A

Presentation on

CONSTRUCTION
MANAGEMENT&
ENTREPRENEURSHIP(BCV501)

by
Prof. K V Mahesh Chandra
Assistant Professor
Department of Civil Engineering
Bangalore Institute of Technology
Bengaluru-560 004
MODULE 3- PROCUREMENT
& CONTRACT MANAGEMENT
 CONTENTS
Procurement Management
1. Definition.
2. Procurement Stages.
3. Procurement Types.
4. Sustainable Procurement Management.
Procurement in construction is the process of sourcing the
products, services, and equipment required to complete a
project successfully.

procurement refers to the process of sourcing, acquiring,

and managing the necessary resources, including materials,
equipment, subcontractors, and professional services, to
complete a construction project.

Construction procurement is the acquisition of materials,

equipment, services or any other resources needed for a
construction project.
• Material Procurement: You’ll need to identify the
different types of raw materials needed for your project,
such as timber, cement, steel or glass by making a material
takeoff. This is an important construction document that
itemizes these materials and indicates information such as

the exact quantities for each and their cost.

Services Procurement: In construction, services

procurement refers to the hiring of contractors and
subcontractors for the execution of a project, or a portion
of it. If you need to subcontract some construction work,
you can use a request for proposal (RFP), get bids and
select the best deal for your project.
• Equipment Procurement: The construction industry
involves the use of many types of equipment, from basic
tools to heavy-duty machinery. You should thoroughly
review the scope of work of your project to determine
what type of construction equipment needs to be purchased
or rented during the preconstruction phase.
Steps involved in procurement process
Steps involved in procurement process
1. The design team creates specifications.
This initial step involves the project’s design team, which
usually includes architects and engineers, creating detailed
specifications for the project. These specifications define
the project requirements, including materials, standards,
dimensions, and performance criteria. This document
serves as a blueprint that ensures all stakeholders
understand the project scope and requirements.
2. Contractors estimate and bid on the project.
Based on the specifications provided, contractors prepare
and share their bids or proposals for the project. This
involves estimating the cost of materials, labour,
equipment, and overheads. The bid also includes a proposed
timeline for project completion. Contractors use their
expertise to offer competitive pricing and timelines in
their bids to win the contract.
Steps involved in procurement process
3. The owner and contractor agree to terms.
Once the bids are reviewed, the project owner or
developer selects a contractor based on various criteria
such as price, experience, proposed timeline, and
submission quality. The chosen contractor and the owner
then agree on terms which are formalised in a contract.
This contract outlines the responsibilities, timelines,
payment schedule, and legalities associated with the
project.
4. Contractors solicit bids or pricing from suppliers.
After the contract is awarded, the contractor must acquire
the materials and services necessary to complete the
project. This often involves soliciting bids or pricing from
various suppliers and subcontractors. The goal is to secure
the best possible prices and ensure material availability
according to the project schedule.
Steps involved in procurement process
5. Contractors plan their procurement sequences.
Effective procurement sequence planning is crucial for
managing the flow of materials and ensuring that resources
are available when needed. This step involves scheduling
the delivery of materials to coincide with the project
phases. Proper planning helps avoid delays and minimizes
storage costs and material damage.
6. The design team reviews contractor submittals.
Contractor submittals include samples, product data, and
other information the contractor provides to the design
team for approval. This ensures that the materials and
products being used in the construction meet the specified
requirements and standards outlined in the initial
specifications.
7. Contractors finalise the purchase with suppliers.
Once the submittals are approved, contractors finalise
their orders with suppliers. This includes confirming
quantities, delivery schedules, and prices. It may also
involve negotiating terms and conditions related to
Steps involved in procurement process
8. Suppliers deliver materials and equipment to the job
site.
Suppliers and subcontractors coordinate the delivery of
materials, equipment, and other resources directly to the
job site based on the agreed schedule. Timely delivery is
critical to keep the project on track and prevent
disruptions in the workflow.
9. Contractor work and materials pass final inspections.
As the construction progresses, various inspections are
conducted to ensure that the work corresponds with
building codes, safety standards, and the project
specifications. Upon project completion, a final inspection
is carried out to certify that all aspects of the
construction meet the required standards. Passing these
inspections is crucial for the project to receive the
necessary certifications and approvals for occupancy or
use.
Types or Methods of Procurement Management
Types or Methods of Procurement Management
1.Design-Bid-Build

This is the most common or traditional method, and, as its

name suggests, it is divided into three phases. It starts
with the design phase, where the client hires a design
team of architects and engineers to create the project
outline, design, and specification documents. Then, the
project is put out to bid, and a general contractor is hired,
who will oversee hiring and managing subcontractors to
complete the work—the GC also oversees the final build
stage within the agreed timeline and budget.
Types or Methods of Procurement Management
1.Design-Bid-Build

The advantages of this method are that

careful preconstruction planning reduces the risk of
overspending, delays, or design mistakes. Plus, a
competitive construction bidding process can help lower
costs that can be allocated to other areas of the project.

