UNIT 12 CONTRACT PROCEDURES A

Structure
12.1 Introduction
Objectives
12.2 hwitation to Tender
12.3 Instructions to the Tenderers
12.4 Prequalification of Contractors
12.4.1 Prequalificati OII Procedure
12.4.2 Example of a Prequalification Questionnaire
12.4.3 Advantages and Disadvantages of Prequnlificatio~~
12.5 Contract Conditions
12.5.1 General Conditions of Contract
12.5.2 Special Conditions of Contract
12.6 Technical Specifications
12.7 Drawings
12.7.1 Cotlstructio~~
Drawings
12.7.2 As Executed Drawings
12.8 Addenda
12.0 Proposal
12.10 Tender Bond aid Performance Bond
12.11 Labour and Material Payment Bonds
12.12 Letter of Ititelit
12,13 Forms
12.14 Surm1~1ry

12.1 INTRODUCTION
In Unit 11, you were told about the legal aspects of the contracts. It also covered the
various types oC contract suitable for construction. In this unit, you will learn about the
procedure to enter into a contract.

i Objectives
i After studying tliis unit, you should be able to

I describe the process of invitation to tender,

discuss pre-qualification procedure for the coiltractors and formulate the
ge~ieral,u~dspecial contract conditions,
know pmcedure of drafting technical specifications and furnishing the
~iecessiu-y"c~~istfllction"
and "as executed" drawings,
explain the tender and perfonnance bond, and
prepare tlie letter of inte~lt.

