CONTRACTS AND TENDERS

PRESENTED BY
AR. ZULFIQAR (Assistant Professor))
M.ARCH (HEALTHCARE), B.ARCH
WHY CLIENT NEEDS CONTRACT ?

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In civil engineering there are number of parties works together mutually
to accomplish the work of the projects in many respects but sometimes
there are some faults or construction work related mistakes are
happened for that no party takes the responsibility for the fault if no
written document( Terms and conditions) is signed by them, that is why
contract is needed in order to overcome this problem legally by the help
of the law. 3
 MUTUAL AGREEMENT

CONTRACT
CLIENT CONTRACTOR

BOUNDED BY
LEGAL TERMS AND CONDITIONS

CONSIDERATIONS
ACCEPT REJECT

A CONTRACT IS AN EXCHANGE OF PROMISES BETWEEN

TWO OR MORE PARTIES TO DO, OR REFRAIN FROM
DOING, AN ACT WHICH IS ENFORCEABLE IN A COURT
OF LAW. 4
A construction contract is a mutual or legally
binding agreement between 2 parties based on
policies and conditions recorded in document
form. The two parties involved are one or more
owners, and one or more contractors. The owner
has full authority to decide what type of contract
should be used for a specific development to be
constructed and to set forth the legally-binding
terms and conditions in a contractual agreement.

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TYPES OF CONTRACTS

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1. LUMP SUM CONTRACT OR FIXED PRICE CONTRACT

An owner agrees to pay a contractor a specified lump sum after

the completion of work without a cost breakdown. After work no
detailed measurements is required.

ADVANTAGES
• Reduce client risk
• Bidding analysis and selection process is straight forward
• Change orders are minimized
• Beneficial in small projects with well defined of quantity of work

DISADVANTAGES
• It can give a greater risk to the contractor than client
• Client may increase their tender prize if no profit
• Preparing tender may be expensive for the contractor
• The employer may have to pay a higher price for any change.
• More chances for disputes between client and contractor

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2. TURN KEY CONTRACT

An agreement in which builder agrees to complete a facility so

that it is ready for the use when delivered to the other
contracting party in operational mode.

ADVANTAGES
• It reduces total time during the contractual process by having just one process
instead of two separate ones.
• Lowest cost when integrating all the elements under one provider
• A very effective practical solution to smaller projects.
• Owner gets peace of mind due to hands over full responsibility to the contractor.

DISADVANTAGES
• A higher cost is assumed due to the higher risk that comes with total responsibility.
• Completion of the project is restricted because typically only the biggest
competitors are the ones that are able to assume the highest risks and the full
responsibility.
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3. MEASUREMENT CONTRACT

It contains BOQ provided by the client or tis consultants, can be used

in situations where the design can be described in reasonable detail
but the amount cannot. The contractor will quote against each BOQ
item and enter a unit rate or unit price to build up the total contract
price on the basis of those BOQ.

ADVANTAGES
• Suitable for competitive bidding
• Easy for contractor selection
• Early project starts possible
• Scope and quantities easily adjustable

DISADVANTAGES
• Final cost not known
• At the outset since bills of quantities at tender time are only estimates
• More staff maybe needed to measure, control and report on units
completed
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 4. ITEM RATE CONTRACT/UNITPRIZE/SCHEDULE CONTRACT

It sets forth the prize for each unit of work constructed. The unit
may be for example the number of meters of pipe furnished and
installed, a manhole structure, the number, each of pumps, a
modular building or a cubic meter of excavation. The contract
may specify a particular number of units or may state that the
supplier will furnish all units needed.
WHERE TO USE ?

• Most often used in heavy construction and public works contracts such as
pipelines, highways, earthwork, bridges etc.

