Contracts and Accounts(22601)
Chapter Marks:
1. PWD procedure to execute the work-08
2. Contracts-12
3. Tender and Tender documents-16
4.Accounts in PWD-10
5. Specification-10
6. Valuation-14
Chapter 2
Contracts
Contract:
It is agreement between two parties or two
persons under certain terms and
conditions
Or
It is undertaking by a person or by a firm
to do some work under certain terms and
condition.
Object/ advantages of contracts:
1. To complete the work with economy
2. To complete the work in scheduled time
3. To complete the work according to
specifications and drawing.
4. For healthy competition between
contractors
5. To complete the work from experienced
person.
Requirement of valid
contracts:
1.writing(written format)
2. Attested by witnesses
3. Competant
4. Subject matter
5. Court of law
6. Mutual concent.
Types of engineering contracts:/
construction contracts:
1. Lumpsum contracts
2. Item rate contracts
3.Percentage rate contract
A.Cost plus fixed percentage rate contract
B. Cost plus variable percentage rate contract
C. Cost plus fixed fee contract
D. Cost plus variable fee contract
Types of engineering contracts:/
construction contracts:
4.labour contracts
5. Demolition contracts
6. Engineering procurement and construction contracts(
EPC contracts)
7. Annuity contracts
8. Target contract
9. Negotiated contracts
10.All -in-Contract
1. Lumpsum contract
In lumpsum contract contractor
undertakes execution of work along with all
contigencies to complete the work in all
aspect for a fixed time and fixed amount.
The detail specification of all work with
plan, section, drawing, security deposit,
progress of work, penalty clause and other
conditions of contracts should be
included at the time of agreement only.
1. Lumpsum contract
Contractor shall complete whole
work for a fixed time and fixed
amount irrespective of quantities of
different items.
Sometimes contractor may submit
the rates like per sq.ft or per cu.ft or
sq.m. are also comes under
lumpsum contracts.
Advantages of Lumpsum
contract:
Project cost is known before
completion of all work
Appointment of staff for
measurement of items and
preparation of running bills is not
necessary
Early completion of work
Contactor can achieve greater profit
by early planning.
Disadvantages of Lumpsum
contract:
Excessive profit or excessive loss to
Contactor due to variation in prises of
materials
Disputes occurs between owner and
contractor regarding quality of material
Quality of work is not assured and it
is risk of ccontractor
suitable for small work.
Types of contracts
2. Item rate contract :
It is called as unit price contract
In this contract,contractor quotes rates on basis of
the bill of quantities supplied by dept.
In bill of quantities full description of item along
with their approximate quantities are mentioned.
Contactor are required to quote rate for each
indibidual item
Rate given by contractor includes all the cost that is
cost of material,cost of labour,overhead charges and
contractors profit
Types of contract
Actual quantities may be more or less but rate
given by contractor remains fixed
Usually joint measurement is taken up by both
the parties after end of work for preparation of
bill and passing the payment.
Advantages of item rate contracts
Quality of work is assured
Extra items can be provided
No dispute between owner and contractor
regarding quality of material and
wormanship
No excessive loss or excessive profit to
the contractor.
Disadvantages of item rate contract
Project cost is not known till completion
of all work
Measurement of item and preparation of
bill is necessary hence extra manpower
is required.
Contractor may try to submit an
unbalanced tender.
PERCENTAGE RATE CONTRACT:
IT IS MODIFIED FORM OF ITEM RATE CONTRACT
IN BILL OF QUANTITIES ALONG WITH DESCRIPTION,
QUANTITIES ALSO RATE ,UNIT PRICE,AMOUNT IS
GIVEN BY DEPT.
CONTARCTOR WANT TO QUOTE ONLY THE
PERCENTAGE ABOVE OR BELOW THE RATE GIVEN
IN DSR
SAME PERCENTAGE IS APPLICABLE TO ALL THE
ITEMS.
PERCENTAGE RATE CONTRACT:
Types of percentage rate contract:
a) cost plus fixed percentage rate
contract
b)cost plus fixed fee contract
c) cost plus variable percentagerate
contract .
d) cost plus variable fee contract
COST PLUS FIXED PERCENTAGE RATE
CONTRACT:
In this contract owner agrees to pay to the
contractor all the cost of construction @
material,labour,overhead charges plus an
agreed percentage of cost as contractors
profit.