12.2 INVITATION TO TENDER

Tenders are invited to ascertain whether an offer can be obtained withui such a margin as
tlie project owner is willing to adopt. The invitation to tender may be extended to more
than one contractor. A list of contractors is prepared with due care and attention. It is
necessary that the tenderers are of equal standing chosen for their suitability for the
particular project or work.
 While inviling lenders (he engineer or llle ;acbitect sll~uldtilke grral c;se lo ellsure tllat
great secrecy is niailltailied wl~ileinviting tenders. The nallrs of the colnprLisg
contractors should 1101 be disclosed till after tlle tenders are opeoed. Tllis is hecause if tllis
information becolnes known there is a possibility that cootr;~ctorswho are tendering may
collude and Ulus illcrease tlie price.
An invitation to tender means so~ileUling111 tlle l~atureof a11obligatiolr 10 accept tile
lowest tender. Tle invitation to bid is ~alrmallyissued in tlic Rlr11101 ii11 advertisennlt or
as a separate letter addressed to individual bidders. n e purpose a to supply sucli
i~lfor~llation
as is necessary to ellable potel~tial131ddersto decide wlather Ulcy u)uld or
sllould take pan in Llle biddilig. It should tlierelorr include: eligibility criteria: tlle sa)pe
of llle works tOgetller witll Ule principal rju;mtities; co~fitructionperiod; sources tor
furlllrr information; cost nf bidding duculneas; amount of tl~ebld securily; d;~tcof tellilrr
~ ~ b n l i ~ aid
~i~ ;myl l illlpartanr
: or u~lusualtender cvalulian criteria. Tllc illvltaliw lo
kllder lllnY be incorporated in tile lmdrr documents nlerely fi)r realrd, or it ]nay he
ornilled.
A pmvisic~~ is n~adein tl1c advrrlisemcnt Uiat the project owner is IIOL bou~ldto accept tl~e
~ O W C Stender
~ or my teilder for that matter. An expressed olirr to ;iccel,t U I lowest
~ telider
w()~lldbe a bilidi~igon owner and will have tlie effect of tunling L e il~vitatioll10 tel~der
illlo iUl offer.
An illvit.?liollto tender for tlle proposed project is sent out by Ule owllel ullder Uie ;idvice
of Ule ellgirieer or Ule arcbilect. Tender docu~llerltsare ~ssuedla tlir tendcrers. il~ese
documnits include L c proposed conditiolls 01 conwad, pblls. specificlions. aild bill of
clu~titleswill1 two culu~lulsleft blank, oiic for (he unit price alld Ulc olller lor U e
am()ullt.nlese two mlunuls :ire filled in by tllc (aldcrcrs. Wllile tcndels arc being
r y the con~etillgcolltaclors .ue givm dctililed illfinmstioll upon
illvited, it is l l ~ c ~ s s aU~at
~llic11 to make up the tender. It is sssenlid that each contractor he give11ide~ltiol
particulxs, or else Llle tenders will be uosatishcu,ry, The ol3ject of meatirniag h e
~luimtitiesin tlle tender documents is to enable Ule fin~ls{aidcri~lg to compete oo tlle
sallle basis. If al same time behre opsiil~gthe tenders, it is lound tililt some n1ler;ltion is
IleCeSSXY 111 Ule patieulars already sent oul, it is essentii~ltlliit a11 Ulc conUi~ctOCSinvited
submit their terlders should be notified about thc clialige or alteoltioa inale nnil Uleir
aclulowledgenlentreceived.
Adequilte tinle sllould be allowed for receiving tlle lellden. Tllis will ellable Ills
c~lllractorsto illake necessary enquiries and obtain quotations for spccial nlsterlsls i ~ ~ d
ilnlls to be procured. This will ensure that the tenders would be on the lower side.
Early ill L e telldering stage the intending contract(~r will usually send oul bill invitations
10 811 lllalerial dealers and subcontractors wha are believed to be interested aid wlrlse
hlds would be desirable. This mailing, hy post card or a formJ lette~,advises nf the
pr(!iect under co~~siderati(n, the itens for wliich a iluotation is requested, the de;lillils for
receipt 01'llle prOp(l~a1~
t l place
hy the prime c o i ~ ~ a c t o(he -.
r , pi?LL where he will receive tlle bids,
~ iYhere llle bi~ldingdocunenls arc available for tla aihco~ltractors,the name of
tile persoil LO wbolll a proposa1 sllould he di~*rclcd, llld m y special illstructiolls that rnay
he llecessary. Prime corlhactors usually il~aiiitililln card or ~o1111)uteriseclfile wit11 hsls of
addresses uld otllcr pertinent iilfor~natio~l about nlaterial suppliers and subartracturs.
T11ese files are mitintilined boU~by geograpl~icalarea ;uld by speciality.
Tllr tenders slloulcl be opened h~a straigllt-forwartl way. To reniove all suspicion of
~av0uritis111,tlle tenders are opened by U1e engineer in Ulr 13sesmce of all tenderers who
llUY choose to be prcsent. In cases where 110 tellder has bee11leceived wiUiin the time
prescribed, late tenders should be opened. However, tenders received very late sl~ouldnut
be opened but retunled to the.Jenderers.
No tender should be opened will~outobtai~lillgllle owner's aulhority Thc acceptance of a
d made known to tlie party witlii~ia reasoiinhle til~lei ~ l dill no case sllould
tellrler s l l ~ l be
it be extended beyond the date when Uie work has o, be starkd as laid down io tlle
Illvitalioll to tenders.
After (XJening fie tenders a comparative sla~cuiesiis prepared of id1 tlle tenders received.
Gellerally, tlle lowest tender is accepled but it is unwise to accept a llendcr wllicll is too
LO solne serious mislakes in tlie cstimatioll. llie mgiaeer shoald cnsun [hilt lllerc
are I I ( ~nllstakes ill the tender before accepting it. A copy <)fll~ealmpi~iilivestalemeat
nay be sent 10 tlie contractors who submitted the tenders. U u l Ulis should he do~leafter'
tlle contract has been signed, particularly so, if'tlle lowest tellder ;~cccptcdis uludl helow
the next.
SAQ 1
(a) What is the procedure to invite tenders ?
(h) What does the intending contractor do before sublnitti~lghis bid ?
(c) Whal is the procedure to open 'md evaluate a tender ?
12.3 INSTRUCTIONS TO THE TENDERERS
For co~npetitivebidding to be valid, all tenders sllouould bid under exactly the same
conditions for a1identical package of work. This requires that all hidders conform to a.
set bidding procedure. Wlleti conlpetitive proposals are requested, a collsiderable amoullt
of information regardilig the te~~derillg process sllould be collllnullicated to all the
intending te~ideras.This hlformation is usuavy included in one of the first divisions of
tile ~pecifi~alicl~ls
and is designated as "Instructioos to Tenderrrs", Tllese instrudions
give the requirements of the owner and also prescribe the procedures Ule bidding
contrilctors are required to follow. The docuinmt mentions conditirs~srelated to tllefor~n
'of b e tender, where and wheu it nlust be suhritlid, security required. alld illtorinati~ll
concemillg late bids and bids submitted hy mail or telegram or courier. If tlle illstructioos
ire not followed it may result in the contractor's bid not being accepted.
Clauses are included that give the owner tlle right to reject any or all of tlle bids, to
postpone Be date of opening the tender, aud to exercise m u ~ yrights nnd privileges in the
selection of Ule successful bidder. Standard sets of' instructions ;Ire designed for general
purpose and do not normally provide all the inforlnatioo specific to a particulnr project
that would he required by a prospective tenderer. Supple~nerltaryiustructiolls or
modificatious :rre customary or reference is made to certain specific ioforlnatioll of
