Project Management Consultant for PMGSY Rural Roads Project in Jharkhand

(World Bank Funded)

Procurement and Contract Management 30 Aug 2013Presented by:

Soumitra Ghosh General Manager,

PROCUREMENT PLAN

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PROCUREMENT PLAN Mode of Bidding

National Competitive Bidding (NCB) International Competitive Bidding (ICB)

Criteria of NCB or ICB (e.g. Contract upto Rs. 100 Crore- NCB, above- Rs. 100 Crore- ICB etc.)

Others e.g. Whether on-line or off-line bidding, Time frame for bidding, evaluation etc.

Formation of Tender Evaluation Committee Technical Committee Financial Committee

Approving Authority3

PROCUREMENT PROCESS FLOW

Receipt of Offers (Technical & Price)

Cost of RFP document accompanying tender

Earnest Money Deposit accompanying tender

Opening of Technical Bids

Price Bids kept un-opened and sealed

Evaluation of Technical Proposal

Evaluation of Commercial Terms & Conditions

Announcement of Qualified Bidders

Opening of Price Bids of Qualified Bidders

Price Bids of Unqualified Bidders kept unopened

Evaluation of Price Bids

Placement of Order/ LOI

Return EMD and unopened Price Bids to Unqualified Bidders and

Unsuccessful Bidders

Invitation of Bids

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Bidding Document

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Bidding document Instructions to Bidders

Background information

Source of funding

Type of Bidding, NCB, ICB Procedures to be followed by Bidders in the

preparation and submission of their Bids e.g. whether two part or one part, tax/ duties to be considered, validity, power of attorney etc.

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Bidding Document Evaluation and Qualification Criteria

This Section contains all the criteria that the Employer shall use to evaluate bids and qualify Bidders, such asoTechnical

Experience on similar type of completed jobs Possession of required machinery/ equipment Having qualified technical staff of reqd. experience etc.

oFinancial Criteria Annual Turnover Net worth etc.

oOthers viz. Domestic preference etc.

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Bidding document Technical Specification

o Specificationo Drawingso Reports etc.

General Conditions of Contracto This part is elaborated in the

‘Presentation on Contract Management’

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Bidding Document Particular Conditions of Contract, or

Special Conditions of Contracto This Section deals with the Conditions specially

applicable to the Works under consideration e.g. Time for Completion, Milestones, rate of deduction of Liquidated damage, Insurance etc.

Bidding Formso This Section includes formats for Letter of

Transmittal, Performance Security, Advance, Financial Bid submission forms etc.

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CONTRACT MANAGEMENT

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A Contract is a written Agreement between the parties that is intended to be legally enforceable

A prerequisite requirement for the enforcement of a contract, is that the terms & conditions are accepted by parties of the contract.

WHAT IS A CONTRACT ?

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Contract Management or Contract Administration is the management of Contracts within the provisions and intentions of the Contract accepted by the Parties.

It is the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk

WHAT IS CONTRACT MANAGEMENT ?

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A very wide subject to highlight and discuss all aspects of Contract Management

Accordingly only important aspects of the Contract Provisions under the following, which need to be closely monitored will be discussed General Conditions of Contract

Special Conditions of Contract

Technical Specification

An Overview

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Right of Access to the Site Employer shall give the Contractor right of

access to, and possession of, the Site within a specified time

Permits, Licences or Approvals Employer shall provide permits, licences or

approvals required by the Laws of the Country, clearance through customs for the delivery of Goods etc.

Obligation of Employer

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Contractor’s General Obligations The Contractor shall execute and complete the Works in

accordance with the Contract and as per Engineer’s instructions, and shall remedy any defects. This includes Environmental & Social issues also

shall provide the Plant, Personnel, Goods, consumables, material, and services for successful execution of Works as specified in the Contract

shall appoint an Engineer as in-charge of Project and shall give him all authority necessary to act on his behalf for execution of the job.

Overall management of site including Safety of men and machineries.

Obligations of the Contractor

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The Contractor shall furnish (at his cost) a Performance Security for proper performance

This is generally in the form of Bank Guarantee for an amount of 5%- 10% of the Contract Value, as agreed in the Contract

It is normally valid up to Defect Liability period

Performance Security

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Broadly: Engineer named in the document shall carry out the

duties on behalf of the Employer as assigned to him

shall approve all drawings prepared by the Contractor for execution of temporary and permanent Works

He and his team shall supervise, examine, inspect, instruction site activities, take measurements of work done, recommend for payment, extension of time etc.

the Engineer shall determine any prayer for extension of Time for Completion, Variation order, Extra claims and other contractual issues

Engineer’s Duties & Authority

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The Contractor shall carry out the work in accordance with recognized good practice

give the Engineer full opportunity to carry out inspection & testing

rectify the defects, remove and re-execute any work which is not in accordance with the Contract and as directed by the Engineer

WORKMANSHIP

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Contractor shall submit a detailed time programme in the form of Bar Chart/ PERT network immediately after commencement

Extension of Time for Completiono Extension may be sought due to various reasons viz.

non-availability of fronts/ approved drawings/ payments, ordering additional works, hindrances due to local or political issues, Act of God etc. and any other delays Caused by Authorities etc.

