Construction Project Engineering

and Administration
unit1
 Chapter -1 :Introduction to Construction
Project Engineering
Outline :
1. Project
2. Engineering Project
3. Construction Engineering Project
4. Various Types of Civil/Construction Engineering
Contract works/ Projects
5. Functions of Construction Management
6. Successful Construction Entrepreneur
Project: A specific development activity with a starting
point and end point intended to accomplish a specific
objective.
Development Partner’s Definition: A project is often a
group of closely –related infrastructure and supporting
institutional development activities ( e.g. Construction
work plus technical assistance)
Engineering Project : A project involving engineering
design, methods, implementation
Construction Engineering Project: Construction
Engineering Project deals with
the designing, planning, construction,
and management of infrastructures such as roads, tunnels,
bridges, airports, railroads,
facilities, buildings, dams, utilities and other projects.
Construction Engineering is considered a professional sub-
practice area of civil engineering or architectural
engineering
Public Works: The term Public works
means any type of construction works
to be completed on behalf of the
government and body corporate either
fully or partially taken by the
Government pursuant to the prevailing
laws
Civil Engineering Vs Construction Technology
Construction technology is a related field that deals more with the practical
aspects of projects. Construction technologists or construction technicians
learn some of the design aspects similar to civil engineers and some of the
project site management aspects similar to construction managers. These
technicians are unique such that they are a cross between civil
engineers and construction managers.

At the educational level, civil engineering students concentrate primarily on

the design work, which is more analytical, gearing them toward a career as a
design professional. This essentially requires them to take a multitude of
challenging engineering science and design courses as part of obtaining a 4-
year accredited degree. Also, education for construction managers is
primarily focused on construction procedures, methods, costs, schedules, and
personnel management. Their primary concern is to deliver a project on time,
within budget, and of the desired quality.

The difference between a construction technologist and a civil engineer is

that civil engineering is an engineering discipline. Construction technology
students take basic design courses as well as construction management
courses.
 Various Fields of Civil Engineering Contract
Works
Roads : Highways and Rural Roads
Bridges:
Canal, Dam, Other Hydraulic Structures
Buildings: Residential. Public buildings
Airports
Water Supply
 Sewerage Treatment Plant
Oil and gas pipelines and plants
Power Transmission lines and Towers
Marine structures
Military installations
Others
 Functions of Construction Management
 Getting the work
Contract Negotiation and Signing the Contract
Liaison with clients
Financing the work
Accounting the Work
Work Supervision
Records Maintaining
Labour Relations
Engineering
 Successful Construction Entrepreneur
1. Build a great team. In construction, your people are your business. Hire dependable,
knowledgeable and skilled employees. Retain your best employees by promoting and
rewarding them for their hard work and reliability.
2. Manage your business, but lead your people. Your employees want to be led, not
managed. Be a great leader and your employees will follow you anywhere. If you try and
manage every aspect of your employees work they will think you have no confidence in
their ability to make good decisions and properly do their jobs.
3. Invest in your business. If you want to earn more business you have to invest time and
money into your company. This means buying new equipment and technology when
needed, training your employees and actively marketing your business.
4. Be selective to be profitable. It’s not enough to just earn more business. When you take
on more work it has to profitable. There’s no sense in doubling the number of jobs you
work if you aren’t increasing your profits.
5. Get the word out. Word of mouth remains the number one method most construction
companies use to market their business and earn more work. Encourage your best
customers to tell others about the great work your company does.
6. Play to your strengths. Would you rather have your company be known as a decent all-
around general contracting firm or the best general contractor doing LEED certified hotel
renovations? Finding a niche market or specializing in a specific industry can set you apart
from your competitors.
7. Network to earn more work. One of the best ways to network is to join and be active in
the local chapter of a trade association. Networking can be a useful tool to build brand
awareness for your company, generate leads and find vendors. Being active and giving
back to your community is also a great networking opportunity for your business.
8. Quality is king. Tread carefully when considering any measure that could sacrifice
the quality of your work. Cutting corners to reduce costs speed up completion of a
project can be detrimental. Your company’s reputation for doing quality work is only
as good as your last project so never compromise your high standards of performing
quality work.
9. Change is good. Adaptability is one of the keys to success in the construction
industry. As we’ve seen with the recent recession, construction can be quite a volatile
industry. If you are unwilling to make adjustments in your business to keep up with the
changing trends you are setting yourself up for failure.
10. Give great customer service. Pleasing your clients should be a top priority. This
doesn’t mean you have to cave in to their every demand. You should be actively
communicating with your client on all aspects of a project so you can be equal
partners in the decision-making process. Satisfied customers will lead to repeat
business and great referrals.
11. Be proactive, not reactive. You can’t just sit back and expect more work to just fall
in your lap. You have to proactively seek out new opportunities to retain and grow
your business. Constantly reach out to the owners, architects and general contractors
you find out what projects they have on the horizon.
12. Make smart decisions. We make thousands of decisions every day, many of which
are inconsequential. When it comes to earning more business, this often means
making hard decisions that will impact your success for years to come. Take the time
to consider all angles and options and perform your due diligence for future success.
Never get pressured into making rash or impulsive decisions.
 Chapter-2: Projects Gets Started
Outline
• Project Cycle
•Principal stages of a Project
•Organization of a Project
 Plan, Programme and Project
A Plan is typically any diagram or list of steps with timing and
resources, used to achieve an objective to do something. It is
commonly understood as a temporal set of intended actions
through which one expects to achieve a goal. For spatial or planar
topologic or topographic sets see map.
Example: Five year Plan, Interim Plan, Sector Plan, Regional Plan
Area Plan
A Program normally comprises a series of projects.
Projects: National Level and Local Level
Project Features:
Objective-Output-Activities-Inputs
Objective- Output-Activities-Input
Causal Relationship of features: In a project inputs enable
activities to be undertaken which will produce outputs which
taken together will lead to the achievement of the objectives.
Project Cycle National /Local Level Needs
National or Local Level Needs

Project
ProjectIdentification
Identification

Project
ProjectPreparation
Preparation

Project
Project Appraisal
Appraisal

Funding
Funding

Project
ProjectImplementation
Implementation

Operation and
Operation and Maintenance
Maintenance

Monitoring
Monitoring and Evaluation
and Evaluation
 Principal Stages of a Project
Feasibility and Social / environmental
assessment
Engineering Design and Pre Construction
Construction
 Organization of a Project
Executing Agency Level:
 Concerned Ministry
Concerned Department
Central Level Coordinating Agencies

Implementing Agency:
Project Management Unit/Office
Specify the reporting requirement eg. Inception,
Progress Reports, Interim Project reports ,Draft
Project Report , Final Project Report ,Completion
Report etc,
and their schedule and frequency where applicable
format, number of copies, names of recipient of the
reports etc
VO/Causes
 a person who provides expert advice
professionally.
A consultant is usually an expert or a professional
in a specific field and has a wide knowledge of
the subject matter.
A consultant is an experienced individual that is
trained to analyze and advise a client in order to
help the client make the best possible choices.
In the general sense, a consultant is an individual
with vast knowledge and experience in a specific
professional field.
Consultants are hired to lend their expertise to
clients in need of insight they do not possess.

Consultants are paid to share their expertise and knowledge to

help businesses attain goals and solve problems.
Consulting is a wide-ranging field with positions in innumerable
industries.
Consultants are often used prior to, and during, the start-up of a
new business or to re-energize a flailing business.
Consultants are also brought in when a business needs
reorganization, including the termination of individual employees
or entire departments.
A client will retain a consultant's services until the goal or
obligations of the particular endeavour have been met. The time
period for consultancy can vary in length, depending on the needs
of the client and on any unforeseen problems or additions to the
project for which the consultant was hired.
 Engineers are involved with the design, development and
construction of a huge range of projects in the built and
natural environment.
Their role is central to ensuring the safe, timely and well-
resourced completion of projects in many areas.
Consulting civil engineers liaise with clients to plan,
manage, design and supervise the construction of projects.
They work in a number of different settings and, with
experience, can run projects as a project manager.
Civil engineering offers many opportunities as well as the
satisfaction of helping to improve and enhance public
quality of life in many settings

As a civil engineer, one will plan, design and Involve in groundwork and review of A&E and statement of
manage construction projects. work (SOW).
Interact with civil engineers/architects for different projects.
These can range from the relatively small-scale, for
Execute the work as field engineer consultant.
example bridge repairs, through to large national
Collaborate with senior consultants to execute risk analysis
schemes, like the building of a new stadium.
studies.
In this regard the responsibility of a Civil Engineer Execute risk management processes and construction
Consultant can be listed as- frameworks.
Plan, design and inspect construction work of various civil Handle and manage asset management services.
projects. Provide risk- based technical assessments.
Oversee design and construction aspects of assigned civil Provide civil engineering related technical assistance and
projects. training guidance.
 S.N. Required Expertise Person-month Inputs
A. International
1 Team Leader/ Chief Resident Engineer 44 months
2 Bridge Engineer/ Expert 6 months
Total International Staff 50 months
B. National
1 Resident Engineers 156 months
2 Assistant Resident Engineers 237 months
3 Material/Pavement Engineers 126 months
4 Bridge/Structure Engineers 30 months
5 Contract Specialist 12 months
6 Transport Economist 12 months
7 Environmental/Bioengineering Specialist 12 months
8 Social/Resettlement Specialist 36 months
9 Senior Inspector of Works (SIOW) 456 months
10 Lab Technicians 234 months
11 Social resettlement staff 88 months
12 Surveyor 24 months
Professional 450 pm
Total National Staff
&Tech. Support 802 pm

A. INTERNATIONAL STAFF
NATIONAL STAFF
(1) Team Leader /Chief Resident Engineer 1. Resident Engineer
i. Educational Qualification i. Educational Qualification
Minimum Graduate in Civil Engineering Minimum Graduate in Civil Engineering
Desirable Masters in Transport Engineering/Highway Engineering/ Construction Desirable Masters in Transport Engineering/Highway Engineering/ Construction
Management Management
i. Experience
i. Experience
Total Experience 15 years Total Experience 12 years
Experience in Related Field 12 years in Road Works Experience in Related Field 8 years in Road Works
Experience in the Proposed Field of Expertise 7 years experience as a Team Leader out of which minimum 4 years experience Experience in the Proposed Field of 5 years experience as a Resident Engineer or 10 Years as ARE in
with 2 Road/ Bridge projects construction supervision of size approximately Expertise Road Projects with minimum experience of 2 Road projects.
$30 million each. Experience in FIDIC contract is desirable Experience in FIDIC contract is desirable

i. Language Communicate fluently in English Language i. Language Communicate fluently in English Language

(2) Bridge Engineer/ Expert 1. Assistant Resident Engineer

i. Educational Qualification i. Educational Qualification
Minimum Graduate in Civil Engineering Minimum Graduate in Civil Engineering
Desirable Masters in Bridge/ Structural Engineering Desirable Masters in Transport Engineering/ Highway Engineering/ Construction
i. Experience Management
Total Experience 12 years i. Experience
Experience in Related Field 10 years in Bridge Design/ Supervision Total Experience 10 years
Experience in the Proposed Field of Expertise 5 years experience as Bridge engineer/ expert and minimum experience of Experience in Related Field 5 years in Road Works
construction/ supervision of 2 pre-stressed high way bridges. Experience in the Proposed Field of 3 years experience as a Assistant Resident Engineer or 5 Years as
Expertise SIOW (after completion of Graduation in Civil Engineering) in Road
i. Language Communicate fluently in English Language Projects with minimum experience of 2 Road projects. Experience in
i. Experience FIDIC contract is desirable
i. Language Communicate fluently in English Language
i. Language Communicate fluently in English Language
Equal or better marks in aggregate
Number of GC Clause Amendments of, and Supplements to, Clauses in the General Conditions of Contract
REPORTS
1.1(b) and 3.1 The Contract shall be construed in accordance with the law of [insert All original drawing, work sheets, field notes, computer
country name].
Note: Bank-financed contracts normally designate the law of the program, reports, and other documents relating to the
country as the law governing the contract.
However, the Parties may designate the law of another country, in which
study shall become the property of the Client.
case the name of the respective country should be inserted, and the square
brackets should be removed.]
Inception Report
4.1 The language is English. The Consultant shall submit Inception Report (6 copies
to the client) within one month of the commencement of
6.1 and 6.2 The addresses are:
Client :
services. The Report will include the consultants'
Attention : detailed work program (including methodology and
Facsimile :
E-mail (where permitted): details of special investigation proposed and any
Consultant :
revision needed in the original proposal and the design
Attention :
Facsimile : criteria).
E-mail (where permitted) :
 Employer : The party named in the Contract as the
"FIRST PARTY" who will enter into contract with the
Contractor for the execution of the Works covered by
the Contract, or any other party authorized by the
Employer to exercise the powers and obligations of the
First Party, provided that the Contractor will be
informed accordingly in writing .
Contractor : The person, company or joint venture
named as Second Party in the Contract whose Tender
has been accepted by the Employer and with whom the
Employer has entered into Contract, and includes the
Contractors personal agents and his legal successors

Relations of the 3 parties in a construction project

Engineer: The Consulting office, or Engineering office or
Employer Contractor
Engineer or any other technical body appointed from time Work Contract
to time by the Employer to exercise in whole or in part the Employer Engineer
powers of the Engineer in accordance with the Conditions Service Contract
of the Contract provided that the Contractor shall be Engineer Contractor
accordingly notified in writing. Engineer supervises the construction and manages the project with
Engineers Representative Any resident engineer, or limited authority.
clerk of works appointed by the Engineer from time to time Responsible from executing the works
Site - The land and other places provided by the Provides the necessary securities and guarantees
Employer or designated as such where the Works are to Held responsible from his and/or his sub contractors actions
be executed, and any other places specifically designated Responsible from the quality of the executed works as well as
the security of the construction site
in the Contract as forming part of the Site.
Prepares the interim payment reports
May use sub contractors as allowed in the conditions of the
contract
Engineer:
Assigned by the Employer to represent the Employer
Name, contact information and authorities of an Engineer are stated in
relevant parts of the Works Contract
After consulting with the Employer and the Contractor, should propose
fair and objective solutions for claims.
Checks the quality of the appropriateness of the workmanship and the
materials used Before Contract Signature 1
Approves the payment certificates of the Contractor Employer gives award notice to the Awardee.
Employer Contract Negotiations are done (if necessary).
Defines the requirements and specifications Priority of documents are re-arranged if necessary due
Provides the construction site to contract negotiations or clarifications during tender
period.
Provides the financial resources (usually)
Contract is signed by the Employer .
Provides the necessary conditions to the Contractor for the execution
of works Contractor submits the required documents (e.g.
performance guarantee) to the Employer together with
the signed Contract.

Upon the signature of the Contract certain procedures need

The Contractor shall design (to the extent specified in the Contract),
to completed before the Contractor can commence the
execute and complete the Works in accordance with the Contract and
works;
with the instructions, and shall remedy any defects in the
18.2 Submission of All Risk Insurance
Works.
20.2 Identification of DAB (Dispute Adjudication Board) The Contractor shall provide the Plant and Documents
member(s). Sometimes identification is done on Ad
specified in the Contract, and all Personnel, Goods,
hoc bases.
consumables and other things and services, whether of a temporary or
3.1 If not already in the Contract, the Employers informs permanent nature, required in and for this design, execution, completion
the Contractor about the details of the Engineer.
and remedying of defects.
Communication lines and rules are established. The Contractor shall, whenever required by the Engineer, submit details
1.8 & 1.9 Supply of Drawings and Instructions of the arrangements and methods which the Contractor proposes to adopt
(RED Book) Drawings should be an integral part of the for the execution of the Works. No significant alteration to these
Contract and should be provided based on a well arrangements and methods shall be made without this having previously
structured calendar been notified to the Engineer.
The Contractor shall be responsible for the adequacy, stability and
If the Contract specifies that the Contractor shall design
safety of all Site operations and of all methods of construction.
any part of the Permanent Works, then unless otherwise
Except to the extent specified in the Contract, the Contractor :
stated in the Particular Conditions:
shall be responsible for all Documents, Temporary
Works, and such design of each item of Plant and Materials as A. the Contractor shall submit to the Engineer the
is required for the item to be in accordance with the Contract, Documents for this part in accordance
and with the procedures specified in the Contract;
shall not otherwise be responsible for the design or B. these Documents shall be in accordance
specification of the Permanent Works.
with the Specification and Drawings, shall be written
in the language for communications

(Engineer's) Duties and Authority (Engineer's) Duties and Authority

a) The Engineer shall carry out the duties specified in issuing variation orders;
the Contract . deciding on the extension of Time for Completion and
b) The Engineer shall exercise the authority specified applying the Liquidated Damages Clause;
in or necessarily to be implied from the Contract . approving the appointment of Subcontractors;
Provided, that the Engineer shall obtain the specific notifying the Contractor on suspension of Works; and
approval of the Employer, in compliance with the terms any other matters as may be set out in Part II of these
of his appointment, and after submitting his conditions).
recommendations to the Employer in writing, in the (c) Except as expressly stated in the Contract, the
following matters : Engineer shall have no authority to relieve the
Contractor of any of his obligations under the Contract
 Engineer's Representative The personnel of the Employer, the Contractor and
The Engineer's Representative shall be appointed by the Engineer to be deployed on the project site is
and be responsible to the Engineer and shall carry out identified. (4.3 Representative)
such duties of watching and supervising the execution
and workmanship of the Works and to test and examine The limits of authority of each personnel is identified
any materials to be used or workshop employed in and a line of communication is drafted based on this.
connection with the Works. He shall exercise such It is recommended that the line of communication is
authority as may be delegated to him by the Engineer signed by all parties.
Engineer refers to the Consultant Firm, not the For example: the Team Leader of the Engineer
Consultant s Team Leader. approves the Contractors Interim Payments, but does
not have the authority to negotiate amendments on the
Consultancy Contract.

Clause 4.4 Necessary permissions and procedures are

Clause 2.1 Right of Access to Site completed for the Sub Contractors.
Employer should give the right to access and possession of
the site to the Contractor after the Contract Signature.
Clause 4.1
Employer should complete his responsibilities and should give
the possession of the site free of problems. Security of the site and works
Delays in this task may cause extensions in the contract
duration and increases in the contract price.
Clause 6 Staff and Labour
1.13 Contractor should complete all the necessary local Sub Clause 6.4 (Local Labour Laws)
procedures and obtain the necessary permits to start construction Sub Clause 6.5 (Working hours)
works.
Sub Clause 6.7 (Health and safety)
Clause 8.1 Unless otherwise stated in PCs the commencement Contractor should take all the necessary precautions to
date is within 42 days after the contract signature. Engineer shall avoid accidents and should assign a safety
give the notice not less than 7 days before the Commencement representative.
Date.
A Project Kick-off meeting is a formal meeting to announce
the start of a project, (or the start of a new project phase).
Once the project manager has created an initial high-level
project plan and has identified the initial project team, the
next step is to schedule a kickoff meeting.
PURPOSE
to introduce the project to all the key stakeholders.
to provide an opportunity for the entire team and other
stakeholders to identify any concerns and issues that could
alter the project plan
if a steering committee has been appointed to the project, the
purpose, expectations, and members of the steering
committee should also be addressed at the kickoff meeting.
 Name Description
Project Sponsor Person or group providing financial resources for the project.
Upper Executive level management who may serve as project sponsors and are
It is very important to clearly understand and Management
Requestor
responsible for the general oversight of the project.
Person who requested the project and all others who worked on the
recognize from the start all of the people who are Project Manager
research, analysis, and subsequent chartering of that request.
Person with overall responsibility for the project.
Project Team Team members whose work is directed by the project manager.
Functional or People who are typically involved in most large projects such as
The definition of a project audience is any person Support groups Enrollment, financial staff, HR, business staff, etc.

or group that supports, is affected by, or is Technical Experts People who have special knowledge related to the project. For example,
a DBA, network engineer, systems engineer, vendor, consultant,
interested in the project. Clients or
functional user, or subject matter expert.
People who receive service and support from Fordham IT.
Sometimes members of this group are referred to Customers
Steering People who have been assigned to oversee the general direction of the
as stakeholders. In either case, these are the folks Committee
Community
project and/or serve as an advisory board.
The University community, including faculty, students, staff, alumni,
who should be invited to the kickoff meeting friends, etc.
Public Groups that might have a vested interest in the project or can assist in the
communication plan such as local media, professional societies, and
regulatory agencies.

Deliverables: Discuss and document what are the

Meeting Objectives: What do we want to achieve at expected deliverables of the project so that there are
the end of this meeting. no misunderstandings on what will be produced.
Project Objectives: What do we want to achieve at Project Team: You might want to create and
the end of this project. organization chart of your project, including main
Project Approach: Define the main phases or stakeholders, steering committee members, subject
matter experts and technical resources that will be
components of the project, what is expected during participating in the project.
the project, are we following a specific
Roles & Responsibilities: It is also a good idea to
methodology? define the main responsibilities of each role in the
project team. This will help to set expectations from
the very beginning.
 Timeline: Discuss a tentative timeline for the project, but be
A typical agenda for Kick-off meeting could be- sure to let everybody know that the timeline will need to be
Change Control: Define the process that will be used to manage validated once the detailed project schedule is completed.
change, especially scope change. Site office: The Contractor shall provide and maintain the
Communication Plan: Define how the project communication site office as per the Contract Documents
will be done: Status Reports, frequency of meetings, project Site set-up: The Contractor shall be responsible for setting
portal, etc. up the site, hoarding, storage and arranging utilities etc.
Risks: Identify the main potential project risks. This should be Project Sign: The Contractor shall provide a project signage
handled as a mini risk assessment session.
as per the Contract Documents.
High-level Requirements: This is a very important part of the
meeting, since you can collect a high-level description of each Cost breakdown/Cash flow: The Contractor shall submit, to
requirement, usually in a few lines per requirement. It is the Consultant, a breakdown of the contract price for each
important to identify each requirement with an identification section of the work and a breakdown of the contract price
number or ID, and if possible with a priority indicator, like related to time, for cash flow purposes. This is required
high, medium, low. I have successfully used a PowerPoint table within a reasonable time, but must be submitted and agreed
to capture requirements during the meeting so that everybody to prior to the first progress billing.
can see them when projected on a large screen.

List of subcontractors: The Contractor shall submit the Schedules:

list of subcontractors proposed for the work. The Construction Schedule: The contractor shall submit
subcontractors should be the same as those named in the a construction schedule for review at the pre-construction
bid. The Owner and/or Consultant must conference. This schedule is to be monitored and updated
by the contractor on a regular basis.
approve any changes or substitutions.
Submittal schedule: The contractor shall prepare and
Permits and Licenses: The status of various permit submit a submittal schedule to the consultant. This
applications should be determined. It is also important to schedule is a chronological listing of all submittals required
make sure that the appropriate parties are pursuing all by the contract documents. The submittal schedule should
the necessary permits. The general assumption is that be coordinated with the construction schedule, and updated
the contractor is obtaining all necessary permits, but to reflect any changes to the construction schedule as work
progresses.
there are cases where certain permits are to be obtained,
or have been obtained by others. Make sure all parties
are aware of their obligations in this area.
Schedules:
Information to be included on submittal schedule: Project Management Tools
Description of each submittal, and name of subcontractor Notices
Dates of each submission
Specification section reference Instructions

Mock-ups/ Sample installations Reports

Quality Assurance Plan
Sources of materials Records
Tests and Frequency of tests
Responsible persons for quality assurance and control Certificates
QA/QC process and Procedure

Construction Planning Construction Planning

SPD, ICB 2012, Sec-4 Bidding Form, PPMO
Construction planning is:
operational planning 1. Title of position
fundamental and challenging activity in the Name
management and execution of construction 2. Title of position*
projects. Name
It involves - 3. Title of position*
choice of technology, Name
definition of work tasks, 4. Title of position*
estimation of the required resources and durations for Name
individual tasks, and
5. Title of position*
identification of any interactions among the different
work tasks. Name
*As listed in Section 3 (Evaluation and Qualification Criteria).
 Construction Planning Construction Planning
SPD, ICB 2012, Sec-4 Bidding Form, PPMO SPD, ICB 2012, Sec-4 Bidding Form, PPMO

Construction Planning Construction Planning

SPD, ICB 2012, Sec-4 Bidding Form, PPMO SPD, ICB 2012, Sec-4 Bidding Form, PPMO
 Scheduling Methods Scheduling Methods
There are several forms of schedules and several
Gantt chart/ Bar chart
methods used to determine accurately the schedule. The Gantt chart or bar chart used today was developed in the
early 1900 from a several different charts used by Mr. Henry
Methods in general use: Gantt to communicate between management and employees
i. Task matrix, about what work was to be accomplished on a given day
ii. Gantt chart, Each bar represents the amount of time that its respective task
will take.
iii. Network diagram, and Gantt charts illustrate the start and finish dates of the terminal
iv. Line-of-balance scheduling. elements and summary elements of a project.
Terminal elements and summary elements comprise the work
breakdown structure of the project.
Although now regarded as a common charting technique, Gantt
charts were considered revolutionary when first introduced.

Scheduling Methods Scheduling Methods

Gantt chart/ Bar chart Gantt chart-
two dimensional chart.
x-axis shows the project timeline.
y-axis is a list of specific activities
that must be accomplished to
complete the project.
These activities are typically listed in
order of earliest start on the project.
The content of the bar chart are bars
that show the planned (and/or actual)
start and end times for each task. Gantt chart- Advantages
most bar charts show a pattern of bars Gantt charts have become a common technique for representing
that begin in the upper left of the chart the phases and activities of a project WBS so they can be
and proceed to bars that complete the understood by a wide audience all over the world.
project displayed in the bottom right A Gantt chart is useful and valuable for small projects that fit on a
of the chart.
single sheet or screen
S.N. Activity Verifying document Performed by Approved by Schedules:
Detailed
Employer /
Information to be included :
1. Work schedule construction
Representative Engineer Description of each submittal, and name of subcontractor
schedule
Det. Sch./Planning Dates of each submission
2. Monthly planning Site Engineer
report (Qty. based) Representative Specification section reference
Monthly Sch./
3. Weekly planning Planning report Site Engineer
Representative Mock-ups/ Sample installations
(Qty. based)
Timely supply of Quality Assurance Plan
Procurement
4. construction Delivery report
materials
section Representative Sources of materials
Supply &
Employee Line
Tests and Frequency of tests
5. Performance of
performance report management Representative Responsible persons for quality assurance and control
human resources
QA/QC process and Procedure
 50

51 52
53 54

55 56
 57 58

Spec.limit
No. of Spec./code Conduct Conduct Rem
Item Material Tests Requiremen Qty. Test Frequency Equipment
test Reference ed at ed by arks
t
each lot/Every 200 t
Fineness
Spec.limit Cond and part of it
Test No. of Spec./code Conduct Rem each lot/Every 200 t
Item Material Tests Requireme Qty. Equipment ucted Setting time Vicat Apparatus Lab Lab Staff
Frequency test Reference ed at arks and part of it IS 4031 Part
nt by Cement IS 8112:1989 each lot/Every 200 t 29 -5
Consistency
As per & IS 12269- and part of it
Weight per 1987 Cement mortar mould,
specified in Lab Comp. each lot/Every 200 t IS 4031 Part
running Site Lab Strength and part of it -6
Tamping Rod, Trowel, Lab Lab Staff
code for Staff Crushing machine
meter
different dia As required/Every 100 t NS 305-2020
Gradation As Specified 136 Sieves , balnance, trays Lab Lab Staff
and part of it or IS 460
Sand
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 Uncertainty: The lack of certainty. A state of having limited
knowledge where it is impossible to exactly describe the
existing state, a future outcome, or more than one possible
outcome.
Risk: A state of uncertainty where some possible outcomes
have an undesired effect or significant loss.
Measurement of Uncertainty: A set of possible states or
outcomes where probabilities are assigned to each possible
state or outcome this also includes the application of a
probability density function to continuous variable
Measurement of Risk: A set of measured uncertainties where
some possible outcomes are losses, and the magnitudes of
those losses this also includes loss functions over continuous
variables.

Risk:
know what the distribution looks like.
Uncertainty:
and we do not know what the possible distribution looks like.
Risk is an uncertain event or condition that, if it occurs, has
an effect on at least one (project) objective.
Project risk is an uncertain event or condition that, if
it occurs, has a positive or a negative effect on a
project objective.
The probability of something happening multiplied by the
resulting cost or benefit if it does.
(This concept is more properly known as the 'Expectation
Value' or 'Risk Factor' and is used to compare levels of risk)
The probability or threat of quantifiable damage, injury,
liability, loss, or any other negative occurrence that is
caused by external or internal vulnerabilities, and that may
be avoided through preemptive action.
 Risk
Risk Identification
Identification
Risk
Risk Monitoring
Monitoring
Controlled
Risk
RiskEstimation
Estimation Risk
Environment

Risk
Risk Response
Response
Risk
Risk Evaluation
Evaluation

The identification, analysis, assessment, control, and avoidance,

minimization, or elimination of unacceptable risks.
An organization may use risk assumption, risk avoidance, risk
retention, risk transfer, or any other strategy
(or combination of strategies) in proper management of future events.
:

Example of Risk Analysis

if performing activity X has a probability of 0.01 of suffering an

accident of A, with a loss of 1000, then total risk is a loss of 10.
 Construction projects involve risks. All project participants face
varying degrees and types of risks which are present during every
phase of a project.
Risks normally determine many of the financial, contractual, and
practical relationships among the participants.
Each participant must have a plan to manage these risks before
making any commitment to the project and other parties.

Project risk management is the art and science of identifying,

analyzing, and responding to risk throughout the life of a project and
in the best interests of meeting project objectives.

Risk management is often overlooked in projects, but it can help

improve project success by helping select good projects, determining
project scope, and developing realistic estimates.

Types of risks that are involved in construction

Negative risk involves understanding potential problems that might projects:
occur in the project and how they might impede project success. Safety (high potential for jobsite injuries)
Negative risk management is like a form of insurance; it is an Difficulty (uncontrolled field conditions)
investment. Unforeseen conditions (modifications)
Risk Can Be Positive as well Diversity of interests
Positive risks are risks that result in good things happening; sometimes called Control (inability to control various factors, e.g. weather,
opportunities.
fire, earthquake, labor needs, market)
A general definition of project risk is an uncertainty that can have a negative or
positive effect on meeting project objectives.
Professional (damage to reputation)
The goal of project risk management is to minimize potential negative
Legal (exposure to litigation and legal liability)
risks while maximizing potential positive risks. Financial (insufficient funding)
Community opposition
Risk Management (RM) is the systematic process of
identifying, analyzing, and responding to project risk. RM Planning: deciding how to approach and plan the RM
RM includes maximizing the probability and activities.
consequences of positive events and minimizing the Risk Identification: determining which risks might affect
probability and consequences of adverse events to the project and documenting their characteristics.
project objectives. Risk Analysis (quantitative and/or qualitative): performing
The identification, analysis, assessment, control, an analysis of risks and conditions to prioritize and estimate
and avoidance, minimization, or elimination of their effects on project objectives.
unacceptable risks. Risk Response Planning: developing procedures and
An organization may use risk assumption, risk techniques to enhance opportunities and reduce threats to
avoidance, risk retention, risk transfer, or any other project objectives.
strategy (or combination of strategies) in Risk Monitoring and Control: Monitor residual risks,
proper management of future events. executing risk reduction plans, and evaluate their
effectiveness throughout project life cycle.