mterest to lellderers already contailled in the advertiselnent or invitalioll to tender.
SAQ 2
What illfclrlllation is contained in tile "Instruclions lo the Tenderers' '?
12.4 PREOUALIFICATION OF CONTRACTORS
--
Bids accepted from all who are inclined to compete, z l d the c o s W d awarded Lo Llle
lowest responsible bidder introduces problellls in Ule awarding of cdnlracts for public
works. For a bidder to be resp(>nsibleunder open competition, he has to furnish the
requiml surety and a record Ulat is free fro111defaulls or proved dishonesty. Tllus,
inconlpeteilt coiltractors and mnso with i~iadequatefinancial resources may i ~ eplaced
an equal basis witll respoilsibla bidders in tbe competition for llle award ol a contract.
Thus, there should be some meclianism to avoid sucli a siluatio~l.
During Be operation ol the contract, the emplnylnet~tof an unqualified contractor leads
to difficulties. It lnay result iu excessive costs on account of slaw progress and
unsatisfactory quality o l work. In fact incompetency is one very imnportml factor in
contracts which always cause inco~ivenience,delays, and extra cost lo Llie owner. TO
reduce or avoid thcse problems, Ule pre-qualificatiorr of contractors has bee11
The purpose of pre-rlualification is to ascertain beforc a contractor is allowed to teoder,
wlietlier he is respollsible and conlpetenl to complete a give11 conslructioll ctaltrilct
satisfaclorily. In some cases tlie pwqualilication procedure is sufficiently compmllellsive
so that it is colisidered safe to reduce the amount of surety bonds, or to delete then1
altogether. in the award ol contracts, wllile ii is assunled that dl utlqualified contraclors
- - L -
rue elinlinaled [ram the filial list of approved contractors.
C~~n.tl*octitni Cont~.nct
h.lati:rpcriier~t
Con~pilinga list of prospective bidders is a difCicult task, because
(a) omission of a particular collVactor is likely lo be criticised iis uni';~ir:
(b) political pressure may be exerled in favour of one or more cc:)ncer1ls:
(c) a coi~tractcxwho can readily handle one kind of work ~niglitno1 he equipped k)r
work ol' another nature;
(d) a conlraclor 111ay be able to perforin a small conlract but not ;I big one;
(c) who is not able lo quillify at one time nlay be able to llleet all
;I co~~lructor
requirenlents later, or vice versa: 'and
(f) Ule i~hilityto co~nplelea conlmct work successl'ully is not always easily
deternlinahlc.
As a ge~ieralcase, it seenls preferable to disallow unqualifictl contractors Lo submit
Lenders at all, rather tlla~lto refuse to award the111tile contrilcl alter they have tilke~ithe
trouhle and expellses o C sublnitti~~g their proposals.
12.4.1 Prequalification Procedure
Tlw prequalificat~o~~ pnredurc lays down that tllc contr;clor su hmil i~ li r~n;llapplication
to Lcnder. The a l , p l i c i ~ t iconlains
~ ~ ~ sul'ficicnt i~~forini~lion.
which arc usually :uawers to a
clnastion~laire,to determine whether tlle contractor is competent and lil to perfor111l l ~ e
proposed work. The applicatio~~ should contail1 detailed nllormalion its to the conlractor's
pas1 experience, preserit work, financial status, quality of orp;n~isalion.and avi~ilal>le
cquipnsnt and plant. Wile11Uiese Caclors are co~~sidered unlit contractors will usually 11i.
clinliniitcd l'rom the lisl of Lhose pernlilted. Thc value of the conuacts cxecutcd in the
preceding five years is, hexample, a ~ i ~ e ; ~ofuawmnaactor's ilveriigc iu111ual wpacity
Tile (lilfercncs belween lllis a~nountand Uie value or ina)mplcte o)~ltr:~cts ia progress is
iln indication of his available capacity for taking on new work. IT his i~vi~ilable capacity is
not at least equal Lo the cstinlated value of the new col~lri~ct. his org;~~lis:~tionshould be
closely exanlined to ascertain whelher he llas tlle al>ililylo expi111dto 111ee1the additional
load. Similarly, llis Fillallcial col~clitionshould be examinetl ;IScolnpi~ledlo tlie eslimated
amount of working capilal required for the proposed work, a11d his piis1 experle~lceiu the
Lype of work in q u e s t i o ~sllould
~ be of appropriate qualily.
12.4.2 Example of a Prequalification Questionnaire
A typical Prequalification Questionnaire would include Ule followi~~g
: (b) The prc~cedureinvolves undue expenditure of time.
(a) Name td firm; state wl~etlleriadividua1,-partllership,corporiition, or joint
venture. Give date of orgulisation, tlte state in which it is incorporated, ancl
narnes and addrwses of officers or partners.
(b) Ol'ficial address.
(c) How niaiiy years has your finn bcen in business ils a conslluction comtractor
u~ideryour present business naine?
(d) List by years the contracts completed during the pas1 five or tell years, giving
the nature of work ruld contract amounts.
(e) Atnoun1 of uncompleted work on contracts now in progress. List tl~etotal value
oTeac11contract, percentage micompletecl, estiinaled date of completion, iuld
value of uilcoinpleted portion.
(1) Financial resources available as working capital for new work. Slate both cash
on hxld and sources of credit. Attacll recent finiu~cials t a i e l ~ ~ eaid
~ i lletters from
b a k s reg'uding credit.
(g) List items of ecluipinent and plant suitable and in good collrlition which c a l lhe
made available for new work; state whether owllctl by you, where located, aid,
if not owned by you, what nssurance you have l h : ~the~ e c l u ~ ~ n ~will
e ~be
lt
available whcn needed. Also give Ule total present valutl 01 i~vaili~ble cquipn~a~l
a11d plant.
(11) List of officials and key persoiu~clwho would rlcvotc full or p;~rlli111e to a new
contract. Give name, title, age, experience, and salary ol'cach.
(i) Kilowledge of local c~nditions;transportation fz~cililies.material and labour
maskets, living conditions for workillen and fanlilies, etc.
C o n t ~ ~Procedurcs
~ct
(j) To what extent would you expect to employ subcontractors ? ,u~d Documents
(k) Does your organisation include men experienced in securing ctwperation of
materials dealers in pronlpt filling of orders, and in securing cooperation of
labour'? Give details.
(1) Have you ever failed to co~npleteany work awarded lo you'? If so, give details.
(m) Has an officer or partner of your firm ever been a11 officer or partner of some
other organisation tllat failed to co~npletea construction contract'?If so, give
details.
(11) Has your firm ever engaged in liligatio~lfor the settlelnent of claiiils or disputes
arising out of a construction cc~ntractlIf so, give details.
12.4.3 Advantages and Disadvantages of Prequalification
Prequalification at best is a judgement of a contractor's i~udificationsas of the day
submitled. Subsequent contracts uxldertaken alight and often d o cllange a contrador 's
financial condition drastically. However there are advantages and disadvantages of
prequalification.
Some of tlie advantages of prequalification arc :
(a) Lists of competent tenderers may be established in advance when Ulere is
sul'ricienl Li~ileto investigate the contractor's clualifications.
(b) When all tenderers are qualified, the contract is simply awarded to the lowest
bidder, a ~ l dthe public official who awards the contract is saved Qe
einbrurass~nentof rejecting a low tender from an unqualified contractor.
(c) Contractors are saved the time and expense of preparing bids for work in which
