SCE4281

Contract Administration &

Measurement
Lecture 8
Contractual procedures in pre- and post-
contract stages

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Lecture 8

Contractual procedures in pre-

and post-contract stages

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Pre–Contract Administration
• Prior to Tendering
– Decide method of calling for tender
– Decide method of tender evaluation
– Prepare schedule for tender procedures
– Complete Tender document
– Check interfacing and handover of land
– Check estimated value of contract in need for
compliance with the WTO GPA tendering
procedures.
– Decide if design and alternative designs by
tenderers are to be invited.

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Pre–Contract Administration
• Calling for Tender
– Determine categories and groups of contracts
eligible to tender
– Arrange tender notice for publication on the
Internet/ Arrange publication on gazette notice (if
required)
– Arrange publication of press release (if required)
– Issue tender documents

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Pre–Contract Administration
• Action during Tender Period
– Arrange pre-tender meeting (if necessary)
– Arrange tender addendum by circulation letter (if
required)
– Deal with queries from tenderers
– Arrange sales of plans or drawings (if required)
– Seek tenderers’ agreement to extension of tender
validity period (if necessary)

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Pre–Contract Administration
• Examination of and Report on Tenders
– Bring to Engineer designate’s attention and investigate
unreasonably low or high rates, missing rates and items of
which any changes in quantity would materially affect the
final contract price.
– Conduct tender evaluation based on a marking scheme
approach or a formula approach.
– Assess designs and/or alternative designs by tenderers (if
alternative designs/tenders are invited)
– Check all tenders for eligibility to tender
– Check tenderer’s past performance
– Check financial capability

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Pre–Contract Administration
• Preparation of Contract Documents
– Prepare, check and seal original , duplicate,
triplicate (and quadruplicate, in case of consultant –
managed contracts) and 3 certified true copies of
contract documents.
• Execution of Articles of Agreement
– Arrange publicity for contract signing (if necessary)
– Signing of original and duplicate of contract
documents (by the Contractor and Government
signatories)

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Pre–Contract Administration
• Distribution of Contract Documents
– Forward original and 3 certified true copies of
contract documents together with the originals and
certified true copies of any surety bond, insurance
policies and premium receipts to departmental
headquarters by hand
– Deliver duplicate of contract documents to the
Contractor and check for receipt
– Forward triplicate of contract documents to the
Engineer

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Post–Contract Administration
• Interim Payment and Its Administration
Procedure
• Valuation of Variation
• Final Account and Its Procedure

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Interim Payment and Its
Administrative Procedure
• It is a normal practice for contracts to be paid sums on
account as the construction is on progress. The reasons are
that :
– Employers assist the contractors to finance construction
operation.
– The expense of “borrowing large sums of” the
contractors would add to the burden of the employers
who intend to minimize the cost.
• Therefore payment on time is important to Contractor.
Certifying payment due and making payment on time are
duties of the Engineer.

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Interim Payment and Its
Administrative Procedure
Monthly Statements
• Under the Civil Engineering Contracts the Engineer has a
duty to determine by measurement the value of the
Contractor’s work which is carried out by the assessment
based on his professional judgment.

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Interim Payment and Its
Administrative Procedure
• The Contractor is required to submit to the Engineer a
monthly statement which must contain the following
details:-
– the estimated value of the permanent works completed up to the
end of the month,
– list and value of goods or materials delivered to the site but not yet
incorporated in the permanent work,
– list and value of goods or materials, not yet delivered to the site,
but of which the ownership is passed to the employers,
– estimated amounts to which the Contractor considers himself
entitled such as constructional plants. This may include method-
related charges.

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Interim Payment and Its
Administrative Procedure
Retention
• In the Civil Engineering Form of Contract, there is a
provision for a percentage of the amount of interim
payment to be deducted by the Employer.
• The sum of money deducted is said to be retained by the
Employer and the sum of the retained money is called
Retention.
• The limit of retention is normally 5% of the contract sum
and the Employer may retain a percentage, normally 10%
of the total value in each payment until the total amount
retained reached the limit of retention.

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Interim Payment and Its
Administrative Procedure
For example:
Total Contract Sum :5,000,000.00
Limit of retention (5%) :250,000.00
Interim Payment:
No.1 Total payment 200,000.00
Retention (10%) 20,000.00 (to be deducted from 200,000.00)
No.6 Total payment 2,200,000
Retention (10%) 220,000(to be deducted from 2,200,000.00)
No.8 Total payment 2,900,000
Retention(maximum) 250,000.00 (to be deducted from 2,900,000.00)

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Interim Payment and Its
Administrative Procedure
The purposes in retaining part of the total value of work
completed are:

• To ensure the contractor will complete the works and pay

for any remedial work that the Contractor refuses to carry
out

• To provide incentive for the contractor to complete any

unfinished work as soon as possible

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Interim Payment and Its
Administrative Procedure
The retention shall only be released upon the following
condition:-

• One-half of the total is paid to the contractor within 14

days after the Engineer has issued a Certificate of Practical
Completion

• The second half of the retention money is released when

all defects are made good and after the Engineer has
issued the Maintenance Certificate or at the end of the
Maintenance Period.

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Interim Payment and Its
Administrative Procedure
Stage Payment
• For simpler forms of construction, stage payments, rather
than the monthly payments, may be arranged.

• Usually the project is divided into a number of stages

according to the functional elements of it.

• Payment will be applied or certified when the stage of

completion is reached.

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Interim Payment and Its
Administrative Procedure
Advantage:-
• This method provides an incentive to the contractor that
they are going to complete the works as soon as possible in
order to secure payment.

Disadvantage:-
• However, if the project is substantial in nature, the financial
outlay to the contractor will be very heavy and it may even
affect the cash flow strategy of the contractors.

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End

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