Disadvantages include potential communication issues

between parties involved because the design is done
before the GC is hired, so it misses their input. This
method is also unsuitable for fast-track projects as
rushes can cause delays or overspending.
Types or Methods of Procurement Management
2.Design-Build
In this procurement method, the client hires a general
contractor (GC) or a team of professionals to oversee the
design and building stages of the project. Since the GC is
responsible for the project’s design, acquisition, and
management, the work becomes much more risky for them.
Therefore, careful planning and risk assessment are
necessary to avoid major issues.
Advantages of this method include better communication
and decision-making, as there is just one single party
responsible, and the potential for faster project
completion as design and construction are done together.
Disadvantages can include limited owner control over the
design process, making the project more expensive.
Types or Methods of Procurement Management
3.Management Contracting
Under a Management Contract arrangement, the project
owner appoints a construction manager to oversee the entire
project, including the design, procurement, and construction
phases.
They acts as an advisor to the owner, providing expertise in
project planning, scheduling, and cost management. This
procurement method offers greater flexibility and owner
involvement throughout the project lifecycle, with the CM
responsible for coordinating the work of various contractors
and ensuring project objectives are met.
The advantages include faster and more accurate design and
construction work due to the contractor’s early involvement in
the design stage, which can help identify potential issues early
on and optimize the design.
Disadvantages of the method include the complexity of
managing multiple subcontractors and communicating with
Types or Methods of Procurement Management
4.Construction Management
Construction Management procurement involves hiring a
construction manager who provides advisory services during
construction. Unlike Management Contracting, where the
CM is involved from project inception, in Construction
Management, the CM is typically engaged once the design is
complete and construction begins. The CM assists the
owner in selecting and managing subcontractors, monitoring
project progress, and resolving construction-related issues,
aiming to optimise project performance and quality.
A big downfall of this method is that if a contractor is late
with their part of the work, it can delay the upcoming
works that need to be completed by other contractors,
delaying the entire project.
Types or Methods of Procurement Management
5. Private Finance Procurement
Private Finance procurement, or Public-Private Partnerships
(PPP) or Build-Operate-Transfer (BOT), involves private
sector entities financing, designing, constructing, and often
operating infrastructure projects.

In this model, the private sector assumes significant

project risks and responsibilities in exchange for revenue
generated from the project over its lifecycle.