they ;Ire unqualified by inexperib~~ce
and lack of financial and other resources.
(d) Failures and dcfaults of contracts during executioil are ti~inimisedby Ule
elimi~latiollof unfit contractors which results in a saving of time and cost of
construction work.
Some of tl~edisadvantages of prequalification are :
(a) The questionnaires are too complicated for small contractors, many of whom
have incomplete records.
(c) favouritism.
It places unlinlited authority on public officials and offers an opportunity for
(d) It restricts competition to large and rich conkactors.
(e) It tends to eliminate young contractors who are slarting in business.
(f) It is soinetiines contei~dedthat financial statelnents and other dctails of a
contractor's business or orgar~isationare personal and private matters and that it
is u~constitutionalt r require that they be inade public in a prcqualification
slatenlent.
(g) Prequalification statldacds inay be ubiwary 'uld judgement inay be
unreasonable. Both inay restrict local contractors, thereby limiting competition
and costs.
(11) The disqualificalioil of a conkactor is a serious inntter and must be taken only
for a well established reason,
(i) There is a possibility Ulat disqualification will be cc~nslruedas a retlectioil upon
the integrity and competency of tlic disqualified contractor even Ulougll the
usual causes ace inadequate capacity lo uiidertake new work, insufficicient
working capital to finance the job, lack of tlie specialised experience required,
and so on.
The value of prequalification is lost when well-rnealu~gpublic officids reduce
Cj)
the procedure to an effective routine in order to avoid adverse publicity.
SAQ 3
(a) Why is prequalification of coiltradors necessary ?
(b) Wliat is likely to happen if unqualified contractors are employed on a job '?
Constrr~ctionContract
Management
(c) Why is compiling a list of prospective bidders difficult '?
(d) What is the procedure for prequalifying bidders ?
SAQ 4
(a) Describe a typical prequalification questio~u~aire.
(b) What are the advantages and disadvantages of prequalification of bidders ?
12.5 CONTRACT CONDITIONS
l l i e contract is usually divided into parts. The first part colnprises the basic articles
related to the scope of the work, compensation to tlie contractor, time of completion, and
similar other things and is the called the "agreement". The second p u t is called the
"general conditions of the contract", and it contains all the supplemental articles. Botli the
agreement and the general conditions nlay be staidardised and printed for use on d l jobs.
A third document called the "special conditions of the contract" is then written
specifically for eacli work to cover the special contractual provisiolls not included in the
standard agreement or the general conditions. These three documents, Logetlier with the
techmica1 specifications and drawings, make up the contract documents.
12.5.1 General Conditions of Contract
The general conditions of the contract, which are also called as general provisions, set
forth the manner and procedure whereby tile provisions of Uie contract are to be
performed according to accepted practices in construction. Tile conditioiis are meant to
regulate and govern Qe obligations of the formal contract. They do liot exert any effect
on 'my remedy at law either party to the contract may have. They are liot meant to
regulate the internal workings of either party to the agreement, except insofar as the
activities of one may affect the contractual rights of the other party or the proper
execution of the work.
The following items are included in the geiieral conditiolls :
(a) Definitions,
(b) Contract documents,
(c) Rights a ~ respoiisibilities
d of die owner,
(d) Duties aid autliorities of tlie engineer or architect,
(e) Rights and responsibilities of the contractor,
(0 Subcontractors,
(g) Separate contracts,
(h) Time,
(i) Payments and completion,
) Changes in the work,
(k) Protection of persons and property,
(I) Insurance and bonds,
(m) Disputes,
(11) Termination of the contract, and
(o) Miscellaneous provisions,
Yrocetlnres
Co~~t~.ilrt
12.5.2 Special Conditions of Contract arid Doct~~ncntu
m e gelleral conditions are iilte~~ded Lo apply to a relatively broad range of construction
arid rilust be amended or suppleinented to conforin to the recluirerilenls of a particular
project. This is achieved by a section of the specificatioils which immediately follows tlie
general collditiolls and are called supplenle~llaryconditiolls or special conditio~ls.Some
examples of necessary i~mendmentsto the general conditioi~sare the number or sets of
colluact documents Ir) he furnished by the contractor, limitations on surveys to be
provided by the owner, spccial instruc lions tc h e contractor when reyuestiiip nlateriill
substilutions, changes in tlle rccluireinellts of insurance, and special documcnlation
illsisted by the owner as a condition of final payment.
me standard set of general conditions inust quite oflen be supplemented by additional
articles. Conditioils of project location, order of procedure, tiines during wliich the work
lnust proceed, cyuipille~ltprovided by the owner, olher contracts, mlusual conlract
administralion requirements, e'uly occupallcy by the owner, tilne of project complelion,
aid liquidaletl damages are some of the contract requirelileilts required tn bc iilcorporated
in the special c~nclitioils.
The details or these couditions 111czy be see11from any of the literature listed at Uie encl of
this block under "Furthcr Rcading".
SAQ 5
(a) What are Lhc itenls included under general conditions of contract '?
(b) Why are special conditions of coiltract necessary in a coiltract document ?
- -
12.6 TECHNICAL SPECIFICATIONS
The verbal descriptions of the technical requiremellts of the work to be accnillplisliecl,
with emphasis placed on the levels of cluality of work to be attained are presented in tht!
technical specifications. These specificatio~lsare usually presented in npproxim;itely thc
same general sequence as Ule corresponding construction operations followecl in the field
during the execution and subdivided' accordulg to the general constructiou craft
jurisdiction. The praclice is to have a separate division of the specifications devoted to
each major type of construction operatio11 Illat will be iilvolvcd sucll as excavation,
concrete, structural steel work, erection, etc.
Maiy projects include eleinents of sucli a nature thal it is ilnpossible or inipractical to
verify the adequacy or quality by field tests after the coiiipletion of the project. hl sucli
cases, the technical specifications lay dowii Ulc illaterials and Uie worlunanship staidards
requited. With other construction elements it is possible to measure, test, or otlierwise
prove tlle scrvice perforinruice of the finished product. In sucli cases, tlie specificatiolis
oflen specify only the desired end resull. Such perfor~nuice,or end-result, specifications
are widely employed.
SAQ 6
What are tile contents of technical spedficatiol~sin a contract ?
12.7 DRAWINGS
There are two types of drawings for any co~lslructionpro-jecl, nanely "construction
drawings" and "as executed drawings". Both the types of the drnwiiig are shown in
Figure 12.1 and Figure 12.2 respectively.

