Important Guidelines on Contract Management at Field How

Important Guidelines on Contract Management at Field

How to Execute Contracts? “Success of Engineer is in getting the Work done” Indian Contract Act General Conditions of Contract (GCC) (Schedule of Items (SOR/NS), Qty, Rate and Specifications) Schedule Of Powers (SOP) Circulars Fair Approach

Why GCC is required • Rules of The Contract – Before the game starts During Execution of Contract After Completion of Contract • Written Procedures for Uniform Implementation • To avoid mistakes • Each Para is numbered for easy reference • Applicable to Both Railways and Contractors Uniformly If any of the GCC Clause is to be varied , the same shall be done with concurrence of Finance (PFA) and approval of GM, before calling tender; unless allowed by Railway Board, explicitly.

GCC 2014 GCC 2018 (Nov’ 18) GCC-2019 (issued on 06/09/2019) Current is GCC- July 2020 (16. 07. 2020) 4

GCC-Contents Part-I: Regulation for Tenders and Contract Para 5. Subject Earnest Money Part-II: Standard General Conditions of Contract Para 4. 16. 17 -A. 17 -B. Subject Communication To Be In Writing (1)Security Deposit (2)Recovery Of Security Deposit (3)Interest On Amount (4)Performance Guarantee Extension Of Time In Contracts (i) Extension Due To Modification (ii) Extension For Delay Not Due To Railway/Contractor (iii) Extension Of Time For Delay Due To Railway Extension Of Time For Delay Due To Contractor

PART-I of GCC REGULATIONS FOR TENDERS AND CONTRACTS 6

ORDER of PRECEDENCE of Documents : Where there is any discrepancy, conflict or contradiction, with regard to conditions of contract, the following shall be the order of precedence: i. Letter of Award ii. Schedule of Items, Rates & Quantities iii. Special Conditions of Contract iv. GCC with ACS issued up to date of inviting tender or as otherwise specified in the tender documents) In case of any conflict between GCC and SCC, then SCC prevail v. Technical Specifications (IRUSS / CPWD) as given in tender documents vi. Drawings This is to be clearly stated in the tender document

1. 2 Definition: • “Railway” : President of the Republic of India or the Administrative Officers of the Railway or Successor Railway authorized to deal with any matters. • “ENGINEER” : Divisional Engineer or the Executive Engineer in executive charge of the works, includes the superior officers of OL and S&C organisations i. e. the SR DEN / Dy. CE • "Engineer's Representative" shall mean the Assistant Engineer in direct charge of the works and shall include any Sr. Section /Junior Engineer of Civil. • "Contractor" shall mean the Person/Firm/Co-operative Society or who enters into the contract with the Railway and shall include their executors, administrators, successors and permitted assigns. • "Contract" shall mean and include the Agreement of Work Order, the accepted Schedule of Rates, the Standard GCC, the Special Conditions of Contracts, if any; the Drawing, the Specifications, the Special Specifications, if any and Tender Forms, if any.

Communication To be In Writing: (Clause 4) All notices, communications, reference and complaints by the Railway (the Engineer or the Engineer's Representative) or the Contractor shall be in writing or e-mailed on registered e-mail IDs. ‘Not in writing’ shall not be recognized. 9

SECURITY DEPOSIT (Clause 16 of Part-II of GCC) 16. (1) • “For the due and faithful fulfillment of the contract (all the contract conditions) by the contractor” • EMD to be converted into SD, 5% of contract value. • Security Deposit may be deposited by the Contractor before release of first on account bill in cash or Term Deposit Receipt issued from Scheduled Bank, or may be recovered at the rate of 6% of the bill amount till the full Security Deposit is recovered. (GCC July 2020) 10

16. (2) (i) Refund of Security Deposit: GCC July 2020 shall be returned to the Contractor along with /after : • Final Payment of the Contract and • Execution of Final Supplementary Agreement or Certification by Engineer that Railway has No Claim on Contractor and • Maintenance Certificate issued, on expiry of the maintenance period as per clause 50. (1), in case applicable. Approval of competent authority. . . . competent to sign the contract. (But not lower than JAG for maintenance Certificate. ) 11

