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SALIENT ISSUES IN CONTRACT ADMINITRATION ByEngr. M. Mazhar-ul-Islam

Convener, PEC Act & Bye-laws Committee

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Procurement & Contract

Management means organization and coordination of activities Procurement is a process of buying and selling the products Administration generally during currency of contract More particularly during supervision stage Procurement is realized through a Contract A contract is an agreement enforceable by law Essentials of a valid contract: (a) competent to contract (b) free consent (c) lawful 5/22/12 considerations (d) lawful objects

Contract stages
Administrative activities for handling of contracts:

Invitation to Bid Bid Evaluation Award of Contract Implementation of Contract Measurement of completed work Computation of payments Modifications in the Contract etc.

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What is Engineering Contract

Engineering Contracts for goods, works and services defined under Section-2(XXV) of PEC Act 1976 for Professional Engineering Works Agreement = Proposal + Acceptance Bidding/Tendering is to seek proposal Principles conforms to Contract Act 1872 All contracts are agreements but all agreements are not contracts

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Type of Contracting
Conventional Contract EPC contract Design and Build Contract Turn Key Contract BOT Contract Fast Track Contract Cost Plus Fixed Fee Contract

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Pakistani Laws on Contract

1. The Contract Act, 1872 2. The Arbitration Act, 1940 3. The Limitation Act, 1908 4. The Specific Relief Act, 1877 5. The Partnership Act, 1932 6. The Stamp Act, 1899 7. Pakistan Environmental Protection Act, 1997 8. The Registration Act, 1908 9. Income Tax Laws 10.Law of Conveyancing 11.Land Acquisition Act, 1894 12.Labor Laws
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AWARD OF CONTRACT
Award to lowest evaluated responsive bidder Conditional acceptance of NOCA Status of NOCA No agreement without performance security Agreement to be signed within 14+14 days Agreement not to change bidding provisions Amendment in Contract subject to the limitations

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Variation of Works
Variation in quality and quantity Adjustment due to measurement is not a variation Variation to be effected with issuance of variation order V.O to be issued by Engineer with prior concurrence of the Employer Variation exceeding 15% needs negotiated settlement No limitations in adjustment of price for V.O
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Extension of Time
Original Schedule should be measured and realistic Unrealistic schedule leads to poor quality and non-performance of Contract Right-of-Way, Non Payment etc. are generally Employers default Contractors right to claim financial compensation, although conditional EOT is granted when Employer is in default Deduction of liquidity damages for the delay attributable to the Contractor
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Payment to Contractor
IPCs within 30 days after Joint Verification Final Payment within 60 days after Joint Verification of Final Payment Certification Price Adjustment due to increase or decrease of cost can be made concurrently or subsequently Delayed Payment Compensation Kibor +2% and Libor +1% incase of local and foreign currencies

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Dispute Adjudication
In a contract a dispute is likely Better documentation, less dispute Engineers role in dispute resolution Mode of Dispute Adjudication Adjudicator The Engineer Dispute Board (DAB) Amicable Settlement Arbitration (Arbitration Act 1940) PEC Rules of Consultation & Arbitration
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Miscellaneous issues
Blacklisting of Contractor Only one amount, Secured advance or Financial assistance, can be granted Insurance Guarantee in case of Bid Security and Performance Security Insurance Security for Advance Payment Guarantee is at the option of the Employer

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Thank you

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