12.7.1 Construction Drawings
The plans or drawirigs are necessary to ccmmunicate to tlie contractor the engineer's
intentions concerning the structure lie has cc)uceived arid clesigned. Tlicy show the
physical aspects of the structure, indicating the m'mgement, rlimensions, construction
details, materials, and olher information needed for estimali~igand constructing the
project. Every project requires drawings prepared individually for it. Drawiiigs tliat are
complete, intelligible, accurate, detailed, and well correlated will lead lo a project which
will be more realistically priced and better constructed than one described by sketchy,
poorly drawn, unbiguous, 'and illcolnplete docu~nents.If well prepared documents are
provided, disputes m d claiins for extra payment during construction are reduced, ruld the
owner is likely to pet a nlucli better completed project ant1 at a lesser price.
personnel. Computer-aided design and drafting (CADD) systems are now useful tools t o Contract Procedures
facilitate the rapid develop~nelltof the design and production of high yudity construction and Doc~~n~ents
drawings. Many of these CADD systems also determine the field quaitities of work as
the design proceeds.
12.7.2 As Executed Drawings
A common general contract requirement is that the contractor s l i o u ~ maintain
~l 'md
prepare one set of full-size conlract drawings marked to show the various kinds of
"as-built" details. These drawings show the actual mariner, location, and diinensioi~sof
all work as actually executed. This includes marking a set of drawings to indicate details
of work items that were not perforliied exactly as they were originally shown, such as
changed work, changed site conditions, and variations in alignment or location. In
addition, details and precise dimensions of those work items that were not exactly located
on tlie original contract drawings should be shown. The set of as-executed drawings is
prepared by tlie ccmtractcx as the work proceeds and is turned over to the en&'rilleer or
owner a1 the end of the project.

