ASSIGNMENTON

CONSTRUCTION CONRACTS & CONTRACTING

PGPM 14

SUBMITTED BY

G.S.VINOD VASAN,PG PPM,REG NO: 211-03-31-9250-2133

ASSIGNMENT

NICMAR/CODE OFFFICE

1. Course No : PGPM 14

2. Course title : Construction Contracts & Contracting

3. Assignment No : 04

4. Date of dispatch : 20-06-2011

5. Last date of receipt of

Assignment at CODE office :

Assignment

Contract administration and monitoring is the most important area of

construction management. Contract administration process should start right

from the day work is assigned to the company. Discuss any project contract

currently in progress with your company and how administration and

monitoring is being done. Draw the organization chart for this activity and

explain all the function carried out. Do you think the system is achieving

results? Discuss.

INTRODUCTION

Contract management is the process that enables both parties to a contract

to meet their obligations in order to deliver the objectives required from the

contract. It also involves building a good working relationship between

customer and provider. It continues throughout the life of a contract and

involves managing proactively to anticipate future needs as well as reacting to

situations that arise.

The central aim of contract management is to obtain the services as

agreed in the contract and achieve value for money. This means optimising the

efficiency, effectiveness and economy of the service or relationship described

by the contract, balancing costs against risks and actively managing the

customer–provider relationship. Contract management may also involve aiming

for continuous improvement in performance over the life of the contract.

The company has got approval from the OHS and the blank tabulated form is given below:

CONTRACT MANAGEMENTDocument 1h: Contract OHS System Approval for Labour Hire

Last Update:

Owner:

Labour hire consists of contractors engaged directly or through labour

hire agencies to carry out work under similar arrangements to normal staff. The

contractor will be supervised directly by University staff. This does not include

contractor managed work teams which fit under the other classifications of

contract management. This document when completed is to be kept with the

current version of the Contractor’s Health and Safety Plan and forms part of the

contract documentation.

Contract Major MinorBusiness services

Event Mgt

Light deliv-ery

Heavy delivery

Contract staff

Off-siteVenue

hire

LongL/M/H haz-

ard

MediumL/M/H haz-

ard

OngoingL/M/H haz-

ard

ShortL/M/H haz-

ard

In general, contractors in this group must be treated in the same manner as staff members as regards induction, supervision and other OHS requirements. The University is described as the “Host Employer”.

Contract Details:

Contract Name. Contract Number:

Company Name:

Name of Contact Person:

Contact details:

Position: Date:

Name and Contact Details of Deakin Representative:

Contract Characteristics

Class Notes

Type of Contract?

CT 1 -9

CT 1: Labour hire contract staff

The type of contract is an important factor in determining the types of OHS controls required

Type of Engagement?

E 1 - 4

E1: Long term project or service contract (more than 2 weeks)

E2: Medium term project or event (up to 2 weeks)

E3: Ongoing but intermittent

E4: Short term (few hours), one-off or annual

Hazard level?

L/M/H

Low: Serious injury is unlikely

Medium: Serious injury is possible

High: Serious injury is likely if not well managed

(Serious injury is any injury that involves lost time or hospital treatment)

Element

(see Table 1:OHS Control Measures for Labour Hire)

DateReceived

Satisfactory/Unsatisfactory /Not Applicable

Contract for Labour Hire

Labour Hire Contractor insurances

Labour Hire Contractor OHS Management System

Labour Hire Contractor has established systems and procedures for managing OHS hazards

Labour Hire Contractor and contractor employees hold all necessary qualifications and permits.