WORK PROGRAMME

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If the Contractor fails to complete the work in totality or in parts/ sections, the Contractor shall pay delay damages (or Liquidated Damages) to the Employer for this default.

This may be to the tune of 0.1% of the unfinished work, subject to a maximum of 10% of the Contract Value or otherwise specified in the Contract

DELAY DAMAGES

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The Works and Sections shall be taken over by the Employer when

the Works have been completed in accordance with the Contract,

issue the Taking-Over Certificate mentioning any minor outstanding work and defects which will not substantially affect the use of the Works or Section

However, minor defects shall be made good during the Defect Liability Period

EMPLOYER’S TAKING OVER

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This is the period after the issuance of Completion Certificate, as stated in the Contract, within which period the Contractor shall

o complete any work which is outstanding on the date stated in a Taking-Over Certificate

o execute all work required to remedy defects or damage, as may be notified by the Employer on or before the expiry date of the Defects Notification Period

DEFECT LIABILITY

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Variation may include additional or modified items arising out of extra work, changes to the quality and other characteristics work, omission of any work not previously mentioned

It may be determined from analogous items available in the Contract

The Extra items may also be determined by analysing the labour, material, fuel and other components including Contractor’s overhead & profit.

VARIATIONS & EXTRA CLAIMS

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The Contract Price may be adjusted to take account of any increase or decrease in Cost resulting from rises or falls in cost of labour,

materials

fuel

other inputs to the Works

This is made after the Base Date, by addition or deduction of the amounts determined by the formulae prescribed in the Contract.

However for fixed price Contracts such adjustments are not made

ESCALATION

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Advance Paymento The Employer normally makes an advance payment, when the

Contractor submits a guarantee of equivalent amount, which is adjusted from the Contractor’s bills as a percentage or in installments as stated in the Contract

Interim Paymento The Employer normally makes payment against monthly

Interim Bills, supported by requisite documents

Final Payment o After receiving the Performance Certificate and other

documents e.g. As-Built drawings etc., the full and final payment is made

PAYMENTS

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Employer shall be entitled to terminate the Contract if

o the Contractor unreasonably fails to carry out any obligation under the Contract,

o abandons the Works or otherwise plainly demonstrates the intention not to continue performance of his obligations

o Corrupt or Fraudulent Practices

o Other reasons bankruptcy, insolvency etc.

TERMINATION BY EMPLOYER

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“Force Majeure” means an exceptional event or circumstance which could not reasonably be avoided or overcome by any of the Parties

This may include, but is not limited to

o war, hostilities, invasion, act of foreign enemies, rebellion, terrorism, riot, commotion,

o Act of God (e.g. flood, famine etc.)

FORCE MAJEURE

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When there is a dispute between the Parties, the following steps should be followed

o The Engineer should thoroughly examine the Contractor’s claim and come to a reasonable solution

o The disputes should be mutually and amicably settled

o If the above step fails, the matter should be referred to Dispute Adjudication Board (Board should be formed at the beginning of the Contract)

CLAIMS, DISPUTES

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Any dispute between the Parties neither settled amicably nor through Dispute Adjudication Board, should be referred to Arbitration

Normally each Party nominates one person each, and these two persons mutually select another person, who becomes the Chairman of the Arbitration Board. The decision of Arbitration Board remains final and binding on both the Parties

There are several rules and procedures of Arbitration, viz. Arbitration & Conciliation Act, 1996, United Nations Commission on International Trade Law (UNCITRAL) etc.

ARBITRATION

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The Technical Part generally consists of the following:o Detailed Technical Specification related to Civil,

Mechanical, Electrical Works, as applicable, to be carried out

o Mode of measurements

o Bill of Quantities

o Drawings

o Other technical details

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Technical Specification etc.

Contract management is successful if:o the arrangements for service delivery continue to be

satisfactory to both parties

o the expected business benefits and value for money are being achieved

o the client/ supplier/ contractor is co-operative and responsive

o the organisation understands its obligations under the contract

o there are very little disputes and the differences can be sorted out through the Contract Clauses

WHEN IS A CONTRACT MANAGEMENT SUCCESSFUL?

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DOsDo Spend time reading and understanding the contract, particularly the contract management and dispute resolution procedures Do flow down your knowledge of key contract processes to members of your internal team

Do notify the Employer in line with the contract if you think you may not meet targets with consequences due to reasons not attributable to you

Do notify the Employer in line with the contract if you think that some extra- contractual work is to be carried out

Do use the daily, monthly reports etc., analyze the reasons and keep records for future necessity

DOs and DON’Ts

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DON’TsDon’t simply put the contract on the shelf once it is signed.

Don’t issue unnecessary letters of minor nature.

Don’t use any unethical or unscrupulous languages while writing a contractual letter

Don’t forget to record any correspondence or instruction given verbally which may give rise to future contractual claims

DOs and DON’Ts (....Contd.)

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ANY QUESTIONS?

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35URS Scott Wilson India