M A S E R BED ROOM

CONSULTANCY
ROOM
7' a x 7' 8"
(

From the initial dqawings prepared by the design engineer or arcl~itecl,delailed drawings
are produced. Custo~nand usage have given place to Inore or less standard classifications
of drawings and a definite order in which Uley appear in a set. The drawings for the
non-overflow section of a colllcrete dam typically include subgroups such as layoul plan,. Rgurc 12.2 :As Executed Urawillgs
foundation treatment, embedments for grouting and drainage, joint details, coiicreting SAQ 7
with reinforcemenl details, galleries and shafts, road features, uld electrical installations,
appearing i n that order. Tlie sheets of each category are designated by a11 identifying Whal do you understand by "construction drawings" and "as executed drawings"
capital letter prefix and are numbered separately and sequentially. Tlie drawings, if and who prepares them ?
revised subsequently, should be duly issued giving reference to the earlier drawings.
However, the drawing format varies with the type of construction. The makeup of the
drawings varies considerably between building, industrial, heavy, highway, and utility
construction.
Nowadays, 'aniinportmt and growing area is computer production of construction .
drawings 'and details. Architects and engineers use interactive computer graphics to
design structures and to produce dimensioned construction drawings for llie field

C I I I I ~ ~ ~ I Co~~tr:lct
IC~~IIII
41:111n~c1neni 12.8 ADDENDA
Addenda arc critical documents that are issued during llic bicltllng period Lo lllake
alleralions in any of Uie tender documenls. They usually become parr of the contract
documcnls when a contract 1s made, ulllcss they are issued only Lo modify a lender
clocumenl thal does no1 become a codracl Jocunienl. Atldenda nlay he issued lo add to,
o ~ n i from,
t or alternately, ~llodifyally clocumait during Lhe tendering period. They ,arc
prepared i ~ l dissued by the engineer to all who hacl collected Ule tender documents. l'hus,
it is very i~ilportalltthal a record is kepL of all lhosc wlio received Uic Lender docuinents
so that all the bidders are assured of receiving exactly the same infornlalion. It 1s for this
reason Ulat a space is providcd in the bid Corm lo enter all adtlcnda received (by nunlber
anrl date) and taken into accotunl while sublnitting lhc tender. The greiller llsk llcs with
sub-biclders, especially Ulose wlio do no1 posscss a full copy of the rcncler documcnts ruld
who, for the mosl part, have to depclld on copies deposited hy lhc engineer in plrul rooms;
allel Uie responsibility is o u the prime tenderer lo ensme that all sub-leu~lersthey recelve
arc hssed on iL11 the relevant adclenda. The sub-hitlders ~liuslensure ill the sallle lime that
they liiive seen anrl accounted for all addenda, and lilakc sure of the same w ~ l htheir ow11
suh-lenders.
Addenda are best nvoitlecl wl~encverpossihle by documenls which recluire no
niotlificalions or corrections, bul sonlctimcs llicy are unavoidi~hlc.They should he issued
will1 great citrc. becinsc in the 111i1idsof 111ost estiillalors. Uicy arc 1101 01' Llle same
calcgory as olhzr Leildcr documcnts, especially if (hey are issued lusl hel'ore llie Lenders
ikrc due ant1 Illus, requiring changes Lo be 111i~lc111 Lhe estimales. A liilstily cons~tlered
;~rklendamay rcsull in eilher overpricing or unclerpitcing lllc work. Tlic fonncr results in
waslc of inoney, while the latter leads lo subsecluent altcmpls by the conlri~ctorLo cut
costs or lo i11;Lkc 1117tllc loss ill so111c otllcr way. Thus, both piove dclt~~lle~ltal Lo llle
owner. Corrective addcnda are an indication lo 111c cslimnlors and leaderers thal there
may hc other defecls in Ule hiel clooumenls, and so atldenda often cletracl irom tile
n t s somelimcs proinpts a search l'o~ways Lo claim Cor additional costs. Hence,
d o c ~ ~ ~ n cant1
addenda should only be ~ssucdwhen they are ;~bsolulelyessentii~l.
Atltlcncla appear in holh ve~baland wrillen form. They slloul~lhe prepired witli even
greatcr cilre U ~ X Io111er ~ O C U L ~ ~ C I Iespecially
IS. when h e y iir? 11ot for n simple nddilion to
llle work ant1 izivolve both a dclclioll i ~ l dan addition of eilhe~worcls or work, or both.
They should be cilrefully prepiu'ed with lhc estinlalo~skccping lheii esli~l~alcs aid tenders
in mind because iicltlalda ofLen create plenly ol' extra work lor hiddcrs a1 Ihc 111osl crilical
lime in a bidding period.
SAQ 8
(a) Wlial are addendil ?
(b) Why shoultl :~clclendabe avoided ?
12.9 PROPOSAL
It is the responsibility of the contractor to submit his tender al Ihc proper place ;uld before
the tilnc mentioned. The completed proposal forln, togelher wilh Llre I,id security and
other supplementary information, is sealed in an e~lvelopet h a ~is addressed ilS directed in
the instructio~lsto bidders and clearly labeled as a proposal for the project being leudered.
Tenders may be deposited at any tirne before h e deadline schccluled l'or tlleir acceptance.
The usual practice, where feasible, is that the contractor delivers personally the seilled bid
shortly before opening time. Alternately, the proposals lnay be sent I>)) letler, Lelegraph.
messenger or courier service. A colmnon problem arises when the bill ;lrrlvcs at the
designaled address afler the established time. Though there is sollie tlisparily how such
cases are liiu~dled,most engineers feel that a late bit1 is no1 a valid l ~ i ( l .
All proposals are to be opelied publicly and read aloud. Such tender openings ire
attended by t h e , p r i ~ nCoiItracLor,
~ ~ubco~itraclor~,
nlatcrial suppliers. and (Nher illterested
parties. The procedure consists of the owner or lijs engiilecr opening each bidcler's sealed
C:IIII~ l.:~ctProccrlllres
envelope, noting the type ruld amount of tender security, verifying receipt of addenda, ancl :1nd I)oclll~lclll\
reriding the anloullt of each tender item. At many tcnder openings, the esti~llatcof cost
prepared by the engineer or owner is alsoread or distributed to those allending. Tender
tabulation forlns are also circulated Lo those attending for noling down the proceedings. It
is customary Ulat the tender opening adjourns wilhoul a1 official ainouncement
concerning Ule identity of the successful tenderer. Before the contract ciUl he awarded, the
bids are carefully sluclicd and evaluated by Ule owner iuld the engineer, a process known
as "canvassing".
After the lenders have been opened and read, the contractor colllununicates Lhe results oL'
llle bidding lo his surely CnlllpiLIlY. This infomation is included into Lhe surely's
permanent file 011 tlie contractor and forlns an iinporliu~L11x1 of the contractor's record 01'
performance ,
I11 closed biclding, the amnunl of !he bids are not necessarily disclosed. After delivery oS
Llie proposals. Ule owner uses the bids in iLtly way he sees fit lo serve his own besl
inleresls. Tllc owner cru~select any of the bidders he clionses. or rejccl all bids. The
owner of1c11lllakes a final selection of the successful conWactor only i~Sterprotracled
~iegoliations.
SAQ 9
(a) W1lU are Lhe special fealures or proposals s u h ~ ~ ~ i tby
l erlifl'crent
d bidders ?
( 0 ) What does Uie owner or his engiileer tlo when the proposals are opcned '1
12.10 TENDER BOND AND PERFORMANCE BOND
Tender Dond
The tender bond is suhlllitlecl along will1 Lhe l ~ t ) l ~ It ~ gui~rantees
~i~l. Illat Ule lc~lclc~
has heen made in good fail11 ailtl that tlic lcntlcrcr will cntcr into the contracl il' 111s
proposal is accepted. 11 arlso guarantees tlial he will funiish Lhe pcri'omi;ulce and
pi~ymcnthoncls. If the hiclder refuses lo sign the contri~clill accortlaiice will1 hi&
bid, thc surety is bountl lo pay to the owner tlie danlilgcs caused thercl,y suldecl lo
the penally of the bontl. Tlle i ~ i n o ~ lofl t the bond is usuiilly spccifictl by the
ownerltlesigaer iu the iuslructions to l ~ i d d e lo ~ sbe 10% of (lie a n ~ o u nof~ the hid.
Performance Bond
The owner 1s e~ilille~cllo j ~ c lwl~iilhc co~llr;~clcd Sor or its cquivalc~lt.'The
perfornlance ho~idis pl~cscribe(l101 Ilic prolcction of thc owner. I1 gu:lrantccs Ills1
the conlr:Lct will be ~~erfornled ;m(l Lhar [he owncl will lcceivc its structure in
substanlial accordii~lcewith lhc tcnns ol 111~:corilracl. A perl'orilliulcc hond includes
by rclerence the Lerilis ot the conlri~cl.i i ~ l ( l(IIC rcsy,onsihilily o f the contractor is Lllc
measure of the surely's obligalio~l.On clclaull ol' Lhc conlraclor, 111c hurclen or
conll act perfonuancc is lhal of tllc surely. A performance bond covers illiy
wilrtailty periocl that may bc recluired by rlic conlracl, the usual hond premium
illcludes one yeix ol' such coverage. All pcrl'otnirulce bontfs have :I I'rlc~value
whicli serves as thc upper lirn~lof expense, Lllc surely will incur in I'inishing Llic
contri~cl,sl~ouldlhi~lacl~onbeco~nesnecessary. This face value is cxp~.essedas :I
fixed suln of money, the :~nlounlof wliicll is usually some percentage oS Ule tolal
coiltract price.
SAQ 10
What is the difference hetween "tender hontl" ancl "l,crformancc bontl" !'
Constroction Contnct
--
Mnl~agerne~~t 1 2 LABOUR AND MATERIAL PAYMENT BONDS
A pay~iientbond protects U~irdparties to ttie contract aid $uarantees payment thr labour
and materids used or supplied durillg tlle execution o f Uie constructio~l.Tliis bond
provides the followillg :
(a) The claimait must have had a dircct contacl with the general contractor or
subcon tractor.
(b) Labour and 111alerialinclude waler, power, light, Ileal, oil, petrol, diesel,
teleplionc, ;uld rental of equipnlent directly applicable to tlie contract.
(c) WritLen nolice must be give11hy the claimanl, othcr than tl~rone 11;tvinp a direct
conlracl with Ulc geilcral coiltrilctor, t o ;my two 01' Ulese: pelier;ll conlracttx,
owner, or surety, witlli11YO days after clairiialt perlormed his last work or
-
12.14 SUMMARY
In this unit, you learnt about tlie procedure to he followed in entering into a contract ruld
tlie viuious documents lo be signed by boll1 tlie parties aid the balds to be executed by
the contractor lo protect the owner from da~~iages in the evenl, the contractor fails to
complete Uie project. How is n tender hvited lor colistructing a project ald what
insCuctions are given lo the bidders liave been explained. To obtain co~itractsLa1 are Bet
from coniplications arising later due to the inadequacy of t l ~ eo~ntractorl11e i ~ r e dto
pre-qualify Llie contractors has bee11 discussed. What are tlir general and special
conditions of contract to be iuclucled in the contract docu~rientsand the tecl~nical
specificatioi1s that should be followed during the execUtia11 of the work have been
discussed in Uiis unil.
-
-