Risk management requires that the project owner,

Project risk management is the art and science designer, and contractor carefully identify and
of identifying, analyzing, and responding to risk examine several aspects of the project at hand.
throughout the life of a project and in the best They accomplish this by evaluating the potential
interests of meeting project objectives. risks of
the project itself,
Risk management is often overlooked in the roles and qualifications of the other team members,
projects, but it can help improve project success the method of project delivery,
by helping select good projects, determining
contractual provisions for allocating risk,
project scope, and developing realistic
and the means of establishing and providing incentives
estimates. for performance.
 Reduction/ Elimination
Accepting/ Retention
Avoidance
Transfer
Insurance Sharing
Bonds Enhancing
Warranties Exploiting

An owner uses insurance to protect against the Bonds are not insurance policies; rather they are
risks posed by physical loss or damage to the financial guaranties provided by a third party (a
work in progress at the construction site. To surety company).
cover these risks, an owner may require the Bonds are backed by assets of the personal or
corporate pledges of the parties whose actions or
performance is being bonded.
Designers typically carry insurance for Typically there are 3 types of bonds in constr.
professional liability (errors and omissions) projects:
insurance usually with deductibles. Bid bonds
The contractor is normally required to Performance bonds
indemnify and hold harmless other parties who Payment bonds
do not control the site.
The purpose of a warranty is to guarantee the quality of the
materials or services provided by a construction trade or
supplier.
They can be provided for under a contract, or may arise by
law in some cases.
Like other risk management techniques, parties must
evaluate the costs of providing a particular warranty against
the benefits that the warranty would provide

When risks become actual losses, the resulting liabilities

must be evaluated.
Often, these liabilities are allocated in contract documents.
If the particular loss is not provided for under the contract,
the law generally allocates responsibility for the loss.

For fair allocation of risks:

A party who has the best control over a risk should
usually take the risk;
A party who has the most cost-efficiency control over a
risk should usually take the risk;
The extent of risk taking should be matched with
compensation/reward/profit;
In addition:
All risks to be properly mitigated/allocated;
Long term objectives/relationship to be considered
 Risk and Uncertainty in Projects
Every project is risky- there is a chance things turn out exactly as planned.
Risk is associated with the certainty level

High certainty outcomes have low-risk; low- certainty outcomes have high risks.

Certainty derives from knowledge and experience as well as from

ability to control project outcomes and respond to emerging problems.
Risk and Uncertainties in Projects
Risk = f (uniqueness, experience of project team).

Construction projects have an abundance of it, Contractors cope with it and owners
Anjay Kumar Mishra, PhD (Project pay for it.

Management) Essentially, it stems from uncertainty, which in turn is caused by lack of

information.
All the risk involves both a threat and a opportunity.

An opportunity is a threat to those who predict failure and a challenge to those who
think they might win.

If somebody is threat-prone, they magnify potential losses and minimize potential

gain.

Risk components
Risk and Uncertainty in Projects Risk Event: What might happen to the detriment or in favor of the
Even in routine projects there are risks because outcomes may be project
influenced either by factors that are new and emerging, or those beyond
control. The Uncertainty of the Event: How likely the event is to occur, i.e., the chance of
the event occurring. (Likelihood)
Also Risk = f (likelihood, impact)
Though the risk cannot be eliminated from projects, it can be reduced. Potential Loss / Gain: It is necessary that there be some amount of
loss or gain involved in occurring of the event (Impact)
Risk: Exposure to adversity. A formal orderly process for systematically identifying, analyzing and
responding to risk events throughout the life of a project to obtain optimum
Risk is a condition in which there is a possibility of an
degree of risk elimination or control. (Al-Bahar, 1998)
adverse deviation from a desired outcome that is expected or
A scientific approach to dealing with pure risks by anticipating possible
hoped . (Vaugham, 1997)
accidental losses and designing and implementing procedures that minimize
exposure to the chance of occurrences of events the occurrence of loss or the financial impact or the losses that do occur.
adversely or favorably affecting project objective as a (Vaugham, 1997)
consequence of uncertainty. (Al-Bahar, 1998) There are three major aspects of risk management:
Risk Identification
Risk Assessment
Risk Response Planning
 1 Risk Identification
Risk management system Risk management begins with identifying the risks and predicting
their consequences - If are significant, ways must be found to avoid
the risk or reduce it to an acceptable level.
Developing a Risk Management Framework Acceptable risk depends on the risk tolerance of project
stakeholders
Risk Identification Experienced managers are more careful (and risk averse), where as
less experienced stakeholders tend to be greater risk-takers (more
risk tolerant)
Risk Classification High risks in projects typically stem from:
Using an unusual approach.
Attempting to further technology.
Training for new tasks or applying new skills.
Risk Developing and testing of new equipment, systems or procedures.
Risk Analysis
Attitude
Looking at a large project from the top resembles looking into the world
map through a fog.
ability to influence the outcome is limited to what they can
Risk Response see. The great temptation is to focus upon what should happen, rather than
what could happen.
A clear view of the event is the first requirement, focusing on the sources of
risk and the effect of the event.

Sources of Risk Sources of Risk

Any factor with an uncertain probability of occurring, Market risk
that can influence the outcome of a project, is considered Market risk is the risk of not fulfilling either market needs or the
a risk source or risk hazard. requirements of particular customers. The sources of market risk
include:
The most difficult part of risk identification is discovering Incompletely/ inadequately defined market or customer needs.
things you already know! Failure to identify changing needs
Failure to identify newly introduced products by competitors.
Project risk can be classified as internal risks and external
risks.
Technical Risk
Technical risk is the risk of not meeting time, cost or performance
1. Internal Risks
High in projects - unfamiliar and with untried technical applications.
Internal risks originate inside the project and
project managers and stakeholders usually have a Technical risk is expressed by rating the end-item or primary process as
measure of control over these. Two main categories being high, medium or low according to the following features.
are- Maturity
Complexity
Quality
Concurrency or Dependency
 Sources of Risk Risk Identification Techniques
2 External Risks Project risks are identified from

External risks include only risks that stem from sources outside the project Reports from past projects
and have little or no control over these, such as changes in- Lists of user needs and requirements
WBSs
Cost estimates
Competitors actions Schedules
Government regulations Models of end-items.
Risk Register
Interest rates
Decisions made by senior management/ customers regarding Techniques for pin pointing risks
project priorities, staffing or budgets based on new invetion
Analogy Technique
Customer needs and behavior Checklists
Weather (adverse) WBS Analysis
Process Flow Charts
Labor availability (strikes/walkouts) Cause- and- effect Diagram
Material/labor resources (shortages) etc. Brainstorming

Risk Likelihood
QUALITATIVE NUMERICAL

Risks are commonplace, but only the notable ones require attention. What is Low 0- 0.20
considered notable depends on three things: Medium 0.21- 0.50
High 0.51- 1.00
MS failure likelihood due to immaturity of software
Risk likelihood
Risk impact, and CS failure likelihood due to complexity of software

Risk consequences MH failure likelihood due to immaturity of hardware

CH failure likelihood due to complexity of hardware

Risk Likelihood D failure likelihood due to dependency on external factors

Risk likelihood is the probability that a hazard or risk factor will actually materialize. Likelihood MH MS CH CS D
0.1 (low) Existing Existing Simple Design Simple Design Independent
It can be expressed as a numerical value between 1.0 (certain to happen) and 0 0.3 (minor) Minor redesign Minor redesign Minor complxty Minor complxty Sch. Depnt.on ES
(impossible) or as a qualitative rating such as high, medium or low.
0.5 (moderate) Major change Maj.Change Moderate complexity Moderate Perf.depnt. on ES
0.7 (significant) Complex design New but similar to exist. Signif.complex.Signif.complex Sch.Depnt.on NS
The association between qualitative ratings and particular values is subjective and
depends on the experience of the project team and risk tolerance of stakeholders. 0.9 (high) research done never done Extreme complx. Extreme complex. Perf.depnt. on NS
 Risk Likelihood
When a project has multiple, independent risk sources, they can be combined and Risk Impact
What would happen if a risk hazard materialized? The result would be called risk
expressed as a single Composite likelihood factor, or CLF. CLF can be computed
as a weighted average, impact.
CLF= W1 MH + W2 CH + W3 MS + W4 CS + W5 D A poorly marked highway intersection is a risk hazard; the risk posed is that of collision
with the impact of injury or death.
Where W1, W2, W3, W4 and W5 each have values 0 through 1 and together total 1.
Risk impact in projects is specified in terms of time, cost and performance measures. For
Example 1: example
The ROSEBUD project involves development of hardware and software with Risk hazard: insufficient numbers of skilled labor
characteristics as follows: The hardware is existing and of minor complexity; the Risk impact: extending the schedule of the project
moderately complex software involves a minor redesign of current software; the
Risk impact can be expressed as a qualitative rating such as high, medium or low. For
performance of the overall system depends on how well it can be integrated into
example, a risk leading to a schedule delay of 1 month or less might be considered low
another, larger system. Calculate the CLF for the probable risk. whereas a delay of 3 months or more might be deemed .
Solution: Risk impact - numerical measure between 0 and 1,meaning and
From Table 2 above, we have; respectively.
MH = 0.1, CH = 0.3, MS = 0.3, CS = 0.5 and D= 0.9. Assuming all sources are rated If technical, cost and schedule impacts are TI, CI and SI, then Composite Impact Factor
equally at 0.2, then, CIF, can be computed using a simple weighted average,
CLF = 0.2*0.1 + 0.2* 0.3 +0.2* 0.3 + 0.2*0.5+ 0.2* 0.9 = 0.31 CIF = W1 *TI + W2 * CI + W3 * SI
Where W1, W2, and W3 are valued from 0 to 1 and together sum to 1. If CIF is 0,
it means whereas CIF equal to 1 means the most severe .

Risk Consequences
Risk Impact The risk is a function of risk likelihood and risk impact. This notion is referred to as the
risk consequence.
Risk consequence can be expressed in two ways.
Impact Value Technical Impact Cost Impact (CI) Schedule Impact First, it can be expressed as a simple numerical rating with a value ranging between 0 and 1.
(TI) (SI)
In that case, the risk consequence rating, RCR, is
0.1 Minimal Within budget Negligible RCR= CLF+CIF- (CLF)* (CIF)
(Low) Small value represents unimportant risk that might be ignored; large values represent
important risk worth attending to. The consequence rating value is interpreted
0.3 Small reduction in Cost increase Minor slip subjectively. In general,
(Minor) performance 1- 10% <1 month
Value over 0.7: high risk project
0.5 (moderate) Moderate reduction Cost increase 10- Moderate slip Value under 0.2: low risk project
in performance 25% (1-3 month) Value of 0.48: moderate level risk
0.7 (significant) Significant reduction Cost increase 25- Significant slip Another way to express risk consequence is an Expected value.
in performance 50% > 3 month The risk consequence expected value is computed as
Risk Consequence= (Impact)* (Likelihood)
0.9 Technical goals Cost increase in Large slip
(High) might not be excess of 50% (unacceptable) The risk consequence on project duration is the Risk Time, RT.
achievable RT= (Corrective time)* (Likelihood)
The risk consequence on project cost is Risk Cost, RC.
RC= (Corrective cost)* (Likelihood)
Example 2 Risk Consequences RISK AND UNCERTAINTY IN CONSTRUCTION
Suppose the baseline time estimate (BTE) for project completion is 26 weeks and the
baseline cost estimate (BCE) is NRs. 500,000. Assume that the risk likelihood for the
CONTRACTS
project as a whole is 0.3, and, should the risk materialize, it would delay the project
by 5 weeks and increase the cost by NRs. 80,000. Calculate the expected project Typical risks of a construction project include
completion time ET and expected project completion cost EC, considering risk into
account. Failure to complete within the stipulated design and construction time
Solution: Failure to obtain the expected outline planning, detailed planning or
building code regulation approvals within the time allowed in the design
As the probability of the risk materializing is 0.3, the probability of not materializing is 0.7. If program
the risk does not materialize, no corrective measures will be necessary, so the corrective time
Unforeseen adverse ground conditions delaying the project
and cost will be nil. Hence
Exceptionally inclement weather delaying the project
RT= 5*0.3 + 0* 0.7 = 1.5 Weeks
Strike by the labor force
RC= 80,000* 0.3 +0* 0.7 = NRs. 24,000 Unexpected price rises for labor and materials
These figures RT and RC would be included as reserve or buffer. RT and RC are the schedule Failure to let to a tenant upon completion
reserve and project contingency (budget reserve) respectively.
An accident to an operative on site causing physical injury
Thus, Expected Project Completion Time, ET = BTE+ RT = 26 + 1.5 = 27.5 Weeks Latent defects occurring in the structure through poor workmanship
Expected Project Completion Cost, EC = BCE+ RC = 500,000 + 24,000 = 524,000 Force majeure (flood, earthquake etc.)
When the corrective time and cost cannot be estimated, then ET and EC are computed as A claim from the contractor for loss and expense caused by the late
ET= BTE (1+likelihood) = 26* 1.3 = 33.8 Weeks production of design details by the design team
EC= BCE (1+likelihood) = NRs. 500,000* 1.3 = NRs. 650,000

Consultants and Risk

The Consultants will always seek to balance the risks in the best interests of the
client.
What do clients want?
Consultants have an expressed and an implied (without expressly being stated)
Clients can have very different objectives, but their needs can be professional duty of care to their clients, who sue for damages when they have
grouped under the headings of time, cost and quality. suffered a loss as a result of bad advice.

Where a consultant gives incorrect advice, they may be sued under the tort
Time can mean both the need for rapid construction and (wrongful act for which damages can be sought by the injured party) of negligence.
completion on the stipulated date. A plaintiff (somebody who begins a lawsuit against another person in a civil court)
must of course, prove that the defendant owed them a duty of care that this duty
Cost means obtaining value for money and completing the project was broken and that damage was suffered as a result.
within budget.
Quality is used to cover technical standards, including such areas One argument often used is that consultants carry very little risk because they only
as safety and fitness for purpose. give advice

But the loss that arises as a result of bad advice can be very significant.
The clients of the industry do not want surprises. The primary burden of risk on a construction project falls between the contractor
and the client, the insurers will often carry low probability, high impact risks, such
They want to achieve their desired objectives and to this end a as fire or collapse.
professional approach to risk management is required.
The risk is best placed with that party involved in the management of a project who
is best able to manage the factor that gives rise to it.
 Contracts and Risks
For instance, the risk of low construction productivity on site is controllable and
Contracts and Risks
Insolvency of one of the parties
acceptable risk for the general contractor to manage.
Interface and coordination problems where more than two parties are involved,
On the other hand, factors such as inflation are beyond the control of the contractor for example on a project with suspended ceiling. The general contractor, the
suspended ceiling specialist contractor, the air conditioning specialist and the
There are various contractual arrangements, which apportion the risk equitably. electrical specialist contractor must all work in accordance with a right
In spite of the best intention of all the parties, disagreements, disputes, disruption construction program
and delays arise, somewhere, which can destroy the best of intentions.
Vague specially written conditions of contract or changed conditions in
standard forms of contract which leads to poor interpretation
Disagreement and Conflict typically arise on projects through:
Inadequate and defective contract documentation Ambiguous specification clauses with decisions left at the discretion of either
party
Inappropriate types of contract arrangements
Inappropriate methods of tendering Methods rather than results being specified in the specification with the
contractor being responsible for providing the desired results
An unreasonable burden of risk being allocated to one of the parties by the contract
Unsuitable personnel for the type of project Deficient drawings or design with discrepancies between the architectural,
A breakdown in personnel relationships and communications structural and engineering services drawings
A burden of contractual risk being carried by a party who is not equipped or capable
of carrying that risk.

The purpose of the Contract

The purpose of the contract is to establish the rights, duties, obligations and
The Fundamental Risks- Liability and Responsibility
responsibilities of the parties and to allocate the risk. The fundamental risks inherent in any construction project are apportioned
The acceptance of an obligation or duty brings with it the acceptance of a between the client, the design team, the general contractor, the specialist
commensurate (appropriate/proportionate) risk contractors and the material suppliers within the various contractual
relationships. The risks are
But with any contractual agreement, the contract defines only the ground rules; the
execution of the contract rests on goodwill, intent and the relationship between the
parties.
Adequacy of design
A construction contract is a trade off between the price for undertaking Cost of construction
the work and willingness to accept both controllable and uncontrollable risks.
Liability for latent defects arising as a result of bad workmanship, faulty
The price for doing the work partly reflects the perception of the risk materials and poor workmanship
involved.
Safety and indemnification for all accidents
Controllable risks reflect, for example, variations of human performance, such as Completion deadlines
management and operative performance. Uncontrollable risks include such factors
as inclement weather, the effects of inflation on costs, or ground conditions on a Quality of workmanship and materials
particular site.
Underlying all the above items is - liability and responsibility.
3 Risk Response Planning
All professionals owe a duty of care and if latent defect
Risk response planning addresses the matter of how to deal with risk.
occurs as a result of negligence by the architect or engineer in The response to, or the allocation of, risk can take any of four forms:
their design, then the client may seek recovery for the damage
suffered.

The complication arises when a defect occurs as a result of

the failure of a specialist design detail.

In practice the reason for defects occurring are rarely

straightforward, and the client has to a number of
parties to ascertain who was responsible and who should pay
for the damage suffered.

Risk Reduction
Risk Transfer One of the ways of reducing the risk exposure is to share risks with other
parties. For instance, the international banks syndicated loans to third world
Does not reduce the criticality of the source of risk; it just removes it to governments or the stock market investor spreads his risks over many securities.
another party. Among the many ways to reduce risk associated with technical performance are
The commonest form of risk transfer is by means of insurance, which to:
changes an uncertain exposure to a certain cost.
Employ the best technical team.
Risk can be transferred partly or fully from the customer to the contractor,
or vice versa, using contractual incentives, warranties, or penalties attached
Base decisions on models/simulations of key technical parameters.
to project performance, cost or schedule measures. Use mature, computer aided system-engineering tools.
Of course it is impossible to entirely transfer the risk to one party or Provide the technical team with adequate incentives for success.
another. Hire outside specialists for critical review and assessment
Transfer of one kind of risk often inheriting another risk. Perform extensive tests and evaluations.
Minimize system complexity (By decoupling activities and subsystems, that
is, making them independent of one another, the failure of any one activity
or subsystem is contained and will not spread to others).
Use design margins (A design margin is quantified value that serves as a
safety buffer to be held in reserve and allocated by management. By aiming
for the target value, any design error can miss by as much as the design
margin amount and still satisfy the requirement).
 Risk Avoidance Risk Acceptance
Risk avoidance is synonymous with refusal to accept risks.
Not all impacts are severe or fatal, and if the cost of avoiding,
reducing or transferring the risk exceeds the benefit, then do
The refusal to contract is a simple example to risk avoidance. However, it is
more relevant to consider the specific risks, which can be avoided. might be advisable.

The basic rational of risk aversion is that it is more unpleasant to lose a Not all risk can be transferred, but even if they were capable of
given sum than pleasant to gain the same amount. being transferred it may not prove to be economical to do so. The
risk will then have to be retained.
In an extreme case, a risky venture may be shunned because it puts basic
necessities at risk. Also, avoiding risk can diminish the payoff
opportunities. The gamble is between paying premium and the probability of the
event occurring and the consequential loss that would result.
Research projects and innovative, new-product development projects are
inherently risky, but they offer potential for huge benefits later on. The risk retention is based on the probability of a claim for
damages and what the practice can afford to pay if the claim is
Better to reduce risk to an acceptable level rather than avoiding successful.

Rules for Risk Taking The Risk of not Risking

risk a lot for a little. Biblical quote from Mark
Always plan ahead For he that hath, to him shall be given; and he that hath not, from him shall
Always analyze both the source and the consequence of be taken away even that which he hath. Broadly applied, this phrase
risks. reflects why risk taking is necessary.
Devise alternative options as a contingency measure.
use other people as an excuse for inaction. If one think big, one loses the capacity to think big. If one try
take risks purely for reasons of principle. the untried, soon the untried becomes frightening and mysterious.
take risks to avoid losing face.
Never risk more than you can afford to lose. If one is in bed for extended periods and use limbs, the ability
Be prepared to seek advice from the experts. to use them at all is curtailed.
Consider the odds (perceived advantages and disadvantages)
and what your experience and intuition tells you. If one take risks one loses capacity to do so. That is the risk of
Consider the controllable and the uncontrollable parts of the not risking.
risk.
 Summarizing Risk Management Summarizing Risk Management
Project management is risk management. Always have a contingency plan (risk reserve) to
Risks have to be identified ,classified & analyzed before cope with the worst eventuality.
response is made. Risk management system should not be complicated
An identified risk is not a risk; it is management or burdensome; they need to be integrated into a
problem.
A risk officer should be appointed to take the
responsibility of risk management.
Risk management needs to be continuous from the A communication channel is to be established within
moment the project starts to the moment it ends.
the project team to ensure that bad news quickly gets
A poorly defined risk structure will breed more risk. to the project manager.
Ensure accurate and comprehensive project
use the ostrich approach.
documentation for better risk planning in future.

Contract
Construction Post Construction
Start/ Prepare Bid Contract Construction
Initializ Advertisemen Award and Project
Documents Contract
e t Approval Administration
Closeout
Kick-off meeting Initial Inspection
Advetise Final
Review contract
and release
Issue Kickoff inspection and Quality Punch list
"Notice of Meeting punch list

Finalize Bid
bid
package
Award" plan/inspection/control
Monthly Cycle
Documents Conduct Contractor Accept contract
Pre-bid contract Meetings Labor Compliance Final Inspection
activities package Payment
Prepare
Staff
verified Requests
Site Monitor
Make final Progress payments Process final payment
Receive payment, notice
Report Bid Contract Monitor of
Progress, Cost,
of completion Change order finalization Project acceptance/Taking
Sign
Open
Bids
time, quality
over
Audit Project Archive project
Analyze
Labor
complience
documents and
Final Report Material source and testing Documents archive
Bids
Insurance
Envionmental Close
Schedules Project audit
Board resolution
to Award
Contract Claim and Dispute
enroachment
permit and coop Submittals reviews Project Reviews
resolution agreements
Health and Safety
Project
Overall Contract Management Process
Completion Claims
Environmental monitoring
S. Contract Administration
Example Contract
No. Risks
Administration Modules Required Documents
1. Definition of acceptance Risks of CA
Delay due to non-acceptance of the final
product.
Functions
Kickoff meeting Agenda, minutes
Wrong product shipping by the vendor in spite Weekly Agenda, minutes
2. Wrong product Meetings
of the correct order made Monthly Agenda, minutes
3. Cost Excessive escalation Management Agenda, minutes
Delay due to verification, approval, contractor Insurance policy, methodologies, organization
Pre-construction
4. Delays chart, working schedule, mobilization schedule
internal problems, vendor and sub-contractor
Test reports, material sources identification and
Change in scope of work after the contract Construction submittals approval, test formats, other standard formats,
5. Change Order
award Submittals progress report formats, bill formats
Problem on mutual understanding, disagreement Warranty and Guarantee documents, punch-list
6. Conflict Closeout Submittals
completion, taking over letter etc.
that can't be easily resolved
7. Poor performance Low level of expected performance in quality Submittal review All submittals
Record Keeping All the documents including email, samples etc.
Risk of Deploy new equipment, new technology
8. Interpreting contract
Failure/termination requires, new vendor, lack of experience Interpretation and documents
Drawings, agreement documents, specifications
Partnering& Modifications Contract modifications Drawings, change in scope
9. Dis-satisfaction between the JV partner
Subcontracting Substitution Works, materials, technique, workmanship
Due to limited vendor for the specific items or Surveying & layout data, complete set of
10. Others Field engineering
works drawings
Executing the
Daily site report, job approval cards, site diary,
Work Coordination & Supervision
instructions, memo, minutes, change/variation
(Site Monitoring)

Claim & Dispute

Master schedule, weekly, monthly, cash flow chart, Notice to the either parties
Scheduling entitlement
progress tracking records
Burden of Proof, Basis of claim documents, Substantiation
Organization chart with hierarchical order, Claims and Claim documents filed
claim
Communication communication procedures and channels, duration to Disputes
Executing Mutual understanding for the dispute resolution by
response Resolving Claim &
the Work Adjudication/Arbitration/Litigation, All the documents in
Material Handling and Material receive records, stockpile records, daily Disputes
chronological order
Storage consumption records,
Contractor Site Safety Management Plan (CSSMP),
Examination and verification Standard format for inspection at the site/offsite
Safety Plan Emergency action plan, Public safety management plan,
Standard test formats, Testing records, instruction of
Testing & inspection Transport Management Plan
acceptance /rejection Health and
Record keeping All the documents including email, samples etc. Safety Safety Training records, Orientation (Pre-work & Pre-job),
Safety Control
Quality Quality assurance plan, flowcharts, Recapitulative test Checklist and inspection reports, instructions
Quality assurance plan
schedule, list of lab staffs, sources of materials
Assurance/ Accident Reporting Injury register, Photographs, Accident Report
Quality control processes non-conformity detection and verification documents
Quality Standard specifications, field test reports, inspection Punch list List of nonconformities of the works, inspection record
control Quality check
reports
Agenda, minutes, successful completion report of the
Measurement Measurement book, BOQ
Closeout meeting/closeout punch list, Certificate of completion, Release of the
Bill/voucher, approved change order, support drawings, Guarantees, Letter of commencing of the DLP
Progress payment
records of extra works and other supporting documents Project
Retention/ Mobilization Closeout Warranty, Guarantee documents, services contact list,
Contract documents, bill, mobilization receipt Post construction services
maintenance manuals, operation manuals
Measureme repayment
Withholding payment Letter stating the causes
nt and All the documents of the contract administration
Liens Enquiry/ non-acceptance letter Document Archive
Payment throughout the project
Liquidated Working schedule, contract documents, time of
damages/Penalty/Bonus completion records Taking over Request letter, Taking Over certificate
 There are many types of engineering contracts, and
engineering contracts can differ dramatically in nature.
Engineering contracts, for example, differ
Explaining ambiguities fundamentally in nature from sales contracts, in that
Supply of drawings and instructions
engineering contracts impose obligations of
performance over a prolonged period of time whereas
sales contracts, by comparison, could, theoretically, be
Approval of materials and quality certificates performed instantaneously.
(In this respect, however, a true "turnkey construction
Suspension of work and determine extra payments arising out
is more akin to a sales contract than to a
of such suspension traditional construction contract.)
Determining EoT for completion of the work
Documenting reasons for EoT
Some engineering contracts involve aspects of sales
Certifying Interim Payments
contracts, for example in an equipment supply and
installation contract.
 General: General:
Work Program and Quality Assurance Plan Work request form, Site instruction form, Site records
either not prepared or prepared for the sake and daily diary either not maintained or properly not
of fulfillment of the requirement only maintained. Mostly work done on verbal instructions
Construction survey not done or done as a Lab/Field tests not done as per requirement
new design without reference to Contract Materials used before receiving test results and
drawings resulting in large variations in approval
contract quintiles. Workmanship and Quality of completed work do not
Site specific Construction drawings not match the test results
prepared Time extension granted even to non performing
Setting out approval/ commencement contractor against contract provision
approval of work activity not documented Contract milestones not monitored/liquidated damage
not applied

Inadequate Supervision resulting in:

Unsatisfactory workmanship and finishing beyond specified
tolerance of both road formation and structures
Cut / fill slope not as shown in drawing
Quality of work visibly detected as unsatisfactory
Setting out defects
Generally little or no curing of cement works
Pavement failures due to inadequate compaction
Unsatisfactory sub base gradation
Unsatisfactory Otta Seal works due to sub base finishing defects
and distributor defects
Construction of inappropriate/avoidable structures
Necessary work included in BOQ omitted
As built drawings not submitted
No supervision during defect liability period resulting in
uncorrected defects and unfulfilled contractual obligations
The contract documents are one of the most important 1 . Agreement
pieces that will guarantee of a successful project. The agreement to be used by the contracting officer
This list contains the most common documents that must (owner) and the contractor. The most essential part of
form part of every construction contract. the contract documents.
Agreement 2 . General Conditions
General Conditions This contract document will define the
Special Conditions obligations and rights on how to execute the project.
Bill of Quantities
Drawings 3 . Special Conditions
Specifications This is usually an extension of the contract and to the
Schedule general conditions. This part must specify specific
conditions and clauses to each particular project or job.
4 . Bill of Quantities
This is formed by the list of diverse trades, and
materials included that form part of the construction.
5 . Drawings
All set of drawings that form part of the job to be performed. These After a contract is signed the parties may not need to
drawings are usually the latest drawings and must be received by the refer to it again unless a dispute arises.
contractor prior to the date of commencement.
6 . Specifications
When a problem develops and escalates and the contract
The technical requirement to complete, execute and/or perform every little
is consulted, you might think that the relevant clause
task or material being incorporated in the construction projects. Usually, supports the stance taken by your company, but the other
specifications are composed by referencing construction standards and side could say the exact same thing, then the ambiguity
codes. is said to be aroused in the contract.
7 . Schedules
The construction schedule is an important piece of the document.
This could be because the contract was not written
Sometimes, construction contracts will require updated schedules clearly enough in the first place.
throughout the construction progress, and might form part of the monthly,
or agreed term, application for payments.

The English language is not always as clear as we The first step could simply be to contact the other party to see if the issue
can be worked out through discussion and negotiation, on the basis that it is
imagine it to be. in everybody's interest to try to put the problem behind you.
When drafting legal documents, complex principles Rectification: rewriting the contract to reflect the parties' intentions. If only
need to be conveyed. If you keep the language too one side has made a mistake, rectification may still be available - but only if
the other party noticed the mistake, is going to benefit from it and has failed
simple some of what you are trying to say may get to draw attention to the mistake.
omitted, but make it too complicated and nobody will be Interpretation: where there has not been a clear mistake in a contract,
able to understand what you're trying to say at all. things become more complex. A very literal reading might give one
particular meaning to a clause, but another party might say that this
Language may be used to convey a particular technical, meaning was obviously not the one which both sides had meant to achieve
during negotiations or when they signed the contract. A court's first point of
legal or scientific meaning which may be different from reference will be the Golden Rule: words should be interpreted in line with
everyday usage. everyday usage and given their natural and ordinary meaning. This should
apply unless it results in an absurdity or inconsistency with the rest of the
It is important that all the parties to the contract have the contract. In this case, the grammar and ordinary sense of the words can be
same understanding of the context in which the modified as far as is needed to resolve the absurdity or make business
common sense of the contract if it is clear what the parties must have
language is going to be used. meant, but no further.
 1.5 Priority of Documents
1.2 Interpretation
The documents forming the Contract are to be taken as mutually
In the Contract, except where the context requires otherwise: explanatory of one another. For the purposes of interpretation, the
(a) words indicating one gender include all genders; priority of the documents shall be in accordance with the following
(b) words indicating the singular also include the plural and words sequence:
indicating the plural also include the singular;
(a) the Contract Agreement (if any),
(c) provisions including the word or require
the agreement to be record in writing; (b) the Letter of Acceptance,
(d) or means hand-written, type-written, printed or (c) the Letter of Tender,
electronically made, and resulting in a permanent record; and (d) the Particular Conditions - Part A,
(e) the word is synonymous with and tenderer with (e) the Particular Conditions - Part B,
and the words with . (f) these General Conditions,
The marginal words and other headings shall not be taken into (g) the Specification,
consideration in the interpretation of these Conditions. (h) the Drawings, and
In these Conditions, provisions including the expression (i) the Schedules and any other documents forming part of the Contract.
plus require this profit to be one-twentieth (5%) of this If an ambiguity or discrepancy is found in the documents, the
Cost unless otherwise indicated in the Contract Data. Engineer shall issue any necessary clarification or instruction.

2. Interpretation
2. Interpretation 2.3 The documents forming the Contract shall be
2.1 In interpreting these GCC, singular also means plural, male interpreted in the following order of priority:
also means female or neuter, and the other way around. Headings (a) Contract Agreement,
have no significance. Words have their normal meaning under the (b) Letter of Acceptance,
language of the Contract unless specifically defined. The Project
(c) Bid,
Manager shall provide instructions clarifying queries about these
GCC. (d) Special Conditions of Contract,
2.2 If sectional completion is specified in the SCC, references in (e) General Conditions of Contract,
the GCC to the Works, the Completion Date, and the Intended (f) Specifications,
Completion Date apply to any Section of the Works (other than (g) Drawings,
references to the Completion Date and Intended Completion Date (h) Bill of Quantities (or Schedules of Prices for lump sum
for the whole of the Works). contracts), and
(i) Any other document listed in the SCC as forming part of
the Contract.
The clearer the drafting of a contract, the less room
there is for ambiguity and dispute. Submitting work program and making it updated is the obligation
of the contractor as per the PPA 2007 and PPR 2007.
some tips to make drafting clearer: PPA 2007
avoid jargon technical language can be misinterpreted;
use clear definitions;
avoid tautology (saying the same thing twice in different
words) and excessive numbers of adjectives;
cut out superfluous words and padding;
use short sentences and paragraphs;
use the active voice and avoid the passive if possible; PPR 2007
avoid ambiguity take care that your words can only be
interpreted in one way;
avoid similar-sounding words which may confuse a
layman;
proof read the contract or, preferably, get somebody else
to proof read it.