Private Finance procurement can offer innovative funding

solutions, accelerate project delivery, and transfer certain
project risks to the private sector.
Types or Methods of Procurement Management
6. Emerging Ideas
In addition to traditional procurement methods, emerging
ideas in construction procurement include collaborative
approaches like Integrated Project Delivery (IPD) - where
stakeholders work together from project inception to
completion, sharing risks and rewards. Other innovative
models include Alliancing - where stakeholders form a single
collaborative team, and Early Contractor Involvement (ECI)-
where contractors are engaged early in the design phase to
provide input on constructability and cost optimisation. These
emerging procurement ideas emphasise collaboration,
innovation, and shared project objectives to improve project
Sustainable procurement is the practice of incorporating
social, economic, and environmental aspects into an
organization's procurement processes in addition to
standard pricing and quality considerations.
Sustainable procurement integrates environment, social,
and governance (ESG) criteria and performance factors
into a company's procurement process and sourcing
decisions.
Sustainable procurement is a purchasing method that
considers the social and environmental impact of goods and
services, in addition to cost and quality.
 Why is Sustainable Procurement Important?
1. Reduce their Environmental Impact: By favoring eco-
friendly products and minimizing resource consumption,
businesses contribute to environmental protection.
2. Improve their Brand Image: Consumers are increasingly
inclined to support brands that demonstrate a commitment
to ethical and sustainable practices.
3. Comply with Regulations: Many environmental and social
regulations demand sustainable procurement practices.
4. Drive Innovation: Sustainable procurement often
encourages innovation by urging suppliers to develop new
sustainable products and solutions.
Environment: Eco-friendly concerns, waste
reduction, energy performance, product lifespan,
and resource protection
Ethics and society: Respect for human rights,
working conditions, diversity, and inclusivity
Economy: Product quality, cost, and delivery
timeframes
 Implementing Sustainable Procurement
1. Supplier Evaluation
One of the first steps towards sustainable procurement is
the thorough evaluation of suppliers. Companies need to
establish evaluation criteria that include environmental and
social aspects and ensure their suppliers meet these
standards. This may involve regular audits and establishing a
supplier responsibility policy.
2. Training and Awareness
This includes educating procurement teams about
sustainability and ethical criteria and raising awareness among
all staff about the objectives and benefits of sustainable
procurement.
 Implementing Sustainable Procurement
3. Certification and Standards
Adopting recognized certifications and standards can help
companies structure their sustainable procurement efforts.
Standards like ISO 26000 (social responsibility), the new
European CSRD directive, or industry-specific certifications can
guide the development of procurement practices that align with
global best practices.
4. Technology and Tools
Integrating advanced technology can facilitate the
implementation of sustainable procurement. Supply chain
management tools, data analytics software, and collaborative
platforms can assist companies in monitoring and improving their
procurement practices.
 Benefits of Sustainable Procurement
• Minimizes risks in a company’s business practices;
• Enables compliance with environmental and social
legislations;
• Enhances consumer perception of the brand;
• Controls costs by adopting a wider approach to whole life
costing;
• Creates markets for new products and services;
• Reduces waste and improves resource efficiency;
• Provides a competitive advantage in world markets;
• Facilitates access to capital and increases valuation.
CONTRACT MANAGEMENT
 DEFINITIONS
 A contract is a written or oral legally-binding agreement
between the parties identified in the agreement to
fulfill the terms and conditions outlined in the
agreement.
 Contract may be defined as an agreement which is
enforceable by law. It is a written undertaking for
execution of work or supply of materials or performance
of any service.
 Contract management in construction project involves
the management of contracts through out the
construction process.
 DEFINITIONS
 Contract management in construction is the process of
overseeing and administrating contracts between various
parties involved in a construction project.
 A construction contract is built around procedures to
streamline the project and protect all parties involved
from disputes. These procedures include things like
payment provisions, design acceptance, risk management
and change control.
 DEFINITIONS
Offer / proposal
When one person signifies to another his willingness to do a
work, he is said to make a proposal. Communication of an
Offer: By words or by actions
Acceptance
When the person to whom the proposal is made signifies his
assent thereto, the proposal is said to be accepted
1. Acceptance must be absolute
2. It must be communicated.
3. It must be according to the mode prescribed.
4. It must be given within the time specified or within
reasonable time
Objectives of Construction Contract Management
The process of properly managing contracts in construction
projects has many goals, but the 5 most important
objectives include:

• Ensuring Timely Completion: Overseeing that all project

milestones and final deliverables are met within agreed-
upon timelines.
• Maintaining Budget Control: Monitoring and managing
costs to ensure the project stays within the defined
budget constraints.
Objectives of Construction Contract Management
Upholding Quality Standards: Ensuring all work adheres to
or exceeds the quality specifications outlined in the
contract.
• Confirming Legal and Regulatory Compliance: Making
sure all contract activities are in alignment with applicable
laws, regulations, and industry standards.
• Facilitating Effective Communication: Serving as the
central point for communication between all contract
parties to aid in the swift resolution of issues and changes.
Essential Elements of Contract
An agreement becomes enforceable by law when it fulfils
certain conditions. These conditions, which may be called
the Essential Elements of a Contract, are explained below
1. Offer and Acceptance: There must be a lawful offer
by one part and a lawful acceptance of the offer by the
other and acceptance must conform to the rules laid
down in the Indian Contract Act regarding offer and
acceptance.
Essential Elements of Contract
2. Intentions to create Legal Relationship: There must be
an intention (among parties) that the agreement shall
result in or create legal relations. An agreement to dine at
a friend‘s house is not an agreement intended to create
legal relations and is not a contract. But an agreement to
buy and sell goods or an agreement to marry, are
agreements intended to create some legal relationship and
are therefore contracts, provided the other essential
elements are present.
Essential Elements of Contract
3. Lawful Consideration: Subject to certain exceptions,
an agreement is legally enforceable only when each of the
parties to it gives something and gets something. An
agreement to do something for nothing is usually not
enforceable by law. The something given or obtained is
called consideration. The consideration may be an act
(doing something) or forbearance (not doing something) or
a promise to do or not to do something. Consideration may
be past (something already done or not done). It may also
be present or future. But only those considerations are
valid which are ―lawfull.
Essential Elements of Contract
4. Capacity of Parties: The parties to an agreement must be legally
capable of entering into an agreement; otherwise it cannot be
enforced by a court of law. Want of capacity arises from minority,
lunacy, idiocy, drunkenness, and similar other factors. If any of the
parties to the agreement suffers from any such disability, the
agreement is not enforceable by law, except in some special cases.
5. Free Consent: In order to be enforceable, an agreement must be
based on the free consent of all the parties. There is absence of
genuine consent if the agreement is induced by coercion, undue
influence, mistake, misrepresentation, and fraud. A person guilty of
coercion, undue influence etc. cannot enforce the agreement. The
other party (the aggrieved party) can enforce it, subject to rules
laid down in the Act.
Essential Elements of Contract
6. Legality of the Object: The object for which the
agreement has been entered into must not be illegal or
immortal or opposed to public policy.
7. Certainty: The agreement must not be vague. It must be
possible to ascertain the meaning of the agreement, for
otherwise it cannot be enforced.
8. Possibility of Performance: The agreement must be
capable of being performed. A promise to do an impossible
thing cannot be enforced.
Essential Elements of Contract
9. Void Agreements: An agreement so made must not have
been expressly declared to be void. Under Indian Contract
Act there are five categories of agreements which are
expressly declared to be void. They are: 1. Agreement in
restraint to marriage. 2. Agreement in restraint of trade.
3. Agreement in restraint of proceedings. 4. Agreements
having uncertain meaning. 5. Wagering agreement.
10. Writing Registration and Legal Formalities: An oral
contract is a perfectly good contract, except in those cases
where writing and/or registration is required by some
statute. In India writing and/or registration is required by
some statute.
Essential Elements of Contract
In India writing is required in cases of lease, gift, sale and
mortgage of immovable property: negotiable instruments;
memorandum and articles of association of a company etc.
Registration is compulsory in cases of documents coming
within the purview of Section 17 of the Registration Act,
e.g., mortgage deeds covering immovable property.
The terms of an oral contract are sometimes difficult to
prove. Therefore important agreements are usually entered
into writing even in cases where wiring is not compulsory
Types of Contracts
There are numerous types of contracts used in
construction projects. The five most common ones are
1. Lump Sum Contracts
In this type of contract, the contractor offers to do the
whole work as shown in drawings and described by
specifications, for a total stipulated sum of money. There are
no individual rates quoted, thus it becomes difficult to make
adjustments in the contract value if any changes are to be
made in the work later on. The schedule of different items of
work is not provided and the contractor has to complete the
work as per drawings and specifications for the agreed lump
sum amount.
Types of Contracts
1. Lump Sum Contracts

Deposit of 10% security money and other conditions of the

contract are included in the contract agreement. Upon the
completion of work, a fixed lump sum amount is paid to the
contractor. Detailed measurements of different items are
required but the whole work is compared and checked with
drawings and specifications before releasing the payment.
In large projects, part payments are made to the
contractor at different stages of work on mutually agreed
terms. In case the contractor stops the work in between he
is not entitled for any further payment.
Types of Contracts
1. Lump Sum Contracts

Suitability

A lump sum contract is more suitable for works for which

contractors have prior construction experience. This
experience enables the contractors to submit a more
realistic bid. This type of contract is not suitable for
difficult foundations, excavations of uncertain character,
and projects susceptible to unpredictable hazards and
variations.
Types of Contracts
1. Lump Sum Contracts
Merits
The owner can decide whether to start or shelve the project
knowing the total lump sum price quoted by different
contractors.

The contractor can earn more profit by in-depth planning and

effective management at site.