fur~lishedLlie last of tlle nlaterials.

I/ 12.15 ANSWERS TO SAQs
(d) The owner is exenipted I'ro~nthe liabilities in coill~eclionwith such claiiit~. 'i
Refer the relevail preceding text in tile u ~ dor
l other useful books on Ule topics listed in
(e) Clailns liiust be filed i11Uie appropriale court.
[lie section "Further Reading" give11at the elid of the block to gel tlie answers of the
(t3 No clain~sshall be entcrtamed after 1 year Sollowing the date on which tlle self-assessment questions.
general conlractor stopped work.
.-

12.12 LETTER OF INTENT

Sometiqles the owner may want the con1ractc)r to commence construction work before the
forliialities associntetl will1 the sigllillg of the contract c:u~he conlpleted. However, the
contractor must proceed cauliously in placing ordersfor mat.eria1 supply: iulc.l issuing
subcontracts before he has an executetl and signed contract in his posses sic.)^^. I11 such
urgency, il is common practice for the owner to autllorise tlie start ofwc)rk by a "letter of
intent", or "letter conlracl". This letter is prepared for obtai~iingthe signatures of both the
1
parties and states their il~lelltto enter into a suitable constructiol~cc.111lractat ;l later date.
After the letter is signed, it is binding on both tlie parties and provides the contractor with
sufficient autliority Lo proceed with Ule construction in the iliterilii period before the
contract is formally executed. Tl~isinterim authorisation includes clear iafonnatic~nhow
costs we to be settled in case the formal contract is wver executed an:l will often li~llit
the contractor.to cerldn procurement and coaslruction activities. Before the document is
signed, it is in the interest of th& contraclor to have it exalnir~edby his lawyer.

SAQ 11
What is the purpose of a letter of intent '?

12.13 FORMS I 1

Bidders are required to co~lipletecertain t'c)rms while they submit a tender. Some sample
forlns are il~cludedin tlie Appendices hcre wit11 the following details. but ally similar
format is also acceplable.
Appendix I Bid Form
Appendix I1 For11for Bid Security (B a~lkGuarantee)
Appendix I11 Form for Bid Security (Boiirl)

Activity
Go to some lieruby project and collect from the contract the "technical
specificalions" for placing reinforcemenl.
 Appendix I (A) Appendix I (B)

f \
ANNEXURE TO FORM OF RID
FORM OF BID Conditions of
Conlr;~ctClause
Amount of Perf(or1nrulce Security :k
(Note :The form forms part of the bid. Bidders are recluircd to fill up all the blank
spaces in the Form of Bid and Appendix). (a) Bank Guxaltec ( 1
(b) Bond ( 1
4:

I (NAME OF CONTRACT) Minimum rii~lountof Third party Insurulce ( )

Period of commencement, from
Engineer's order to commence :C ( ) days
TO : (Naine aid Address of the Einployer 1
n n l e for conlplction :I: ( )days
DESCRIPTICIN OF WORKS : ( 1-
Amount, of liquic'!ated daillages :F ( ) /cl ily
Period of Main tcnance ;I: ( )days
sir
Perccnta.ge for adjustment oC Provisional Suills :I: ( ) %J

(1) H a v i n g e x a ~ ~ l i i l ethe
d Drawings, C o n t l i t i o ~ ~osf Contract,
Specificatio~land Bill of Quilntities for t l ~ cexeculioii 01' the Percent ol' Rcleul.ion :I: ( )
above-named Works, we, the undersigned, offer lo execute, co~nplete Liinit of Retention Money ;I: ( 1
and lnaiillain the whole of the said Works in colll'or~nitywith the said
Drawings, Condiliclns of Contract, Specification and Bill of Minimum Ainounl Interim Certil'ic;ltes :I ( )
Quantities for the suill of [Rupees (in figures a i d words)] or such Time within which pi~ymentlo be ~ilade
other sum as may be ascertained in accordance with llie said after Cerll'iciite I: ( ) days
Conditions.
(2) We undertake, if our Bid is accepted lo comnience thc Works wlthin
Dat.ec'l this (lay of 1 .
[ ] days of receipt of lhe Engineer's order to commence, and to
comnplele and deliver the whole of the Works comprisetl in the
Coiltract witl~iil[ ] days calculated from the last day of llle al'oresaid Signidure in the
period in which Ule Works are to be commenced. capricily of duly aulliorises to sign Bid
(3) If our Bid is accepted we will furnish a security ill the forin of :i bank for iind 011 bellrill' of' (in block
guarantee (to be approved by you) to be joinily and scvera.lly bound capil:~ls).
with us in rul aillouilt of [ ] per ceiit of the above n;lmed suin in
accordance with the Coilditioils of Contract or a perfor~ilanceho11d in ...
a11 cunouilt (of [ ] per cent of the above llailles sum ill ncca)rcliu~ce
with Nnlne of Witness Address
the Conditions of Contract.
(4) ,We agree to abide by this Bid i'or the period [ 1 t1;iys L'ro111 the date Sigl:~ture
oCBid openiilg prescribed in Clause [ ] oi'tllc Instri~ctioiisto Biddcrs,
and it shall reinain binding upon us ruld may he acceplcd it1 any lime
before tlie expiration of lhnl period. \ J
(5) U~ilessand uiilil a11 Agreeinent is prepared rind execuletl, [his Bid,
together with your written acceptailce thereof', slli~llconstilute a
billding Contract betweell us.
(6) We u~lderstmldthat you are no1 houild lo accept the lowesl or ruly Bid
you may receive.
 Contract Procedures
Appendix I1 Appendix IIl and Docu~nents