8.3 Programme
The Contractor shall, whenever required by the Engineer, The Contractor shall submit a detailed time programme to
submit details of the arrangements and methods which the the Engineer within 28 days after receiving the notice under
Contractor proposes to adopt for the execution of the Works. Sub-Clause 8.1 [Commencement of Works]. The Contractor
No significant alteration to these arrangements and methods shall also submit a revised programme whenever the
shall be made without this having previously been notified to
previous programme is inconsistent with actual progress or
the Engineer (Clause 4.1 General Obligations,
CoC, FIDIC 2010) with the obligations. Each programme shall
include:
(a) the order in which the Contractor intends to carry out the Works,
including the anticipated timing of each stage of design (if any),
Documents, procurement, manufacture of Plant, delivery
to Site, construction, erection and testing,
(b) each of these stages for work by each nominated Subcontractor (as
defined in Clause 5 [Nominated Subcontractors],
8.3 Programme 8.3 Programme
(c) the sequence and timing of inspections and tests specified in the The Contractor shall promptly give notice to the Engineer of
Contract, and specific probable future events or circumstances which may
(d) a supporting report which includes: adversely affect the work, increase the Contract Price or delay
(i) a general description of the methods which the Contractor intends the execution of the Works. The Engineer may require the
to adopt, and of the major stages, in the execution of the Works, and
Contractor to submit an estimate of the anticipated effect of the
(ii) details showing the reasonable estimate of the
future event or circumstances, and/or a proposal under Sub-
number of each class of Personnel and of each type of
Equipment, required on the Site for each major stage. Clause 13.3 [Variation Procedure].
Unless the Engineer, within 21 days after receiving a programme, If, at any time, the Engineer gives notice to the Contractor that
gives notice to the Contractor stating the extent to which it does not a programme fails (to the extent stated) to comply with the
comply with the Contract, the Contractor shall proceed in accordance Contract or to be consistent with actual progress and the
with the programme, subject to his other obligations under the stated intentions, the Contractor shall submit a
Contract. The Personnel shall be entitled to rely upon the revised programme to the Engineer in accordance with this
programme when planning their activities. Sub-Clause.

26.3 The Contractor shall submit to the Project Manager for

approval an updated Program at intervals no longer than the
2.6 Programme period stated in the SCC. Suppose the Contractor does not
submit an updated Program within this period. In that case,
26.1 Within the time stated in the SCC, after the date of the
the Project Manager may withhold the amount stated in the
Letter of Acceptance, the Contractor shall submit to the
SCC from the next payment certificate and continue to
Project Manager for approval a Program showing the
withhold this amount until the next payment after the date
general methods, arrangements, order, and timing for all
on which the overdue Program has been submitted. In the
the activities in the Works. In the case of a lump sum
case of a lump sum contract, the Contractor shall Provide an
contract, the activities in the Program shall be consistent
updated Activity Schedule within 15 days of being
with those in the Activity Schedule.
instructed to by the Project Manager.
26.2 An update of the Program shall be a program showing
26.4 The Project approval of the Program shall
the actual progress achieved on each activity and the effect
not alter the obligations. The Contractor may
of the progress achieved on the timing of the remaining
revise the Program and submit it to the Project Manager
work, including any changes to the sequence of the
again at any time. A revised Program shall show the effect of
activities. Variations and Compensation Events.
 7. Plant, Materials and Workmanship (FIDIC 2010 )
7.2. Samples
Not mentioned clearly in PPMO CoC The Contractor shall submit the following samples of
Mentioned well in FIDIC 2010 under Clause 7 Materials, and relevant information, to the Engineer for
7. Plant, Materials and Workmanship consent prior to using the Materials in or for the Works:
7.1. Manner of Execution (a) standard samples of Materials and
The Contractor shall carry out the manufacture of Plant, the samples specified in the Contract, all at the cost,
production and manufacture of Materials, and all other and
execution of the Works:
(b) additional samples instructed by the Engineer as a
(a) in the manner (if any) specified in the Contract,
Variation.
(b) in a proper workmanlike and careful manner, in
accordance with recognised good practice, and Each sample shall be labelled as to origin and intended
(c) with properly equipped facilities and non- use in the Works.
hazardous Materials, except as otherwise specified in
the Contract.

7. Plant, Materials and Workmanship (FIDIC 2010 ) 7.4. Testing

7.3. Inspection
This Sub-Clause shall apply to all tests specified in the Contract, other than
The Personnel shall at all reasonable times:
the Tests after Completion (if any).
(a) have full access to all parts of the Site and to all places from
which natural Materials are being obtained, and Except as otherwise specified in the Contract, the Contractor shall provide all
(b) during production, manufacture and construction (at the Site and apparatus, assistance, documents and other information, electricity, equipment,
elsewhere), be entitled to examine, inspect, measure and test the fuel, consumables, instruments, labour, materials, and suitably qualified and
materials and workmanship, and to check the progress of experienced staff, as are necessary to carry out the specified tests efficiently.
manufacture of Plant and production and manufacture of Materials. The Contractor shall agree, with the Engineer, the time and place for the
The Contractor shall give the Personnel full opportunity specified testing of any Plant, Materials and other parts of the Works.
to carry out these activities, including providing access, facilities, The Engineer shall give the Contractor not less than 24 notice of the
permissions and safety equipment. No such activity shall relieve the intention to attend the tests. If the Engineer does not attend at the
Contractor from any obligation or responsibility.
time and place agreed, the Contractor may proceed with the tests, unless
The Contractor shall give notice to the Engineer whenever any work is otherwise instructed by the Engineer, and the tests shall then be deemed to
ready and before it is covered up, put out of sight, or packaged for
storage or transport. The Engineer shall then either carry out the have been made in the presence.
examination, inspection, measurement or testing without unreasonable The Contractor shall promptly forward to the Engineer duly certified reports
delay, or promptly give notice to the Contractor that the Engineer does of the tests. When the specified tests have been passed, the Engineer shall
not require to do so. If the Contractor fails to give the notice, he shall, endorse the test certificate, or issue a certificate to him, to that
if and when required by the Engineer, uncover the work and thereafter effect. If the Engineer has not attended the tests, he shall be deemed to have
reinstate and make good, all at the cost.
accepted the readings as accurate.
 7.6. Remedial Work
Notwithstanding any previous test or certification, the Engineer
may instruct the Contractor to:
(a) remove from the Site and replace any Plant or Materials which
7.5. Rejection is not in accordance with the Contract,
If, as a result of an examination, inspection, (b) remove and re-execute any other work which is not in
measurement or testing, any Plant, Materials or accordance with the Contract, and
workmanship is found to be defective or otherwise (c) execute any work which is urgently required for the safety of
not in accordance with the Contract, the Engineer may the Works, whether because of an accident, unforeseeable event or
otherwise.
reject the Plant, Materials or workmanship by giving The Contractor shall comply with the instruction within a
notice to the Contractor, with reasons. reasonable time, which shall be the time (if any) specified in the
The Contractor shall then promptly make good the instruction, or immediately if urgency is specified under sub-
defect and ensure that the rejected item complies with paragraph (c).
the Contract. If the Contractor fails to comply with the instruction, the Employer
shall be entitled to employ and pay other persons to carry out the
work. Except to the extent that the Contractor would have been
entitled to payment for the work, the Contractor shall subject to
Sub-
arising from this failure.

9. Test on Completion 9.4. Failure to Pass Tests on Completion

9.1. If the Works, or a Section, fail to pass the Tests on Completion
The Contractor shall carry out the Tests on Completion in repeated under Sub- Clause 9.3 [Retesting], the Engineer shall be
accordance with this Clause and Sub-Clause 7.4 [Testing ], after entitled to:
providing the documents in accordance with subparagraph (d) of (a) order further repetition of Tests on Completion under Sub-
Sub-Clause 4.1 [ General Obligations].
Clause 9.3;
In considering the results of the Tests on Completion, the Engineer
(b) if the failure deprives the Employer of substantially the whole
shall make allowances for the effect of any use of the Works by the
benefit of the Works or Section, reject the Works or Section (as
Employer on the performance or other characteristics of the Works.
As soon as the Works, or a Section, have passed any Tests on the case may be), in which event the Employer shall have the
Completion, the Contractor shall submit a certified report of the same remedies as are provided in subparagraph (c) of Sub-Clause
results of these Tests to the Engineer. 11.4 [ Failure to Remedy Defects]; or
9.3. Retesting (c) issue a Taking-Over Certificate, if the Employer so requests.
If the Works, or a Section, fail to pass the Tests on Completion, In the event of sub-paragraph (c), the Contractor shall proceed in
Sub-Clause 7.5 [ Rejection] shall apply, and the Engineer or the accordance with all other obligations under the Contract, and the
Contractor may require the failed Tests, and Tests on Completion Contract Price shall be reduced by such amount as shall be
on any related work, to be repeated under the same terms and appropriate to cover the reduced value to the Employer as a result of
conditions. this failure.
 FIDIC 2010 clause 6.9- 6.12 FIDIC 2010 clause 6.9- 6.12
6.9.
The Personnel shall be appropriately qualified, skilled The Contractor shall submit, to the Engineer, details showing the
and experienced in their respective trades or occupations. The number of each class of Personnel and of each type of
Engineer may require the Contractor to remove (or cause to be Equipment on the Site.
removed) any person employed on the Site or Works, including the Details shall be submitted each calendar month, in a form approved
Representative if applicable, who: by the Engineer, until the Contractor has completed all work which
(a) persists in any misconduct or lack of care, is known to be outstanding at the completion date stated in the
(b) carries out duties incompetently or negligently, Taking-Over Certificate for the Works.
(c) fails to conform with any provisions of the Contract, or 6.11. Disorderly Conduct
(d) persists in any conduct which is prejudicial to safety, health, or the The Contractor shall at all times take all reasonable precautions to
protection of the environment. prevent any unlawful, riotous or disorderly conduct by or amongst
If appropriate, the Contractor shall then appoint (or cause to be the Personnel, and to preserve peace and protection of
appointed) a suitable replacement person. persons and property on and near the Site.

PPMO CoC 2014 clause 9 Situations may occur during contract performance that cause the
9. Personnel and Equipment Client to order a suspension of work, or a work stoppage.
9.1 The Contractor shall employ the key personnel and use a contractor may wish to respond to actual or alleged breaches of
the equipment identified in its Bid to carry out the Works, or contract by an employer by suspending works, or an employer may
other personnel and equipment approved by the Project wish to respond by suspending payment.
Manager. The Project Manager shall approve any proposed A suspension of work under a construction or architect-engineer
replacement of key personnel and equipment only if their contract may be ordered by the contracting officer for a reasonable
relevant qualifications or characteristics are substantially period of time.
equal to or better than those proposed in the Bid. If the suspension is unreasonable, the contractor may submit a written
9.2 If the Project Manager asks the Contractor to remove a claim for increases in the cost of performance, excluding profit.
person who is a member of the staff or work There is a very close relationship between suspension and termination
force, stating the reasons, the Contractor shall ensure that the and, depending on how the clause is drafted, the end result of a
person leaves the Site within seven days and has no further suspension clause may be much the same as a termination clause in
connection with the work in the Contract. that either party will have the right to terminate the contract at the end
of the agreed suspension period.
 FIDIC 2010 clause 8.8- 8.12 FIDIC 2010 clause 8.8- 8.12
8.9. Consequences of Suspension
8.8. Suspension of Work If the Contractor suffers delay and/or incurs Cost from complying with
The Engineer may at any time instruct the Contractor to the instructions under Sub-Clause 8.8 [Suspension of Work]
suspend progress of part or all of the Works. During such and/or from resuming the work, the Contractor shall give notice to the
suspension, the Contractor shall protect, store and secure such Engineer and shall be entitled subject to Sub-Clause 20.1 [
part or the Works against any deterioration, loss or damage. Claims] to:
(a) an extension of time for any such delay, if completion is or will be
The Engineer may also notify the cause for the suspension. If delayed, under Sub-Clause 8.4 [Extension of Time for Completion], and
and to the extent that the cause is notified and is the (b) payment of any such Cost, which shall be included in the Contract Price.
responsibility of the Contractor, the following Sub- Clauses After receiving this notice, the Engineer shall proceed in accordance
8.9, 8.10 and 8.11 shall not apply. with Sub-Clause 3.5 [Determinations] to agree or determine these
matters.
The Contractor shall not be entitled to an extension of time for, or to
payment of the Cost incurred in, making good the consequences of the
faulty design, workmanship or materials, or of the
failure to protect, store or secure in accordance with Sub-
Clause 8.8 [Suspension of Work].

FIDIC 2010 clause 8.8- 8.12 FIDIC 2010 clause 8.8- 8.12

8.10. Payment for Plant and Materials in Event of 8.11. Prolonged Suspension
Suspension If the suspension under Sub-Clause 8.8 [Suspension of
The Contractor shall be entitled to payment of Work] has continued for more than 84 days, the Contractor
may request the permission to proceed.
the value (as at the date of suspension) of Plant
If the Engineer does not give permission within 28 days
and/or Materials which have not been delivered after being requested to do so, the Contractor may, by
to Site, if: giving notice to the Engineer, treat the suspension as an
(a) the work on Plant or delivery of Plant and/or Materials has omission under Clause 13 [Variations and Adjustments] of
been suspended for more than 28 days, and the affected part of the Works.
(b) the Contractor has marked the Plant and/or Materials as If the suspension affects the whole of the Works, the
the property in accordance with the Contractor may give notice of termination under Sub-
instructions. Clause 16.2 [Termination by Contractor].
 FIDIC 2010 clause 8.8- 8.12
PPMO SBD 2014 clause 57
8.12. Resumption of Work 57.1 The Employer or the Contractor may terminate the
After the permission or instruction to proceed is given, Contract if the other party causes a fundamental breach of
the Contractor and the Engineer shall jointly examine the Contract.
the Works and the Plant and Materials affected by the 57.2 Fundamental breaches of Contract shall include, but
suspension. shall not be limited to, the following :
The Contractor shall make good any deterioration or (a) the Contractor stops work for 30 days when no stoppage of
defect in or loss of the Works or Plant or Materials, work is shown on the current Program and the stoppage has not
been authorized by the Project Manager;
which has occurred during the suspension after
(b) the Project Manager instructs the Contractor to delay the
receiving from the Engineer an instruction to this effect
progress of the Works, and the instruction is not withdrawn within
under Clause 13 [ Variations and Adjustments ]. 30 days;
(c) the Employer or the Contractor is made bankrupt or goes
into liquidation other than for a reconstruction or amalgamation.

(d) a payment certified by the Project Manager is not paid by

the Employer to the Contractor within 90 days of the date of PPMO SBD 2014 clause 57
the Project certificate;
(e) the Project Manager gives Notice that failure to correct a 57.3 When either party to the Contract gives notice
particular Defect is a fundamental breach of Contract and the of a breach of Contract to the Project Manager for a
Contractor fails to correct it within a reasonable period of cause other than those listed under GCC 57.2 above, the
time determined by the Project Manager; Project Manager shall decide whether the breach is
(f) the Contractor does not maintain a Security, which is fundamental or not.
required; and 57.4 Notwithstanding the above, the Employer may
(g) the Contractor has delayed the completion of the Works terminate the Contract for convenience.
by the number of days for which the maximum amount of
liquidated damages can be paid, as defined in the SCC. 57.5 If the Contract is terminated, the Contractor
shall stop work immediately, make the Site safe and
(h) If the Contractor, in the judgment of the Employer has
engaged in corrupt or fraudulent practices in competing for or secure, and leave the Site as soon as reasonably possible.
in executing the Contract, pursuant to GCC 58.1
 II INTRODUCTION
Determining EoT for completion of the work
Documenting reasons for EoT EOT is one of the provision clauses
Certifying Interim Payments
Variation Order (VO) in the standard contract form. The
New rates purpose is to preserve an
Provisional sums
Nominated Sub contractor right in liquidated
Substantial completion
Work completion- measurement and valuation damages. In the circumstances that
the delays are caused by inevitable
Actions on unacceptable performance
Termination of Contract reason, EOT allows contractor to set
an agreed completion date. [1]

Factors causing Extension of Time [2] Land Acquisition Problems

Improper Project Feasibility Study Delay in Issuance of Drawings
Delay in Instructions from Consultants Mistakes with Soil Investigations\
Extreme Weather Conditions Improper Investigation of Foundations at Site

Unfavorable Site Conditions Late Deliveries of Materials

Late Variation Orders Approval
Poor Professional Management
Difference between Building Code & Specification
Delay in Interim Payment Certificates
Delay by Sub-Contractors
Land Acquisition Problems Slowness in Decision Making
Delay in Issuance of Drawings Shortage of Fuel, Materials and Equipment
Lack of Baseline Schedule Lack of Capable Representative

Poor Design Poor Site Supervision

LITERATURE REVIEW
General condition of contract clause no. 35 of standard bidding The Project Manager shall decide whether and
document for procurement of work prepared by Public by how much to extend the Intended
Procurement monitoring office state that: [3] Completion Date within 21 days of the
The Project Manager shall extend the Intended Contractor asking the Project Manager for a
Completion Date if a Compensation Event occurs or a
decision upon the effect of a Compensation
Variation is issued which makes it impossible for
Event or Variation and submitting full
Completion to be achieved by the Intended Completion
supporting information at least 21 days prior to
Date without the Contractor taking steps to accelerate
the remaining work, which would cause the Contractor the intended completion date.
to incur additional cost.

The Contractor can claims for an extension of the time for

If the Contractor has failed to give early
completion subject to sub clause 20.1 [ Claims]
warning of a delay or has failed to cooperate
or due to delayed by any of the following causes:
in dealing with a delay, the delay by this Variation due to change in quantity of an item of work
failure shall not be considered in assessing Exceptionally adverse climatic conditions

the new Intended Completion Date. Unforeseeable shortages in the availability of

personnel or goods caused by epidemic or
Standard contract forms, especially that of the
governmental action.
International Federation of Consulting Engineers
Any delay caused by the employer, the
(FIDIC) has included Extension of Time for
personnel or other contractors
completion on sub clause 8.4. This includes: [4]
 Within 42 days after receiving a claim or any
further particulars supporting a previous claim,
the Engineer shall respond with approval, or with
disapproval and detailed comments. He may
also request any necessary further particulars,
but shall nevertheless give his response on the
principles of the claim within the above defined
time period.

If the Engineer does not respond within the

timeframe defined in this Clause, either
Party may consider that the claim is Prevailing Legislations
rejected by the Engineer and any of the regarding Extension of Time in
Parties may refer to the Dispute Board in
Nepal
accordance with Sub-Clause 20.4 [
Obtaining Dispute Decision ].
 Procedure/Process for EOT:- [6]
As per the Clause 120 of Public Procurement
As per the section 56 of Public Procurement Act 2063, the
conditional requirements for EOT are: [5] Regulation 2064, the following process must be
Provision of EOT must be incorpotated in Agreement followed and fulfilled before the approval of EOT.
Document. Application for EOT must be submitted to PE before
Force Majeure
21 days of deadline by Contractor/ Consultancy/
Failure of the Public Entity to make available the
Importer/ Service Provider with reasons for the
materials to be made available by it
requirement of EOT.
Miscellaneous genuine reasons.

Investigation by Public Entity's responsible officer Whether the delay is due to PE's taking the
over the EOT application and respective documents required documents associated with contractor
on following terms:
for the purpose of Investigation or not.
Whether the concerned contractor has endeavored
Whether the delay is due to Force Majeure
his/her 100% to complete the work as per contract
(Earthquake, Flood, Landslide, Soil Erosion,
agreement in time or not
Whether the concerned public entity has provided Pandemic/Epidemic or not.
the construction entrepreneur, supplier, service
provider or consultant with the matters required to be
provided under the contract or not
Approval of EOT:- For the EOT of above 15% up to 25% of initial
Project Duration, approval can be done by the
On rigorous study or investigation, if the reasons
Departental Chief.
provided on the application are found genuine,
For the EOT of above 25% up to 50% of initial
the approval of EOT can be done based on:
Project Duration, approval can be done by the
For the EOT of up to 15% of initial Project Secretariat of the Concerned Ministry/Entity.
Duration, approval can be done by the Officer
who had approved the Procurement. No EOT of above 50% of initial Project Duration
can be done. For such requirements, the Contract
should be terminated.

Liquidated damages:
however, he or she is not required to pay liquidated
The following provisions may be made in the
damages if the performance of work or delivery of
procurement contract in regard to the liquidated
damages: goods is delayed due to the occurrence of a force

(a) If the work under the procurement contract could not majeure event or without any fault or negligence on

be completed within the time specified in the contract his or her part, and
due to the delay on the part of the supplier, consultant, (b) The concerned construction entrepreneur,
service provider or construction entrepreneur, he or she supplier, service provider or consultant shall not be
shall pay to the public entity liquidated damages, released from the obligation of performing the work
generally of zero decimal zero five (0.05) percent of the under the procurement contract even upon payment
contract price per day not exceeding ten percent of the of the liquidated damages referred to in clause (a).
contract price
(3) While determining the rate referred to in sub-rule
(2), the rate shall be so determined as equivalent to the
same amount that the construction entrepreneur has to
pay as liquidate damages to the public entity on daily
basis for failure to complete the work within the period
specified in the procurement contract.
(4) Notwithstanding anything contained elsewhere in
this Rule, the total amount of reward shall not exceed
ten percent of the contract price.
*Normally following source of index shall apply. Public Entity shall
choose applicable Index for each item.
(a) Labor: "National Salary and Wage Rate Index"- "Construction
Labor" of Nepal Rastra Bank or rate fixed by District Rate Fixation
Committee

(b) Material:"National Wholesale Price Index" - Construction

Materials" of Nepal Rastra Bank

(c) Equipment usage: "National Wholesale Price Index" -

"Transport Vehicles and Machinery Goods" of Nepal Rastra Bank
or "Fuel" Price fixed by Nepal Oil Corporation.

** Bidders proposed weightings should be within the range

specified by the Employer in column - 5
R1

R0

)
 SNRTP Document Provision:
Extension of Time
If the Contractor has failed to give early warning
Contract Document Provision:
of a delay or has failed to cooperate in dealing
The PM shall extend the Intended Completion Date if a with a delay, the delay by this failure shall not be
Compensation Event occurs or a Variation is issued which considered in assessing the new Intended
makes it impossible for Completion to be achieved by the Completion Date.
Intended Completion Date
The Project Manager shall duly record all delays
The Project Manager shall decide whether and by how caused by the contractors not meeting the
much to extend the Intended Completion Date within 21 approved program and inform the same to the
days of the Contractor asking the Project Manager for a Contractor with a copy to the Employer. Such
decision upon the effect of a Compensation Event or delays shall be considered while assessing the
Variation and submitting full supporting information at extension of intended completion date.
least 7 days prior to the intended completion date.
109 110

Compensation Events : (f) Ground conditions are substantially more adverse than could
reasonably have been assumed before issuance of the Letter of
(a) The Employer does not give access to a part of the Site by Acceptance
the Site Possession Date (g) PM gives an instruction for dealing with an unforeseen
(b) The Employer modifies the Schedule of Other Contractors condition, caused by the Employer, or additional work
required for safety or other reasons.
in a way that affects the work of the Contractor
(h) Other contractors, public authorities, utilities, or the
(c) PM orders a delay or does not issue Drawings, Employer does not work within the dates and other
Specifications, or instructions required for execution of the constraints stated in the Contract, and they cause delay or
Works on time. extra cost to the Contractor. (i)The advance payment is
delayed.
(d) PM instructs the Contractor to uncover or to carry out
additional tests upon work, which is found to have no (j)
Defects. (k)The PM unreasonably delays issuing a Certificate of
(e) PM unreasonably does not approve a subcontract to be let. Completion.
(l) Force majeure events as determined by the PM.
111 112
Many construction contracts allow the construction period
to be extended where there are delays that are not
the contractor's fault. This is described as an extension of 56. Provision Concerning Extension of Contract Period:
time (EOT). (1) Provisions concerning the extension of period of
When it becomes reasonably apparent that there is a delay, procurement contract shall be as provided in the concerned
or that there is likely to be a delay that could merit an EoT, procurement contract.
the contractor gives written notice to the contract (2) Notwithstanding anything contained in Sub-section (1),
administrator identifying the relevant event that has caused if the period of procurement contract is to be inevitably
extended due to force majeure, failure of the Public Entity
the delay.
to make available the materials to be made available by it or
If the contract administrator accepts that the delay was other reasonable causes, the competent authority may
caused by a relevant event, then they may grant an EoT and extend the period on the prescribed grounds upon
the completion date is adjusted. submission of application by the person obtaining
extension of time and liquidated damages are complex legal procurement contract.
issues and both of them are inter-linked.

120.
120. Time of Procurement Contract may be Extended: a) Whether the concerned construction entrepreneur, supplier,
service provider or consultant had made, to the extent of his/her
(1) If the work under the procurement contract cannot be best efforts to complete the work under the procurement contract
completed within the time of such contract due to the on time or not,
occurrence of conditions set forth in Section 56 of the Act, the
concerned construction entrepreneur, supplier, service provider (b) Whether the concerned Public Entity had made available to
or consultant shall have to make an application, stating causes the construction entrepreneur, supplier, service provider or
thereof, for extension of time, to the concerned Public Entity at consultant the matters to be made available as per the contract or
least seven days before the expiry of time of such contract. not,
(2) Upon receipt of the application pursuant to Sub-rule (1), (c) Whether the work is delayed due to force majeure or not,
the competent authority may conduct or cause to be conducted (3) If, upon an inquiry made pursuant to Sub-rule (2), the causes
necessary inquiry in respect thereof. In so conducting or referred to in the application are found to be reasonable, the
causing to be conducted inquiry the entity must take into authority accepting the bid may extend a period of up to six
account the following matters:- months and the Departmental head may extend a period above it.
Relevant events for EoT may include:
Variations.
GCC16. The Works to Be Completed within intended
Exceptionally adverse weather.
Completion Date
Civil commotion or terrorism.
16.1 The Contractor may commence execution of the Works on
Failure to provide information.
the Start Date and shall carry out the Works in accordance with
Delay on the part of a nominated sub-contractor. the Program submitted by the Contractor, as updated with the
approval of the Project Manager, and complete them within the
Delay in giving the contractor possession of the site. intended Completion Date.
Force majeure (such as an epidemic or an 'act of God'). 27. Extension of the Intended Completion Date
Loss from a specified peril such as flood.
27.1 The Project Manager shall extend the Intended Completion
The supply of materials and goods by the client. Date if a Compensation Event occurs or a Variation is issued
Strikes. which makes it impossible for Completion to be achieved by the
Changes in statutory requirements. Intended Completion Date without the Contractor taking steps
Delays in receiving permissions that the contractor has taken to accelerate the remaining work, which would cause the
reasonable steps to avoid. Contractor to incur additional cost.

27.2 The Project Manager shall decide whether and by how

much to extend the Intended Completion Date within 21 days The Contractor shall be entitled subject to Sub-Clause 20.1
of the Contractor asking the Project Manager for a decision [ Claims] to an extension of the Time for
upon the effect of a Compensation Event or Variation and Completion if and to the extent that completion for the purposes
submitting full supporting information at least 7 days prior to of Sub-Clause 10.1 [Taking-Over of the Works and Sections] is
the intended completion date. or will be delayed by any of the following causes:
If the Contractor has failed to give early warning of a delay or (a) a Variation (unless an adjustment to the Time for Completion
has failed to cooperate in dealing with a delay, the delay by has been agreed under Sub-Clause 13.3 [Variation Procedure])
this failure shall not be considered in assessing the new or other substantial change in the quantity of an item of work
Intended Completion Date. included in the Contract,
(b) a cause of delay giving an entitlement to extension of time
under a Sub-Clause of these Conditions,
 The Society of Construction Law (SCL) rule
(c) exceptionally adverse climatic conditions, Rule 1
(d) Unforeseeable shortages in the availability of personnel or
Goods caused by epidemic or governmental actions, or
(e) any delay, impediment or prevention caused by or attributable
to the Employer, the Personnel, or the
other contractors.
If the Contractor considers himself to be entitled to an extension
of the Time for Completion, the Contractor shall give notice to
the Engineer in accordance with Sub-Clause 20.1 [
Claims]. When determining each extension of time under Sub- [This will effectively result in an extended Time for
Completion and will relieve the Contractor from having to
Clause 20.1, the Engineer shall review previous determinations pay penalties for delay (or Delay Damages under FIDIC)]
and may increase, but shall not decrease, the total extension of
time.

Rule-2 Rule-3
For the case of recovery of delay (or prolongation) costs incurred
due to the Employer delays, the Contractor must be able to prove Where Delay to Completion occurs
that there has been no other delay, which is in his own control, concurrently with Delay to
and which is equally (or partly) contributing for delaying the Completion, the concurrent delay
Time for Completion. should NOT reduce any Extension of Time
(EOT), which is due.

[Result of Rule No. 1 will not change and is

irrespective of the result of Rule No. 2]
57. Payment of Bill or Invoice: Subject to the procurement 123. Payment of Bill or Invoice (PPR, 2007) :
contract, the Public Entity shall have to make payment of the (1)
bill/invoice as prescribed (PPA, 2007) (d) On the basis of the quantity of work handed over or
123. Payment of Bill or Invoice (PPR, 2007) : completed,
(1) The procurement contract may provide that in making (e) Pursuant to Sub-rule (1) of Rule 122 or on the basis of terms
payment of running bill, any other bill or invoice, the Public and conditions of the letter of credit.
Entity may, as per the terms and conditions of contract, make (2) In order to receive payment of a running bill, any other bill or
payment in accordance with any or all of the following basis:- invoice, the supplier, construction entrepreneur, service provider
(a) On monthly basis, or consultant shall have to submit the documents required as per
(b) On the basis of actual work performed as technically measured the procurement contract.
and recorded in the measurement book, (3) The Public Entity shall have to make payment, as per the
(c) If the procurement contract sets forth work performance procurement contract, against the bill or invoice submitted
milestones, upon receipt of such milestones and if such milestone pursuant to Sub-rule (1) within thirty days of approval of such
are not set forth, on the basis of the work performed, running bill, any other bill or invoice and documents by the
concerned authority.

123. Payment of Bill or Invoice (PPR, 2007) : 123. Payment of Bill or Invoice (PPR, 2007) :
(4) In making payment pursuant to Sub-rule (1), the Public (6) In a procurement contract, the Public Entity may provide the
Entity shall have to deduct, for retention money, five percent following:-
amount of the amount stated in the running bill or invoice (a) That if in any previous running bill of the procurement
and keep the same. contract or any other bill or invoice anything was for any reasons
or mistakenly stated necessitates correction of the payment, the
(5) Where a procurement contract provides that upon prompt
Public Entity may, itself or at the request of the concerned
payment of the amount under bill and invoice by the Public
supplier, construction entrepreneur, service provider or consultant,
Entity, the supplier, construction entrepreneur, service correct or change such payment amount in the running bill or any
provider or consultant will provide discount of a certain other bill thereafter, and
amount or percentage of such payment, the Public Entity (b) That if the supplier, construction entrepreneur, service
shall provide such payment only after deducting such provider or consultant does not perform the work in accordance
discount. with the terms and conditions of the procurement contract, the
Public Entity may deny or deduct the payment under a running
bill or any other bill or invoice.
123. Payment of Bill or Invoice (PPR, 2007) :
(7) The Public Entity shall have to make the payment as
provisioned under Sub-rule (1) within the period specified in the
procurement contract. If it does not make payment within that 40.1 The Contractor shall submit to the Project Manager
period, it shall have to pay interest thereon as per the procurement monthly statements of the estimated value of the work
contract provision. executed less the cumulative amount certified
(8) The payments under clause (a), (b), (c) and (d) of Sub-rule (1) previously.
to the supplier, construction entrepreneur, service provider or
40.2 The Project Manager shall check the
consultant of an amount exceeding twenty five thousand Rupees
shall be made through account payee cheque. monthly statement and certify the amount to be paid to
the Contractor within 30 days of submission by
contractor.
40.3 The value of work executed shall be determined by
the Project Manager.