Demerits
Before the contract is awarded, the project has to be studied
thoroughly and the complete contract document has lo be
prepared in advance.
In this type of contract, unforeseen details of work are not
specified in the contract document. Many additional items may
have to be undertaken as the work progresses, giving opportunity
to the contractor for claiming higher rates for the extra items
not included in the contract agreement.
Types of Contracts
2. Item Rate Contracts

Also called a schedule contract, in this contract, the

contractor undertakes the execution of work on an item
rate basis. The amount to be received by the contractor,
depends upon the quantities of various items of work
actually executed. The payment to the contractor is made
on the basis of detailed measurements of different items
of work actually done by him.
Types of Contracts
2. Item Rate Contracts

Suitability
The item rate contract is most commonly used for all types
of engineering works financed by public or government
bodies. This type of contract is suitable for works which
can be split into various items and quantities under each
item can be estimated with accuracy.
Types of Contracts
2. Item Rate Contracts
Merits
• In this type of contract, there is no need for detailed drawings at
the time of allotting contract as ¡n the case of lump sum contract. The
detailed drawings can be prepared after the contract is awarded.
• Changes in drawings and quantities of individual items can be made as
per requirement within agreed limits. •
The payment to the contractor is made on the actual work done by him
at the agreed rates.
Demerits
• The total cost of work can only be known upon completion. As such,
the owner may incur financial difficulty if the final cost increases
substantially.
• Additional staff is required to take detailed measurements of work
done for releasing payments to the contractor.
• The scope for additional saving with the use of inferior quality
materials may prompt the contractor to use such materials in the work.
Types of Contracts
3. Lump Sum and Scheduled Contracts
This is similar to the lump sum contract except the schedule
of rates is also included in the contract agreement. In this
type of contract, the contractor offers to do a particular
work at a fixed sum within a specified time as per plans and
detailed specifications. The schedule of rates for various
items is provided which regulates the extra amount to be paid
or deducted for any additions or deletions made during the
progress of work. Measurements of different items of
original work are not required but extra items are required to
be measured for payment. The original work shall however be
checked and compared with the drawings and specifications.
Types of Contracts
3. Lump Sum and Scheduled Contracts
Suitability
This type of contract is more suitable for construction
works for which contractors have prior work experience
and can consequently estimate the project cost more
realistically.
Merits
• In this type of contract, additional staff for recording
detailed measurement of original item of work is not
required for making payment to the contractor.
Types of Contracts
3. Lump Sum and Scheduled Contracts
Merits
• The owner can know from tenders as to what the project will
cost him. Knowing the financial implications, the owner can
decide to start or defer the project.
Demerits
• Before the contract is awarded the project has to be studied
thoroughly and all the contract documents are required to be
completed in every respect.
• The non-scheduled extra items arising out of changes made in
the drawings and specifications are often a source of dispute
because the contractor presses for rates higher than the
prevailing market rates.
Types of Contracts
4. Cost Plus Fixed Fee Contract
Cost plus fixed fee contract is desirable when the scope
and nature of the work can atleast be broadly defined. The
amount of fee is determined as a lump sum from a
consideration of the scope of work, its approximate cost,
nature of work, estimated time of construction, manpower
and equipment requirements etc. In order to negotiate such
a type of contract, it is essential that the scope and some
general details of the work are defined. The contractor in
this type of contract is selected on the basis of merit
rather than the fee alone.
Types of Contracts
4. Cost Plus Fixed Fee Contract
In case of cost-plus percentage contract, the contractor
has a tendency to increase his profit by increasing the cost
of work.
But this drawback is overcome in cost plus fixed fee
contract because here the contractor‘s fee is fixed and
does not fluctuate with actual cost of work. Once this fee
is fixed, the contractor cannot increase the cost of work.
Types of Contracts
4. Cost Plus Fixed Fee Contract
Suitability
• This type of contract is suitable for works required to
be completed expeditiously and where it is difficult to
foretell what difficulties are likely to be encountered.
• This contract is also suitable for important structures
where the cost of construction is immaterial.
Merits
• In this type of contract, actual cost is to be borne by
the owner. Therefore, the contractor performs the work
in the best interest of the owner resulting in good
quality work.
Types of Contracts
4. Cost Plus Fixed Fee Contract
Merits
• The work can be taken in band even before the detailed
drawings and specifications are finalized.
• Changes in design and method of construction if needed
can be easily carried out without disputes.
• The work can be executed speedily.
Demerits
• This form of contract cannot bc adopted normally in case of
public bodies and Government departments.
• The final cost of the work is no known in advance and this may
subject the owner to financial difficulties.
Types of Contracts
5. Cost Plus Percentage of Cost Contract
In this type of contract, instead of awarding the work on lump sum or
item rate basis, it is given on certain percentage over the actual cost
of construction. The actual cost of construction is reported by the
contractor and paid to him by the owner together with a certain
percentage as agreed earlier.
The contractor agrees to do the work in accordance with the drawings,
specifications, other conditions of contract. In this type of contract
proper control has been exercised by the owner in purchase of