In this contract all the documents like
specification,drawings,designs,elevation etc.
are not necessary at the time of signing the
agreement.
These can be supplied to the contractor
time to time
COST PLUS FIXED PERCENTAGE RATE
CONTRACT:
Payment to the contractoris made
periodically on the basis of cost of
material,labour,overhead charges etc.
on advice of engineer incharge
This type of contract is not suitable for
PWD and suitable for private sector but
in case of emergency works or works
involving difficult foundations this type
of contract can be adopted by PWD.
COST PLUS FIXED FEE CONTRACT:
In this contract owner agrees to pay to the
contractor all the cost of construction @
material,labour,overhead charges plus a
certain amount of cost as contractors profit
In this contract all the documents like
specification,drawings,designs,elevation etc.
are not necessary at the time of signing the
agreement.
These can be supplied to the contractor
time to time
COST PLUS FIXED FEE CONTRACT:
Payment to the contractoris made
periodically on the basis of cost of
material,labour,overhead charges etc.
on advice of engineer incharge
This type of contract is not suitable for
PWD and suitable for private sector but
in case of emergency works or works
involving difficult foundations this type
of contract can be adopted by PWD.
COST PLUS VARIABLE PERCENTAGE
RATE CONTRACT:
In this contract owner agrees to pay to the
contractor all the cost of construction @
material,labour,overhead charges plus
contractor profit or percentage is variable.
Contractor's profit is linked to actual cost
of constuction. It increases or decreases
with increase or decrease in the cost of
construction from the estimated amount.
Hence contractor gets more profit if he
can bring down cost of construction nearer
to estimated amount
COST PLUS VARIABLE PERCENTAGE
RATE CONTRACT:
Contractor gets less profit
if actual cost of constuction
exceeds estimated amount.
In all other manner this type
of contract is similar to cost
plus fixed percentage rate
contract.
COST PLUS VARIABLE PERCENTAGE
CONTRACT
Payment to the contractoris made
periodically on the basis of cost of
material,labour,overhead charges etc.
on advice of engineer incharge
This type of contract is not suitable for
PWD and suitable for private sector but
in case of emergency works or works
involving difficult foundations this type
of contract can be adopted by PWD.
COST PLUS VARIABLE FEE CONTRACT:
In this contract owner agrees to pay to the
contractor all the cost of construction @
material,labour,overhead charges plus
contractor profit or fee is variable
Hence contractor profit or fee is depends
upon early and economical completion of
work.
fee paid to the contractor is fluctuates with
actual cost of construction and sheduled
time.
COST PLUS VARIABLE FEE CONTRACT:
Hence higher the actual cost of
constuction than estimated cost
lower is fee and vice versa. Also
when actual time of constuction
exceeds sheduled time lower is the
fee and vice versa.
ln all other aspect this type of
contract is similar to cost plus fixed
fee contract.
Labour contract:
In this contract contractor quotes
rates for all the items of work only
for labour work excluding the
materials which are supplied by
department.
The contractor has to made his
own arrangement for supply of tools
and plants, scaffolding,centering
materials required for the work.
Labour contract:
Owner wants to keep close watch
to wastage of materials because
contractor is less bothered about
wastage of materials.
This type of contract is most
popular in our regions because
quality work is assured and
disputes between owner and
contractor is minimzed.
Labour contract:
Contractor is not affected by
any increase or decrease in
the prises of materials.
Advantages of labour contract:
Contractor is not affected by
any increase or decrease in
the prises of materials.
Disputes are minimized
Quality work is assured
Disadvantages of labour contract:
Owner wants to keep close
watch over consumption and
wastage of materials
Project cost is not known till
completion of all work
RATE LIST METHOD:
IT IS RECOGNIZED SYSTEM OF CARRYING OUT PETTY
(SMALL)WORK UPTO RS 3000 OR LESS.
AS SUCH WORKS IS VERY SMALL NO ADVERTISEMENT IS
PUBLISHED IN THE NEWSPAPER,NO SECURITY DEPOSIT,NO
EMD
EXECUTIVE ENGINEER WILL MAINTAIN A LIST OF PETTY
WORKER IN HIS OFFICE
WHENEVER SUCH WORK IS ARISES PETTY WORKER WILL BE
INFORMED ABOUT THE WORK
PETTY WORKER WILL SUBMIT HIS RATE LIST IN A SEALED
COVER AND LOWEST RATE IS ACCEPTED BY THE DEPT.