Labour hire employee has a good understanding of the hazards and risks associated with the contract

(University responsibility) Plant and equipment used by the contractor is appropriately licensed or registered and is maintained on a regular basis

The Labour Hire Contractor is recommended for inclusion on the Approved Contractor List (Panel) for (describe type of contract)

Hazard Disclosure and Labour Hire Job Description

(University responsibility) Project Risk Assessment

The University will be required to develop (if required) and use Job Safety Assessments and/or Safe Working Method Statements

The labour hire employee will operate under University Permit and Isolation procedures and have been made familiar with them

The labour hire employee have completed the General University Induction

The labour hire employee will complete a Local Site Induction before commencing work

The labour hire employee has received copies of the Site Safety Rules

Deakin staff will be required to supervise the contractor

The labour hire employee will follow University sign in/sign out procedures

The labour hire employee will be monitored (indicate how frequently and whether randomly or by agreement)

Element

(see Table 1:OHS Control Measures for Labour Hire)

DateReceived

Satisfactory/Unsatisfactory /Not Applicable

The performance of the labour hire employee will be formally evaluated (indicate when)

Comments

Authorisation Signature Date

Local supervisor

Contract Manager

Contractor Representative

Element Date Yes / No

The Contractor is approved for inclusion on the Approved Contractor List

The Contract meets the University OHS contractor management requirements

Authorisation Signature Date

Dean / Head of School / Director

Table 1:OHS Control Measures for Labour Hire

OHS Control Measures

Notes

Resources and Tools

All the forms are intended for adaption as required

Contract OHS Management

Contracts cannot transfer responsibility for OHS to the contractor

For use of the Contract Manager:

(1a) Contract OHS Management System Guidelines

(1b) Contract OHS Management System Template for Labour Hire (This document)

WorkSafe Victoria: Host Employers: Managing the safety of labour hire workers

Written contract OHS requirements must be included in the contract.

For use of the Contract Manager:

(2) Model Contract Clauses

Hazard Management

Project Risk Assessment

Required for all contracts that involve a medium to high hazard level. An initial risk assessment should be carried by the Contract Manager to identify issues. The risk assessment must be discussed with the labour hire employee

For use of the Contract Manager and Contractor:

(3a) Contract OHS Risk Assessment for construction and related works

(3a) Contract OHS Risk Assessment for maintenance and related works

OHS Management System

Large labour hire contractors will have an established OHS Management System.

For use of the Contract Manager:

(4a) OHS Guidelines for Contractor Selection

OHS Control Measures

Notes

Resources and Tools

All the forms are intended for adaption as required

(4c) Tender OHS Management System Evaluation

For completion by the contractor:

(4b) Tender OHS Management System Questionnaire

WorkSafe Victoria: Labour Hire Agency health and safety ‘health check’

Proof of WorkCover and insurance coverage

Normally required for all contracts

Hazard Disclosure Statement

The Hazard Disclosure Statement is a formal advice to the Contractor about hazards known to Deakin University that may affect the safety of the contractor

The Labour Hire Provider may require the University to complete a Labour Hire Description or OHS Management System assessment

For use of the Contract Manager:

(6) OHS Hazard Disclosure Statement

(6b) Labour Hire Job Description

WorkSafe Victoria: Assessment of host employer’s system for managing OHS

Job Safety AssessmentsIn major works where there are activities with a medium to high hazard level

For use of the Contract Manager or local supervisor:

(10a) Guidelines for Job Safety Assessments

(10b) Job Safety Assessment Template

(10c) Safe Working Method Statement Template

Safe Work Method Statements

In major works where there are activities with a medium to high hazard level

University’s Permit and Isolation procedures

The labour hire employee must be familiar with these procedures.

Local procedure

Labour Hire employee Certificates

Where work requires that the operator has certification (e.g. forklift driver),

The Contract Manager must verify their currency

Local inductionThis induction is required and would be the same as a similar University staff member

This is the normal induction process for casual and contracted staff

OHS Control Measures

Notes

Resources and Tools

All the forms are intended for adaption as required

The induction checklist chosen will depend upon the nature of the work

For use of the Contract Manager:

(15a) Contractor OHS Induction Checklist - Maintenance and Service contracts

(15b) Contractor OHS Induction Checklist - Office based labour hire, casual staff, temporary staff contracts

(15c) Contractor OHS Induction Checklist - Venue hire contracts

(15d) Contractor OHS Induction Checklist - Laboratory and workshop based contractors and temporary staff

(15e) Contractor OHS Induction Checklist – Labour Hire Selection, Induction and Training Record

Site induction

Site Safety Rules Booklet

Site Safety Rules provided as a booklet to the Labour Hire employee

Local arrangements

Supervision and Monitoring

The University is responsible for supervision

Required The supervisor nominated in this document

Sign in and Sign out procedures

Normal University arrangementsRequirements for the contractor:

(21a) Site Sign In / Out Template

Monitoring the performance of the contract

Direct responsibility of the University supervisor

Evaluating contractor performance

Where a labour hire contractor has an ongoing relationship with the University, the contractor’s OHS performance must be periodically reviewed.