5. GUARANTEED MAXIMUM PRICE CONTRACTS

In this type of the owner and contractor agree that project will
not cost the owner more that a set price. The contractor is paid a
cost basis percentage but not more than the set maximum price.
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6. COST PLUS INCENTIVE FEE

The contractor specifies time and quality criteria. If the

contractor meets those criteria, it is paid its costs plus a set fee.
If the contractor exceeds those criteria, perhaps by completing
the job early, the contractor is paid an additional fee based on a
scale set forth in the contract. If the contractor does not meet
those criteria the fee is less.
WHERE TO CHOOSE

Cost plus incentive contracts are appropriate where due to an incomplete or

very complex design , contractor would be unable to give a lump sum price
without including a large contingency for unknown factors.

7. FIXED PRIZE INCENTIVE CONTRACTS

It provides contractors with an additional financial incentive upon
completing a project. However this incentive fee is fixed and under
normal circumstances it can not be increased or decreased once the fee
has been agreed and the contract is signed. 11
 TENDER
Tender is :
 an offer to contractor to do the work for a certain amount of money
 incorporate time and other conditions required
 to carry out the contract requirements
 main reason is to complete a project
 The tender which is submitted by the contractor is generally based on a
bill of quantities & specifications of the statement of work.
TYPES OF TENDERS
1. OPEN TENDER
The system of invitation of tenders by public advertisements in the most
open public manner possible should be used as a general rule and must be
adopted with certain exceptions
 Wide publicity may be given to the call of tenders by:
 (a) Notices in Railway offices,
 (b) Notices in other Got. Offices,
 (c) Advertisement in vernacular/local news papers,
 (d)Advertisement in National/International news papers, if work is
very important.
2. LIMITED TENDER

 Where for reasons, which should be in the public interest, it is considered

not practicable or advantageous to call for open tenders, limited tenders
may be invited with approval of the competent authority. The reasons for
inviting Limited tenders from firm/contractors should be kept on record
while approaching finance for concurrence.
 Tenders are invited from the parties in approved list.
 The minimum number of contractors to be borne on the approved list
should not be less than 10 .
 Limited tenders may be invited from all the contractors borne on the
approved list and not restricted to 10 numbers of contractors.
 The tender notices should be sent by registered post or under certificate of
posting or handed over to the parties concerned and their clear
acknowledgement obtained.

3. SPECIAL LIMITED TENDERS

Can be adopted in following situations under consultation with FA&CAO
 Work of specialized nature
 Work of urgent nature (to be approved by GM personally)
 Consultancy Works (to be approved by GM personally)
 Tenders called from contractors who need not be in approved list.
 Preferably tenders should be invited from six Tenderers but not from
less than four.

4. SINGLE TENDER

Calling of single tender should be resorted to only in exceptional

circumstances after recording necessary certificates that:
1. It is not in the public interest to call for tenders.
2. The demand is urgent.
3. No other suitable contractor is available to execute the work.
4. It should also be recorded as to why single tender is being resorted to
in preference to limited tenders.
It should be ensured that prior financial concurrence is invariably
obtained before obtaining single tender, which should not be below the
level of SAG Officers. The offer should as usual be considered by the
Tender committee before acceptance by the competent authority viz. GM.
 TENDER PROCESS
1. TENDER NOTICE

TENDER INVITATION

TENDER SELECTION

TENDER AWARD
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TENDER NOTICE
 The Tender Notice is a brief
description of the job being
tendered
 to be published in
Newspapers and on the
Internet.
 The Internet is a very cost
effective way of publishing the
tenders.
FORMAT OF AN IDEAL TENDER NOTICE

1. Name of the Project. 9. Date and time up to which

tender documents can be
2. Name & Address of the obtained.
Company offering the 10. The cost of tender
tender. documents.
3. Name of work, materials or 11. Due date of submission
services. 12. Eligibility Criteria
4. Place of work location.
5. Approximate estimated
cost of work.
6. Earnest Money.
7. Period of completion.
8. Date on which the Tender
Document sale
commences.
SUGGESTED READING FOR STUDENTS

• Construction Project Administration- 6th Edition

by Edward R. Fisk.

Thank You
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