41.1 Payments shall be adjusted for deductions for advance payments and
retention. The Employer shall pay the Contractor the amounts certified by
40.4 The value of work executed shall comprise: the Project Manager within 30 days of the date of each certificate. If the
(a) In the case of an Unit Rate contract, the value of the quantities of Employer makes a late payment, the Contractor shall be paid interest as
work in the Bill of Quantities that have been completed; or indicated in the SCC on the late payment in the next payment. Interest
(b) In the case of a lump sum contract, the value of work executed shall be calculated from the date by which the payment should have been
shall comprise the value of completed activities in the Activity made up to the date when the late payment is made.
Schedule. 41.2 If an amount certified is increased in a later certificate or as a result
40.5 The value of work executed shall include the valuation of of an award by the Adjudicator or an Arbitrator, the Contractor shall be
Variations and Compensation Events. paid interest upon the delayed payment as set out in this clause. Interest
shall be calculated from the date upon which the increased amount would
40.6 The Project Manager may exclude any item certified in a
have been certified in the absence of dispute.
previous certificate or reduce the proportion of any item
41.3 Items of the Works for which no rate or price has been entered in
previously certified in any certificate in the light of later
BOQ shall not be paid for by the Employer and shall be deemed covered
information. by other rates and prices in the Contract.
 (b) any amounts to be added and deducted for changes in legislation and changes
in cost, in accordance with Sub-Clause 13.7 [Adjustments for Changes in
The Contractor shall submit a Statement in six copies to the Legislation ] and Sub-Clause 13.8 [Adjustments for Changes in Cost];
Engineer after the end of each month, in a form approved by the (c) any amount to be deducted for retention, calculated by applying the
Engineer, showing in detail the amounts to which the Contractor percentage of retention stated in the Contract Data to the total of the above
considers himself to be entitled, together with supporting amounts, until the amount so retained by the Employer reaches the limit of
Retention Money (if any) stated in the Contract Data;
documents which shall include the report on the progress during
(d) any amounts to be added for the advance payment (if more than one
this month in accordance with Sub-Clause 4.21 [Progress Reports].
instalment) and to be deducted for its repayments in accordance with Sub- Clause
The Statement shall include the following items, as applicable, 14.2 [Advance Payment];
which shall be expressed in the various currencies in which the (e) any amounts to be added and deducted for Plant and Materials in accordance
Contract Price is payable, in the sequence listed: with Sub-Clause 14.5 [ Plant and Materials intended for the Works];
(f) any other additions or deductions which may have become due under the
Contract or otherwise, including those under Clause 20 [Claims, Disputes and
Arbitration ]; and
(g) the deduction of amounts certified in all previous Payment Certificates.

An Interim Payment Certificate shall not be withheld for any other

No amount will be certified or paid until the Employer has received and reason, although:
approved the Performance Security. Thereafter, the Engineer shall, within (a) if any thing supplied or work done by the Contractor is not in accordance
28 days after receiving a Statement and supporting documents, deliver to with the Contract, the cost of rectification or replacement may be withheld
the Employer and to the Contractor an Interim Payment Certificate which until rectification or replacement has been completed; and/or
shall state the amount which the Engineer fairly determines to be due, (b) if the Contractor was or is failing to perform any work or obligation in
with all supporting particulars for any reduction or withholding made by accordance with the Contract, and had been so notified by the Engineer, the
the Engineer on the Statement if any. value of this work or obligation may be withheld until the work or obligation
has been performed.
However, prior to issuing the Taking-Over Certificate for the Works, the
Engineer shall not be bound to issue an Interim Payment Certificate in an The Engineer may in any Payment Certificate make any correction
amount which would (after retention and other deductions) be less than or modification that should properly be made to any previous
the minimum amount of Interim Payment Certificates (if any) stated in the Payment Certificate. A Payment Certificate shall not be deemed to
Contract Data. In this event, the Engineer shall give notice to the indicate the acceptance, approval, consent or
Contractor accordingly. satisfaction.
The Employer shall pay to the Contractor: the amount certified in the Final Payment Certificate within 56 days
(a) the first instalment of the advance payment within 42 days after after the Employer receives this Payment Certificate; or, at a time
issuing the Letter of Acceptance or within 21 days after receiving
the documents in accordance with Sub-Clause 4.2 [Performance the Contractor is being made) is suspended, the undisputed amount
Security ] and Sub-Clause 14.2 [Advance Payment ], whichever is shown in the Final Statement within 56 days after the date of
later; notification of the suspension in accordance with Sub- Clause 16.2 [
(b) the amount certified in each Interim Payment Certificate within Termination by Contractor ].
56 days after the Engineer receives the Statement and supporting Payment of the amount due in each currency shall be made into the
documents; or, at a time when the loan or credit (from which bank account, nominated by the Contractor, in the payment country
part of the payments to the Contractor is being made) is suspended, (for this currency) specified in the Contract.
the amount shown on any statement submitted by the Contractor
within 14 days after such statement is submitted, any discrepancy
being rectified in the next payment to the Contractor; and

Variations
literally means change, alteration, modification etc

allows PM/Employer to modify the contract as

required during the performance of contract.
allows to execute unforeseen works without breach of
contract or a new contract
are required for the satisfactory completion and
140
 Variations Variations

are required for the satisfactory completion and Types of variations

an unavoidable variation;
Greater the elements of unknown more chances of
variations
a variation for the convenience of the client;
Contractor is not bound to execute more than
contracted unless contractual provisions bind him a variation for the convenience of the
In construction contracts, a variation is usually defined Contractor / Consultant.
as a change to the Works. Each standard form of
contract in general includes provisions relating to
variations and their management.
141 142

Variations Variations
Variation may include: Effect of variation:
changes to the quantities work included in the Contract, Satisfactory completion and functioning of works
changes to the quality and other characteristics of any work, Reduction/increment in scope of work
changes to the levels, positions and/or dimensions of any part Reduction or increase in volume of work
of the Works,
Increment /reduction in project cost
omission of any work unless it is to be carried out by others,
Time extension
any additional work, Plant, Materials or services necessary
for the Permanent Works, including any associated Tests on Increment in price escalation cost
Completion, boreholes and other testing and exploratory Revision of contract rates
work, or Fixation of new rates
changes to the sequence or timing of the execution of the Dispute/Claim situation
Works.
143 144
 Variations Variations
Contract Provision Contract Provision
GCC clause -----: PM to access quotations given by contractor
The Contractor shall provide the Project Manager with a BOQ item ,change in quantity within limit, unchanged
quotation for carrying out the Variation when requested to timing of execution then BOQ rate otherwise quotation
do so by the Project Manager. may include new rate.
Clause ----- Changes Contract Price unreasonable rate PM to determine as appropriate.
---- (a) if final quantity differs by>25% & change exceeds VO may be treated as compensation event in emergency
2% of initial contract price, PM to adjust rate to allow for if time does not allow for quotation.
the change. no additional cost that could be avoided by early warning
(b) prior approval of Employer necessary to adjust rate if by the contractor.
change increases the contract price by >10%. Contract Data restricts authority of PM for issue of
(c) contractor to provide cost breakdown variation and adjustment of rates
145 146

Variations Variations
Negotiation Basis of New Rate/Rate Revision Benefits &Risks associated with variation:
provision of contract document. Increase in project cost; delay in project completion
Minor and major item absence of fund may result in scope curtailment.
approved norms, existing market high rate pricing for varied works due to uncompetitive
rate arrived through negotiation
Rate negotiation generally an advantage to the
contractor.
situation.
Competitive bid could result to be more costly due to
change of situation e.g. work nature, market rate, quarry increase in BOQ item quantity with escalated rates.
site, taxes etc.
Opportunity for non performing contractor for excuse
effect of escalation clause ,currency proportion, exchange for time extension.
rate if applicable
Contract litigation
147 148
 A variation order is a change, often in construction, that Variations may include:
modifies all or part of an existing order. Alterations to the design.
Many construction projects undergo changes, especially Alterations to quantities.
after the beginning of building, and the cost impact on a
construction project with a variation order can be Alterations to quality.
costly. Alterations to working conditions.
A variation order may simply be an addition to an Alterations to the sequence of work.
existing order, or it may replace the order entirely. Variations may not (without the contractors consent):
Other variations may include alterations to design,
alteration to quantity, modification in sequencing of Change the fundamental nature of the works.
work, quality alterations and working condition Omit work so that it can be carried out by
alterations. another contractor.
Variation orders affect not only the cost o the project, Be instructed after practical completion.
and may affect completion dates as well. Require the contractor to carry out work that was the
subject of a prime cost sum.

54. Variation Order:

(1) Unless otherwise provided for in the procurement
contract, if the circumstances that could not be foreseen at the
time of signing of procurement contract arise in the course of
implementation of the procurement contract, the competent
authority may, by stating clear reasons thereof, issue as
prescribed, a variation order for a variation of up to
fifteen(25%) percent and for a variation order above it, a
variation order may be issued as per the decision made by the
Government of Nepal Council of Ministers by complying
with the procedure as prescribed in the case of the Public
Entity under sub-clause (1) of clause (b) of Section 2 and in
the case of other Public Entity as decided by the supreme
executive body of such entity.
54. Variation Order: 118. Variation Order:
(1) After having started the work in accordance with the
(2) The variation order under Sub-section (1) shall be procurement contract, if there is required addition to and
issued in the following manner:- reduction in the quantity or addition of new item to or
(a) To be so issued as not to change the basic nature or substitution in such work due to technical reasons, the
scope of the concerned work, following authority may, after preparing the cost estimate
of such alteration and new item, issue a variation order
(b) There must have been made arrangements for budget subject to the provision of Section 54 of the Act as
and, hereunder:-
(c) Approval of the competent authority must have been (a) In cases where the drawings, design and specifications
obtained. etc. of the construction work need not be changed but the
quantity of the work will be altered, the variation order of
(3) Other provision concerning the issuance of up to five percent of the contract price by the chief of the
variation order shall be as prescribed. public entity of gazetted second class rank.

118. Variation Order: 118. Variation Order:

(1) (2) If a variation order exceeding fifteen percent of the contract price
requires to be issued pursuant to Sub-rule (1), a proposal shall be
(b) Variation order of up to ten percent of contract price, whether submitted, with the recommendation of a committee consisting of
the drawing, design and specifications of construction work chief of the financial administration section, concerned Departmental
requires to be changed or not, by the chief of the Public Entity of head and one officer concerned with subject matter or expert
the gazetted second class by obtaining the approval of one level designated by the secretary under the chairpersonship of the
higher authority, and variation order of up to fifteen percent by the concerned secretary in the case of the Public Entity under sub-clause
Departmental head by assigning technical justification, (1) of clause (b) of Section (2) of the Act, to the Council of Ministers,
(c) In the case of procurement of goods and other services, Government of Nepal and in the case of other Public Entity to the
variation order of up to fifteen percent(25%) of the contract price, supreme executive body of that entity.
by the chief of the concerned Public Entity by assigning technical (3) A variation order shall not be issued with rates exceeding the rates
justification, and stated in the procurement contract. If a variation order requires to be
issued with higher rates, an approval shall be obtained from one level
(d) In the case of procurement of consultancy services, variation higher authority after making the rate analysis as well.
order of up to ten percent of the contract price, by the chief of the
concerned Public Entity by assigning technical evidence and (4) If a new item requires to be added to the construction works under
variation order of up to fifteen percent by the Departmental head the procurement contract, the Public Entity shall have to determine
by assigning technical justification. the rate by analyzing the rate as well of such new item.
 118. Variation Order:
(5) In issuing a variation order pursuant to this Rule, there shall be 38.1 All Variations shall be included in updated Programs,
clearly stated the nature of variation, large item, small item, and, in the case of a lump sum contract, also in the Activity
whether time requires to be extended or not; if time requires to be Schedule, produced by the Contractor.
extended how much time is to be extended, whether the rate of 38.2 The Contractor shall provide the Project Manager with a
variation item is lesser or higher than that of stated in the bill of quotation for carrying out the Variation when requested to do
quantities, what is the percentage of the total contract price in so by the Project Manager. The Project Manager shall assess
terms of updated modifications, the source to meet additional the quotation, which shall be given within seven (7) days of
amount for the work required to be carried out under the variation the request or within any longer period stated by the Project
order; what will be the percentage of the total sum after variation Manager and before the Variation is ordered.
compared to the initial contract price. 38.3 If the quotation is unreasonable, the Project
(6) If any additional work requires to be done immediately due to Manager may order the Variation and make a change to the
lack of time for any reasons or due to occurrence of conditions Contract Price, which shall be based on the Project
requiring an emergency work to be done, if any, the Public Entity own forecast of the effects of the Variation on the
may further the proceedings of variation order by obtaining prior costs.
approval of the one level higher authority.

38.4 If the Project Manager decides that the urgency of varying the
work would prevent a quotation being given and considered without
delaying the work, no quotation shall be given and the Variation shall
be treated as a Compensation Event. Variations may be initiated by the Engineer at any time prior to
38.5 The Contractor shall not be entitled to additional payment for issuing the Taking-Over Certificate for the Works, either by an
costs that could have been avoided by giving early warning. instruction or by a request for the Contractor to submit a proposal.
38.6 In the case of an Unit Rate contract, if the work in the Variation The Contractor shall execute and be bound by each Variation,
corresponds to an item description in the Bill of Quantities and if, in
the opinion of the Project Manager, the quantity of work above the unless the Contractor promptly gives notice to the Engineer stating
limit stated in GCC 37.1 or the timing of its execution do not cause (with supporting particulars) that:-
the cost per unit of quantity to change, the rate in the Bill of (i) the Contractor cannot readily obtain the Goods required for the Variation,
Quantities shall be used to calculate the value of the Variation. If the or
cost per unit of quantity changes, or if the nature or timing of the
work in the Variation does not correspond with (ii) such Variation triggers a substantial change in the sequence or progress
items in the Bill of Quantities, the quotation by the of the Works.
Contractor shall be in the form of new rates for the relevant items of Upon receiving this notice, the Engineer shall cancel, confirm or
work. vary the instruction.
Each Variation may include:
(a) changes to the quantities of any item of work included in the Contract If the Engineer requests a proposal, prior to instructing a
(however, such changes do not necessarily constitute a Variation),
Variation, the Contractor shall respond in writing as soon
(b) changes to the quality and other characteristics of any item of work,
(c) changes to the levels, positions and/or dimensions of any part of the as practicable, either by giving reasons why he cannot
Works, comply (if this is the case) or by submitting:
(d) omission of any work unless it is to be carried out by others,
(e) any additional work, Plant, Materials or services necessary for the (a) a description of the proposed work to be performed
Permanent Works, including any associated Tests on Completion, boreholes and a programme for its execution,
and other testing and exploratory work, or
(f) changes to the sequence or timing of the execution of the Works. (b) the proposal for any necessary
The Contractor shall not make any alteration and/or modification modifications to the programme according to Sub-Clause
of the Permanent Works, unless and until the Engineer instructs or 8.3 [Programme] and to the Time for Completion, and
approves a Variation.
13.2 Value Engineering (c) the proposal for evaluation of the
Variation.

(1) Unless otherwise provided in procurement contract, if price needs to

The Engineer shall, as soon as practicable after receiving be adjusted in the course of implementation of a procurement contract
having duration exceeding fifteen months the competent authority may
such proposal (under Sub- Clause 13.2 [Value adjust price.
Engineering] or otherwise), respond with approval, Provided that where a procurement contract has been concluded to
disapproval or comments. The Contractor shall not delay procure a public construction work following the invitation of national
level bidding and the price of any construction materials is increased or
any work whilst awaiting a response. decreased unexpectedly by more than ten percent of the previous price,
price shall be adjusted as prescribed by deducting ten percent in the
Each instruction to execute a Variation, with any amount so increased or decreased.
requirements for the recording of Costs, shall be issued (2) Notwithstanding anything contained in Sub-section (1), price
by the Engineer to the Contractor, who shall adjustment cannot be made where the work under the contract is not
completed within the period prescribed in such contract and has taken
acknowledge receipt. more time due to the delay by the person who has obtained procurement
Each Variation shall be evaluated in accordance with Clause 12 contract or if procurement contract is concluded on the basis of lump
[Measurement and Evaluation ], unless the Engineer instructs or sum contract or fixed budget.
approves otherwise in accordance with this Clause.
 119. Price Adjustment:
119. Price Adjustment:
(1)
(1) The Public Entity has to provide a statement in the
procurement contract that price adjustment can be carried out. (e) The relevant price indices to be used to adjust the price of each
component,
(2) The price adjustment provision in the procurement contract (f) the method of measuring fluctuation of exchange rate between
shall contain the following matters as well:- the currency used for the indices and the currency to be used for
(a) Condition of price adjustment, making payment,
(b) Formula to determine, (g) Baseline date to be used for application of price adjustment
In determining formula pursuant to this clause, formula shall be formula,
so formulated as to adjust the price only of the labor, materials (h) Interval of time for application of price adjustment formula,
and equipment used on the works completed, and
(c) Maximum amount of price adjustment, (i) Minimum price escalation to be determined by the use of price
(d) Composition of price to be used in the formula under clause adjustment formula and other terms and conditions and restrictions
(b), (the price of labor, equipment, materials, fuel etc.), to be fulfilled for application of the provision relating to price
adjustment.

119. Price Adjustment: 1.1.4.10 Provisional means a sum (if any)

which is specified in the Contract as a provisional sum,
(3) The maximum amount of price adjustment to be for the execution of any part of the Works or for the
made pursuant to this Rule shall not generally be more supply of Plant, Materials or services under Sub-Clause
than twenty five percent of the initial contract prices. 13.5 Provisional Sums].
The procurement contract may provide that if the amount 13.5 Provisional Sums
of price adjustment exceeds to that price, the Public Each Provisional Sum shall only be used, in whole or in
Entity may terminate the procurement contract or part, in accordance with the instructions, and
negotiate with the construction entrepreneur, supplier, the Contract Price shall be adjusted accordingly. The
service provider or consultant in order to limit the total sum paid to the Contractor shall include only such
contract price within the approved budget or may pursue amounts, for the work, supplies or services to which the
other measures or arrange for additional budget. Provisional Sum relates, as the Engineer shall have
instructed.
13.5 Provisional Sums 7.1 The Contractor may subcontract with the approval of the
(b) Plant, Materials or services to be purchased by the Project Manager, but may not assign the Contract without the
Contractor, from a nominated Subcontractor (as defined in approval of the Employer in writing. Subcontracting shall not
alter the obligations.
Clause 5 [Nominated Subcontractors] or otherwise; and for
which there shall be included in the Contract Price:
(i) the actual amounts paid (or due to be paid) by the Contractor, and
(ii) a sum for overhead charges and profit, calculated as a percentage
of these actual amounts by applying the relevant percentage rate (if
any) stated in the appropriate Schedule. If there is no such rate, the
percentage rate stated in the Contract Data shall be applied.
The Contractor shall, when required by the Engineer, produce
quotations, invoices, vouchers and accounts or receipts in
substantiation.

4.4 Sub Contractors

The Contractor shall not subcontract the whole of the Works.
A nominated sub-contractor is one that is selected by The Contractor shall be responsible for the acts or defaults of any
the client to carry out an element of the works. Subcontractor, his agents or employees, as if they were the acts or
Nominated sub-contractors are imposed upon the main defaults of the Contractor. Unless otherwise stated in the Particular
contractor after the main contractor has been appointed. Conditions:
(a) the Contractor shall not be required to obtain consent to suppliers
The mechanism for nominating is an instruction in solely of Materials, or to a subcontract for which the Subcontractor is
relation to a prime cost sum to which a main named in the Contract;
contractor is entitled to add its mark up and attendance (b) the prior consent of the Engineer shall be obtained to other proposed
costs. Subcontractors;
It allows the client to have direct separate negotiations (c) the Contractor shall give the Engineer not less than 28 notice of
the intended date of the commencement of each work,
with major suppliers of goods or services and feed and of the commencement of such work on the Site; and
their appointment and design input into (d) each subcontract shall include provisions which would entitle the
the contract after works by the main contractor have Employer to require the subcontract to be assigned to the Employer
commenced. under Sub-Clause 4.5 [Assignment of Benefit of Subcontract] (if or when
applicable) or in the event of termination under Sub-Clause 15.2
[Termination by Employer].
 The Contractor shall not be under any obligation to
employ a nominated Subcontractor against whom the
5. Nominated Sub Contractors Contractor raises reasonable objection by notice to the
Engineer as soon as practicable, with supporting
particulars. An objection shall be deemed reasonable
In the Contract, means a if it arises from (among other things) any of the
Subcontractor: following matters, unless the Employer agrees in
(a) who is stated in the Contract as being a nominated writing to indemnify the Contractor against and from
Subcontractor, or the consequences of the matter:
(b) whom the Engineer, under Clause 13 [Variations and (a) there are reasons to believe that the Subcontractor
Adjustments], instructs the Contractor to employ as a does not have sufficient competence, resources or
Subcontractor subject to Sub-Clause 5.2 [ Objection to financial strength;
Notification ]. (b) the nominated Subcontractor does not accept to
indemnify the Contractor against and from any
negligence or misuse of Goods by the nominated
Subcontractor, his agents and employees; or

(c) the nominated Subcontractor does not accept to enter

into a subcontract which specifies that, for the subcontracted
work (including design, if any), the nominated
Subcontractor shall:
(i) undertake to the Contractor such obligations and The Contractor shall pay to the nominated Subcontractor
liabilities as will enable the Contractor to discharge his the amounts shown on the nominated
obligations and liabilities under the Contract, invoices approved by the Contractor which the Engineer
(ii) indemnify the Contractor against and from all certifies to be due in accordance with the subcontract.
obligations and liabilities arising under or in connection These amounts plus other charges shall be included in the
with the Contract and from the consequences of any failure
by the Subcontractor to perform these obligations or to fulfil Contract Price in accordance with sub-paragraph (b) of
these liabilities, and Sub-clause 13.5 [ Provisional Sums ], except as stated in
(iii) be paid only if and when the Contractor has received Sub-Clause 5.4 [ Evidence of Payments ].
from the Employer payments for sums due under the
Subcontract referred to under Sub- Clause 5.3 [ Payment to
nominated Subcontractors ].
 Price Adjustment
To adjust Fluctuation (rise/fall) in the costs of Compulsory for contract period more than 18 months
resources :
Labor For contract period more than 15 months
Material adjustment provision for abnormal price increment in
Equipment construction material in excess of 10% irrespective of
contract duration. Adjustment is applicable for
additional percent above 10%. Contact indicates the
No adjustment is to be applied to work valued on the
applicable construction material
basis of Cost or current prices.
Maximum adjustment amount (up to 25%) for price to
be stated in the contract as per PPA.

177 178

By Anjay Kumar Mishra

Based on Syllabus of Pokhara University

6. Claims Disputes and Dispute Settlement

Introduction to disputes
Introduction to claims Causes of commercial disputes
Reasons for Claims Common causes of construction disputes
Sources of claims Methods of dispute settlement: Litigation, ADR
Preparing claims Principles and practice of arbitration
Analysis of claims Nepal Council of Arbitration
Preparing Defense Arbitration Act
 Contract Claim and Dispute Settlement
A claim is a request by a contractor for additional Cost
compensation or time extension for events beyond the

differing or unexpected site conditions

change in scope
delays caused by the owner
Force Majeure situation
Contractual provisions e.g. compensation events
and variations
change in the terms of the contract

Contract Claim
A claim is a request for compensation not anticipated in the
terms of the original contract.
A change order that is written, negotiated, and accepted
without going outside the project team is not a claim.
An extra contractual payment, not legally due under the
original contract or subsequent amendments
An ex-gratia payment to the contractor
It represents compensation paid to the contractor on grounds
of hardship
Becomes legal after the court upheld
Claims also include owner requests for compensation for
the failure to meet contractual terms.
 12

Contract Dispute

13 14
From the Completion Date until Defects Liability
Certificate has been issued, the risks of loss of or
damage to the Works, Plants and Materials is an
risks except loss or damage due to
(a) defect which existed on the Completion Date,
(b) an event occurring before the Completion Date, which
was not itself an risk, or
(c) the activities of the Contractor on the
Site after the Completion Date.
 What is a Delay Claim? Construction Claim
construction claim consists of two major parts:
(1) the entitlement section, which typically includes a
detailed description of the actions or inactions of the
party from whom relief is sought, entitling the claimant
to compensation; and
(2) the damages section, which sets forth the
calculations and support for the compensation
claimed.
Discussions on engineering and construction
claims and disputes are quite complicated.

Construction Claim Types of Construction Claim

Over the years, disputes in the construction industry have
increased in number and become more and more complex. Extension of Time
Construction disputes can be frustrating, upsetting and time Disruption
consuming; the construction contracts tend to be complex and Acceleration
can have arduous conditions, and projects can be badly Variation Account
managed making delays, additional costs and liabilities Finance Charges
unavoidable. Interest
Another marked change over the same time span is the change Increased Costs
in the way in which we resolve these disputes, with the Overheads Recovery
traditionally favoured litigation being replaced by arbitration, Loss of Profit
mediation, adjudication and dispute review boards. Retention Release
The ability to avoid disputes is perhaps even more important Claims Preparation Costs
than managing them so it is essential to get the best contract Wrongful Withholding of Sums DueLost Opportunity
arrangements in place.
 Reasons for Arising Claim Reasons for Arising Claim& Dispute

Competitive market resulting in low bids. Risks being either ignored or dealt with arbitrarily
Plans and specifications are incomplete.
Contradictory statements in the contract documents. obligations to the contractor
Inexperienced contractors: less familiar with contract
documents and procedures. contract clause only to make profit
Contractors more aware of claims. Lack of contractual obligation on the part of both
Inability to recognize risks and failure to deal parties
adequately with those including their sharing amongst Inability to define contract terms clearly
the contracting parties

Management of Construction Claims

 Preparing Construction Claims
Avoiding Claims
Claims in the construction industry are commonplace.
While it is best to avoid construction claims from the
beginning of a project, it is important to resolve claims
quickly and efficiently once they arise.
Avoidance or a quick resolution of claims is often crucial to
the economic success of the project.
How you document and present a claim will often determine
whether you obtain a quick and inexpensive resolution of
the claim or whether you get stuck in a prolonged and
expensive legal battle.
Once you determine that a claim merits prosecution,
comprehensive preparation and organization is essential and
should be promptly undertaken.
Claims and disputes involving construction projects tend
to be technically complex and factually intensive. Requirements for a Successful Claim
An effective way to present a claim and resolve a dispute
is through the submission of a claim document.
A claim document is a written synopsis of the claim that
can be presented to the opposition at the early stages of the
dispute.
Whether a formal or informal process is followed, the
immediate and primary goal of preparing and submitting a
claim document is to bring about a prompt and satisfactory
resolution of the claim through an informed negotiation.
Failing a satisfactory resolution of the claim, a well-
prepared claim document provides a blueprint or plan for
further claim prosecution.

Preparing Defense to Claims

The claim preparation process begins with identifying,
quantifying, determining and defining the root cause of a
project impact, whether a differing site condition, a change in
means and methods, a loss in productivity, or an other
unexplained (or partially explained) cost/time overrun.
Once the identification and quantification of a delay or impact
is defined, a causation and responsibility analysis, or
entitlement analysis, is performed to determine the ability to
recover costs and the appropriate contract clause(s) that provide
for resolution.
A review of project records and documents, as well as the
definition of scope outlined in the contract, is necessary to
establish the facts surrounding the claim and to develop strategy
for preparation as well as resolution.
 Determine Type of Delay:
Identify Concurrent Delays:
Excusable Non-excusable
Excusable
Owner-caused Force majeur Contractor-caused
Caused by Owner and Contractor

Non-
Compensable Non-compensable
compensable Non-compensable
 Disputes

Construction Disputes
Sources of Disputes in Construction Contract Sources of Disputes in Construction Contract
Contract Document is one of the main sources of
disputes among the contracting parties. Other sources
are:
Employer, Contractor wants to maximize the profit but the employer
wants to get high quality work accomplished in minimum
Contractor,
cost,
Consultant,
There is tendency of the contractor to increase quantities with
Organizations related to the projects and higher rates,
other environment. In many cases the contractor inflates the claims,
Contractors and consultants have separate contractual relations Contractor generally tries to justify his/ her fault and
with the employer. Therefore, there is possibility of dispute shortcomings on to the employer,
raised by the contractor and/ or consultants against the employer
Misinterpretation of the clauses of the Agreement on his own
interest,

Sources of Disputes in Construction Contract Sources of Disputes in Construction Contract

Consultants and Dispute Contract (Contract Documents): the main

There may also be the dispute in projects due to the consultants source of dispute because parties in contract
because,
More authority vested on consultants by the contract document but
want to interpret the contract documents for
are less accountable, their own interest.
Employer has to bear the cost resulting from the Consultant's Contract document mainly consists of:
decision, but consultants want to exercise their independent power,
Consultant gets benefit of his job extended by any extension of BoQ and Method of Measurement:
time for completion but employer want to early completion, Drawing:
Variation Order claims and disputes as a result of inappropriate
design and drawing, insufficient field survey, Lack of experience, Specification:
skill, efficiency of the consultant who prepare these documents Condition of Contract (CoC):
Sources of Disputes in Construction Contract Sources of Disputes in Construction Contract
Project Team: Generally there are four components in a
project team. If all components form a team and works as
a single team, project can be run smoothly without
dispute.
Client: owner of the project and considered as the drafter of the
contract.
Consultant: FIDIC envisaged the impartial role of the
consultant in contract administration.
Contractor: the party who implement the contract. Dispute in
contract basically depends on the contractor who generally
initiates the dispute.
Project Manager: the representative of the client on the work
site who should fulfill the obligation of the client on the work
site.

Sources of Disputes in Construction Contract

Management of Construction Disputes
Other reasons:
Inability to recognize risks and failure to deal adequately with
those including their sharing amongst the contracting parties
Risks being either ignored or dealt with arbitrarily
tendency to own all the rights and shift obligations
to the contractor
Lack of contractual obligation on the part of both parties
Inability to define contract terms clearly
Excessive high or low quoting of bill of quantities items by the
Contractors
Absence of timely and proper response by the Employer
Absence of proper documentation regarding reason of delay and
deviation in the contract
Management of Construction Disputes

Dispute Resolution
 Dispute Resolution Alternative Dispute Resolution (ADR)

Contract Claim and Dispute Settlement Contract Claim and Dispute Settlement
Contract dispute 1. Genuine misunderstandings of the contract, law or the
facts on the part of one or both the parties in dispute.
in the contract sum or extension of contract period is misunderstanding may be caused by :
rejected by the PM, and the Contractor formally notifies insufficient knowledge of the contract
that it does not accept the decision by the PM. provisions/law, facts,
Generally the Contractor elevates a matter to the level of badly formulated contract, and
dispute. However, the PM / Employer is also entitle to insufficient attention paid to ascertain and
elevate and may elevate a matter to dispute. establish the reality of dispute matters.
2. Deliberate desire of the parties to gain unjustified benefit
Contract usually expressly provides a procedure
at the cost of other parties.
for determining such disputes.