RATE LIST METHOD:
SPECIAL REPAIRS AND MAINTENANCE IS CARRIED
OUT BY THIS METHOD
ANY NO OF LABOURS MAY BE ENGAGED TO COMPLETE
THE WORK BUT RATE REMAINS FIXED
DAYS WORK METHOD:
It is the method of costing and valuing an item of work
on the basis of daily consumption of material and
requirement of labour
Department obtain quotations from selected contractors
for materials and labour required for the work.
After approval from engineer incharge contractor
purchases materials from market and engages labour on
daily basis.
DAYS WORK METHOD:
BOTH THE SHEETS THAT IS MATERIAL
UTILIZATION AND LABOUR ATTENDANCE IS
CHECKED BY ENGINEER INCHARGE ON DAILY BASIS.
ON AND ABOVE THIS COST SOME EXTRA AMOUNT
IS GIVEN TO CONTRACTOR TO COVER OVERHEAD
CHARGES AND CONTRACTOR’S PROFIT.
DAYS WORK METHOD:
BOTH THE SHEETS THAT IS MATERIAL
UTILIZATION AND LABOUR ATTENDANCE IS
CHECKED BY ENGINEER INCHARGE ON DAILY BASIS.
ON AND ABOVE THIS COST SOME EXTRA AMOUNT
IS GIVEN TO CONTRACTOR TO COVER OVERHEAD
CHARGES AND CONTRACTOR’S PROFIT.
PIECE WORK METHOD:
SMALL WORK UPTO RS 5000 OR LESS IS CARRIED
OUT BY THIS METHOD
BY THIS METHOD CONTRACTOR AGREES TO
COMPLETE WHOLE WORK WITHOUT REFERENECE
TO TOTAL QUANTITY OR DURATION
BY THIS METHOD PERIODICAL MAINTENANCE AND
REPAIR WORK IS CARRIED OUT.
PIECE WORK METHOD:
AS SUCH WORKS IS VERY SMALL NO
ADVERTISEMENT IS PUBLISHED IN THE
NEWSPAPER,NO SECURITY DEPOSIT,NO EMD
EXECUTIVE ENGINEER WILL MAINTAIN A LIST OF
PETTY WORKER IN HIS OFFICE
WHENEVER SUCH WORK IS ARISES PETTY WORKER
WILL BE INFORMED ABOUT THE WORK
PETTY WORKER WILL SUBMIT HIS RATE LIST IN A
SEALED COVER AND LOWEST RATE IS ACCEPTED
BY THE DEPT
PIECE WORK METHOD:
IN THIS TYPE OF WORK SMALL AGREEMENT IS
CARRIED OUT WITHOUT REFERENCE TO
ACTUAL QUANTITY OR DURATION .
NO SECURITY DEPOSIT ,NO EARNEST MONEY
DEPOSIT ,NO PENALTY PROVISION BUT NOTICE
IS ISSUED TO PETTY WORKERS WHEN DELAY IN
THE WORK IS CAUSED.
DEPARTMENTAL METHOD OF
EMPLOYING DAILY LABOUR
IN THIS METHOD DEPARTMENT DIRECTLY
PURCHASES MATERIALS FROM THE MARKET
AND ALSO ENGAGES LABOURS ON DAILY BASIS
THIS PROCEDURE IS ADOPTED BY THE
DEPARTMENT WHENEVER NO CONTRACTOR IS
INTERESTED TO CARRY OUT WORKS OR
CONTRACTOR HAS PUT VERY HIGH COST .
DEPARTMENTAL METHOD OF
EMPLOYING DAILY LABOUR
BY THIS METHOD PROFIT OF THE
CONTRACTOR CAN BE SAVED.
SOMETIMES THIS METHOD PROVES TO BE
ECONOMICAL BUT NOT ALWAYS BECAUSE
CONTRACTOR HAS POSSESES
ORGANIZATIONAL SKILLS AND OTHER SKILLS
WHICH ARE REQUIRED FOR SATISFATORY
COMPLETION OF WORK.
DEPARTMENTAL METHOD OF
EMPLOYING DAILY LABOUR
LACK OF THESE SKILLS ON GOVT EMPLOYEES
WILL RESULT IS DELAY IN COMPLETION OF
WORK AND ALSO PROVES TO BE
UNECONOMICAL CONSTRUCTION