materials and in arranging labour.
The suitability, merits and demerits of these type of contract are
similar to cost plus fixed fee contract. An addition to demerit, the
tendency of the contractor to increase the cost of work to earn more
profit by way of percentage of enhanced actual cost.
Special Contracts
1. Turnkey contract
 A turnkey contract is an integrated contract in which all
works pertaining to various disciplines such as civil, electrical,
mechanical etc. are in a single contract called the main
contract. The main contractor can sublet the contract to sub-
contractors who are specialist in their respective fields.
 In this contract, the main advantage of the owner is that he
need not to coordinate the work of different contractors.
The main contractor is responsible for all kinds of jobs,
starting from planning to commissioning stage.
 The owner takes over the entire work which is fully
operational and of proven performance from the main
contractor.
Special Contracts
2. Package contract
In a package contract, two or more related jobs, each of which
could form a separate contract are combined in a single contract.
In the field of civil engineering, generally design and
development are combined with construction and supplying or
maintenance.
In this type of contract, plan of work and standards are
established and the work is carried out accordingly by the
contractor. The main contractor is responsible for safe guarding
the owner‘s interest, clear approval of design and technical
aspect have to be taken from the owner. The responsibility for
the correctness of design lays with the main contractor.
Special Contracts
3. Negotiated contract
In this type of contract, negotiation across the table takes
place between the representatives of the owner and the
main contractor for the project cost and other conditions
of contract. In this type of contract, detailed project
specifications, are arrived at by discussions between the
owner and the main contractor.
A negotiated contract involves extended discussions for
finalization as a competitive contract. Most of the
consultancy works of World Bank are negotiated contract.
Special Contracts
4. Continuing contract
In this type of contract new or additional work is awarded
to the contractor on the basis of the agreed terms and
conditions of an existing contract. Such contract do not
require retendering and hence can save time and money.
5. Running contract
Such contracts provide goods and services at specified
intervals or as on when required by the owner. The
contract price is not fixed and the payment is based on
actual goods supplied and services rendered as specified in
the contract document.
Special Contracts
7. BOT (Build - Operate – Transfer) contract
A third-party contract to build, then operate an assets( for
e.g dam , bridge, road) for a specific amount of time for a fee
and then transfer the asset back to contracting company or
entity ( usually a government entity). This is commonly used
by public sector for large capital projects. The system of
contracting is useful when client does not want to invest
directly in the project and wants to encourage development
projects through external funding and investment. It is also a
method of attracting and involving the private sector which
typically involve very heavy capital investment.
Special Contracts
8. BOOT - Build – Own –Operate –Transfer contract
It is similar to BOT except that rather than receiving a
fee for operating it. It receives the net income from the
asset as if it owned it. This asset is a revenue generating
asset ( e.g: toll bridges, powerstations)
Important Conditions of Contracts
The members of the construction team should be fully aware of their
rights and obligations under the contract. Following are the important
conditions of contract.
1. Time of completion.
2. Delay and extension of time.
3. Penalty.
4. Compensation of delay in completion of work.
5. Liquidated damages.
6. Debitable agency.
7. Valuation of variations.
8. Settlement of disputes.
9. Force majeure and natural disaster.
10. Price escalation.
11. Termination of contract.
Contract Document
The contract document consist of contract agreement on
non-judicial stamp paper of prescribed value and the
following sets of document each page of it is signed both
by the owner and the contractor.
1. Cover or Title Page
It contains the name of the work, name of the owner, name
of the contractor, contract agreement number, contents
etc.
2. Contents page
It contains the contents of the agreement with page
references
Contract Document
3. Notice Inviting Tender(NIT)
It contains a brief description of work estimated cost of work
date and time for receiving the tender, amount of earnest money
(EMD), security deposit(SD), time of completion etc.
4. Tender form
It comprises of bill of quantities, contractor‘s rate, total cost of
work, time for completion, security money to be deposited and
penalty process etc.
5. Schedule of issue of materials
It contains the list of materials to be issued by the department
or owner to the contractor with rates or place of issue.
Contract Document
6. Drawings
These comprise a complete set of fully dimensioned
drawings including plans, elevations, sections, detailed
drawings and site plan.
7. Specifications
It is not practicable to include the detailed information of
each item of work in the limited space of description in the
bill of quantities. As such detailed agreement forms a part
of the contract agreement.
Contract Document
7. Specifications
Specification should be clear and precise covering all items of
bill of quantities (BOQ).
Following specifications are normally included in the contract
document
a. General specification - These specify the class and type of
work, quality of materials etc, in general for the work as a
whole.
b. In detailed specification – These views detailed
description of each item of work including material and
method to be used along with quality of workmanship
required
Contract Document
8. Conditions of Contract
The terms and conditions of the contract specify the
following.
a. Rates of each item of work inclusive of materials, labour ,
transport, plant and equipment and other arrangements
required for the completion of work.
b. Amount and form of earnest and security money to be
deposited.