65 66
 Contract Claim and Dispute Settlement Contract Claim and Dispute Settlement
Dispute Settlement Dispute Settlement
Amicable Settlement: Parties to negotiate and discuss to find
a solution. adjudicator or the DRC shall give a decision in writing
Adjudication/DRC if not settled amicably within 30days of within 30 days of receipt of a reference of the dispute.
receipt of request by either party Either party may refer a decision of the Adjudicator or
Adjudication: (up to 100M contract)
Dispute decided speedily /cost effective manner by a neutral
and impartial Adjudicator (expert)
- Adjudicator selected by consensus of both the parties/
If neither party refers the dispute to arbitration within the
or appointing authority mentioned in the contract (SCC) shall be final and binding.
Dispute Resolution Committee: (>100M contract) arbitration shall be conducted in accordance with the
Three member panel. Members experienced with the type of arbitration procedures published by the Nepal Council of
construction. One member selected by each of the disputing
party. The third member selected by the other two. Arbitration (NEPCA)
67 68

Contract Claim and Dispute Settlement Contract Claim and Dispute Settlement
1. Simple Rules for avoiding Claims: 2. Recommendations (Contd.)
i) Know exactly what the contract requires Contract document should be clear, accurate,
comprehensive, and should fairly distribute risks
ii) Do what the contract requires, but without interference
iii) Don't do anything else, without proper documentation Develop a solid document control plan and keep control
of progress reports, daily meetings, schedule revisions,
2. Recommendations cost estimates, change orders and their justifications,
Have clear understanding of the scope of work and how correspondence.
it will be constructed so that contractor need not make
guess work, Always remember that the owner has the obligation to
provide construction site, accurate plans and
Review of the design and bid documents prior to the bid specifications, and inspection without interference
to identify and correct any design/documentation errors
or inadequacies.
69
Negotiation or Amicable Settlement Adjudication or Mediation

Dispute Review Experts (DRE) Dispute Review Board (DRB)

Arbitration
 Benefits of ADR in Contract

Choice of Dispute Resolution Method Choice of Dispute Settlement Method

 Comparison of Dispute Resolution Methods Nepal Council of Arbitration "NEPCA"
Items of
NEGOTIATION MEDIATION ARBITRATION LITIGATION
comparison
Process An attempt to reach A neutral third party A formal procedure The court system
NEPCA, founded in 1991, an autonomous and non-
agreement through
give-and-take in
assists the
negotiations, but does
in which arbitrators
render a decision (can
renders a judgment or
decision based on
profitable organization,
informal discussion not render a binding be binding or relevant law and the
decision nonbinding) facts established to administer arbitration and other
Cost Lowest cost method Low cost method Moderate cost
method
High cost method alternative methods of dispute resolution in an
Degree of time
control
High Moderate Time control depends Time control depends
on third parties on court system
expeditious and less expensive manner by arranging
co-operation from the concerned sector.
Private and Highly Moderately Relatively private Open to public and
confidential
Control and Greatest control and Good control and
and confidential
Third-party control
press exposure
Judicial system control
committed for the institutional development of Acts
Flexibility flexibility of
proceedings
flexibility of
proceedings
and reduced
flexibility of
and reduced flexibility
of proceedings
and proceedings related thereto, for the settlement of
proceedings
national and international disputes of development,
Decision making Parties reach Objective third-party Experts decide Judge and jury render
decisions based on opinion is introduced technical issues and decision based on the construction, industry, trade and other nature which
facts to the decision- evaluate evidence facts and the law
making process are to be resolved through arbitration.

Nepal Council of Arbitration "NEPCA" Arbitration Act, 2005

NEPCA provides administrative services for arbitrating
different kinds of dispute at reasonable fees.
The council is not involved in deciding cases but supplies
lists of individuals from which the parties mutually select
impartial arbitrators.
Arbitration is conducted by specific rules and procedures,
and the awards by arbitrators are legally binding and
enforceable.
Address-
NEPAL COUNCIL OF ARBITRATION
Jwagal-10, Kupondole, Lalitpur, Nepal
Tel: 977 1 5530894
Arbitration Act, 2005 Arbitration Experience in Nepal

Pokhara University
Nepal Engineering College
Centre for the Post Graduate Studies

7. Procurement of Works, Service and Equipment

7. Procurement of Works, Service and Equipment Introduction to Procurement of Services
Procurement of Services Consultancy means any study,
Introduction to procurement of services research, survey, design, drawing, supervision,
Method of selection of consultants training, testing, software development service or
Selection Procedure other intellectual or professional service of a
Criteria of short listing similar nature;
Request for proposal and the proposal means the act of hiring motor
Proposal scoring criteria vehicles, equipment or goods, carriage or repair
Award of contract and maintenance of goods; (
)

Introduction to Procurement of Services - Why Difficult?

include policy advice; governance; institutional reforms; Services are more difficult to evaluate than goods. Goods
social considerations including poverty alleviation and gender have objective standards
concerns; environment assessments and audits, participation and
Supplier of services are often reluctant to provide benchmark
consultation, institutional strengthening and capacity building
including training; legal and financial services; management and Excellent services are easy to monitor but mediocre or poor
engineering services; and construction supervision services are difficult to evaluate.
Goods can be returned whereas services cannot
Poor quality services may continue undetected and cause
The term includes a wide variety of private and public greater problems
entities, including consulting firms, engineering firms, construction
managers, management firms, procurement agents, inspection agents, Special Characteristics in Procurement of Consulting
auditors, United Nations (UN) agencies and other multinational Services
organizations, investment and merchant banks, universities, research Represents a small portion of total cost in projects
institutions, government agencies, nongovernmental organizations But may amounts to a large number of contracts
(NGOs), and individuals ( Significant impact on the success of the project
)
 Difference in Procuring Goods/ Works and
Selecting Consulting Services
GOODS AND WORKS CONSULTING SERVICES Prior to procuring Consultants all the documents
Product based Knowledge based including cost estimate, procurement plan, special
Open competition Selective competition requirement or other descriptions shall be
Public bid opening Non-public bid opening of technical offers prepared
Public opening of financial proposals
Procurement of consultancy service (Cl. 8 b):
Price is a major factor Quality is a major factor
(1) By requesting competitive proposals,
Detailed specification Terms of Reference (general work program)
(2) Through direct negotiations.
Single-stage procedure Two-stage procedure
In the case of a consultant the qualification
Negotiations rarely Negotiations usual
criteria set forth in the documents relating to
Contract awarded to Contract awarded to
Lowest Evaluated Bid Best Evaluated Bid 6
proposals. (Cl. 10 b)

12 (3) In preparing cost estimate under this Rule the

- Cost Estimate of Consultancy Services (PPR rule 12) Public Entity shall have to mention the following cost:-
12 (2) Matters shall be taken into account while (a) Remuneration of key manpower and other
preparing the cost estimate of consultancy service manpower,
(a) The norms, if any, relating to cost estimate of (b) Travel expenses, lodging expense for manpower,
consultancy service prepared by the concerned office expense, necessary goods, equipment and
ministry, services expenses, translation of report and other
(b) Terms of reference of the concerned consultancy documents, printing expense,
services, (c) If the consultant has to organize training, seminar
(c) The actual cost incurred on the procurement of the and travel, the expenses required for such activities and
same nature made in the current or previous year by other expenses.
the concerned Public Entity or other Public Entity (by
adjusting price to the rate of previous years ).
PPR rule 14 (2)
- Procedures to be followed for employing consultants
(a) Cost estimate of up to one hundred thousand Rupees-
by the Chief of the Office of gazetted third class, selection process:
(b) Cost estimate of up to five hundred thousand (a) need for high-quality services,
Rupees- by the Chief of the Office of gazetted second
(b) need for economy and efficiency,
class,
(c) need to give all qualified consultants an opportunity
(c) Cost estimate of up to one million Rupees- by the
to compete in providing the services financed by ADB,
Chief of the Office of gazetted first class,
(d) interest in encouraging the development and
(d) Cost estimate of an amount whatsoever above one
use of national consultants from developing member
million Rupees- by the Departmental head.
countries (DMCs),
Rule 15(2) The Public Entity shall not be allowed to
(e) need for transparency in the selection process, and
invite sealed quotations and bids or proposals for
consultancy services without updating the cost estimate (f) need for increasing focus on anticorruption and
observance of ethics.

Method of Selection of Consultants I. Quality- and Cost-Based Selection (QCBS)

QCBS is based on the quality of the technical proposal and the cost
ADB and WB Guidelines
of the services to be provided
I. Quality- and Cost-Based Selection QCBS
Under QCBS the cost of the proposed services is a factor in the
II. Quality-Based Selection QBS selection. This method is appropriate when,
III. Fixed Budget FBS
(i) the scope of work can be precisely defined,
IV. Least Cost Selection LCS
(ii) the TOR are well specified and clear, and
V.
(iii) the client and the consultants can estimate with reasonable
VI. Single Source Selection SSS precision the personnel time as well as the other inputs required
PPR of the consultants.
I. Quality- and Cost-Based Selection QCBS QCBS uses a competitive process among short-listed firms that
II. Quality-Based Selection QBS takes into account the quality of the proposal and the cost of the
III. Least Cost Selection LCS services in the selection of the successful firm.
IV. Fixed Budget FBS The relative weight to be given to the quality and cost shall be
V. Direct Negotiation determined for each case depending on the nature of the
assignment (70-90 for quality and 30-10 for cost, normally 80/20).
 Selection Procedure for QCBS A. Terms of Reference (TOR)- sees also Rule 69 of PPR
The selection process shall include the following steps: Shall be prepared by a person(s) or a firm specialized in the area
(A) preparation of the TOR; of the assignment.
The scope of the services described in the TOR shall be
(B) preparation of cost estimate and the budget;
compatible with the available budget.
(C) advertising;
TOR shall define clearly the objectives, goals, and scope of the
(D) preparation of the short list of consultants; assignment and provide background information (including a list
(E) preparation and issuance of the RFP [which should include: the of existing relevant studies and basic data) to facilitate the
Letter of Invitation (LOI); Instructions to Consultants (ITC); the preparation of their proposals.
TOR and the proposed draft contract]; TOR shall list the services and surveys necessary to carry out the
(F) receipt of proposals; assignment and the expected outputs (for example, reports, data,
(G) evaluation of technical proposals: consideration of quality; maps, surveys).
(H) public opening of financial proposals; However, TOR should not be too detailed and inflexible, so that
competing consultants may propose their own methodology and
(I) evaluation of financial proposal; staffing.
(J) final evaluation of quality and cost; and Firms shall be encouraged to comment on the TOR in their
(K) negotiations and award of the contract to the selected firm. proposals.

TOR may be compared to technical specifications for

the purchase of goods or works.
Areas to be covered are: B. Cost Estimate (Budget)
Objective: What is the anticipated result of services. The cost estimate shall be based on assessment of the resources
Background: What is the history of assignment. Any needed to carry out the assignment:
constraints.
Staff time, logistical support, and
Scope of Work: What is the consultant expected to
do? Degree of details. Are there any specific decision Physical inputs (for example, vehicles, laboratory equipment).
points during the performance of work? Costs shall be divided into two broad categories:
Purchases: Are any hardware requirements connected (a) fee or remuneration (according to the type of contract used)
with the assignment? When should such deliveries to and
the client be made and on what terms? (b) reimbursable, and further divided into foreign and local costs.
Reports: How and when will the report be presented? The cost of staff time shall be estimated on a realistic basis for
Contributions: What is the client going to provide in foreign and national personnel.
the way of facilities, professional support and physical
facilities?
 Selection Procedure for QCBS Selection Procedure for QCBS
C. Advertising see also Rule 70 of PPR D. Short List of Consultants see also Rule 70 of
To obtain expressions of interest, the Employer shall PPR
advertise a request for expressions of interest for each Shortlists shall comprise six firms with a wide geographic
contract for consulting firms in the national gazette or a spread,
national newspaper or in an electronic portal of free In case of International EoIs, no more than two firms from
access. any one country and at least one firm from a developing
Also in UNDB online and in dgMarket for int. EoIs. country, unless qualified firms from developing countries
May also advertise requests for expressions of interest in are not identified
an international newspaper or a technical magazine. For the purpose of establishing the short list, the
The information requested shall be the minimum required nationality of a firm is that of the country in which it is
to make a judgment on the suitability and not be so registered or incorporated and in the case of Joint Venture,
complex as to discourage consultants from expressing the nationality of the firm appointed to represent the Joint
interest. Venture.

Criteria of Short Listing Criteria of Short Listing

1. Eligibility and Qualifying Criteria
2. Qualifying Criteria Firm's Capacity 50 Points
Financial Capacity - 10 points
Eligibility Criteria (Mandatory Requirement) : Resource Personnel - 30 Points
a. Firm Registration Certificate Office Equipment and Facilities - 10 Points
b. VAT / PAN Registration Certificate.
c. Up to date Tax Clearance Certificate b. Experience 50 Points
d. J.V.Agreement in case of Firms in J.V General Experience of the Firm in Civil Engineering
e. Power of Attorney / Authorization Letter of the Works
signatory 15 points
f. Adherence to the code of ethics and anti-corruption Detailed Engineering Survey and Design of motor able
Roads - 35 Point
E. Preparation and Issuance of the Request for Request for Proposal and the Proposal
Proposals (RFP) see also Rule 71 of PPR F. Receipt of Proposals
Standard RFP shall be used. Shall be allowed enough time for the consultants to prepare their
proposals depend on the assignment (normally 1-3 months), can be
Any changes shall be introduced only through the RFP data
extended
sheet During this time the firms may request clarifications about the
The RFP includes: information provided in the RFP.
letter of invitation; The technical and financial proposals shall be submitted at the same
time but in separate sealed envelopes.
instructions to consultants, including a data sheet and No amendments to the technical or financial proposal shall be accepted
evaluation criteria; after the deadline.
technical proposal standard forms; The technical envelopes shall be opened immediately by a committee
financial proposal standard forms; The financial proposals shall remain sealed and shall be deposited with
a reputable public auditor or independent authority until they are
TOR; opened publicly.
standard form of contract Any proposal received after the closing time for submission of
proposals shall be returned unopened.
RFPs shall be sent to consultants on the shortlist.

G. Proposal scoring criteria - PPR G. Proposal scoring criteria - WB

Rule 71 (6)- Public Entity shall have to provide an appropriate
marks, according to the nature of assignment, not exceeding the
following marks:- specific experience: 0 to 10 points
(a) Proponent's experience of specific assignment, Methodology: 20 to 50 points
Up to 10% of the total marks Key personnel: 30 to 60 points
(b) Method of performance and responsiveness to the terms of reference- Transfer of knowledge: 0 to 10 points
20%-50% of the total marks
Participation by nationals: 0 to 10 points
(c) Qualifications and experience of the key personnel
Total: 100 points
30%-60% of the total marks.
(d) Technology transfer or training
Up to 10% of the total marks
(e) Participation of domestic manpower
Up to 10% of the total marks

Total : 100 marks

 I. Public opening of financial proposals
G. Proposal scoring criteria - ADB The Employer shall notify the consultants that have secured
I. Qualifications of Proposer (100 200) the minimum qualifying mark, the date, time, and place set
II. Approach and Methodology (200 400) for opening the financial proposals.
III. Personnel (500 700) The financial proposals shall be opened publicly in the
The evaluation shall be based on the evaluation criteria defined in presence of representatives of the consultants who choose to
the instructions to consultants. attend (in person or online).
After the technical quality is evaluated, firms whose technical The name of the consultant, the technical points, and the
proposals did not meet the minimum qualifying score of 750 points proposed prices shall be read aloud (and posted online when
out of a possible 1,000 points, or were considered non-responsive
to the invitation requirements, will be advised and their financial
electronic submission of proposals is used) and recorded
proposals will be returned unopened. when the financial proposals are opened.
Firms that have secured the minimum qualifying technical score The Employer shall also prepare the minutes of the public
will be advised of the location, date, and time for opening of opening and a copy of this record shall be promptly sent to
financial proposals. the Financing Institution and to all consultants who
submitted proposals.

i. Evaluation of financial proposal

The Employer shall then review the financial proposals. j. Final evaluation of quality and cost
If there are any arithmetical errors, they shall be corrected. (the costs The total score shall be obtained by weighting the quality
shall be converted to a single currency as stated in the RFP). and cost scores and adding them.
The RFP shall specify the source of the exchange rate to be used and the The weight for the shall be chosen, taking into
date of that exchange rate, provided that the date shall not be earlier than
four weeks prior to the deadline for submission of proposals, nor later
account the complexity of the assignment and the relative
than the original date of expiration of the period of validity of the importance of quality.
proposal. The proposed weightings for quality and cost shall be
For the purpose of evaluation, shall exclude local identifiable specified in the RFP.
indirect taxes on the contract and income tax payable to the country of
the Employer Except for the type of services specified in Section III,
The cost shall include all remuneration and other expenses the weight for cost shall normally be 20 points out of a
such as travel, translation, report printing, or secretarial expenses. total score of 100.
The proposal with the lowest cost may be given a financial score of 100 The firm obtaining the highest total score shall be invited
and other proposals given financial scores that are inversely proportional for negotiations
to their prices.
 j. Final evaluation of quality and cost Example:
Example:
(2) The weightage of marks assigned for financial
(1) Total weightage marks assigned for technical proposal
proposal = 20.
=80
Marks obtained in the technical proposal by proponent a., b. and c The amount quoted in the financial proposal by the
having obtained the determined pass marks:- bidders a, b and c who are passed in the technical
a = 90 proposal:-
b = 85 a = 4, 50 000.00
c = 80 b = 4, 30 000.00
Method of computing the marks to be obtained by the c = 4, 20 000.00 Therefore, the lowest quoted
technical proposal on the basis of above marks:- amount = 4, 20 000.00
a = 90 x 80 = 72 Therefore, the lowest quoted amount = 4, 20 000.00
100
b = 85 x 80 = 68 c = 80 x 80 = 64
100 100

j. Final evaluation of quality and cost Award of contract

Example: Negotiations
The method of computing the marks to be obtained by the financial proposal on Negotiations shall include discussions of the TOR, the
the basis of the above marks:- methodology, staffing, inputs, and special conditions of the
a = 4, 20 000 x 20 = 18.66 contract.
4, 50 000 These discussions shall not substantially alter the original TOR or
b = 4, 20, 000 x 20 = 19.53 the terms of the contract, lest the quality of the final product, its
4, 30 000 cost, and the relevance of the initial evaluation be affected.
c = 4, 20 000 x 20 = 20.00
Major reductions in work inputs should not be made solely to meet
4, 20 000
the budget.
Prop Net score of the Net score of the Total Remarks
The final TOR and the agreed methodology shall be incorporated in
onent technical proposal financial proposal marks
of which shall form part of the contract.
a 72.00 18.66 90.66 Proponent 'a' The selected firm should not be allowed to substitute key staff,
b 68.00 19.53 87.53
who has scored unless both parties agree that undue delay in the selection process
the highest marks makes such substitution unavoidable or that such changes are
c 64.00 20.00 84.00 shall be selected.
critical to meet the objectives of the assignment.
Negotiations
If this is not the case and if it is established that key staff were Rejection of Proposal and Cancellation
included in the proposal without confirming their availability, the firm of Procurement Proceedings- PPA Cl. 36 (1)
may be disqualified and the process continued with the next ranked
firm. (a) If all the received proposals are not substantially
The key staff proposed for substitution shall have qualifications equal responsive to the terms of reference,
to or better than the key staff initially proposed. (b) If the cost offered by the selected proponent is
Successful negotiations conclude with signing of the contract. substantially more than the cost estimate and available
Financial negotiations shall include clarification of the budget,
tax liability in the country (if any) and how this tax (c) If the consultancy service is no longer required or,
liability has been or would be reflected in the contract.
(d) If it is proved that the proponents have submitted the
For the Donor Funded Projects
proposal by mutual collusions.
If the borrower and the firm cannot reach agreement, the borrower
may terminate the negotiations with prior agreement and start Provided that the proposal of those proponents who have
negotiations with the next ranked firm until an agreement is reached. not colluded may be processed.
The borrower shall send a copy of the signed contract to Donor for its
records.

Rejection of Proposal and Cancellation of Rejection of Proposal and Cancellation

Procurement Proceedings- WB
The Borrower will be justified in rejecting all proposals only if of Procurement Proceedings- ADB
all proposals are nonresponsive because they present major The borrower will be justified in rejecting all proposals only if all
deficiencies in complying with the TOR or if they involve costs proposals are non-responsive because they present major
substantially higher than the original estimate. deficiencies in complying with the TOR or if they involve costs
substantially higher than the original estimate.
In the latter case, the feasibility of increasing the budget, or
scaling down the scope of services with the firm should be In the latter case, the feasibility of increasing the budget, or scaling
investigated in consultation with the Bank. down the scope of the services with the firm should be investigated
in consultation with ADB.
Before all the proposals are rejected and new proposals are
invited, the Borrower shall notify the Bank, indicating the Before all proposals are rejected and new proposals are invited, the
reasons for rejection of all proposals, and shall obtain the borrower shall notify ADB, indicating the reasons for rejection of
before proceeding with the rejection and the new all proposals, and shall obtain before
process. proceeding with the rejection and the new process.
The new process may include revising the RFP (including the The new process may include revising the RFP (including the
short list) and the budget. These revisions shall be agreed upon shortlist) and the budget.
with the Bank. These revisions shall be agreed upon with ADB.
 Selection by other methods- WB Guideline
In QBS, the RFP may request submission of a technical proposal
only or request submission of both technical and financial proposals
QBS is appropriate for the following types of assignments: at the same time, but in separate envelopes (two-envelope system).
(a) complex or highly specialized assignments for which it is difficult to
The RFP shall provide either the estimated budget or the estimated
define precise TOR and the and for which the client expects the
consultants to demonstrate innovation in their proposals (e.g., country number of key staff time, specifying that this information is given as
economic or sector studies, multi-sectoral feasibility studies, design of a an indication only and that consultants shall be free to propose their
hazardous waste remediation plant or of an urban master plan, financial own estimates.
sector reforms); If technical proposals alone were invited, after evaluating the
(b) assignments that have a high downstream impact and in which the technical proposals using the same methodology as in QCBS, the
objective is to have the best experts (e.g., feasibility and structural Borrower shall ask the consultant with the highest ranked technical
engineering design of such major infrastructure as large dams, policy proposal to submit a detailed financial proposal.
studies of national significance, management studies of large government
The Borrower and the consultant shall then negotiate the financial
agencies); and
proposal and the contract. All other aspects of the selection process
(c) assignments that can be carried out in substantially different ways,
shall be identical to those of QCBS, including the publication of the
such that proposals will not be comparable (e.g., management advice,
and sector and policy studies in which the value of the services depends
Award of Contract except that only the price of the winning firm is
on the quality of the analysis). published.

This method is appropriate only when the assignment is simple and This method is only appropriate for selecting consultants for assignments
can be precisely defined and when the budget is fixed. of a standard or routine nature (audits, engineering design of noncomplex
The RFP shall indicate the available budget and request the works, and so forth) where well-established practices and standards exist.
consultants to provide their best technical and financial proposals in Under this method, a qualifying mark for the is
separate envelopes, within the budget. established.
TOR should be particularly well prepared to make sure that the Proposals, to be submitted in two envelopes, are invited from a short list.
budget is sufficient for the consultants to perform the expected tasks. Technical proposals are opened first and evaluated.
Evaluation of all technical proposals shall be carried out first as in Those securing less than the minimum qualifying mark are rejected, and
the QCBS method. the financial proposals of the rest are opened in public.
Then the price proposals shall be opened in public and prices shall be The firm with the lowest price shall then be selected.
read out aloud. Under this method, the minimum qualifying mark shall be established,
Proposals that exceed the indicated budget shall be rejected. understanding that all proposals above the minimum compete only on
.
The Consultant who has submitted the highest ranked technical
The minimum qualifying mark shall be stated in the RFP.
proposal among the rest shall be selected and invited to negotiate a
contract.
 It does not provide the benefits of competition in regard to quality
and cost, lacks transparency in selection, and could encourage
This method may be used for small assignments for unacceptable practices.
which the need for preparing and evaluating competitive Therefore, single-source selection shall be used only in exceptional
proposals is not justified. cases.
In such cases, the Borrower shall prepare the TOR, Single-source selection may be appropriate only if it presents a clear
request expressions of interest and information on the advantage over competition:
experience and competence relevant to the (a) for tasks that represent a natural continuation of previous work
assignment, establish a short list, and select the firm with carried out by the firm,
the most appropriate qualifications and references. (b) in emergency cases, such as in response to disasters and for
consulting services required during the period of time immediately
The selected firm shall be asked to submit a combined following the emergency,
technical-financial proposal and then be invited to (c) for very small assignments, or
negotiate the contract. (d) when only one firm is qualified or has experience of exceptional
worth for the assignment.

j. Selection by other methods- PPR Rule 81, 82

Quality Based (QBS) method - select only the proponent who has Please see also-
obtained the highest marks in the technical proposal Nepal Procurement Act, 2063 and
Fixed Budget (FBS) method - cancel the proposal having cost Nepal Procurement Regulation 2064
exceeding the ceiling of such budget and select the proposal of the
proponent who has scored the highest marks in the technical
proposal after falling under such ceiling.
Least Cost method - select a proposal having the lowest cost out of
the proponents who have scored minimum marks prescribed for
being successful in the technical proposal
Direct Negotiation- If a service requires to be obtained for such
matters as training, workshop and seminar useful and necessary for
the Public Entity such services may be procured by direct
negotiations by the chief of the Public Entity himself/herself in the
case of a service valuing less than one hundred thousand Rupees and
by the approval of one level higher official in the case of the service
valuing above it.
 7. Procurement of Works, Service and Equipment
Pokhara University
Nepal Engineering College
Centre for the Post Graduate Studies
Single stage single envelop bidding Introduction to procurement of
Two Stage bidding services
Receiving the bids and Bid evaluation
Method of selection of
Bid Examination and deviations
Bid Evaluation report
consultants
Selection of Lowest evaluated bidder Selection Procedure
Award of contract Criteria of short listing
Request for proposal and the
procurement of works
7. Procurement of Works, Service and Equipment Procurement Methods Recommended proposal
PPMO Roles and Responsibilities Proposal scoring criteria
Nepal Procurement Act, 2063 and Award of contract
Nepal Procurement Regulation 2064

Bidding Procedures Under Competitive Bidding Single Stage Single Envelop Bidding

In the Single Stage bidding procedure, the Bidders

Four international bidding procedures may be submit bids in one envelope containing both the
selected by the Executing Agency to suit the nature of financial proposal and the technical proposal, which
the particular procurement: are opened in public at the date and time advised in
(i) Single Stage, the bidding documents.
(ii) Two Envelope (Single Stage), The bids are evaluated and, (following approval by
(iii) Two Envelope (Two Stage), and the Donor Agency, if required) the contract is
awarded to the lowest evaluated substantially
(iv) Two Stage.
responsive Bidder
Two-Envelope, Single Stage Bidding Two-Envelope, Two Stage Bidding
(Not Applicable in PPA) Bidders submit simultaneously two sealed envelopes- technical proposal
and financial proposal.
Bidders submit simultaneously two sealed envelopes, one containing
the technical proposal and the other the financial proposal. Initially, only the technical proposals are opened
Initially, only the technical proposals are opened. The financial proposals remain sealed and are held in custody by the
Executing Agency.
The financial proposals remain sealed
The technical proposals are evaluated and, if the Executing Agency
The technical proposals are evaluated by the Executing Agency. requires amendments or changes to the technical proposals, such
No amendments or changes to the technical proposals are permitted. amendments and changes are discussed with the Bidders.
The objective of the exercise is to allow the Executing Agency to Following discussion of the amendments and changes to the technical
evaluate the technical proposals without reference to price. proposals, the Bidders are invited to submit supplementary financial
Bids of Bidders who do not confirm to the specified requirements may proposals based on the revised technical proposals.
be rejected as deficient bids The supplementary financial proposals should only contain the changes in
Following approval of the technical evaluation the financial proposals price resulting from the changes in the technical proposals.
are opened in public. Supplementary financial proposals which contain changes other than those
The financial proposals of the technically responsive Bidders are discussed during technical evaluation will result in rejection of the bids.
evaluated and the award of contract is made to the lowest evaluated
substantially responsive Bidder.

The objective of the exercise is to ensure that all technical

proposals conform to the same acceptable technical standard
Two Stage Bidding
and meet the technical requirements of the Executing Agency. Bidders first submit technical proposals in accordance with the
specifications, but without prices.
Bids of Bidders who are unable or not prepared to amend their
The technical proposals are opened and evaluated by the Executing
technical bids so as to conform to the technical standard
Agency and discussed with the Bidders.
required by the Executing Agency may be rejected as deficient
Any deficiencies, extraneous provisions and unsatisfactory technical
bids.
features are pointed out to the Bidders whose comments are carefully
After the evaluation of technical proposals, the second stage is evaluated.
to invite Bidders to the opening of the financial proposals. The Bidders are allowed to revise or adjust their technical proposals to
The original financial proposals and the supplementary meet the requirements of the Executing Agency.
financial proposals are opened in public at a date and time The objective of the exercise is to ensure that all technical proposals
advised by the Executing Agency. conform to the same acceptable technical standard and meet the
The financial proposals and the supplementary financial technical requirements of the Executing Agency.
proposals are evaluated and the award of contract is made to Bids of Bidders who are unable or not prepared to amend their
the lowest evaluated substantially responsive Bidder. technical bids so as to conform to the technical standard required by
the Executing Agency may be rejected as deficient bids.
After the evaluation of technical proposals has been
approved, the second stage is to invite Bidders to submit Bidding Procedures Under Competitive Bidding
revised technical proposals and to submit financial The Single Stage bidding procedure is the main bidding procedure used
by GoN and by the Donor Agencies.
proposals based on the revised and agreed-upon technical
The Two Envelope (Single Stage) bidding procedure allows bids to be
proposals. evaluated on purely technical and commercial grounds without
The financial proposals and revised technical proposals reference to price and is commonly used in civil works contracts in
are opened in public at a date and time advised by the projects funded by the Asian Development Bank.
The Two Envelope (Two Stage) bidding procedure should be used for
Executing Agency. procurement where alternative technical proposals are possible such as
In setting the date, the Executing Agency should allow for certain types of machinery or equipment or manufacturing plant.
sufficient time for Bidders to prepare financial proposals The Two Stage bidding procedure may be adopted in large and complex
and incorporate the changes required in the technical contracts where technically unequal proposals are likely to be
encountered or where the Executing Agency is aware of its options in
proposals. the market, but for a given set of performance requirements there are
The financial proposals and revised technical proposals two or more equally acceptable technical solutions available to the
Executing Agency.
are evaluated and the award of contract is made to the
lowest evaluated substantially responsive Bidder.

Bid Submission
Bidders submitting bids by mail or by hand shall enclose the
original and each copy of the Bid, including alternative bids, if
permitted in accordance with ITB 13, in separate sealed envelopes,
duly marking the envelopes as and
. These envelopes containing the original and the copies shall
then be enclosed in one single envelope. The rest of the procedure
shall be in accordance with ITB sub-Clauses 22.2 and 22.3.
Submission/Receiving/ Opening the Bids
 Bids requested to be withdrawn in accordance with
Bid Modification/Withdrawal ITB 24.1 shall be returned unopened to the Bidders.
A Bidder may withdraw, substitute, or modify its bid after it (ITB 24, Procurement of Works, Small Contracts,
has been submitted by sending a written notice, duly signed by Guide, ADB)
an authorized representative, and shall include a copy of the (ITB 24, PPMO SBD (Works, above 60 mil.) 2014
authorization in accordance with ITB 20.2, (except that
withdrawal notices do not require copies). The corresponding Bidders May Request for Modification or Withdrawal
substitution or modification of the bid must accompany the within the Time for Bid Submission. (clause 19 PPA)
respective written notice. All notices must be:
(a) prepared and submitted in accordance with ITB 20 and Request for Modification or Withdrawal to be Submitted
ITB 21 (except that withdrawal notices do not require Before the Deadline With the Followings on the Outside of
copies), and in addition, the respective envelopes shall be the Envelope: (clause 58 PPR)
clearly marked
; and Description of Work
(b) received by the Employer prior to the deadline Name and Address of the Employer
prescribed for submission of bids, in accordance with ITB
22. Modification or Withdrawal

The Employer shall open the bids in public at the address, All other envelopes shall be opened one at a time, reading
date and time specified in the BDS in the presence of out: the name of the Bidder; the Bid Price(s), including any
Bidders` designated representatives and anyone who discounts and alternative bids and indicating whether there is
choose to attend. Any specific electronic bid opening a modification; the presence of a bid security. Only
procedures required if electronic bidding is permitted in discounts and alternative offers read out at bid opening shall
accordance with ITB 22.1, shall be as specified in the be considered for evaluation. No bid shall be rejected at bid
BDS. opening except for late bids, in accordance with ITB 23.1.
First, envelopes marked shall be The Employer shall prepare a record of the bid opening that
opened and read out and the envelope with the shall include, as a minimum: the name of the Bidder and
corresponding bid shall not be opened, but returned to the whether there is a withdrawal, substitution, or modification;
Bidder. Envelopes marked shall be the Bid Price, per contract if applicable, including any
opened and read out with the corresponding bid. No bid discounts and alternative offers; and the presence or absence
modification shall be permitted unless the corresponding of a bid security, if one was required. The
modification notice contains a valid authorization to representatives who are present shall be requested to sign the
request the modification and is read out at bid opening. record. The omission of a signature on the record
Only envelopes that are opened and read out at bid shall not invalidate the contents and effect of the record. A
opening shall be considered further. copy of the record shall be distributed to all Bidders.
(ITB 25, Procurement of Works, Small Contracts, Guide, ADB)
(ITB 25, PPMO SBD (Works, above 60 mil.) 2014 (ITB 25, PPMO SBD (Works, above 60 mil.) 2014
 Bid to be Opened Immediately on the Same Day at the Bid Evaluation
Place and Time Specified in the Bid Document (clause 22
PPA) Purpose of Bid Evaluation
Clause 59 PPR
The main purpose of bid evaluation is to determine the
Opening in the Presence of Bidders lowest evaluated substantially responsive bid among the
Separate Late, Withdrawal, Modified and Normal Bids bids submitted before the bid closing time on the date
Late Bids to be Returned Unopened specified in the bidding documents.
Firstly Open Withdrawal Envelope, Then Modified and then Normal The lowest evaluated substantially responsive bid may
Bids
or may not necessarily be the lowest priced bid.
Prepare Minutes of Bid Opening
No Decision as to the Acceptance or Rejection of Any Bid Shall be
In order to determine accurately the lowest evaluated
Taken or Announced in the Bid Opening Session. substantially responsive bid as per the terms and
conditions of the bidding documents, a logical
systematic evaluation procedure designed to cover all
aspects of the evaluation process should be followed.

