect on the cost and time of the completed item can
be identified. Any deviation from the activity S-curve is reported immediately acted upon.
Fig: 6.5 Earned Value Analysis
For conducting EVA, actual and estimated costs are made available to determine the progress factors
at any point of time (or stage) of the project. Progress and cost factors are used to monitor variance
and trends for individual activities. In order to establish a trend, actual progress must be measured
and compared with the forecasted progress which is the base line S-curve. Once it becomes evident
that a work is behind schedule/estimate then the targets should be revised and the potential influence
on monthly progress be evaluated and a new target be computed.
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For conducting EVA, we must first define following terms:

Budgeted cost for work scheduled (BCWS)/planned value:
It is the budgeted amount of cost for work scheduled to be accomplished plus the amount of level of
effort or apportioned (allocated) effort or scheduled to be accomplished in a given time period. In
simple term, BCWS is the value of work that should have been done at a given point of time i.e.
expected expenditure at given point of time (review date).
Budgeted cost for work performed (BCWP)/earned value:

It is the budgeted amount of cost for completed work, plus budgeted level of effort or apportioned
(allocated) effort. This is sometimes referred to as “Earned Value’’. In simple term, BCWP is the
value of work done at a point of time.
Actual cost for work performed (ACWP)/actual value:

It is the amount reported as actually expended in completing the work accomplished within a given
time period. In simple term, ACWP is the actual cost of work done at a point of time.
These costs (BCWS, BCWP, ACWP) can be applied to any level of the work break down structure
(i.e. program, project, task, subtask. work package) for work that is completed Using these
definitions, the following variance definition can be obtained:
Cost Variance (CV) = BCWP - ACWP

If it is zero, you are right on budget. If it is negative, you are over budget. If it is positive, you are
under budget.
Schedule Variance (SV) = BCWP - BCWS

If it is zero, you are right on schedule. If it is negative, you are behind schedule. If it is positive, you
are ahead of schedule.
Cost Variance Percent (%) (CVP) = (C V/BCWP) * 100

Schedule Variance Percent (%) (SVP) = (SV/BCWS) * 100
Schedule performance index (SPI) = BCWP/BCWS

(Value below 1 indicates that the project is behind schedule.)
Cost performance index (CPI) = BCWP/ACWP

(Value below 1 indicates that the project is over budget.)
New Duration estimate = original time estimate / SPI
New Cost estimate = original cost estimate / CPI
6.8 Time Cost Tradeoff
6.8.1 Project cost

For any project total expenditure incurred in terms of man power, equipment, machinery, materials
and time to achieve a particular goal is known as total cost of the project. The total cost of the project
is the sum of two distinct costs.
 Direct cost
 Indirect cost
6.8.1.1 Direct cost

The cost of materials, equipment and money spent on man power form the direct cost. The direct
costs of project are of major concern and behavior pattern of direct costs with time is of importance.
Direct cost of a project depends on the completion time of project, but the variation is not linear.
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Fig: 6.6
6.8.1.2 Indirect cost

The expenditures which cannot be allotted clearly to the individual activities of the project, but are
assessed as a whole are called indirect costs. The indirect cost includes overhead charges,
administrative and establishment charges, supervision charges, loss of revenue, loss in profit and
penalty etc.
6.8.2 Definitions of Terms
6.8.2.1 Normal time

The time usually allowed for
an activity by the estimator is
known as normal time. It is
the standard time for that
activity and is denoted by Tn.
6.8.2.2 Crash time

The minimum possible time
in which an activity can be
completed by deploying extra
resources is known as crash
time. Beyond the crash time
the duration of an activity
cannot be reduced or
shortened by any amount of
increase in mobilization. It is
denoted by Tc.
6.8.2.3 Normal cost

The direct cost required to complete the activity in the normal duration is called normal cost and is
denoted by Cn.
6.8.2.4 Crash cost

The direct cost corresponding to the crash time of completing an activity is known as crash cost and
is denoted by Cc.
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6.8.2.5 Cost slope

The direct cost curve generally is a curve as shown below. But this curve can be approximated by the
straight line or more than one straight lines depending upon the flatness of the curve. Thus the slope
of this straight line is cost slope.
6.8.2.6 Minimum duration
The duration obtained after crashing all activities is known as minimum duration.
Time cost trade-off