c. Manner of payment to contractor including running

payments, final payments, refund of security money.
d. Time of completion of work e. Proportionate progress to
be achieved
Contract Document
8. Conditions of Contract
f. Penalty for poor quality and unsatisfactory work, back to
proportionate progress and for delay in completion.
g. Extension of time for completion of work
h. Engaging other agency at contractors cost and risk
i. Termination of contract
j. Changes in design and drawings etc and valuation of variations
k. Measurement of the work
l. Arbitration for settlement of disputes.
All the above stated documents collectively constitute a contract
document. The documents are considered together for the
purpose of contract interpretations, giving rise to meaning and
effect to each part of the contract.
Contract Document
Contract Document
Contract Document
Contract Document
 Tender
Tender is an offer in writing for executing certain
specified work or for supplying specified materials subject
to certain terms and conditions like rates, time limit etc.
Types of Tender
1. Open Tenders
2. Limited tenders.
3. Single tender.
4. Rate contract
 Tender
Types of Tender
1. Open Tender
Open tender is a tender in which bids are invited from all
contractors. An open advertisement in the important news
papers and Indian trade journal will be published.
2. Limited Tender
In this kind of tender, only selected contractors are
invited to bid or quote the rates for the supply of articles
or to execute the work
 Tender
Types of Tender
3. Single Tender
Only a single firm or contractor is invited for the tender.
If the quoted rates are high, negotiations prior to
agreement are done with the contractor.
4. Rate Contract
This type of contract is used mainly for the supply of
stores of items. The quantities are not mentioned.
According to this contract, items are supplied at fixed rate
during the period of contract.
 Tender
Tender Documents
a) Notice Inviting Tenders.
b) Tender form with standard conditions of contract.
c) Schedule of quantities.
d) Special terms and conditions.
e) Complete specification of work.
f) Special specification and additional condition of
contract.
g) Approved drawings where necessary.
 Tender
Tender Process
1. Tender Solicitation
 During the tender solicitation phase, the property owner
or their representative will typically issue an Invitation
for Tender (IFT), a Request for Quote (RFQ) or a
Request for Proposal (RFP).
 For public project tenders, agencies are generally required
to issue an open invitation to qualifying contractors who are
registered to work on government construction jobs.
 On private projects, tenders may be open or sent to a
smaller group of contractors in a non-competitive tendering
process.
 Tender
Tender Process
1. Tender Solicitation
 Regardless of the project type, the tender package
contains project details to enable contractors to produce
an accurate tender, including:
 Construction specifications.
 Project requirements.
 Contract type.
 Project delivery method.
 Bonding & insurance requirements.
 The solicitation will typically also ask for additional
information about the contractors who apply, including
professional qualifications and examples of similar past
projects. Project owners use this information to
prequalify the contractors, ensuring that they will be
able to complete the job as promised.
 Tender
Tender Process
2. Tender Submission
 In the tender submission phase, interested contractors
submit documentation about the project timeline and
costs, as well as information about their business. During
this phase, general contractors will often solicit their
own tenders, proposals or RFIs from subcontractors
they need to hire to complete specialized aspects of the
job. The GC will combine the subcontractor proposals to
prepare the tender they submit to the property owner.
 Tender
Tender Process
2. Tender Submission
 In order to create an accurate tender, contractors
must create an accurate estimate of project costs,
including:
 Labour.
 Materials.
 Equipment.
 Overhead.
 Profit margin.
 By reviewing the project specifications and bill of
quantities, performing material takeoffs and calculating
overhead and profit margin, contractors should be able
to nail down a competitive tender. A good tender
represents the best quality at the most reasonable price.
 Tender
Tender Process
3. Tender Selection
 When it comes to tender selection, property owners will
often pick the tender with the lowest or most
competitive price. On public projects, government rules
often require that the lowest tender wins.
 However, commercial project owners often take into
account a variety of factors beyond price, including