Principles In Bid Evaluation c) Rejection of Bids

a) Confidentiality of Procedures All valid bids received shall be evaluated in accordance
After the public opening of bids, no information relating to the with the terms and conditions of the bidding documents
examination, clarification and evaluation of bids, and and only those bids which do not substantially meet the
recommendations concerning awards, shall be communicated to specifications or the bidding requirements may be
any person not officially concerned with these procedures until the rejected.
announcement of the award of the contract to the successful
d) Extension of Bid Validity Period
Bidder has been made.
The validity of bids may only be extended in exceptional
b) Clarifications and Alterations of Bids
circumstances.
No Bidder will be permitted to alter its bid after the bids have
been opened. Only clarifications, which do not change the If an extension of bid validity is considered necessary, all
substance or price of the bid, may be requested or accepted by the those who submitted bids shall be asked to extend the
Executing Agency. Any response to an inquiry of the Executing validity of their bids.
Agency which leads to a change in the bid price shall be The bid securities of Bidders who do not extend the
considered as an alteration and shall not be considered in the bid
validity of their bids shall be returned to them promptly.
evaluation. The records of all clarifications sought and received
must be kept by the Executing Agency.
 e) Rejection of All Bids
The rejection of all bids is justified when the bids submitted are Bid Evaluation Committee
not substantially responsive or where none of the bids received
meets the specifications or where there is evidence of lack of
competition. PPA Clause 71
The rejection of all bids and call for new bids solely for reason Public Entity to constitute an Evaluation Committee
of high price is not justified and is generally not accepted by for examination and evaluation of Pre-qualifications,
Donor Agencies. Tenders, Consulting Service Expression of Interest
Where all bid prices have substantially exceeded the cost and Proposals and Sealed Quotations
estimate, the Executing Agency may, instead of calling for new
bids, negotiate with the lowest evaluated Bidder for a reduction
of the bid price only. But No provision of Negotiation in
PPA/PPR in Work Contract
If no satisfactory contract can be concluded, rebidding should be
initiated with appropriate modification of the scope of the
contract.

Bid Evaluation Committee

Bid Evaluation Committee Head of the Procurement Section shall act as Secretary to the Bid
Evaluation Committee
The committee may co-opt experts from within or outside the
PPR Clause 147
government in appropriate cases, with the approval of the head of the
Evaluation Committee members entity
Public Entity Chief or Senior Officer nominated Chairperson
Bid Evaluation Committee may appoint technical evaluation sub
by the chief (Technical person, if possible) committees or advisers or outside consultants to assist the Bid
Evaluation Committee in properly evaluating bids and making
Head of Financial Administration Section of the Member
Public Entity
recommendations for award
The Secretary of the Bid Evaluation Committee shall take minutes of
Technical Expert related to the subject (Officer Member meetings of the Bid Evaluation Committee and maintain a file of all
level, if possible) matters considered by the Bid Evaluation Committee
Bid Evaluation Committee will formulate the procedure itself
Legal Officer, if PE has one Member Bid Evaluation Committee will submit the Evaluation Report to the
Public Entity Chief
 Bid Evaluation Unacceptable Deviations
Debatable Deviations
Different Payment Terms
Completion/Maintenance
Periods
Special Methods of
Construction
Questionable Subcontracting
Omission of Minor
Works/Item
Modified Liquidated Damages
Different Codes/Standards

Qualification Criteria
Substantial Responsiveness Average Annual Turnover
1.5 to 2.5 times estimated annual cash flow

Financial Capability
BIDS WITH DEVIATION
Assessed Bid Capacity = A* N * 1.5 - B,
where
May be Considered Substantially Responsive, if A = Maximum value of works executed in any one year
Deviations can be Assigned Monetary Value to be Added B = Value at current price level of the existing commitments and ongoing works to be
completed by the Applicant during the next N years; and
as Penalty for Evaluation Purposes N = Number of years prescribed for completion of the works for which the bids are
invited.
AND IF Liquid Asset/Credit Facilities

Such Deviations are Otherwise Acceptable Specific Experience

At Least 2 Works of Similar Nature and Complexity
Equipment Requirement

Key personnel requirement

 Bid Evaluation
Evaluation (clause 23 of the Act and 60 of the Regulation):
Only for Substantially Responsive Bid Whether the Bidder:
Currency Conversion
Is Under Any Sanction Pursuant to Section 63.2 and
As of Pre-informed Date 62.3 of PPA
Unbalanced Bids
Has Submitted Bid that has been Provided by the
Higher Unit Prices for Earlier Works - Front Loading
Higher Unit Rates for Underestimated Work Procuring Entity
clause 23 of the Act and 60 of the Regulation): Has Submitted the Bid Purchased by the Firm Itself
Whether the Bidder:
Appears in More Than One Bid Either Individually or as a
Partner in a Joint Venture
Has Submitted Power of Attorney Authorizing the Signatory to
Sign the Bid if One was Required
Has Provided Joint Venture Agreement
Has Provided Qualification Documents
Has Provided Rate Analysis
Has Provided Other Requirements

Bids for Which No Action Will be Taken (clause 24 of the Act): Bid Evaluation
Unsealed Bids
Bids Not Submitted Within Time Conversion to Single Currency
Bids Withdrawn Comparison Excluding VAT
Ineligible, Bids without Signature of Authorized Representative, Evaluation to be Based on Criteria and Basis
Bid Security not as Specified, Substantially Not Responsive Specified in the Bidding Documents
(clause 23.2 of PPA)
Minor Deviation Accepted. Monetary Value for
Collusion in Bid Submission (clause 26.6 of PPA)
These Deviation to be Considered
If the Qualification of Pre-qualified Bidder is Substantially Less
than at the Time of Pre-qualification (clause 23.7 of PPA) In Case of Difference, as Specified in Original to
Prevail
Technical, Commercial and Financial Aspect to be
Evaluated
Bid Evaluation Bid Evaluation

Technical Aspect Commercial Aspect

Scope of Supply of Goods or Works Delivery/Completion Period; Payment
Major Technical Specifications for All Key Terms; Liquidated Damages; Bonus
Items Being Procured Guarantee Obligations; Liability of Bidder
Duration of warranty period Any new condition inserted by the bidder
If Any Difference in Bid Requirement and If Any Difference in Bid Requirement and
Proposed Bid Proposed Bid

Bid Evaluation Bid Evaluation

Inland Transport Cost; Technical Features Consistency of Work Plans and Schedules with the
No Cost Benefit Shall be Afforded for Exceeding Requirements in the Bidding Documents
the Minimum, Whenever Only a Minimum Rating Reasonableness and Reliability of Unit Rates
or Capacity or Output etc., is Specified in the Quoted for BOQ Items
Bidding Documents Identification of Unbalanced Bids (High Rates for
Domestic Preference Earlier Work and Underestimated Items)
Suppliers' Recommended Spare Parts Should Not In Such Case Request Clarification, If Satisfactory
be Considered in Bid Evaluation Award With Additional Security
 Bid Evaluation??? Important Points
No Preference for Any Bidder or Class of Bidders, Either for
Price or for the Other Terms and Conditions.
All bids received should be opened and read out at the time of
Approved? bid opening which should be immediately after the deadline
Annual Turnover (Best 3 Years) out of 10 for submission of bids. No bid should be rejected at bid
opening except for late bids, which shall be returned unopened
Year, For NCB only? to the Bidder. Minutes of bid opening must be prepared.
Liquid Asset/Line of Credit Conditional? The Secretary of the Bid Evaluation Committee shall take
Turnover of Domestic Bidders to be Inflated minutes of meetings of the Bid Evaluation Committee and
maintain a file of all matters considered by the Bid Evaluation
by NRB Index (Amount Excluding VAT) Committee
Bid Evaluation Committee will formulate the procedure itself
Bid Evaluation Committee will submit the Evaluation Report
to the Public Entity Chief

Contract Award Methods of Procurement

Award Contract Within Bid Validity Period to Selection of Procurement Method (Clause 8 of the Act
the Substantially Responsive Lowest Evaluated and clause 20, 22 of the Regulation)
Bidder a. International Competitive Bidding
Letter of Intent to Successful Bidder, cl. 27.2 PPA b. National Competitive Bidding
Time for Complaint (7 days), cl 27.3, 47 PPA
Letter of Acceptance
c. Sealed Quotation
Performance Security in Standard Format (Counter d. Direct Procurement
Guaranteed, if from Foreign Bank) (Amount to be e.
Increased if Unbalanced Bid)
Contract Agreement f. Force Account
Notification to Unsuccessful Bidder
 Types of Contract Unit Rate Contract
(Clause 22, Appendix 4 of the Regulation)
Also Called as or Bill-of
Unit Rate Contract
Quantities Contract. Bid is Based on Estimated Quantities
Lump-sum Contract
Adopted When the Quantities are Difficult to be Estimated
Cost Reimbursable Contract
Precisely or They are Expected to Vary
Time and Material Rate Contract
Payment Based on Units of Work Actually Executed/Done
Design and Build Contract
and Measured in the Field
Management Contract
Performance Based Maintenance Management Contract
Piecework Contract

Lump Sum Contract Cost Reimbursement Contract

Contractor SHALL be Responsible for ALL Risks And SHALL Provide for Payment of Costs Actually Incurred
Performance as per Specification With the Specified Lump by the Contractor PLUS a Percentage to Cover Overheads
Sum Amount and Profits
Used in Situations of High Risk and Unpredictable
Changes, IF ORDERED, Are to be Paid Separately Conditions When Contractors May Refuse to Accept
Adopted When Quantities are Fairly Known (Eg. Conventional Contracts
Superstructure of a Bridge) OR Difficult to Measure (Eg. SHALL Establish an Estimate of Total Cost for the
Offshore Underwater Pipeline) Purpose of Committing Funds and Establishing a Ceiling
that Contractor May Not Exceed (Except at its Own Risk)
Without Prior Approval of the Department Chief
 Design and Build Contract
Time and Material Rate Contract May be Used When the Same Contractor to Design and
These Contracts SHALL Stipulate: Hourly/Daily/Monthly Build
Labour Rates Including Overheads and Profit, Procuring Entity to Use Services of Professionals for
checking the Design Before Approving
May be Utilized for Maintenance and Repair Services, and Management Contract
Other Situations Where it is Difficult to Predict the
May be Used in Project Where There are Diverse
Requirement of Labour and Material
Activities
Contractor Takes the Legal and Contractual Responsibility
about Quality and Timely Completion.
Payment Made to the Contractor Signing the Agreement
With the Procuring Entity

Performance Based Maintenance PPMO- Roles and Responsibilities

Management Contract Office Establishment:
Used in Repair and Maintenance Projects Established as per the provision made in the new Public
Payment Based on Performance Rather Than Item-wise Procurement law of Nepal.
Quantity The Public Procurement Act, 2063 (B.S.) and Public
Penalty Provision if Performance Indicators NOT Met Procurement Regulation, 2064 (B.S.) have been enforced
on 2063/09/30 (B.S.) and 2064/5/03 (B.S.) respectively.
Piecework Contract
PPMO was established as the government agency on
Used for Small Repair and Maintenance Works
2064/5/3 (B.S.) and is placed directly under the prime
On As and When Required Basis minister.
Contract Period Generally Not to be More Than One Year This organization has 51 staffs including the secretary as
head of this institution.
 PPMO- Roles and Responsibilities PPMO- Roles and Responsibilities
Mission:
Vision:
1. To be the guiding body responsible for procurement
To ensure good governance in procurement system policy formulation and the implementation and
of the Public Entity that is transparent efficient and monitoring of effective public procurement system
free of corruption using information and
2. Establish and maintain transparency, accountability,
communications technology also as a tool for
effectiveness, efficiency and economy along-with non-
implementation through proper coordination within
discrimination and equality in public procurement
all Public Entitys improved relations between the
proceedings of Nepal.
Government and its suppliers contractors consultants
and service providers and build an atmosphere of 3. Achieve maximum benefits from the public
trust and confidence between the Government and expenditure through economy and rational judgment.
the general public.

8. Coordination in public procurement at all levels including

1. Prepare public procurement policy and recommend measures of conduction of debarment proceedings,
implementation to the government for improvement and proper 9. Develop human resource and professionalism development plan
functioning of the public procurement system. for public procurement, including by arranging training programs
2. Monitor the public procurement law implementation through visit for public officials and bidders concerning public procurement, and
and documentation procedure. qualification and certification, and career development schemes for
3. Develop the indicators for the continuous monitoring of the public public officials involved in procurement,
procurement proceedings. 10.Solicit the views of the business community as well as stake
4.Advise on public procurement matters for public procurement holders thoughts on the effectiveness of the procurement system on
proceedings a regular basis through consultative bodies;
5.Establish and maintain websites dedicated to public procurement 11. Planning and coordinate foreign technical assistance in the field
management of public procurement,
6.Develop and Issue the SBDs for Civil Works, Goods and
12. Function as a secretariat of the Procurement Review Committee
Consultancy.
(PRC), and
7.Issue manuals, directives, instructions and technical notes for
facilitating the procurement proceeding 13.Present an annual report to GoN reporting on the overall
functioning of public procurement system.
Nepal Procurement Act, 2063 and
Nepal Procurement Regulation 2064 Pokhara University
Nepal Engineering College
Centre for the Post Graduate Studies

7. Procurement of Works, Service and Equipment

7. Procurement of Works, Service and Equipment

Introduction
Introduction
Considerations that guide procurement policies
Prequalification (PQ)-
St. PQ Document,
PQ notice
Post Qualification
Purpose of SBD
SBD for Works
Format for SBD
Single stage single envelop bidding
Two Stage bidding
Receiving the bids and Bid evaluation
Bid Examination and deviations
Bid Evaluation report
Selection of Lowest evaluated bidder
Award of contract
Procurement- Definition Procurement Vs Acquisition
The term refers to the process of While the terms are used interchangeably by many in industry,
acquiring goods, works and services. The process anyone ever talked with government professionals knows
that the terms are not synonymous to them.
spans the whole cycle from identification of needs
is used in a narrow sense to define the technical
through to the end of a services contract or the useful
process of actually getting a needed service or product, while
life of an asset. (UNDP Fin. Reg. 21.01(a) , March has a much broader, strategic meaning.
2005). Acquisition is a much wider concept than procurement, covering
means acquisition of any goods, the whole life cycle of acquired systems.
consultancy services or other services or carrying out The Defence Acquisition University (DAU) defines acquisition as
or causing to be carried out any construction works, the conceptualization, initiation, design, development, test,
by a public entity pursuant to this Act (PPA, 2007) contracting, production, deployment, Logistics Support,
modification, and disposal of weapons and other systems,
supplies, or services (including construction) to satisfy DoD
needs, intended for use in or in support of military missions.

Steps in Procurement Procedures Procurement Policy

Procurement Plan A procurement policy is simply the rules and regulations
Procurement Strategy that are set in place to govern the process of acquiring
Pre and Post qualification goods and services needed by an organization to function
Preparation of Bid documents efficiently.
Invitation for Bid (IFB) The exact process will seek to minimize expenses
associated with the purchase of those goods and services by
Bidding Period
using such strategies as volume purchasing, the
Submission/ Opening of Bids establishment of a set roster of vendors, and establishing
Bid Evaluation reorder protocols that help to keep inventories low without
Contract Award jeopardizing the function of the operation.
Advance Payment Both small and large companies as well as non-profit
Contract Implementation organizations routinely make use of some sort of
Contract Completion procurement policy.
Procurement Strategy Procurement Strategy

The choice of strategy is a major decision which has Procurement strategy covers the following areas:
far-reaching consequences and, once it has been
options.
settled, it is essential that it be followed throughout
Selection of the procurement method and elaboration of the
the implementation of the project. procedures to be adopted.
Lack of adherence to the strategy may lead to flaws in Selection of the SBDs to be used.
the procurement process resulting in delays, disputes Development of qualification and award criteria.
and extra costs to all. Hiring of consultants to assist in preparation of SBDs and bid
evaluation.
Development of the time schedule for the procurement process
recognising the number and location of contracts and the provisions
in the FAR and donor procurement guidelines where applicable.
Preparation of a budget for the procurement process

Procurement Planning Procurement Planning

Assess the need and separate:

For every project / public investment program, as of
Consulting services
following a master plan shall be prepared.
Works
Multiyear project or
Goods
Decide for each contract package: ANNUAL INVESTMENT>100 MILLION
(NRs.)
What should be the size grouping similar
items,large,small, values, slice and package Master plan shall be implemented after it is approved
How to invite bids open, restricted, sealed from the secretary of gon.
quotations, direct, user-driven, Each procuring entity shall prepare an annual
When each step should be taken for each package procurement plan in line with master plan and shall
Who should prepare who should review get the approval from appropriate authority.
Master Procurement Plan Annual Procurement Plan

Annual Procurement Plan for Procurement > NRs. 1

million.
Annual Procurement Plan Shall Include:
Types and quantities of works to be procured
Indication of possible packages of procurement
Timing of the procurement
Method of Procurement
Type of Contract
Such other information as may be required in
accordance with instructions by PPMO

Considerations that guide procurement Considerations that guide procurement

policies policies
Principal criteria followed in public procurement procedures is
transparency, economy and efficiency, opportunity to all eligible Obtain the maximum returns of public expenditures in an
bidders, and encouraging development of domestic contracting economical and rational manner by promoting competition,
and manufacturing industries.
fairness, honesty, accountability and reliability in public
procurement processes

Need for economy and efficiency

(1) In making procurement, a Public Entity shall have to
make such procurement by complying with the procedures
Give all eligible (qualified) bidders opportunity to compete
set out in this Act.
Encourage development of local industries in borrowing country
(2) Any procurement made in such a manner as to be
Procurement process to be transparent
contrary to Sub-section (1) shall be void and invalid.
Pre Qualification and Post Qualification Pre Qualification
Bidders are selected either by Pre- qualification Process or by
Post qualification Process. The successful execution of contracts for large buildings, civil
Where Bidders are not pre-qualified, minimum post qualification engineering, supply and installation, turnkey, and design and
criteria to be clearly specified in the bidding document and build projects requires that contracts are awarded only to
enforced. firms, or combinations of firms, that are suitably experienced
Choice of selection depends on the nature and complexity of in the type of work and construction technology involved, that
procurement are financially and managerially sound, and that can provide
all the equipment required in a timely manner.
PPA 2007, Clause 11:
The assessment by an implementing agency of the suitability
Open Competition May be Carried Out in One or Two Stages
of firms to carry out a particular contract prior to being invited
Open Competition With Pre-qualification to submit a bid is a process called prequalification.
Open Competition Without Pre-qualification

Pre Qualification Prequalification (PQ)- Provision in PPA

Two forms of qualification prequalification and post- 12. Prequalification to be Determined:
qualification are used to ensure that bidders have adequate (1) In order to procure such construction work as determined by the
capability and resources to perform the particular contract Public Procurement Monitoring Office from time to time to be large
satisfactorily, taking into account their- and complex, or to procure goods of high value such as industrial
(1) experience record on works of a similar nature and plants or with a view to identify qualified bidders, the Public Entity
complexity, shall, prior to making invitation to bids, prepare prequalification
(2) financial capability, documents and publicly invite to proposals for the determination of
(3) personnel capability, prequalification.
(4) equipment capability and (2) Where the Public Entity considers appropriate, it may also
(5) litigation history. determine prequalification for other procurement as well.
Prequalification is carried out in advance of bidding to establish a (3) The prequalification documents under Sub-section (1) or (2) shall
list of capable firms to be invited to tender while ensuring that a set forth the qualification criteria required for prequalification and the
proper level of competition is safeguarded. method for the preparation of proposal and the manner for the
submission of proposal.
Prequalification (PQ)- Provision in PPA Prequalification (PQ)- Provision in PPR
12. Prequalification to be Determined:
32. Matters to be Stated in the Pre-qualification Documents:
(4) The Public Entity shall provide as prescribed the prequalification
documents required to submit proposal as referred to in Sub-section (1) or If a Public Entity is to invite a bid by prescribing pre-
(2) to all persons, firms, companies and organizations that request for qualification, it shall have to prepare pre-qualification
such document. documents before inviting bids. Such pre-qualification
(5) The selection of the qualified applicant shall be made on the basis of documents shall contain the following matters:-
the qualification criteria set forth in Sub-section (3). The Public Entity
shall openly publish a list of the applicants so selected and send the same a) Qualification required for the proposed work and in the
to all applicants. case of a joint venture, the qualification of the partners,
(6) If any applicant whose prequalification proposal is rejected, requests (b) Documents and information to be submitted by bidders
for the information of the reasons for the rejection of his or her proposal, to prove their qualifications and eligibility,
within thirty days of the notice being given pursuant to Sub-section (5),
the concerned Public Entity shall have to provide such information to him (c) If procurement requires to be made by making separate
or her. lots or package of goods or construction work such lots or
(7) Other provisions relating to the terms and conditions of packages,
prequalification and determination thereof shall be as prescribed.

Prequalification (PQ)- Provision in PPR Prequalification (PQ)- Provision in PPR

32. Matters to be Stated in the Pre-qualification Documents: 33. Pre-qualification Criteria Required to be
Approved:
(d) Method of preparing proposal, from the Departmental head
(e) Procedure of evaluating pre-qualification proposal, 34. Pre-qualification Documents to be Made Available:
(f) Major terms and conditions of procurement contract, (1) to the interested individual, firm organization or a
(g) Such matters prescribed from time to time by the company
Public Procurement Monitoring Office as required to be (2) shall bear the signature of the chief of the Public
included in the pre-qualification documents, and Entity or an employee designated by him/her and the seal
(h) Method, place, deadline for submitting pre- mark of the office.
qualification proposals. made available by the concerned Public Entity or from
two or more other entities specified by it.
 Prequalification (PQ)- Provision in PPR Prequalification Notice
Specific Procurement Notice/ Invitation for Prequalification
(PWD)
Employer: [Brief Description of Works]: [Loan/Credit/Grant No.]: [Name
(1) The evaluation committee shall make necessary examination. In of the Donor Agency, if applicable]:
so examining, an applicant who has fulfilled all the criteria of
This invitation for prequalification follows the general procurement notice
qualification shall be deemed to have been selected and the one who for this project that appeared in Development Business No. [number] of
has not fulfilled all the criteria of qualification shall be deemed not to [date].
have been selected. Government of Nepal [has received/has applied for/intends to apply for] a
(2) An applicant selected for pre-qualification from the examination [loan/credit/grant] from the [name of Donor Agency] towards the cost of the
under Sub-rule (1) shall be deemed to be qualified to submit a bid for [name of project], and it intends to apply part of the proceeds of this
procurement proceedings. [loan/credit/grant] to payments under the contract for [insert name/no. of
contract if prequalification is being invited for more than one contract,
describe each contract and indicate whether applications may be made for
(1) The evaluation committee shall prepare a report together with the prequalification for one or more of the contracts].1 The [name of the
detailed analysis of the examination carried out by it pursuant to Rule Employer] intends to prequalify contractors and/or firms for [description of
35 and submit to the Public Entity within fifteen days from the date on works or goods to be procured].2 It is expected that invitations to bid will be
which it had started evaluation work. made in [insert month and year].3

Prequalification Notice Pre Qualification and Post Qualification

Prequalification will be conducted following the criteria contained in the
prequalification documents and is open to all bidders from eligible source countries
of [name of Donor Agency].4
Interested eligible bidders may obtain further information from and inspect the 1. Used where cost of Bid Disadvantages of Pre
prequalification documents at the [name of agency] (address below) [state address Preparation is very high Qualification
at end of document] from [office hours].5 A complete set of prequalification - Large or Complex Works 1. May increase Procurement
documents in English may be purchased by interested bidders on the submission of a - Custom Designed Lead Time
written application to the address below and upon payment of a nonrefundable fee6 Equipments 2. Applicants could be limited in
of [insert amount in Nepalese Rupees] or [amount in specified convertible - Industrial Plants number
currency]. The method of payment will be [method of payment].7 The document - High Value Contracts 3. Occurrence of collusion or
will be sent by [delivery procedure].8 - Specialized Services rigging
Applications for prequalification should be submitted in sealed envelopes, delivered 2. Saves expense for
unqualified Bidders
to the address below9 by [date],10
3. Improves interest in Choice of Post Qualification
for [name of project and the contract name(s) and number(s)] Potential qualified
Contractors 1. Where Pre Qualification are
[Name of office], [Name of officer] not held Post Qualification is
[Postal address and/or street address] 4. Reduces potential for done
controversy
[Telephone number, indicate country and city code], [Facsimile or email address] 2. Saves time
Post Qualification Why Standard Bidding Documents (SBD) ?
Post-qualification is used where no prequalification has been Promotes harmonization and standardization of procurement practices
carried out and bids are invited at large from one or more classes
Facilitates a uniform understanding among practitioners and end-users
of contractor, and is carried out after bids are received as part of of the their rights and obligations
the bid evaluation process.
Promotes increased capacity by promulgating best practices and
Post-qualification has the advantage of reducing the total facilitating predictability in procurement proceedings
procurement time by cutting out the prequalification steps. Enhances and promotes transparency
Standard Bidding Documents (SBD) Clarity of tender requirements-provides information that enables
Standard Bid means the documents prepared in a procuring entities to achieve value for money in a procurement process
level of quality determined by a competent authority, and Helps to avoid/minimizes cost overruns/variation orders
distributed to the public authorities for the purpose of Avoids/minimizes disputes in Contract Administration -delayed projects
customization and providing them to bids as a basis for
Flexibility -Allows PE to customize the bid documents and state all
preparation of their tenders. conditions of the tender
Helps to minimize risk in public procurement
Ensures award to lowest evaluated bidder

Standard Bidding Documents (SBD) Standard Bidding Documents (SBD)

SBD for Works/ Format for SBD

Types Invitation for Bids

Work Part - I Bidding Procedures
Section - I Instructions to Bidders ...
Goods
Section - II Bid Data Sheet
Service Section - III Evaluation and Qualification Criteria
SBDs currently in use in Nepal Section IV Bidding Forms
FIDIC harmonized Form of Contract Part - II Requirements
Section - V Works Requirements
PPMO SBDs
Section - VI Bill of Quantities
Part - III Conditions of Contract and Contract Forms
Section - VII General Conditions of Contract
Section - VIII Special Conditions of Contract
Section - IX Contract Forms
 SBD for Works- Format SBD for Works- Format
Section - I Instructions to Bidders Section - I Instructions to Bidders
A. General C. Preparation of Bids
1. Scope of Bid 9. Cost of Bidding
2. Source of Funds 10. Language of Bid
3. Fraud and Corruption 11. Documents Comprising the Bid
12. Letter of Bid and Schedules
4. Eligible Bidders
13. Alternative Bids
5. Eligible Materials, Equipment and Services
14. Bid Prices and Discounts
B. Contents of Bidding Document
15. Currency of Bid and Payment
6. Section of Bidding Document 16. Documents Comprising the Technical Proposal
7. Clarification of Bidding Document, Site Visit, Pre-Bid 17. Documents Establishing the Qualifications of the Bidder
Meeting 18. Period of Validity of Bids
8. Amendment of Bidding Document 19. Bid Security
20. Format and Signing of Bid

SBD for Works- Format SBD for Works- Format

Section - I Instructions to Bidders Section - I Instructions to Bidders
D. Submission and Opening of Bids 31. Correction of Arithmetical Errors
21. Sealing and Marking of Bids 32. Evaluation of Bids
22. Deadline for Submission of Bids 33. Comparison of Bids
23. Late Bids 34. Qualification of the Bidder
24. Withdrawal, and Modification of Bids
25. Bid Opening or All Bids...
E. Evaluation and Comparison of Bids F. Award of Contract
26. Confidentiality 36. Award Criteria
27. Clarification of Bids 37. Letter of Intent to Award the Contract/ Notification of
28. Deviations, Reservations, and Omissions Award
29. Determination of Responsiveness 38. Performance Security
30. Nonconformities, Errors, and Omissions 39. Signing of Contract
40. Complain and Review
 SBD for Works- Format SBD for Works- Format
Section - II Bid Data Sheet Section - III Evaluation and Qualification Criteria
A. General 1. Evaluation
1.1 Adequacy of Technical Proposal
B. Bidding Document 1.2 Multiple Contracts
C. Preparation of Bids 1.3 Completion Time
1.4 Alternative Technical Solutions
D. Submission and Opening of Bids
1.5 Quantifiable Nonconformities, Errors and Omissions
E. Evaluation and Comparison of Bids 2. Qualification
2.1 Eligibility
2.2 Pending Litigation
2.3 Financial Situation
2.4 Experience
2.5 Personnel
2.6 Equipment

SBD for Works- Format SBD for Works- Format

Section - IV Bidding Forms Section - IV Bidding Forms
Letter of Bid Form ELI - 1: Bidder's Information Sheet
Table of Price Adjustment Data as per GCC 45.1 Form ELI - 2: JV Information Sheet
Table of Price Adjustment Data as per GCC 45.7 Form LIT - 1: Pending Litigation
Bid Security Form FIN - 1: Financial Situation
Technical Proposal Format Form FIN - 2: Average Annual Construction Turnover
Personnel Form FIN - 3: Financial Resources
Form PER-1: Proposed Personnel Form FIN- 4: Current Contract Commitments / Works in
Form PER-2: Resume of Proposed Personnel Progress
Equipment Form EXP - 1: General Construction Experience
Form EXP - 2(a): Specific Construction Experience
Bidder's Qualification Form EXP - 2(b): Specific Construction Experience in Key
 Chapter- 2+7

Concept of Procurement

Procurement Difference Between Procurement

Procurement is concerned with acquiring all of the and Purchasing
goods, services and works with the processes
Purchasing is a process within overarching or
involved such as selecting of vendors , establishing
umbrella procurement process.
payment terms , strategic vetting , negotiation of
contracts and actual purchasing of products. Procurement deals with sourcing activities ,
negotiation and strategic selection of goods and
Purchasing: is a sub-set of procurement. It
services that are usually important to organization.
generally simply to buying goods or services. It
Purchasing is the process of how goods and
includes receiving and payment as well.
services are ordered.
A transactional function of procurement.
2 3
 What is Public Procurement? Private Procurement:
Public Procurement: is defined as the
acquisition of goods, services works and non-
This is procurement that is
consulting services with use of public funds; to completed within the context of
support government operations intended for for-
public use.
Goal: To award timely and cost effective
Private procurement happens
contracts to qualified contractors , suppliers and within privately owned companies;
service providers for the provision of goods and also known as the private sector
services to support government and public
service operations in accordance with the
principles and procedures established the rules.4 5