For use of the Contract Manager:

(23a) Non Conformance Report Form

(23b) Post / Annual Contractor Evaluation Form

Based on the above data and elements of consideration i do have submitted a

labour contract that happened in a company.

Name of Project

Completing Water Supply System for the upcoming project Aditya

Aluminum, at Lapanga, Sambalpur, Orissa.

Scope of Work

Complete Design and Engineering, Manufacture, Supply, Transport,

Handling, Erection, Testing and commissioning including Performance

Guarantee Test for Water Supply System and related Substation, pipe Line,

WBM Road for supply of Raw Water from Hirakud Reservoir to Aditya

Aluminium Smelter & Captive Power Plant at Lapanga, District Sambalpur,

Orissa.

Important details of the contract:

Name of the company : Aditya Aluminium,

(A Division of HINDALCO Industries Ltd.)

Lapanga, Sambalpur, Orissa

Name of contractor : Not to Display

Type of Contract

The contract is of Lump sum Fixed Price type turnkey contract. The

above contract includes complete design, engineering, supply, erection, testing

and commissioning of equipment. In case any item is missed out or omitted

from the list of technical specification for completion of the job as per contract

provision it is also deemed to be in scope of the supplier without any cost

implication to the company.

Price of the contract

The contract price is payable by the company to the supplier in consideration

of all the supplies to be made and all services to be provided by the suppliers

according to the terms of the contract shall be:

(i) Supply of equipment including Not to Display

Commissioning spares, packing

Forwarding, transit Insurance

(ii) Design, Engineering, Unloading, Not to Display

Storage, Handling, Erection and

Commissioning including all civil

Work etc. with supervision and

insurance for storage and erection

of the “water Supply System”

in Complete

The above prices are exclusive of Transport, Excise Duty with education

cess, Sales Tax, Entry Tax, but inclusive of work Contract Tax and other Taxes

and duties as applicable to the scope of the contract.

Price Variation

In this contract the aforesaid contract price shall remain firm throughout

the entire contract period and shall not be subject to any escalation on the any

account whatsoever expect for any statutory variation (Increase or decrease) in

taxes and duties and the price of the MS spirally welded pipe for main water

supply. The price of the MS pipe are based on 11th jan,2010 if any variation in

the in price by the SAIL shall be applied on the supply price of the pipe with its

correspondence impact on taxes and duties and shall be paid.

Similarly for intake well & pipe line laying system the depth/length

variation are applicable at mutually agreed unit rates. In case of any variation

(increased and decreased) in account , the total contract price shall be increased

or decreased and the advances/payments already paid and/or due for payment

shall be adjusted accordingly.

Time of Completion

The program of delivery, installation and commissioning of the

“Equipment” will be effective from the effective date and will be according to

the schedule of 24 months from the effective date.

For construction of the raw water pipe line land corridor will be provided

by Aditya Aluminiumin phases within 8 month of the date of LOI. Incase of any

delay in providing land corridor due to any reason attributable to Aditya

Amuminium, the contract period shall be extended correspondingly without any

financial impact to the company.

Similarly for the construction of intake well and channel inside the

Hirakud Reservoir, in case any delay in the construction due to change in

stipulation of government of the Orissa and central government or Dam

authority etc. the contract period will also be extended correspondingly without

levying and LD.

Payment terms

The payment of the contract price will be made by the company in

accordance with the following terms on receipt of invoices and other related

documents:

For supplies

1. 10% contact value as advance with LOI against of BG

2. 5% of contract value against the submission & approval of GA drawings.