Time and cost are the two most important resources that a project manager deals with. Both of these
resources have constraints and the job of a project manager is to
have judicious balance between them. The judicious balance
between time and cost is called Time-Cost trade-off and it can be
achieved by studying the availability and demand of these resources
for the given project. The sum of direct costs and indirect costs is
known as total costs of the project. The relationship between
indirect costs, direct cost and total cost with duration is given in
figure above. From figure it is seen that the curve of direct costs
does not have a linear relationship with time. Thus the combination
of direct and indirect cost gives a curvilinear relationship with time
as shown. From the total cost ACB, it can be seen that the total cost
of a project is minimum for certain time duration. This duration is
known as optimum duration for the corresponding minimum cost.
Further if the project duration is increased, the total cost will also increase. On the other hand if the
project duration is decreased to the crash value, the project cost will be the highest. The optimum
duration is less than the normal duration corresponding to the direct costs. This is due to the fact that
both direct and indirect cost increases beyond the normal duration, whereas below the normal
duration indirect cost decrease, but the direct cost increases.
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References
 A text Book of Project Engineering (IInd Edition) – Er. Santosh Kr. Shrestha and Er. Ishwar
Adhikari
 A text Book of Construction Management (IInd Edition) – Shrestha, Shrestha and Bhattarai
 Construction Management (2007 Edition) - Dr. Rajendra P. Adhikari
 Construction Management and Accounts (IIIrd Edition) – B.L. Gupta & Amit Gupta
 Fundamentals of PERT/CPM and Project Management – S.K. Bhattacharjee
 Notes provided in Masters in CM (NEC-2013 A.D.): Er. Khem Nath Dallakoti
 Estimating & Costing In Civil Engineering – B. N. Dutta
 Engineering Management – Construction Planning by Richard H. Neale and David E. Neale
 Construction Planning, Programming and Control by Brian Cooke and Peter Williams
 Construction Management Fundamentals (IInd Edition) – Knutson, Schexnayder, Fiori and
Mayo)
 https://www.google.com.np/search?ei=dj7CWsm_BIjTvATYx7igCA&btnG=Search&q=defin
ition+of+project (2074/12/19)
 https://en.wikipedia.org/wiki/Project (2074/12/19)
 https://www.theknot.com/content/what-does-rsvp-mean (2074/12/22)
 https://www.designingbuildings.co.uk/wiki/Record_keeping (2075/1/8, Saturday)
 Read more: http://www.businessdictionary.com/definition/progress-report.html
 http://w3.gel.ulaval.ca/~poussart/gel64324/McMurrey/texte/progrep.htm
 Public Procurement Act 2063 first amended 2073 and PPR 2064 with 5 th amended on 2073.
 http://cec.vcn.bc.ca/cmp/modules/mon-wht.htm
 https://evaluateblog.wordpress.com/2013/07/02/types-of-monitoring-in-monitoring-and-
evaluation-me/
 https://www.slideshare.net/srengasamy/project-monitoring-evaluation-s-presentation
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Project Engineering &amp; Construction Management

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Project Engineering &amp; Construction Management

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A Complete Manual

Compiled by: Er. Mahendra Singh (M.E./M.Sc. in Construction Management)

1.1 Definition and Characteristics of Project

“According to Trevor Young, a project is a “collection of limited activities, carried out in an

1.2 Classification of project

B. According to the Foreign aided project:

2.) Bilateral project

2.) Capital intensive project

E. According to the Orientation:

2.) Process oriented

F. According to Scale and Size

G. According to Nature of project

H. According to Time frame and speed

1.3 Characteristics of Project

1.) A defined (specific) goal or objectives

5.) Specific task, not routinely performed

6.) Team Work

7.) Rapid Expenditure

8.) Resource being consumed

9.) Risk and Uncertainties

10.) Planning and Control

11.) Defined deliverables

12.) Contracting and subcontracting

13.) Progressive elaboration:

1.4 Setting project objective and goal

S - Specific & (Clear and well defined)

M- Measurable so that project outcome can be measured and compared (Evaluated)

A- Achievable / Attainable and Agreed by all the members of the team

R-Realistic, possible under limited set of resources

Examples of SMART goal

1.) Bad example of SMART goal: “I want to write a book”.

Good example of a SMART goal:

2.) Bad example of a SMART goal: I want to have a lot of money”.

Good example of a SMART goal:

1.5 Project Life Cycle & Phases

After the completion of this phase, a go/no-go decision is made.

c.) Engineering and Design Phase

d.) Implementation Phase

e.) Divestment/ Phase out/ Termination

Project life cycle in terms of resources/risk and time

Fig: 1.1 Project Life Cycle

1.6 Concept of Project Appraisal

Project appraisal answers two important questions

The primary function of appraisal is to evaluate a project’s ability to achieve.

Project Appraisal Document should include the following:

Factors to be considered during project appraisal (appraisal factors)

1.7 Project Proposal

Contents of Project Proposal

1.7.1 Technical part of project proposal

1.7.2 Financial part of the project proposal

1.7.3 Management part of the proposal

1.8 Procedure for developing project proposal

Step 1: Project brief (Statement of Work)

Step 2: Pre/Feasibility study

Step 3: Preliminary/detailed design

Step 4: Proposal Development

Analysis of Technical Issues

Managerial Analysis of Project

Profile of Proposing Group Process of Feasibility Analysis of the Project

and the project are worth con-

Prepare Funding proposal

Fig: 1.2 Process of Feasibility Analysis of the Project

2.1 Introduction of Planning

Project Engineering & Construction Management

Project Engineering & Construction Management