Public Vs Private Procurement Actors, Stakeholders and

Definition Beneficiaries
Public Procurement:
Actors: Public Entiries/Procurement
This is procurement that is completed within the context of
not-for- Practitioners
sector, the procurement that occurs in this context is typically Stakeholders: Those who get benefit from
government affiliated, which can be central, state, or local. the result of public procurement. Also those
Private Procurement: who might be directly or indirectly affected
This is procurement that is completed within the context of by a particular procurement action.
for- Beneficiaries: All inhabitants of the country
within privately owned companies; also known as the private
sector
6 7
 Economy: synonymous with efficiency, value for money
Principles of Public Procurement and commercially reasonable price.
Transparency: Information on the public Openness: Access to information pertaining to public
procurement process made available to all procurement requirements to all qualified organizations
public procurement stakeholders, bidders, and individuals.
suppliers, service providers and the public at Fairness: Impartial and reasonable, should have right to
large. challenge the procurement process.
Integrity: is reliability: of two fold. One on the Competition: Public procurement requirements should be
integrity of the procurement process and other widely disseminated to increase the chances of good
your integrity as a procurement practitioner. market response leading to the award of reasonably
priced contracts.
Accountability: person responsible for their actions and
decisions with respect to public procurement process.
8 9

There are 4 main principles:

1. Economy: Value for money - Procurement Management
concern
The Procurement management is the process of
2. Efficiency: quick procurement -
Planning,
3. Fairness: No discrimination
Organizing,
4.
Sourcing,
All of these 4 parameters should be met 100%, but in practice it
is not possible. Attempt should be to be in the nearest of
Mobilizing ,
Controlling ,
Contracting and
Procurement should not be done for the Closing the Contract
pleasure of the procurement. for acquiring the Works, Goods , Consulting Services and
Non-Consulting Services
10 11
 Procurement Categories
Works: Infrastructure related works
including renovation, extension, repairs.
Goods: Physical products either finished or
manufactured.
Consulting Services: Technical services
whose output is not equipment intensive.
Advisory and project related services
Non-Consulting Services: involve the use of
equipment and standard methodology for
achieving the objective: equipment maint. 12 13

Procurement Cycle Things to do quickly become Efficient

Public Procurement Practitioner
Identification of
Preparation of
Works/Goods/S
ervices
Procurement Plan
Study the Public Procurement Rules : Legal
Completion or
Termination of
Contract Pre-qualification/
Frame work
Short listing

Contract
Understand the Public procurement system
Implementation
Start Issuing Bid/RfP
Documents
Develop and use checklist
Award of Contract
Get organized
Pre-Bid Meeting
Contract
Negotiations
Find a Mentor
Bid/RfP Evaluation or
Post Qualification Bid/RfP Submission
Strive to continually improve.
and Opening
14 15
 Causes of Delays in Procurement Conflict of Interest in Public
Process Procurement
Delays in Preparing Technical Specification, Occurs when the public procurement practioner is in
Scope of works, ToR position to be influenced or appear to be
influenced by a private or personal interest ; to
Extension of bid or proposal submission date
gain personal advantage or disadvantage. A code
Delay in opening bids or proposal received of conduct for procurement practioner sets out
Delay in evaluation values and clear guidance on expected behaviors.
Delay in approval Clear and known rules of behaviors applicable to all
Delay in contract negotiation will foster mutual respect and increase public
Challenges by the contractor/supplier/ confidence in practioner .
consultants in procurement process.
16 17

Plan Plan Vs Planning

A plan is typically any diagram or list of steps with
Plans are of little importance, but
details of timing and resources, used to achieve
an objective to do something. planning is essential -Winston Churchill
Planning Plans are nothing; planning is
The term planning implies the working out of sub- everything. Dwight D. Eisenhower
components in some degree of elaborate detail. Broader- A good plan, violently executed now, is
brush enunciations of objectives may qualify as better than a perfect plan next week.
metaphorical roadmaps. Planning literally just means the
creation of a plan; it can be as simple as making a list. It
George S. Patton
has acquired a technical meaning, however, to cover the
area of government legislation and regulations elated to
the use of resources. 18 19
 Plan, Programme and Project Procurement Plan
A Plan is typically any diagram or list of steps with timing and
resources, used to achieve an objective to do something. It is commonly The product of procurement planning process
understood as a temporal set of intended actions through which one
expects to achieve a goal. For spatial or planar topologic or topographic Required to :
sets see map. list all requirement expected to be procured over a period of time.
Example: Five year Plan, Interim Plan, Sector Plan, Regional Plan Area schedule the procurement
Plan identify the resources
A Program normally comprises a series of projects. monitor the procurement process
Projects: National Level and Local Level Enhance the transparency and predictability of the procurement
Project Features:Objective-Output-Activities-Inputs process
Objective- Output-Activities-Input
Causal Relationship of features: In a project inputs enable activities to
be undertaken which will produce outputs which taken together will lead
to the achievement of the objectives. 21

The process of what to procure/buy . Basically deals

Procurement Strategy Development
Important Because:
Deals with:
Allows planners to determine if expectations are realistic
Opportunity for all stakeholders involved in the processes to meet in
What to buy?
order to discuss the particular procurement requirements Why to buy?
Permits to create procurement strategy for procuring each How to buy ?
requirement to be included in the Procurement plan.
What purpose does it serve?
Estimates the time required to complete the procurement process.
Assess the technical expertise to develop technical specifications / or
How much does it cost ?
scope of the work Where can it be the sources?
Assess the feasibility of combining or dividing procurement How many sources are available?
requirements into different packages.
What is the risk?
22
What is the requirements into different packages. 23
 Preparation of Procurement Plan Elements of A Procurement Plan
A reference number / Contract ID
1) Annual Procurement Plan: Every Year
Brief description of requirement
2) Multi-Year Procurement Plan/Master
Estimated value of the requirement
Procurement Plan
Procurement Method
To be revised at every 3-6 months Date of estimate approval

Note: PP is live Document. Date of IFB/ EoI

Date of Bid Submission
Date of Bid /RfP Opening
PP is Monitoring Tool Date of Bid / RfP Evaluation
Date of Contract Award 25

Standard Format of PP of Works and Goods Standard Format of PP for

Services
 Method of PP Preparation Market Study In Public Procurement
Also Known as :Market analysis, market assessment, market
Procurement Entity-W/G/S/Procurement sounding, market research
Method-S.No.-Nature of Works-F.y. Useful when
Defining requirements
Description of Services:Rajmarg-Budha-Jhajpur-
Gauji-Bridhasharam Rd. ( 6.50 Km) Upgrading Preparing budgets
with Graveling, Structures etc. Choosing procurement methods
SNRTP-KAN-W-NCB-1.1-UG-071-72 Planning and scheduling the procurement of requirements
SNRTP-PMU1-G-DP-2-071-72 justifying amendments in bid /contract documents
Expected results:
Identification , interest and availability of suppliers, contractor or
service providers
29

Methods of Procurement
Implementation Arrangement For Works, Goods and Non-Consulting Services
Executing Agency Level:
Open Competitive Bidding
Concerned Ministry
Limited Competitive Bidding
Concerned Department
Central Level Coordinating Agencies Sealed Quotations
Direct Procurement
Implementing Agency: Community Participation
Project Management Unit/Office Force Account
Others : NGO,Total Cost bidding Process,
Catalog Shopping method, Buy Back Method
31
 Open Competitive Bidding (OCB) OCB with Pre-Qualification and Post Qualification
Pre-Qualification:
An open competitive bidding is the approach as it provides Used to shortlist the bidders
all eligible prospective bidders with timely and adequate Ensures that only those with appropriate and adequate
advertisement of a requirements and equal capacity , capability and resources are invited to submit the
opportunity to bid for the required Works, Goods or Non- bids.
Consulting Services. It may be Appropriate for large or complex contracts or in other
circumstances , such as the need for custom designed
equipment, plant, IT equipment, Design and build ,
NCB ICB procurement under turnkey, management contracting in
National Competitive Bidding International Competitive Bidding which high cost of preparing detailed Bids required.
(Competition among the Local Bidders) (Competition among the International Qualification of sub-contractors /subsidiaries/parent
& Local Bidders)
32 entities 33

Pre-Qualification --- contd. Post Qualification

Is optional depending upon the nature and No pre-qualification
complexity of the goods, works or non- Generally preferred
consulting services.
Qualification criteria specified in the bid
Minimum requirements are normally assessed document
on a pass /fail basis against such criteria as
eligibility, experience, technical capability and
not into consideration of the qualification of other
financial resources
firms such as its subsidiaries, parent entities,
All bidders that substantially meet the affiliates, sub-contractors ( other than specialized
minimum qualification requirements are invited sub-contractors if permitted in the request for bid
to submit a financial bid
34 35
 Limited Competitive Bidding(LCB)
Stage of Bidding A limited competitive bidding is bidding process by
Single Stage One Envelop(IS1E) : invitation without open advertisement.
Most appropriate when the specification and This is appropriate where
requirements are sufficient to enable submissions of There are only a few well known contractors/ suppliers
complete bids. e.g. for complex industrial plants or highly specialized
works or equipments.
IS1E procurement requires submission of both
Small quantities are involved e.g. procurement of
technical and financial bids in one envelop
special items such as telecommunication facilities ,
Single Stage Two Envelop (IS2E): airfield lighting etc.
One Envelop- Technical bid Other exceptional reasons e.g. emergency actions
Other Envelop- Financial Bid ( Price Bid) required in a natural disaster that justify waiver or
Evaluated Sequentially. departure of OCB
36 Generally for ICB 37

Sealed Quotation (SQ) Direct Procurement (DP)

Any works or Goods cost exceeding more than NPr Any works or Goods cost and up to NPr 500,000 can be
500,000 and up to NPr 2 million can be procured by procured by inviting a particular or limited nos. of
inviting sealed quotations from eligible bidders. bidder/vendor/supplier.
Notice of Invitation of SQ is published in a National May be appropriate when there is only one suitable
Daily or Local Daily widely circulated newspaper. firm or there is justification to use a preferred firm
Minimum 15 days are given to the potential bidders to DP is suitable under the following circumstances:
prepare and submit their The procurement is of both low value and low risk
SQ validity period 45 days from the date of submission No advantage could be obtained by competition
of SQ. The Case is exceptional as emergency
SQ security amount 2 to 3 % of Cost estimate. The required goods is proprietary and obtainable from
Security validity period 75 days only one source
Awarded to the lowest priced bidder within Cost
38 39
estimate.
 Community Participation Forced Accounts
Forced Account, which refers to works such as construction and
installation of equipment and non-consulting services carried out by a
Adopted in the Community Driven Development (CDD)Projects government department using its own personnel and equipment.
where large number of small value of works, goods and non-
consulting services with labor intensive are outlined. It may be practical method of procurement under following
circumstances:
CP is suitable under the following circumstances:
The size, nature and location of the works make it unsuitable to adopt
Large nos. of small works are scattered in the remote areas. competitive bidding, e.g. maintenance and repairs of roads and where the
To increase the utilization of local know- how, appropriate cost is difficult to estimate accurately or control.
technologies and materials/goods. The construction and installation works are small and scattered or in
To provide employment and income directly to the persons living remote areas , so that qualified contractors are unlikely to bid at
in the project area. reasonable prices.
If the projects after completion are to be operated and maintained The risks of unavoidable work interruption are better born by the
by the community. implementing agency than by a contractor .
Emergency needing prompt attention specially where private firm may
for the cost of the works up to NPR 10 million without use of heavy not be interested in conflict areas..
equipment. 40
Institutional development e.g. training of maintenance crews.
41

Others Methods of Procurement:

Procurement Through NGOs: Types of Contract
The trainings like people awareness, orientation, strengthening , main
streamlining ; which by engagement of local or national NGOs may be Unit Price Contract (Unit Rate Contract)
efficient, effective and economical ; can be accomplished through NGOs.
Lump Sum Contract
Total Cost Procurement Method:
This refers the completive bidding based on the percentage more or less Cost Reimbursable Contract
than total cost of the whole work . Time and Material Contract
Catalog Shopping Method: Design and Build Contract
This is the completive bidding based on the prices of goods ,made public
by the concerned manufacturer or authorized seller/dealer. BOOT, BOT Contract
Buy Back Method: Refers the replacement of new goods by old one
to concerned manufacturer after the old goods becomes irrational to use
and store from the perspective of environment.
42 43
 Unit Price Contract (Unit Rate Contract Lump Sum Contract
It is simply a type of contract where the client pays the contractor based
A contract under which a principal (customer or owner)
upon the rate for the particular item of work which the contractor
executed or worked. agrees to pay a contractor a specified amount for completing
Generally it is the most preferred type of contract for building
work without cost breakdown.
construction where client pays the contractor monthly or interim (in It is the traditional means of contract procuring and involves a
general) based upon the decisions made during contract agreement. single lump sum price for all the works being agreed before
To give you an example: the works begin.
Item: Concrete work (M60 grade) It is generally considered a beneficial contract agreement if the
Rate: Rs. 5100 (per Cum) work is well defined when tenders are sought and significant
Total quantity: 1000 cum (for whole project according to BOQ) changes to requirements are unlikely. This means that
At the end of one month the contractor is able to accurately price the works they are
Quantity done by Contractor: 100 Cum being asked to carry out.
So, contractor claim 100 * Rs. 5100 = RS. 510000 to client
44 45

Advantages of Lump Sum Contract Disadvantages of Lump Sum Contract

Lump sum contracts can be seen to reduce client risk as the price is fixed It can give greater risk to the contractor than some
(although in reality it is still likely to vary, but not by as much as some other contract forms, as there are fewer mechanisms available for
other forms of contracting). them to vary their price.
It is widely accepted and understood as a method of contracting. As a result of the additional risks faced by the contractor, they may
The bidding analysis and selection process is relatively straight-forward. increase their tender price.
The greater degree of certainty on the part of the client can make it Careful documentation and record keeping of change orders is
simpler and easier to secure a construction loan. required, which can be time-intensive.
Change orders are minimized.
Preparing the tender may be more expensive for the contractor.
The management required by the client is reduced.
As a result, there may be a slower tender process than for
There can under certain circumstances be a greater margin for profit for
other contract forms.
the contractor.
Lump sum payments are made in regular, predictable installments,
The employer may have to pay a higher price for any alteration or
providing the contractor with a reliable and stable cash flow and making additions that are required that are beyond the scope of the contract.
financing simpler for the client Disputes can arise relating to change orders, scope and design
46 47
changes, and so on
 Cost Reimbursable Contract Different forms of Cost Reimbursable Contract
A cost reimbursable contract, also known as a cost-plus contract, allows an
employee or contractor to protect their profits and assets with minimum Cost plus-a fixed- fee type contract: The owner pays for
hassle. The purpose of the contract is to allow a contractor to either stop the actual cost of construction and agreed lump sum amount
working after available funds have been spent, or if necessary to receive as compensation for the profit agreed to at the
additional funding to continue the project. time of entering into the contract.
Uses
Cost plus-a percentage of cost type contract The owner
A cost reimbursable contract may be used by almost any type of contractor
or contract employee and is not limited to construction work. Depending on
pays for the actual cost of construction and a certain
the job, the concerns of the employer and employee and local laws, a percentage of this cost for profit portion agreed to at the time
different type of cost reimbursable contract may be used for each individual. of entering into the contract.
Limitations Cost plus-an-incentive-fee type contract The owner pays
In most cases a cost reimbursement contract will hold legal limitations to for the actual cost of construction and for his profit , the
prevent it being abused or misappropriated by either party involved.
contractor is paid an incentive amount worked out by an pre-
Limitations often include allowable fees, meaning only fees that would
logically incur from the contract can be applied to the reimbursement. The agreed formula in such a way that it is more if the target costs
contractor generally must be able to account for the costs and must consent are met , but less if otherwise.
48 49
to monitoring during construction.

The highest risk for the owner and the most secure way for a contractor. Time and
Time and Material Contract (T & M Contract) materials contracts are the least desirable contract type for the federal
Time and materials (T&M) is a standard phrase in government.
a contract for construction, in which the employer agrees to pay
When using time and materials contracts, the following items could be negotiated:
the contractor based upon the time spent by the contractor's employees
Labor Rate: Specifying a fixed rate for all labor including administrative
and subcontractors employees to perform the work, and for materials personnel. If you are using T&M on large projects, be sure to offer discounted
used in the construction , no matter how much work is required to labor rates to reduce total project cost.
complete construction. Time and Materials is generally used in projects Material Mark-Up: T&M contracts usually add between a 15 and 35 percent onto
in which it is not possible to accurately estimate the size of the project, or material prices.
when it is expected that the project requirements would most likely Not-to-Exceed: The Time and Material not to exceed, is a contract in which the
change. contractor can bill the work being performed but there is a cap that could be used
This is opposed to a fixed-price contract in which the owner agrees to as the maximum amount being charged by the contractor. This type of
pay the contractor a lump sum for fulfillment of the contract no matter variation can be used to increase efficiency, and it assumes the
excessive costs. It also provides the owner with a cap that will guarantee that
what the contractors pay their employees, sub-contractors and suppliers. contractor will not exceed that cap.
Many time and materials contracts also carry a guaranteed maximum Maximum Labor Hours: In addition to the not-to-exceed condition, time and
price, which puts an upper limit on what the contractor may charge, but material contracts, a maximum number of labor hours could be set. When the
also allow the owner to pay a lesser amount if the job is completed more contractors exceed a specified amount, those additional hours shall not be billed
quickly. 50 to the other party. This avoids the efficiency = more issue of
51 time
and materials contracts.
Time and Material Contracts Drawbacks Design and Build Contract (DB Contract)
Profit Limits: Some savvy customers will try to establish not to ) contracting method widely used
Design-build contracts are an excellent
exceed conditions, will try to reduce mark-up on materials and around the world. As the name implies, this type of contract is used when
even negotiate reduced billable per hour rates. both design and construction take place simultaneously throughout the
length of the contract. However, many owners tend to select other
Ignored Market Prices: Sometimes companies will set lower contracting methods instead because a design-build contract can present
prices, based on their internal cost structure, than actual market some challenges and situations in which the final cost cannot be easily
rates or even vice-versa. determined or projected.
Reduced Business: Customers are not used to work on time and When Design-Build Contracts Are Used
material contract, so finding new business opportunities could be Primarily, design-build is used when an opportunity exists for the owner
challenging. Customers will likely prefer fixed price contracts. or agency to save time by having construction begin before the final
Billing: Time and materials contracts should be structured in such design has been completed. The traditional system of design-bid-build
way that the company will be able to bill sufficient amount of has been used for many years. It is based on the assumption that the
owner has the design plans in hand before bidding out the construction
money to cover fixed costs. When the billing hours are reduced,
on a project to the lowest bidder. Many projects could be more cost-
fixed costs must also be reduced at the same rate as the billable effective if they could be implemented faster, thus the evolution of
hours. design-build.
52 53

Design and Build Contract (DB Contract) Design and Build Contract (DB Contract)
Design-Build Characteristics ) Advantages
Deign-build contracts are usually written by the contractor who is in Reduces design time.
charge of the design and is also responsible for building the project. Simplifies construction drawings.
Typically the owner prepares a request for qualification where Value engineering alternatives are always up for discussion and analysis
sources are analyzed under fair competition based on certain criteria Reduces construction calendar.
and weighed factors. A design-build contract is usually the preferred Minimizes communication channels with a single point of contact.
contracting method under a tight schedule as it's intended to save Minimal change orders.
time. Fast track schedule.
Customized to actual site conditions easily.
This contracting method is also preferred by federal agencies with a
Identify long lead items earlier.
need to fast track schedules as the final project can be obtained faster,
Allows for the project to be repeated.
and the return on investment is capitalized sooner.
Disadvantages
Using a design-build contract, designers and builders work hand-in-
The project outcome might not produce the expected result.
hand to produce construction drawings and analyze a logical
A project that is not scheduled properly might be substantially delayed.
construction sequence.
Final costs can be reasonably higher than original estimates.
The design process is scheduled in phases, just as the builder is ready Eliminates the possibility of using an integrated design.
to start that particular phase. 54
The vision could appear to favor the contractor.
55
 Characteristics of PPPs
Public Private Partnership (PPP, 3P, P3) A PPP is a clearly defined project, where the procuring institution
Definition: PPPs or public private partnerships are long-term contracts carefully defines its objectives.
between the public and private sector. The main objective of PPPs all The contractual relationship spans a set length of time, which may
over the world is to ensure the delivery of well maintained, cost-effective range from 5 to 30 years.
public infrastructure or services, by leveraging private sector expertise The private party plays a key role at each stage of the project:
and transferring risk to the private sector funding, development, design, completion and implementation.
The funding structures of a PPP sometimes combine public and
Three basic tests for PPPs: There are three internationally applied private funds.
standard tests to determine whether a PPP is the appropriate vehicle for Payment arrangements in PPPs are based on outputs, related to the
procuring a public asset or service: provision of services and/or infrastructure and services.
Can substantial risk be transferred to the private sector? They allow the procuring institution to spread payments for large
Is the project affordable to the procuring institution? projects over the lifetime.
Does a PPP procurement option show value for money? Direct user charges, like road tolls or water fees, may also
contribute to a revenue.
56 Risks are allocated to the party most able to carry them. This means
57
mitigating their impact and/or being able to absorb the consequences.

Models of PPP Contract Models of PPP Contract

Design-Build (DB): The private-sector partner designs and builds Build-Own-Operate-Transfer (BOOT): The private-sector partner is
the infrastructure to meet the public-sector partner's specifications, granted authorization to finance, design, build and operate an
often for a fixed price. The private-sector partner assumes all risk. infrastructure component (and to charge user fees) for a specific period
Operation & Maintenance Contract (O & M): The private-sector of time, after which ownership is transferred back to the public-sector
partner, under contract, operates a publicly-owned asset for a partner.
Buy-Build-Operate (BBO): This publicly-owned asset is legally
specific period of time. The public partner retains ownership of the
transferred to a private-sector partner for a designated period of time.
assets.
Build-lease-operate-transfer (BLOT): The private-sector partner
Design-Build-Finance-Operate (DBFO): The private-sector
designs, finances and builds a facility on leased public land. The
partner designs, finances and constructs a new infrastructure private-sector partner operates the facility for the duration of the land
component and operates/maintains it under a long-term lease. The lease. When the lease expires, assets are transferred to the public-sector
private-sector partner transfers the infrastructure component to the partner.
public-sector partner when the lease is up. Operation License: The private-sector partner is granted a license or
Build-Own-Operate (BOO): The private-sector partner finances, other expression of legal permission to operate a public service, usually
builds, owns and operates the infrastructure component in for a specified term. (This model is often used in IT projects.)
perpetuity. The public-sector partner's constraints are stated in the Finance Only: The private-sector partner, usually a financial services
original agreement and through on-going regulatory authority.58 company, funds the infrastructure component and charges the public- 59
sector partner interest for use of the funds.
 History of Public Procurement in Nepal Suggestions of the review
Country Procurement Assessment Review Endorsement of separate public procurement law
2059: by The World Bank Enforcement of this law to all public procurement law
Weakness observed in Financial Rules: Immediate amendment in Financial rules ,2056
Insufficient Time for Bid Preparation Establishment of independent Public procurement Unit
Availability of Bids related document to Bidder not established as right of the
Bidder Establishment of Effective review Mechanism in
No mandatory to evaluate the bids based on the pre-set evaluation criteria Bidding system
Bid opening at different Places and no fixed time for it
Regular Monitoring of Bid related documents
No domestic preference in ICB
Intention to award only to the lowest priced bidder Training on Public Procurement at every level of GON
No provision of modification, amendment and withdrawal in and of the bid officials
Competition based on the classes of the bidder

60 61

Consult, Consultant and Consulting

PPA, 2063 & PPR 2064 Services
To consult is to give or get help or advice
Based on the UNCITRAL MODEL LAW ON
PROCUREMENT A consultant (from Latin: consultare "to deliberate") is a
professional who provides expert advice in a particular area
Has encompassed the provisions of WB such as security (electronic or physical), management,
procurement Guidelines and Fidic education, accountancy, law, human resources, marketing
10 Parichhed, 76 Dafa in PPA, 2063 (and public relations), finance, engineering, science or any of
many other specialized ...
15 Paricched , 153 Rules and & 7 Annexes in
The legal definition of consulting services is simply the
PPR 2064 provisioning of services by an independent contractor by
63 processes in PPR ...

62 63
 Consult, Consultant and Consulting
Services
PPA, 2063/ 2 ( e) : The Consulting Services are
meant by study, research, survey, design, drawing,
supervision, Training, auditing, development of
software or any types of intellectual or professional
services.

WB/ADB : A wide variety of private and public

entities including international and national
consulting firms, engineering firms ,-------------
65

Guiding Principles of Selection of

When could consultants be hired? Consultants
Consultants may be hired if: Ref : PPA 2063 , 29 (1)
Need for high quality Services
The services they would be providing is beyond the
capability of the Procuring Entity to undertake, Need for Economy and Efficiency
either because it does not have the expertise or it Need to give equal opportunities to all
could not devote enough time to the work due to eligible/qualified consultants to complete in
numerous other assignments; and providing the services
Or Encouraging the development and use of national
As per Financing Agreement with The Development consultants in case of International Consulting/
Partners; subject to use of foreign sources . Consultants to be procured
Need for transparency in the selection process
66 67
 Scope of Consultants
Procurement Guidelines Used
Private and Public entities
Consulting and Engineering Firms Guidelines: SELECTION AND EMPLOYMENT OF
Management Firms CONSULTANTS
Procurement Agents UNDER IBRD LOANS AND IDA CREDITS & GRANTS BY
WORLD BANK BORROWERS
Inspection Service Providers
January ,2011
Auditors
Guidelines on The Use of Consultants by Asian
UN Agencies Development Bank and Its Borrowers
Investment and Merchant Banks March, 2013
Universities and research instituitions Public Procurement Act 2063, & Public Procurement Rules
Government Agencies ,2064 ( Inclusive of Amendment 2073)
NGOs
Individuals 68 69

Basic Requirement for Selection of

Cycle Consultants
Identification of
Preparation of
Procurement Plan required to
Services Procurement Plan
Identify the types of services required
Completion or
Termination of
Contract Short listing establish the mode of procurement
Contract know the type of Consultant (
Implementation
Start Issuing EOI/RfP
Documents
Individual, firm, National,
Award of Contract International )
Pre-Proposal
Contract Conference determine the ABC
Negotiations

RFP Evaluation
RFP Submission Approved Budget for Contract
Technical /Financial
Opening 70
(ABC) 71
 Methods of Selection of Methods of Selection of
Consultants Consultants
QCBS: Quality Cost Based Selection QCBS: Quality Cost Based Selection
QBS: Quality Based Selection QBS: Quality Based Selection
FBBS: Fix Budget Based Selection FBBS: Fix Budget Based Selection
LCBS: Least Cost Based Selection LCBS: Least Cost Based Selection
CQBS: Consultant Qualification Based CQBS: Consultant Qualification Based
Selection Selection
SSS: Single Source Selction SSS: Single Source Selection
Individual Consultants Individual Consultants
72 73

Quality Cost Based Selection Quality Based Selection (QBS)

Appropriate for complex or highly specialized assignments
(QCBS) Difficult to define precise TOR and required input from
the consultants: examples: country economic or sector
A competitive process among short- studies, multi sector feasibility studies, design of
listed firms hazardous Waste remediation plant, Urban plan, financial
sector reforms competitive process among short-listed
Takes into account the quality of the firms
proposal and the cost of the services Submission of TP with or without FP ( Two envelop
System)
Cost as a factor of selection is used as RFP either provides estimated budget or time inputs of key
judiciously experts
Highest ranked Consultants will be asked to submit the FP
Weight to the quality and cost if not submitted
depends upon the nature of the Financial Negotiation include the negotiations of all
assignment 74 75
Fixed Budget Selection(FBS)
Least Cost Selection(LCS)
Appropriate for simple assignments Appropriate for assignments of routine
Budget is fixed nature such as audits, engineering design
Easy to define TOR and required input where established practices and standards
from the consultants: examples exist
Submission of TP with FP ( Two envelop Minimum qualifying mark for quality is
System) established Budget is fixed
RFP provides available budget Submission of TP with FP ( Two envelop
System) from short list
FP exceeding Budget rejected.
TP with less than qualifying marks rejected
Highest ranked Consultants will be asked to
negotiate FP with the lowest price selected and
76 77

Consultant Qualification Single Source Selection(SSS)

Selection(CQS) Prevents the benefit completion in
quality and cost
Appropriate for smaller assignments or Exceptionally used for
emergency situation Natural continuation of previous work
Highly specialized expertise is required Emergency works
Very small assignments
provides depth of expertise in specific Only one firm or individual is
area qualified.
One Firm is selected from short-list.
Asked to submit the TP and FP 78 79
 Selection Process under QCBS
Steps:
Individual Consultant Preparation Of ToR
Preparation of Cost Estimate and Short Listing Criteria
No need of Advertisement Advertising for EoI
But advantageous if advertisement is Preparation of Short List of the Consultants
done Preparation and Issuance Of RFP which includes LOI, ITC, Data
Sheet, TOR, Proposed Draft Contract Agreement Document
Comparison of Three Best CVs
Receipt of Proposals
Selected on the basis of relevant Evaluation of Technical Proposal
experience, qualification and capability Public Opening of Financial Proposal
to carry out the assignment Evaluation of Financial Proposal
Negotiation . Combined Evaluation Of TP and FP
80
Negotiation and Award of Contract to the selected firm 81

TOR Preparation Cost Estimate Format

S.N. Item Unit Quantity Rate per Amount Remarks
Basic Elements of TOR: Rules 69 Unit (NPR) (NPR)
Remuneration
Introduction of the Project A

1
Background of the Services Sub-Total
Objective of the Services : If transfer of knowledge and training Remuneration (A)
Reimbursable
are objectives ; should be specifically stated B
Expenses

Scope of the Services 1 Travel

Qualification Required 3 Trainings

Sub-Total Reimbursable
Time for completion of the services (B)
Overhead/Office
Management
C
Expenditure @ 5 % of
Total ( A+B)
Deliverables and Reporting Obligations D
Net Total

Selection Method E
Contingency @5% of
Net Total A+B)
Types of Contract F
Total (D+E))

Taxes G
VAT @13% of F
82 83
Total with VAT
H
 Cost Estimate Cost Estimate
How do you compute the cost of consultancy? a. Basic Rates
The basic rates represent the salaries actually being received by the professional staff
The cost of consultancy shall be computed on the basis from the consulting firms as certified by the consultant with
of cost to the consultant of actual services to be rendered a sworn statement to be submitted to the Procuring Entity. The basic rates of all
by the consultant plus a reasonable level of management individual members of the staff shall be clearly indicated in the contract. In determining
the basic rates, the following may be considered as bases:
fee. The amount of management fee depends on the
i. Salary history;
complexity and magnitude of the project, and other direct ii. Industry rates; and
expenses associated to the undertakings. The cost of iii. Two hundred percent (200%) of the equivalent rate in the Procuring Entity as the
consultancy shall consist of the following and shall be floor.
presented in the agreement in like manner: b. Billing Factor or Multiplier
The billing factor or multiplier shall be derived from the following to be supported by
1. Remuneration Costs audited financial statements prepared by an independent auditing/accounting firm/entity
These are the remuneration to be paid to the and certified by the consulting firm with a sworn statement:
staff/personnel who are directly engaged in the consulting services i. Overhead Cost These are incidental and general administrative and management expenses of
the firm other than those directly related to the project, and are expressed in percent of the
as per agreed manning schedule. It covers the basic rates of 84the total of the basic salaries of all the personnel of the firm. 85
staff multiplied by a billing factor of the consulting firm.