3. 60% of contract along with 100% taxes &duties on pro-rata as per

approved billing schedule against lawful invoice.

4. 10% of contract value against achievement of milestone.

5. 5% of contract value after issuing of commissioning certificate against

performance bank guarantee of equivalent amount.

6. 10% of contract value against issue of final acceptance certificate (FAC).

i.e. after completion of defect liability period of 12 month from date of

commissioning certificate.

For Civil, Erection, Testing & Commissioning

1. 10% contact value as mobilization advance against of BG of equivalent.

2. 5% of contract value against the submission & approval of GA drawings.

3. 60% of contract along with 100% taxes &duties on pro-rata as per

approved billing schedule against lawful invoice.

4. 10% of contract value against achievement of erection milestone.

5. 5% of contract value after issuing of commissioning certificate against

performance bank guarantee of equivalent amount.

6. 10% of contract value against issue of final acceptance certificate (FAC).

i.e. after completion of defect liability period of 12 month from date of

commissioning certificate.

Quality inspection and testing during manufacturing

The company will be entitled at all reasonable times to witness the

inspection, examination and testing of the equipment and erection &

construction work at workshop of supplier.

For this the contract should give one week prior notice to company for

testing.

The supplier should provide such assistance, labour, material, electricity,

fuels, apparatus and instrument etc. for carry out test. If, after inspecting,

examination, or testing any part of the equipment and erection & construction

work, the company should decide that such part is defective or not in

accordance with the terms and specification for the contract, then it may reject

such part by giving to supplier seven working days written notice of such

defect.

The company will bear all the costs and expenses for deputing its

inspector.

Warranty

The supplier warrant that all material and all services provided by the

supplier should new, free from defect in workmanship and material or design

and fit purpose for which they are supplied.

The supplier warranty shall be effective for 18 month from last date of

receipt of supplies or 12 month from the date of successful commissioning.

During the warranty period if there are any failure, the supplier, on it

option, repair. Make good, replace, or modify with all possible speed without

any additional cost to company.

If supplier does not commence the correction activities the company may,

at its option, correct the defect at the suppler expenses. In such case the

warranty period will extended to 12 month from the date on which such

replacement or repair is completed.

Project Management, Co-Ordination, Monitoring and Supervision

The supplier should depute at their own expense duly qualified

supervisors to site to supervise the erection and construction work and putting in

to operation at site.

The supplier should provide supervisory services for project

management, installation and commissioning also bear all the cost against the

facilities provided to its supervisors.

All the work should be complete on or before time if any site supervisor

deputed at site for work is not able to complete the work on time or at any guilty

of serious misconduct, the supplier should remove or replace such persons at

supplier expense so as not to cause any interruption in carrying out the erection

& construction work or any delay in specified time schedule for the work.

The supplier should provide adequate on the job training to operating and

maintenance staff of the company at site during the erection & commissioning

without charging any additional cost to the company.

Liaison and co-ordination for processing of all statutory clearances with

State Government Authority at Bhubaneswar or at District Level or with the

DAM Authorities shall be carried by the supplier.

Liquidated damages (LD) for delays and shortfall in performance

In the event of delay in completion of supply and commissioning of the

water supply system, beyond the completion period as per schedule, the supplier

shall pay LD @ 0.5% of the contract price per week of delay subjected to a

maximum of 5% of the contract prices for both supply and erection order value.

The payments of deduction of liquidated damages shall in no way relieve

the supplier from completing the supplies and works and discharging all its

other obligations under the contract provided however that the above mentioned

liquidated damages are the supplier only obligation to financially compensate

the company in case of delay completion of the facility and/or failure to achieve

the performance guarantees.

The important point from contract point of view to be monitored/ resolved

1. The company should furnish all the pertinent data and information’s

available to it without charges and within a reasonable time and should

give such assistance as should reasonably required by the supplier for

carrying out the supplier obligations under the contract as per schedule.

