CONTRACT &

CONTRACTORS
ALBERT JOSEPH BABY
Roll no:13
 Contract
• Indian contract act 1872, according to Indian contract act, contract is
defined as an agreement enforceable by law.
• Contracts is an agreement between two or more parties by which they
legally bind themselves to do certain things.
• The purpose of contract is to protect both parties and to assure that certain
duties will be performed in a prescribed way.
 Major Engineering contractors in India
• L&T
• Nagarjuna constructions
• Punch Loyd
• Tata projects
• HCC
• Gammon
• Essar projets
• Reliance infra
 Selecting the contractor
• Receiving bids- price
• Contractors reputation
• Know how in certain types of work
• Past record
• Reliability, credibility
• Contractor must prepare a preliminary design in order to make an estimate of the
cost for use in their proposals. The proposal should contain the following
information.
• General description of the project
• Scope of the contractors work
• Description of each portion of the plant with accompanying flow diagrams and
plot plans.
• Auxiliary equipment's to be constructed
• List and description of major equipment’s
• Statement of product quality and production rate
• Proposed cost and fees.
• LIQUIDATED DAMAGES: It is an amount of compensation payable by a
contractor to the owner due to delayed construction.

• UNLIQUIDATED DAMAGES: It is an amount of compensation payable

when a contract is broken. The party who suffers such a breach is entitled to
receive this amount from the party who has broken the contract.
 Contract classification
• Classification of contract in accordance with the mode of reimbursement
1. Fixed price or Lumpsom contract
2. Cost reimbursable contract
3. Time and material contract
4. Turn key contract
5. BOT, BOO contract
 Lump-sum or fixed price contract
• The lump-sum contract allows nothing over or under a fixed single sum.
The contractor agrees to perform certain services which are specified in
detail by the owner in an inquiry or by the contractor in a proposal.
• The amount is fixed for the contract
• No variation of price after the execution
• Applicable to small contract
 Cost plus contract or Cost reimbursable
contract
• contractor is to be reimbursed for all costs applicable to the contract plus a
percentage varies with each type of contract and service. Usually percentage
varies with each type of contract and service.
• Contractors profit increase directly with his costs, owner has no control over the
cost and the contractor accordingly increase his cost as much as possible.
• Under the cost plus contract the owners auditors and engineers have continuous
access to all the contractors records.
• Many of the large process firm prefer the cost plus contract to other type since it
gives them much more freedom and control over the contractor.
 Time and material contract
• Combination of fixed price and cost reimbursable contract.
• Rates are fixed ,hours are not fixed.
• Buyer agrees to pay the contractor a lumpsum for construction no matter
what the contractor pay their employees.
• Many time and material contract also carry a guaranteed maximum price,
which puts an upper limit on what the cost may change, but also allow the
buyer to pay less amount if the job is completed more quickly.
 Guaranteed Maximum contract
• The guaranteed maximum cost contract is similar to the lump-sum
contract except that the guaranteed price may be apply to material and
equipment only or labour only.
• Escalation on either material or labour may be permitted or contract may
be written to exclude all escalation.
• Guaranteed maximum contracts are often written to allow the contractor a
bonus depending on the amount of charges under the maximum.
 9.Turn-key contract
• In this system all the works related to a project including designing,
planning, execution etc. are to be done by the contractor.
• Once the project is completed it is handed over to the owner.
• The owner has to complete the transaction works and occupy the structure
by simply turning the key, ie. opening the door.
 11. BOT system

• Build operate and transfer is a new system in which the land is acquired by the
Govt. and the contractor is asked to build the structure and then operate it until
he collects the money he had spent for the construction, as fees from the users.
• Once the construction cost is recovered, the structure is handed over to the
owner. No payment is made to the contractor by the owner/Govt.
• Security is provided to the builder by the Govt. regarding law and order
problems if any.
• Bridges and roads are usually constructed by adopting this system of contract.
Toll is collected from the users/vehicles passing over it by the contractor to
recover the construction cost.
 SECURITY DEPOSIT
• Security deposit is the amount the contractor has to deposit with the
owner before awarding a work, after his tender is accepted.
• This amounts to generally 5% to 10% of estimated cost of the project.
• This will be refunded to the after the completion of the project. No
interest is paid on SD.
QUALIFICATIONS OF THE CONTRACTORS

Registration of contractors:-
• The contractor must get himself registered in the departments for which
he is interested to take up works.
• Government contractors are entitled to do govt. jobs if awarded.
• Contractors are classified according to the registration and registration
fees and depending on this they can undertake works up to certain amount.
 Pre-qualification of contractors
• Sometimes works are awarded on the basis of quotations invited from a group of
‘selected tenderer’ (a group of known reputed contractors) who are considered
suitable for that job. This method is known as ‘pre-qualification’ and saves a lot
of time.

• In the advertisement itself it must be mentioned that only contractors having

experience in the particular work should submit the tender.
 Contract form
• The most conventional type of contract consist of two parts
1. Agreement- general scope of work, usually by reference to a proposal or
specification and drawings, the contract price or terms of payment and
the necessary formal signatures, witness and notaries.
2. General conditions- completion date, cancellation, subcontracts,
insurance and many other terms are discussed.
3. Certifications and special description of certain items included in the
second part.
THANK YOU