 Project experience.
 Safety record.
 Scheduling philosophy.
 Tender
Tender Process
3. Tender Selection
 Because contractors submit tenders in a variety of
different formats and with a wide range of prices, the
tender solicitor will typically go through a process called
tender levelling. During tender levelling, the owner will
attempt to standardize the tender formats as much as
possible, enabling them to compare the similarities and
differences between them. This process enables the
owner to compare "apples to apples" to make a more
informed decision about the right contractor for the
job.
 Tender
Tender Process
4. Contract Formation
 After the owner selects a tender, they work together
with the contractor to form a construction contract that
both parties will eventually sign. While the type of
contract (e.g. fixed-price, time and materials, etc.) is
generally predetermined by the owner, contractors still
have leeway at this point to negotiate the terms of the
contract, as well as the final pricing structure.
 Tender
Tender Process
5. Project Delivery
 Even though it's not technically part of the tender
process, project delivery plays a very important role in
tendering.
 Before tendering starts, the property owner will
determine the project delivery method. Common delivery
methods in construction include:
 Design-Tender-Build
 Design-Build.
 Construction Manager at Risk
 Integrated Project Delivery (IPD)
 Tender
Tender Process
5. Project Delivery
 During tendering, the project delivery method
determines how tenders are solicited and submitted. For
example, Design-Tender-Build solicits tenders from
general contractors based on designs from a separate
firm, whereas Design-Build employs a single firm for
design and construction, so tenders are only received
from subcontractors supporting that firm's work.
 After tendering, the project delivery method often
influences contract negotiations. For example, with the
CMAR method, there is likely a guaranteed maximum
price in the contract, which the construction manager
will want to carefully negotiate to ensure project
profitability.
 Breach of Contract
 A breach of contract occurs when a party fails to uphold
their contractual obligations.
 “Breach of contract” is a legal concept in which a
binding agreement or negotiated for exchange is not
respected by one or more of the parties to the contract
by non-performance or interference with the other
party's performance. “Breach of contract” is the pre-
condition for a claim of damages.
 Breach of Contract
Types of Breach of Contract
Breaches of contract can be categorised as Major or material,
Minor or non-material, Anticipatory, Actual and Fundamental.
1) Major or Material breach of contract: When a key element
of the contract is either not undertaken or not provided as
agreed. Straying from the project plans and failing to make
payment could cause a material breach.
2) Minor or Non-material or Immaterial or Partial breach of
contract: where the important aspects of a contract have been
delivered but some small parts of the obligation are either not
undertaken or not delivered. Using a different brand than
specified in the contract or small variations in colour or texture
might be a minor breach (provided the quality is similar).
 Breach of Contract
Types of Breach of Contract
3) Anticipatory breach of contract: when one of the parties to
the contract notifies the other party that they won’t be able to
fulfil their obligation of the contract by the agreed time.
4) Actual breach of contract: when one of the parties delivers
their side of the contract either improperly or incompletely. But,
using substandard materials that are obviously inferior to the
ones required by contract could result in a material breach.
5) A fundamental breach of a contract is when the person has
the contract breached against can disobey the breaching party
for damages incurred as well as terminate the contract if they
wish to do so.
 Breach of Contract
Common causes for breach of contract in construction industry
are a) faulty drafting of contract, b) defective performance, c)
faulty schedule, slack monitoring and delays and d) failure to
perform.
How to reduce the risk of breach of Contract?
1. One option is to draft a contract with the best possible
contract clauses. In the construction industry, standardized
contracts documents are used. Even then every contract is
unique in one or another way. The terms should be drafted by an
experienced professional.
2. The contract schedule should be prepared before call of
tender and all possible aspects should be considered in preparing
the schedule.
3. Quality and progress should be implemented and monitored
meticulously.