2. The supplier , in carrying out its responsibilities, shall comply with the

legislation, laws, by-laws, rules, regulations of the Govt. of India, the

State of Orissa and other local authorities as may be applicable including

those relating to environment, labour and safety.

3. The company should make timely payment to the suppliers for all

amounts due to the suppliers under the contract in accordingly with the

terms and provisions of the contract.

4. The Engineer-in-charge (EIC) carryout such duties in issuing certificates,

decision, instructions and order as per contract to be carried out by the

supplier. EIC shall have the full authority to act on behalf of the company

for all purpose in connection with the contract and shall be supplier

primary point of contact with company in relation to the execution of the

work. The supplier shall proceed with the works in accordance with

decision, instruction and order given by EIC subject to and in accordance

with the contract, including provision for variation hereof.

5. Liaison and co-ordination for processing of all statutory clearances with

State Government Authority at Bhubaneswar or at District Level or with

the DAM Authorities shall be carried by the supplier.

6. During the contractual period, the supplier shall indemnify the company

to co-ordinate and ensure to take care of all the Local, socio, economic,

cultural, education and political requirement of various non profitable

organizations, association, institution including district and local

administration if any form time to time as a part of their contractual and

social obligation with due consultation and approval from the company.

7. The supplier shall also get approved by the company the list of its

vendors engaged for the purpose of the contract.

8. The supplier shall make its own arrangement for land, supply of water,

electricity or any other facilities required for fabrication, erection, and

commissioning of the work.

9. The supplier shall indemnify to the company that they will create as

environment of awareness and physical being that is conducive to a safe

and healthy workplace, in accordance with all federal, state, local and

corporate regulation and contractual obligations. The supplier shall

provide safety programs that are effective in identifying and reducing

hazards in the work place and impart training to their employees to

develop safe work practices that efficiently produce quality products in a

safe manner with an objective to have an injury free workplace and zero

accident.

10.The supplier shall use liberal factors of safety throughout the design and

shall follow all other relevant IS and also international codes, wherever

applicable.

The Consultant

The Consultant will be totally responsible for all the engineering of

Projects going on at all the branches. He will be involved in each activities from

initial idea, generation of layout drawings with all infrastructure requirements,

Detail working drawings, estimates, and site execution up to hand over.

The consultants would be responsible for preparation of drawings and

documentation within their various disciplines with regard the Services. Site-

visits would be made by the consultants at specified milestones, or as may be

required.

The Group Head (CEO & COO):

The group head’s role would be the monitoring of the designer’s output

and activities, and taking responsibility for all the work that is generated by the

group.

Project In charge (Sr. V.P.):

Interaction with contractors to detail out their requirements, obtaining

signoffs and overseeing the tendering and negotiating process. Subsequently,

during the execution stage, he monitors the project for cost, quality, and

schedules and local administration.

The Project Manager (GM):

The project manager audits the project during the drawing/design stage,

for conformance to the stipulated process, and for adherence to agreed

schedules. Subsequently, during the execution stage, he monitors the project for

cost, quality, and schedules.

The Site In Charge(Manager/ Sr. Manager):

The site in charge is responsible for achieving quality on site, interpreting

the drawings and documentation on site, and raising reports on quality and

scheduling.

Assistant Site In charge (Asst. Manager/ Engineer):

The role of a Assistant site In Charge is the day to day monitoring of site

activities. Monitoring of day to day schedules and raw material quality fall

within the scope of duties. He is responsible for Co-ordination between Vendors

and the generation of daily and weekly status reports.

Recommendations & Conclusion

1. In this contract there is no provision and any point hasn’t made about

change of the scheme for drawl of water from the reservoir and change in

the price of the contract according to that change.

2. The contract doesn’t have the provision of the penalty as per contract the

contract can’t leave work there is provision of the liquidity damage

maximum of 5 % of the contract value. The contract has to complete the

work and if there is any defect in the work the contractor has to rectify it

on his own expenses within the guarantee period in case of any delay of

contract due to unsatisfactory work the company will suffer the loss by

unavailability of the water at plant area.

References:

- NICMAR publication lesson books on Construction Contract

Management