Cost Estimate 2. Reimbursable Costs Cost Estimate

ii. Social Charges These include all other expenses associated with the execution of the
services. These costs may be classified into:
staff in accordance with the policies of the consultant and of the Per Diems
government. Their totality expressed as a percentage of the basic International /Domestic Travel
Domestic Transportation
or a combination of the following, based on audited and sworn Communication Expenses
statement to be submitted by the consultant to the Procuring Entity:
Cost of office/engineering supplies and cost of
preparing/reproduction drawings and other documents to be
submitted;
Cost of field office either through rental or construction;
Equipment rental and purchases whenever justifiable;
Acquisition of software licenses; and
Cost of other items deemed necessary for the project as certified
86 bythe agency concerned. 87
 Short list Eligible Consultants Selection Process of Consultants Under QCBS
Legal Reference: Act 30 (1), (2) (3) and Rules 70 (1) & (2) in Steps 1 :Short-Listing :Notice for Expression of Interest EOI through National
relation to the requirements for the procurement of consulting Daily News Paper :Contents : PPR , 2064 /Rules 70 (3)
Name and Address of Public Entity: For correspondence and submission of EoI
services.>NPR. 2mill - 100 mill: NCB ; >NPR.100million : ICB General Description of Project/ Services
What is short listing? The process of short listing determines the Sources of Funding for intended Services
most qualified consultants from those that submitted eligibility Qualification of the firm/individual in terms of general and similar experience ,
documents to undertake the project. resources required
Why is there is a need to short list? If all eligible bidders are invited to Profile of the works of similar nature in last 7 years ( but for individual 4 years)
submit proposals, the chance of a consultant being awarded the contract Input ( PM / PD) of key personnel for the services
diminishes greatly. Considering the substantial costs incurred in Tentative service completion time
preparing a proposal, this discourages a consultant from participating in
Last date and time of submission of EoI(16th day of Ist date of Publication of EOI
the bid. A short list of, say, 6-8 nos. greatly increases the chances of a )
consultant and thus encourages it to put in more time and effort in If EOI is from the JV of firms
preparing a good proposal. In the end, government, in general, and the Description of Firm
Procuring Entity, in particular, receive better proposals to choose from. In case of JV name, address description of all the JV indicating the lead
/main partner
88 89

Selection Process of Consultants Under QCBS

Steps 2: Evaluation of EoIs with reference to Evaluation Criteria Contents of RFP
approved before receiving EOIs Letter of Invitation ( LOI)
Major Evaluation Criteria: Rules 70 (5) (12) Instruction to Consultants (ITC) : Standardized by the PPMO
Qualification
Experience Data Sheet : to be prepared by the Client to modify/ add and
Organizational/ Managerial Capacity (Turn Over): Not > 1.50 times the Cost supplement ITC
estimate of Services TOR to be prepared by the Client
Selection of the Three top ranked EoIs : Rules 70 (8)
Technical Proposal (TP)) to be submitted by the Short Listed
Issuance of Request for Proposal (RFP)
Consultants
RFP submission ( Minimum 15 days for NRs. 2 million and 30 days for >
2 million ) : Rules 71 (1) Financial Proposal ( FP) to be submitted by the Short Listed
Technical Proposal Opening and Evaluation Consultants
Financial Proposal Evaluation Contract Form
Combined Evaluation ( 80 % TP and 20 % FP)
General Conditions of Contract (GCC) : standardized by the
Selection of the Top Ranked Consultant
PPMO
Negotiation with Top Ranked Consultant and Award of Contract
Special Conditions of the Contract (SCC) : to be prepared by the
90 Client to modify, add / supplement the GCC 91
 Qualification Criteria: Rules 71 (6) Cancellation of the Proposal PPA Act , 2063
/Dafa 36 (1)
Understanding of ToR and Methodology : 20-35% If all the Proposals are substantially non-
Qualification and Experience of Key experts 30-60% responsive with respect to TOR;
Transfer of Knowledge &Technology and Training :
0-10% If the financial proposal of the
Participation by National Experts: 0-10 % substantially responsive proposal is
Total ---------------------------------100 substantially higher than the cost estimate
Minimum Pass Marks should be Stated (70- and available budget ;
80 )
If no need of the Consultancy services ;
If the proposals are in collusion
92 93

Negotiation with Winning Consultant PPA, 2063

/Dafa 37 (1) (2) & (3) and PPR Rules 81 (5) & (6)
Important Note during negotiation
No negotiation on remuneration of professionals except QBS
Time given to Consultant : 7 days for NCB and 15 days for
Method of Selection
ICB
Negotiation can be done on reimbursable expenses
Boundaries of Negotiation
If negotiation fails with Ist called consultant , the next
ToR and Work Area
negotiation will held with second ranked consultant in case of
QBS , FBS and QCBS except IInd low priced consultant in
case of LCS
Currency Minutes of Negotiation
Price Adjustment Prepare the Negotiated Contract in Standard Form
Variation Within 7 days of success of negotiation an
Professional Liability intention to accept the proposal is given to
Conflict of Interest successful consultant and other short listed
Substitution of Experts
94 consultants :PPA Dafa 38 (2) 95
Mobilization of Experts, Mobilization Advance
Contract Signing with respect to PPA Professional Liability Insurance
dafa 52 What Is Professional Liability Insurance?
More commonly known as errors and omissions (E&O
Prepare the Final Contract Agreement insurance), is a special type of coverage that protects
Form and Signing by both Parties your company against claims that a professional service
you provided caused your client to suffer financial harm
Before Contract Signing : Follow the due to mistakes on your part (errors) or because you
PPA Dafa 47 , 49, 50, 51, and PPR failed to perform some service (omissions).
Rules 100, 101, 102, 103, 104, 105, Professional Liability Insurance definition in a
nutshell: Professional Liability Insurance protects you
106, 107 and 108 both when your company performs insufficiently and
After Contract Signing : Follow the when you're not at fault. So even if a disgruntled client
brings a frivolous lawsuit against your small business,
PPR rules 7 & 8 : Professional Liability Insurance 96
you're still covered. 97

Professional vs. Ordinary Negligence

Professional Liability Insurance Coverage Professional negligence: If you are a professional or you market
Legal fees. Usually, these run between $150 and $400 yourself as an individual with a specialized skill set, your clients are
per hour a lawyer spends on your case. entitled to a standard of care. In other words, your clients expect you to
help them, not hurt them. If you breach those expectations, that's
Expert witness fees. This may include travel, meals, professional negligence. Say you're an accountant preparing a client's tax
and document costs. forms. You make an error, which triggers an audit from the IRS. The
Administrative costs. Shipping, document processing, client sues your business over the mistake because they should be able to
reasonably expect a professional accountant to check their work.
software licenses, and copying all costs money that gets
Ordinary negligence: Basically, ordinary negligence means that a
tacked on to your ever-growing legal bill.
person should take reasonable measures to avoid causing harm or injury
Court costs. This includes filing and transcript fees. to others. Unlike professional negligence, this type of negligence applies
Settlement costs. This is the lump sum you pay to avoid to the public at large. For example, say you back your car out of the
future legal costs, plus the cost of a mediator if used. driveway, but you check your rearview mirror first. A stranger is
walking their dog when your car's tire clips the canine's paw. The owner
Court judgments. If you lose at trial, this is the amount sues you because you should have taken care to check your surroundings
the court orders you to pay. 98 before reversing. 99
 Procurement of Works
Requirements Format of Estimate : Schedule : 1 related with Rule 10
Identification of Works Item Unit Quantity Rate /Unit Amount
Preparation of Procurement Plan: Annual /Multiyear Item A Say Cu.m. a b a*b = x
PP Item B Say Sq.m. c d c*d = y
Pre-Feasibility/Feasibility Study Item C Say R. M. e f e*f =z
Total X= x+y+z
DPR ( Detailed Project Report ) Preparation
Work Charge Staff expenditure @ 2.50 % of X = X1 0.025 X
Detail Survey
Miscellaneous expenditure @ 2.50 % of X= X2 0.025 X
Design
Net Total ( Y) = X +X1+X2
Drawing
VAT @ 13 % of Y Z
Cost Estimate : PPR 2064, Rule 10 , Schedule 1
Grand Total ( GT) Y+Z
Management of Construction Site
Note: 10 % Physical Contingency and 10 % Price Contingency both of Y
Annual Works and Budget Program (AWBP) should also be added for budget allocation and management.
100 101

Calculation of Rate per Unit

Procurement Methods and Strategy

Labor Expenditure ----- X
Estimate Amount ( NPR) Procurement Remarks
Method
Construction Material Expenditure-----Y Up to 500,000 Direct Purchase
> 500,000 and up to 2 million Sealed Quotations
> 2 million Sealed Bids Pre-Qualification
Equipment including fuel and lubricants-----Z NCB Post Qualification
LCB IS1E
Total (A) = X+Y+Z ICB IS2E
> 20 million and up to 1 billion NCB among only IS2E
Domestic Bidders
> 1 billion and up to 5 billion ICB Foreign Bidder need to
IS2E have JV with Domestic
bidder
Net Rate per Unit (R) = A+ B 102
> 5 billion ICB Open to all 103
 BID DOCUMENT
Procurement Cycle Bid: an offer to do something when you are competing with
other people to do it:
Offer: an offer as "an expression of willingness to contract on certain
Identification of
Preparation of terms, made with the intention that it shall become binding as soon as it
Works Procurement Plan is accepted by the person to whom it is addressed", the "offeree".
Completion or
Termination of
A Bid is the price selected by a buyer to buy a stock, while the Offer is
Contract Pre-qualification/
Post Qualification
the price at which the seller is offering to sell the stock.
Bidder: a person or
Contract
Implementation company who offers money for goods or property when competing with other
Issuing Bid for Pre//Post
Start
Qualification Documents
people to buy it, or someone who offers to do a job for a particular price
Award of Contract Bid Documents : required to be submitted in response to an invitation
Pre-Bid Meeting for bid (IFB). These include the prescribed bid form, drawings,
Contract
Negotiations
specifications, time lines, charts, price breakdowns, etc. Bids not
Bid Evaluation for Pre-
accompanied by all the required documents are considered incomplete
or Post Qualification Bid Submission and
Opening
bids, and are usually automatically rejected.
104 105

BID DOCUMENT
What is bid security?
IFB
ITB A bid security is a monetary guarantee intended
BID Data Sheet to dissuade bidders from withdrawing their bids
BID Form before the end of bid validity period because
BID Security they would otherwise forfeit the bid security
Qualification Criteria amount to the procuring entity.
GCC
Formats of the bid security:
SCC
BOQ Unconditional bank guarantee
Specification Irrevocable letter of credit
Drawing Certified check
106 107
 Pre-Bid Meeting
Are gatherings scheduled after an invitation for bids or request for
Bid Securing Declaration proposal is advertised.
Objective: to explain the details of the solicitation documents to
interested bidders

The bid securing declaration is a non- time for pre-bid meeting: one week or more generally 14 days after
monetary form of bid security. It is a IFB/RFP
venue: easily accessible
notarized sworn statement made by a bidder procedure:
committing to sign the contract if they are opening remarks and introduction
presentation of the procurement aspect of the requirement
selected before the end of the bid validity question and answers on the procurement aspect
period stipulated in the bid document. presentation on the technical aspects of the requirement
question and answer on the technical aspect
closing remarks
minutes and circulation to all the stakeholders
108
addendum notice 109

Bid Submission Bid Evaluation

Only accepted timely submitted bids
to be checked whether the bids are sealed
records of submitted bids specified with date The Purpose of Bid Evaluation in team
and time (separately) work is to select the lowest evaluated
all the bids must be registered with numbers substantially responsive bidder with
receipt of the bids should be given to the compliance of procurement principle
submitters

110 111
 Evaluation of Bids Evaluation of Bids
Process outlined covers: To be started Immediately
Formation of BEC ( Ref PPA 71/PPR 147) Preliminary Examination:
Working Procedure /Code of Conduct to be framed and approved
by BEC Purpose: To identify and reject the bids that
Receipt and Bid opening minutes of bids opened
First Visit the PPMO site for identification of Black listed bidders are incomplete, invalid or substantially
Preliminary Examination of Bids non-responsive to the bidding documents.
Seeking clarifications from bidders
Financial comparison of bids Elements of PE :
Detailed Examination of bids
Examination of Post-qualification criteria of the responsive bidders Verification
Finalization of the lowest evaluated substantially responsive
bidder Eligibility
Submission of Bid Evaluation Report (BER) with Bid Award
Recommendatio n
Completeness of Bid
Bid Evaluation Must be completed with in Bid Validity Period
Substantially Responsiveness
112 113

Evaluation of Bids Evaluation of Bids

Verification: Bid Security:
Bid submission/Opening in stipulated Date/time Bid Security Format consistent with sample in Bid
Bid opening minutes document
Same bid as sold Bid Security Amount
Joint Venture Agreement Bid Security Validity Period
Power of Attorney NRB)
Qualification Documents Completeness of Bid:
Eligibility Bid form signed
Nationality Bill of Quantities /Price Schedule filled properly and signed
Government Owned Entity One bid submitted
Firm/Business Registration Certificate Audited Balance Sheet
VAT/PAN Certificate Declaration Letter for eligibility
Tax Clearance /Income statement/Certificate/Time Extension Conflict of Interest
for Tax Clearance Substantially Responsive:
Ineligibility based on a United Nations resolution or Bid Validity Period
country law 114
Alternative bid 115
 Evaluation of Bids
Decision on for detailed evaluation of bids:
Based on the process mentioned above decision should
be made at this stage, to go for detailed examination:
Committee should be agreed on:
those bids which are substantially non-responsive and
should not be considered further;
any clarification needs to be requested from bidders.
A log of all requests for clarification and responses must
be kept. Requests for clarification can be sought at any
time, up to the contract award decision.

116 117

Evaluation of Bids
Detail Examination:
Correction of arithmetic errors
Do not consider Provisional Sum
Do not consider VAT
Modification and discounts
Analysis of prices for major items (to check whether the bid is
substantially balanced and to verify that the prices are not so low that the bidder
would incur substantial financial losses and fails to complete work satisfactorily
or reflection of misunderstanding of specifications)
Priced deviations time and advance etc.
Domestic preference
Qualifications (Financial, Equipment, Experience)
Front loading and inconsistent rates (higher unit prices for earlier works,
higher unit rates for underestimated work items)

118 119
 Verification /Examination of Qualification Criteria Problem in bid evalualtion
Average Annual Turn over in last 3 years over 5/10 Cartelling
years
Experience as a prime contractor in the projects of Collusion
similar nature of works in last 5 years
Liquid Asset/ Credit Facility Intimidation
Equipments Requirements
Manpower requirements Every Cartelling is collusion but
all the collusions are not cartelling
Intimidation is combination of
120 both cartelling and collusion. 121

Verification of Intimidation,cartelling
and collusion
Less no. of bid submission in against of more no. of
bid purchased.
Same hand writing in BOQ
Same item rate filled up
Item rate only in figures for lowest bidder
Procurement of Goods
Bid security guarantee from the same Bank issued
on the same date.
Same bid security guarantee amount
Item rate inconsistent
Line of credit and bid security guarantee from the
different Bank
122 123 008)
 Meaning of Goods
In economics, goods are materials that satisfy GOODS
human wants and provide utility, for example, to
a consumer making a purchase of a satisfying product PPA, 2063/ 2 ( c) : The are
meant by CHAL or ACHAL things and
non-consulting services related with
supply of that particular.

WB/ADB : A wide variety of tangible and

intangible commodities for the use of
private and public entities.
124 125

Public Goods and its Procurement Goods' Procurement Cycle

Goods offered by government and its
entities for the use of common Identification of
Goods

people in the light of economic

Preparation of
Completion or Procurement Plan
Termination of
Contract
development of country Contract
Implementation

The procurement of those goods Start

Award of Contract
IFB and Issuing of
Bid Documents

through public money Public Contract

Pre-Bid-Meeting

Procurement of Goods
Negotiations

Bid Evaluation:
Technical and Bid Submission
Financial Evaluation Technical /Financial
126 Opening 127
Guiding Principles of Procurement of
Goods Methods of Selection of Vendors
Need for high quality Goods Principally ( Ref Act 8 (1) (K : 1-10)
Need for Economy and Efficiency Through Competitive Proposals from the
Need to give equal opportunities to all respective vendors
eligible/qualified Vendors to compete in
supplying the Goods
No piecemeal procurement to limit the
Encouraging the development and use of competition : Ref Act 8(2)
national vendors in case of International
Competitive Bidding
Need for transparency in the selection process
128 129

Basic Requirement for Procurement

Procurement Guidelines Used
of Goods
Guidelines : Procurement of Goods, Works, and Non-
consulting services Procurement Plan required to
UNDER IBRD LOANS AND IDA CREDITS
& GRANTS Identify the types of goods
BY WORLD BANK BORROWERS establish the mode of procurement
January ,2011
know the type of vendor ( Individual,
Guidelines on The Procurement of Goods by
Asian Development Bank and Its Borrowers firm, National, International )
December , 2016 determine the ABC
Public Procurement Act 2063, & Public
Procurement Rules ,2064 ( Inclusive of Approved Budget for Contract
Amendment 2073) (ABC)
130 131
 Most Important : Specification Specification
What is a Specification?
and Cost Estimate The specification is one part of a bid document: either a Expression of
Interest (EOI), or a Request for Tender (RFT).
Ref : PPR 2063 ( Amended , 2074) Rules : 2 A specification can be defined as:"a document, primarily for use in
(k): Actual purchasing cost of the similar procurement, which clearly and accurately describes the essential
nature of goods purchased by the same requirements for goods, products or services".
It may also include the procedures for determining that the requirements
entity or others in the district in the have been met.
prevailing or previous years What is not included in a specification?
(Kh): Local Market Price A specification does not include: conditions of tender ,conditions of
contract performans or questionnaires used by tenderers to submit
(G) : Other market price including offers.
transportation cost Importance of a clear specification
Preparing a specification is a core process in tendering and contracting,
(Gh): Rate disseminated publically by and is often considered a difficult task. Great care and consideration is
required when writing the specification because a poor description of
132 requirements may mean that the product or service is not delivered133as
required.

Minimising cost: The cost of the tender process is reduced if the Specification
specifications are:
research the market, (by making general enquiries of suppliers,
uniform for the same or similar requirements;
purchasers or industry associations, or by placing formal
clear, complete and reliable (permitting tenderers to evaluate and advertisements for Registrations of Interest) to determine
respond to the documents quickly and with assurance); and readily
currently available solutions to problems, likely costings and
incorporated into a contract.
Functional Specifications Is the documentation that describes the time scales;
requested behavior of a product or services. The documentation assess the risk of a supplier failing to fulfill specifications,
typically describes what is needed by the user as well as requested against the risks of continuing with the existing situation;
properties of inputs and outputs. identify what is to be procured and confirm that the proposed
Technical Specifications Describes the explicit technical procurement will fulfill the customer or user needs;
characteristics of an item, product or service required by the user. A determine the scope including the likely demands on a supplier
data sheet is not a technical specification. and the range of goods or services which will be required; and
Before preparing a specification determine the evaluation criteria, so that the specification
Before you prepare a specification, you should:
clearly indicates the relative importance of each requirement.
identify customer or user needs through the business plan where
appropriate, and give full consideration to their requirements; 134 135
 Specification of Goods Verify current availability of brand and model number if used in the
specifications. All brand and model numbers referenced must be in current
Writing Principles, Techniques and Tips production and available on the market. If specifications indicate an
Leave out brochure language that cannot be objectively acceptable brand and model or part number, invite competitive brands by
evaluated. Instead select only the essential characteristics or indicating .
features necessary to meet your requirements. When specifying compliance with certain industry test methods or standards,
Begin the description with a common name for the goods or include copies or indicate where copies may be obtained.
When sizes, weights, speeds, etc. are a part of the specification, determine if
services, if possible. Use instead of
a range is acceptable then indicate minimums or maximums or approximates.
Include enough detail for the bidders to understand your If an item must fit into a given space, indicate the available space
requirements. Technical specifications should contain enough dimensions.
detail to differentiate the level of quality or performance Sample requirements, if any, are to be clearly identified as a requirement in
required. the specifications with clear instructions on how to label the sample, when it
Be clear and precise. Avoid ambiguity. You should always is due,.
question if the specification would answer all necessary Sample requirements, if any, are to be clearly identified as a requirement in
the specifications with clear instructions on how to label the sample, when it
questions if the roles were reversed and you were the vendor is due, and how it will be used in the evaluation for award.
trying to respond to the Invitation for Bid. Delivery warranty (ie. Parts, labor, and/or service requirements, etc.) and
136 training requirements, if applicable, are to be clearly defined. 137

When bidding maintenance services, define the service requirements, advise if

parts, labor, travel, and service hours are required. Specify number of
preventative maintenance inspections required and any other inclusions or Basis of Estimate Criteria
exclusions that are to be priced.
Catalog Listing or Industrial/Construction databases
mile radius of -----. Instead, request a reasonable response time. Documented Vendor Estimate Based on Drawings/
Identify any instructional materials or service manuals that the contractor must
Sketches and Specifications
furnish. Also, incorporate into the specifications the type of training they must
provide to the end users and where this training is to take place. Engineering Estimate Based on Drawings/ Sketches and
If compatibility with an existing piece of equipment is a factor, describe the
equipment, connectors, interfaces, brand and model of the existing equipment.
Specifications
Clearly state the packaging requirements, size, types of finish, color, etc. Engineering Estimate Based on Similar Items or
Understand the use of the following words and use them properly: Procedures
"Shall" denotes the imperative
"May" denotes the permissive Engineering Estimate Based on Analysis
"And" means it must have both or multiples Expert Opinion (Engineering Allowance)
"Or" means either is acceptable
Indicate the appropriate unit of measure. Example: box bxs, package pkg., Existing Lien
each ea. 138 139
 InCoTerm Work Study
Used by International Chambers of Commerce for the trade of Goods world
wide
Give guide to importers , exporters , lawyers, transporters , insurers involved
Work Study is a generic
in the trade
EXW: Ex Works
term for management
- services and system
premises or at any other named places ( works, factory, warehouses )
- The seller neither loads the goods on any collecting vehicles nor clears the engineering techniques,
goods for clearance
FCA : Free Carrier used to investigate:
- Seller delivers goods to the carrier nominated by buyer at the seller premises
- Delivery point must be specified because risk passes to the buyer
Methods of performing
CPT: Carriage Paid to work (Method Study).
- Seller delivers the goods to carriers nominated by the seller at agreed place.
Seller must contract for carriage cost up to the destination. The time taken to do it
CIP: Carriage and Insurance Paid to
- CPT with Insurance (Work Measurement).
DAT : Delivered at terminal
DAP: Delivered at Place 140
1
DDP: Delivered and Duty Paid

Work Study- Definition Method Study- Introduction

What is Work Study?
What is work?: Work is an activity in which one exerts It is the systematic study of work systems with the purposes of
1. Developing the preferred system and Method
physical and mental effort to accomplish a given task or ( with lowest cost)
perform a duty. 2. Standardizing this system and method
Work Study is the systematic examination of the methods of 3. Determining standard time for the task
carrying out activities such as to improve the effective use 4. Assisting in training the worker in the preferred Method
of resources and to set up standards of performance for the
activities carried out. Above stated definition has FOUR parts.
A generic term for those techniques, particularly method However, the TWO most important for WORK STUDY are:
study and work measurement, which are used in the 1.MOTION STUDY
examination of human work in all its contexts, and which (or Work Methods Design) &
lead systematically to the investigation of all the factors 2. TIME STUDY
which affect the efficiency and economy of the situation (or Work Measurement)
being reviewed, in order to effect improvement.
 Method Study- Introduction Method Study- Introduction
ILO Definition- Method study is the systematic recording and critical examination of
It is the systematic examination of carrying on activities so as to improve existing and proposed ways of doing work, as a means of developing
the effective use of resources and to set standards of performance for the
activities being carried out. and applying easier and more effective methods and reducing costs.
The British Standards defines method study as:- Used to analyze
systematic recording and critical examination of the factors and Movement of body, people, or material
resources involved in existing and proposed ways of doing work, as a
means of developing and applying easier and more effective methods and Activities of people & machines
reducing
Method Study Objectives
Method study is a technique to reduce the work content mainly by Improvement of processes and procedures.
eliminating unnecessary movements by workers, materials, or
equipments. Improvement in the design of plant and equipment.
However, even after that, there could be substantial unnecessary time Improvement of layout.
taken for the process because of lack of management control or inaction Improvement in the use of men, materials and machines.
of worker.
Method Study approaches and tools of Method Analyst: Economy in human effort and reduction of unnecessary fatigue.
Flow Diagrams & Process Charts etc. Development of better working environment.
Critical questioning techniques.

Method Study- Introduction Steps/Procedure Involved in Methods Study

Work study is a tool of productivity enhancement. 1. Select : select the work to be studied.
It simplifies a job to reduce unnecessary or excess work, wasteful The job should be selected for the method study based
use of resources and sets up standard time for performing that job.
upon the following considerations:
This implies that :
There is a direct relationship between work study and a) Economical aspect
productivity. b) Technical aspect
Thus, by applying WS principles if the cost is reduced by 20%, c) Human aspect
then, we can say that productivity has gone up by 20%.
2. Record: record the relevant facts about the job by direct
observation
Recording techniques used for method study are charts
and diagrams.
 Recording techniques for method study Flow Process Charts
A flow process chart is a chart of all the activities involved in a
process.
It is similar to an operations process chart, except that more detail is
i) Operation process chart: shown by including transportations and delays as well as operations,
An operation process chart inspections, and storages.
provides the chronological Not usually used for entire assemblies, it is used for just one
sequence of all operations and component (or operator)
inspections that occur in a Add in information on:
Operation duration (time to complete)
manufacturing or Distance traveled (for transport operations)
business process. Good for showing savings of a new method.
Operation process chart used Process charts summarizes the whole process
only two symbols, i.e., They are used to compare the existing and the proposed methods
operation and inspection. Process is observed, who, what, where, when, and how questions are
asked
Every detail is understood and the chart of the existing situation is
drawn
9

Flow Process Charts

Quantity: ii) Flow process chart:
Operations: Pieces per hour
A flow process chart is
Transportation: How many are moved at a time used for recording
Inspection: How many pieces per hour if under time standard greater detail than is
and/or frequency of inspection possible in an operation
Delays: How many pieces in a container process chart.
Storage: How many pieces per storage unit It is made for each
component of an
Time in Hours per Unit assembly rather than for
If 250 pieces are processed in an hour then 1 unit is processed in the whole assembly.
0.00400 hours. Record 400 Flow Process Types:
If 200 units are moved in 1 minute, then 1/200 = 0.005 minutes i. Product or Material
per part, and 0.005/60 hours/part =0.00008 hrs/part. Record 8. type
ii. Worker (Man) type
iii. Machine type
10
 ASME Standard Symbols Process Chart Symbols
ASME has recommended FIVE standard symbols to be used on
Process Charts, given below:
1. OPERATION : Main steps of the
task /job involving modification /change.
2. INSPECTION: Checking quality / quantity.

3. TRANSPORTATION : For movement of

persons/materials.
4. DELAY (TEMPORARY) : For waiting time of
operators or materials.
5. STORAGE (PERMANENT DELAY) : For
controlled storage involving authorized
issue/receipt of material etc.

NOTE:
For two parallel events, both are shown in one joint or
combined symbol: e. g. operation & inspection ,jointly are shown
by symbol, indicated in the figure.

12

The Outline Flow Process Chart iii) String Diagram:

is a scale layout drawing on which, length of a string is used to
It uses ONLY TWO SYMBOLS: record the extent as well as the pattern of movement of a worker
working within a limited area during a certain period of time.
& It is a scale diagram on which colour threads are wrapped around
It provides an OVERALL PICTURE of the pins or pegs, which are used to indicate the paths taken by either
worker or material or equipment when processing is done on material
process / job / task. from start to finish.
Primarily it is used to show the sequence of
operations & inspections for a manufacturing or
an assembly kind of jobs.
3. Examine: examine the way the job is being performed 4. Develop: develop the most practical, economical, and effective
method.
and test its purpose, place, sequence and method of
performance. After critical examination of records is complete, it is necessary to

In this step, the information provided by charts and approaches are:

diagrams is critically examined and screened by asking a) Eliminate unnecessary activities.
some searching questions. Like, what is done?, why it is b) Combine two or more activities. For example, the total set-up time
done?, what else might be done? etc. will reduce if one uses a combination tool for two operations, say, facing
and drilling.
This examination is carried out with a view to eliminate, c) Re-sequence activities to reduce time and effort.
combine, rearrange and/or simplify the activities. d) Simplify process to reduce number of operations or reduce effort or
reduce
throughput, etc.
e) Attack on constraints, which are preventing the method to perform
better.

5. Evaluate: evaluate different alternatives to develop a new 7. Install: install the new method as a standard practice and train the
improved method comparing the cost-effectiveness of the selected persons involved in applying it.
new method with the current method of performance. 8. Maintain: Maintain the new method and introduce control
6. Define: clearly define the new method and present it to those procedures to prevent a drifting back to the previous method of work.
concerned, i.e., management, supervisors and worker. Method Study Applications
A report on new improved method should be prepared. It should The need for methods analysis can come from a number of
include: different sources :
Description of the method. Changes in tools and equipment.
Cost of installing the new method, including new equipment and Changes in product design or new products.
relaying out shops or working areas. Changes in materials or procedures
Diagram of the work place layout. Other factors (e.g. accidents, quality problems)
Tools and equipment to be used and diagrams of jigs/fixtures etc.
Executive actions required to implement the new method.
 Work Measurement
Work measurement is the application of techniques
designed to establish the time for a qualified worker to
carry out specified jobs at a defined level of performance
or at a defined rate of working.
A qualified worker is one who has acquired the skill,
knowledge and other attributes to carry out the work in
hand to satisfactory standards of quantity, quality and
safety.
Defined rate of working is the amount of work that can be
produced by a qualified worker/employee when working
at normal space and effectively utilizing his time and
where work is not restricted by process limitation.
20

Work Measurement Work Measurement

Technique of work measurement:
Uses of work measurement:
a) Time study: short cycle repetitive jobs
To compare the efficiency of alternative methods.
b) Work sampling: Long cycle jobs
Cost estimation
c) Predetermined motion time standards: manual operations
Pricing of products and services confined to one work centre.
Incentive pay systems
Capacity planning
Production scheduling
To provide information on which estimates for tenders, selling
prices and delivery
promises can be based.
 Time Study Time Study
"a work measurement technique consisting of careful time
Steps in making a time study
measurement of the task with a time measuring instrument, 1) Select the work to be study
adjusted for any observed variance from normal effort or pace and The job is a new one not previously carried out.
to allow adequate time for such items as foreign elements,
unavoidable or machine delays, rest to overcome fatigue, and
A change in material or method of working has been made
personal needs." (The Industrial Engineering Terminology and a new time standard is required.
Standard) A complaint has been received about the time standard for
Time study is a direct and continuous observation of a task, using a an operation.
timekeeping device (e.g., decimal minute stopwatch, computer- A particular operation appears to be holding
assisted electronic stopwatch, and videotape camera) to record the up the subsequent operations and possibly previous
time taken to accomplish a task and it is often used when:
operations.
there are repetitive work cycles of short to long duration,
Standard times are required prior to the introduction of an
wide variety of dissimilar work is performed, or
incentive scheme.
process control elements constitute a part of the cycle.

Steps in making a time study

Time Study 6) Adjust the observed time by rating factor to obtain normal time
Steps in making a time study (basic times) for each element.
2) Obtaining and recording all the information about the job, the 7) Sum the normal times for each element to develop a total normal
time for the task
operator and the surrounding conditions, which is likely to affect
8) Determining the allowances to be made over and above the
the carrying out of the work. normal time for operation.
3) Breakdown the operation into . 9) Determining the for the operation.
4) Measure the time by means of a stop watch taken by the 10) Test and review standards wherever necessary.
operator to perform each element of operation. Either continuous Time study equipment
method or snap back method of timing could be used.
5) At the same time assess the effective speed of work
relative to the concept of normal speed. This is called
performance rating.
 Mechanical and Electronic Stopwatch

Mechanical Stopwatch Electronic Stopwatch

Calibrated in decimal minutes LED read-out