PROJECT CONTRACTING

PRESENTED BY:
Karunesh Kumar Sharma
Pratishtha Agrawal
What is contract
A contract is a legal agreement.
It is an exchange of promises by two or more
persons.
Section 2 (b) of Indian contract act 1872
defines contract as an agreement
enforceable by law.
Concept of project contract
To execute the project, various agencies are
hired for special work to be done for project.
These agencies are specialist in particular type
of job which is to be carried out during the
execution of project.
These agencies are assigned vast scope of
work and related rates for work content.
Objectives of project contract
Contract have limitation on the time or
schedule ground of project.
Site mobilization by the contractor and their
assigned work to be completed with in
schedule.
Contractor may contract with other contractor
whose work is associated with their activities.
Safety norms to be followed at site.

Need of contract
The required expertise to carry out the work is
available with contractor while the resources
and expertise available in house is inadequate
to carry out the work.
Even though the required expertise are
available in house there may be time
constraints and the project may be required to
be completed with in certain deadline which
may be impossible to accomplish unless a part
of work is assigned to contractors.
Types of contract
Broadly contracts can be divided into two
types. They are
1) Turnkey contracts
2) Non turnkey contracts
Turnkey contracts
In this type of contract, the entire responsibility
of project execution is entrusted to the
contractor.
It is as if owner comes into the picture only
when project is completed and he turns the key
of the plant to start production.
Till such time the project reaches a ready to
start stage, the contractor takes care of all
aspects of project execution.
Cont..
Scope of contract covers all areas of the
project. Viz, design, engineering, construction,
structural work, supply and erection of plant
machinery, supply of spares, testing etc.
These contracts may be for whole project or
even for a sub unit of main project.
Such sub unit is a separately identifiable
component of the total project.
Non-turnkey contracts
These contracts are preferred when the
projects are small sized.
When there is a strong competent and capable
team is available with the organization.
In these contracts, The total project is divided
into suitable work packages.
The packages that need to be given to
contractors are identified.
A contractor may be entrusted with one or
more work packages.

Cont..
However , the responsibility for overall
supervision and performance of the project
will rest with the in-house project
department.
Non turnkey contracts are:
1) Piece-work contract
Best suited for small works like site clearance,
maintenance repair works, earth work
excavation etc.
The contractor agrees to execute a specific
work for a specified rate without reference to
the quantity/magnitude of work involved, or
the time taken for completing specified work.
Cost of work is very small for such contracts.
2) Lump sum contract
Used for all major non-turnkey contracts.
Contractor agrees to execute the work
completely in all respect, within the stipulated
time, in accordance with the drawings ,
designs and detailed specifications and for an
agreed sum.
Work done is only compared with the
drawings and specifications.
Time of completion of work is crucial factor.


3) Cost-plus percentage contract
The contractor uses his own materials and
labour and execute the work according to
drawings and specifications
Project promoter exercises close control
during execution to ensure right quality of
material is used.
Contractor is paid at a certain percentage
above the actual cost of execution.
4) Labour contract
The project promoter arranges for the supply
of all required material at work site and the
contractor arranges the labour.
Thus, the contract is entered into only for the
labour portion of the work.
Chosen when promoter do not want to
compromise with quality of material.
Process of project contracting
Preparation of specification

Tender notice

Bid submission

Bid evaluation

Letter of intent

Closer of contract
Assigned work is to be verified.
Work done is measured or verified for the
billing purpose.
Material reconciliation.
Demobilization from the site.