FORM OF BID SECURITY

(BOND)
(Note : The Bidder may co~npleteeither tllis form of Bruk Guarantee or a fonll (Note : The Bidder may complete either lhis form of Bond or a tbrrn of B'ank
of Bond or provide c)lher acceptable security.) Guarantee or provide other acceptable security.)

WHEREAS, [Narne of Bidder1 (11ereinaft.ercalled "thc BOND N O . DATE BOND EXECUTED

Bidder") has submitted his bid [Date] -- for the construction By this Bond We [Namne of Bidder]
of (Name of Contract) (hereinafter called "the Bid"). (hereinafter called "the Principal") as Principal
and [Nanle of Surety] of the country of [Name of Coulltry
of Surety] ,aufllorised to tr,ulsact business in tlle country
1 KNOW ALL MEN by these presenls Ulal We [Na~neof I?alk] of of [Name of Country of Employer] (hereinafter called "the Surety")
[Name d Cc>ul~try] having our registered office at are held and firmly bound unto (Name of Employer) (hereinafter called "the
(hereinafter called "Ule Ballk") are bountl untt ) (Name Employer") as Obligee, in tile sum of [ JJo: tile payment of which
of Employer) (hereinafter called "the Employer") in the sum of sum.well and lruly to be made, we, the said Principal and Surety bind ourselves,
[ ] for wl~icl~
pay~nentwell and ttuly b) he made lo the said our successors and assigns, jointly u ~ severally,
d firmly by these presents.
Employer tl~eBank binds himself, his successors and assigns by Uiese presents. \

SEALED with our seals and dated this d a y of 20 -.

SEALED witl~Ule Co~nlllonSeal of the said balk tl~is day of -20-.

I THE CONDITIONS of his obligatio~~ arc

WHEREAS, die Principal has subnlitted a written Bid to tlle Employer dated the
--- day of - 20 , for the construction of [name of Contract]

I (i) If the Bidder withdraws his Bid during the period or bid validity (hereinafter called Ule "Bid").
specified in the For111of Bid; or

I (ii) IS the Bidder having been notified of ll~eacceptaim of his Bid by tl~e
Employer during period of bid validity;
(a) fails or refuses to execute the Forin of Agreenlelll in accordance
with the Instructions to Bidders, if required; or
(b) fails or refuses to furnish tl~ePerformance Security, in
accordance witll tl~eInstructions to Bidders,
We undertake to pay to the Employer up to the above amount upon receipt of his
first written demand, witllout the Employer having to substantiate his dem:lnd,
provided that ill his demand the Employer will ilole tllat tl~eunount clailned by
him is due lo him owing eo the occurrence of one or boll1 of the two a~nditicws,
specifying the occurred conditio~lor cot~clitio~ls.
This Gunrantee will re1n'a.h in force up to and including the date [ ] days after
the closing date for sub~nissionof bids as stated in Ule Invitation lo Bid or as
extended by you at any tirne prior to this dale, notice of which extensicw b tl~e
Bank being hereby waived, ru~dany clemiuld in respect thercof should reacl~the
Bank not later b a n tl~eabove dale.
Now, Ulerefore, tl1e conditions of lhis obligation are :
(i) If Ule Principal witlldraws his Bid during Ule period of bid validity
specified in Lhe Form of Bid; or
(ii) If the Priiicipal, baving been notified of the acceptance of his Bid by
the Emnployer during the period of bid validity:
(a) fails or refuses lo execute the Form of Agreemenl in accordance
with llle Instructions to Bidders, if required; or
(b) fails or refuses to furi~ishthe Perrormance Security iin
accordailce with the Instruclio~lsto Bidders, if requiretl,
Ltlen tl~isobligation shall rcinain in full force and effect, otherwise it shall be null
and void.
Provided however, that the Surety slid1 nol be :
(i) liable for a greater sutrl than tile specified penalty OF Ulis bond, uor
(ii) liable for a greater sum Ulan t l ~ difference
e between the amount of the
said Principal's Bid and t l ~ eamount of the Bid that is accepted by the
Employer.

I DATE

WITNESS
SIGNATURE OF THE B ANK

SEAL
I The Surety execuling this instrument hereby agrees tllat its obligatioii will relnai~i
in force up to and including the date [ 1 days after the closing date for
sublnission oE Bids as stated in the Invitation to Bid or exlelrded by the Employer
at any time prior to this date, notice of wl~ichextension(s) to the Surety being
hereby waived.

I (Signature, Name a1(1Address)

PRINCIPAL
SIGNATURE(S)
SLWTY
SIGNATURE(S)
NAME(S) AND TITLE(S) NAME(S)

~ SEAL