SECURITY DEPOSIT (Clause 16. 2 of Part-II of GCC July 2020)16. (2) (ii) Forfeiture of SD • Whenever the contract is rescinded as a whole …the SD already with railways under the contract shall be forfeited. • In case the contract is rescinded in part or parts under clause 62 (1), SD shall not be forfeited. Clause 16. (2) (ii) of Part-II of GCC July 2020 • No interest shall be payable upon the EM or SD or amount payable to the contractor…… But Govt. securities deposited in terms of Sub-Clause 16. (4)(b) will be payable with interest accrued thereon. 12

16. (4) PERFORMANCE GUARANTEE (Clause 16(4) of Part-II of GCC) • PG @ 5% (3%) of contract value. (As per ACS 1 to GCC 2020) • To be deposited within 21 days of issue of LOA and before signing of agreement. • Extension to the time of submission of PG beyond 21 days can be given by the authority competent to sign the agreement (upto 60 days), however a penal interest @12% per annum would be applicable for delay beyond 21 days i. e. 22 nd day after the date of issue of LOA. •

PERFORMANCE GUARANTEE (Clause 16(4) of Part-II of GCC) • To be valid initially till date of completion plus 60 days. • In case of extension of date of completion, to be valid till revised date of completion plus 60 days Value of PG would not change for a variation of upto (+/-)25% • Beyond 25% increase in contract value, additional PG @5% of contract amount in excess of original agreement value to be deposited. • If the value of contract decreased by more than 25%, PG to 5% of decrease value shall be return to contractor, on submission of request , duly safeguarding the interest of Railways. 14

PERFORMANCE GUARANTEE • 16. 4(e) The Performance Guarantee (PG) shall be released after physical completion of the work based on 'Completion Certificate' issued by the competent authority stating that the Contractor has completed the work in all respects satisfactorily. • (f) Whenever the contract is rescinded, the Performance Guarantee already submitted for the contract shall be encashed in addition to forfeiture of Security Deposit available with railway. • 16. 4 (g) PG shall be encashed only in following cases: • Failure by contractor to extend validity of PG. • Failure to pay the President of India any amount due either as agreed by contractor or determined under any of the clauses/conditions of the agreement within 30 days of service notice to this effect. • Contract being determined or rescinded under clause 62 of the GCC.

17–A Extension of Time In Contracts (Cl. 17 -A) 17(A)(i) Extension due to Modification: • On account of increase in magnitude of work. • Extension request from contractor when cause arises, but not beyond less than 1 month before D. O. C. 17(A)(ii) Extension for delay Not due to Rly or Contractor: • Notice of happening within 15 days. • Extension can be given on request. • No compensation. Same rate, terms & conditions. 17(A)(III) Extension for delay due to Rly. • Delay in handing over site, drawings, to hand over the Contractor possession of the lands etc • Rly. To grant extension • No damage or compensation 16

17–B Extension Of Time In Contracts 17 B. Extension of Time with Liquidated Damages (LD) for delay due to Contractor: The time for execution of work shall be deemed to be the essence of the contract. • If contractor fails to complete the works within the specified time for the reasons other than those Clause 17 and 17 -A, the Railway may, allow the contractor further extension of time. (Proforma at Annexure-VII) • For extension, recover from contractor, as agreed damages and not as penalty, for each week or part of the week. • Liquidated damages (LD) shall not exceed 5% of Contract Value.

17(B) For Delay due to Contractor: Rate of Liquidated Damages Duration of Extension of time as % of Original completion period including period of extension of DOC granted under section 17 A(i) Upto 20% Rate as % of contract value for each week or part of the week 0. 01% to 0. 10% as decided by Engineer Above 20% upto 30% 0. 20% Above 30% upto 40% 0. 30% Above 40% 0. 50% Liquidated Damages (LD) shall not exceed 5% of Contract Value. Provided further, if the Railway is not satisfied that the works can be completed within further extension of time allowed, can rescind the contract under Clause 62, whether or not actual damage is caused by such default.

17–C Bonus for early Completion Contractor entitled for a bonus in case of open tenders having • Value more than Rs 20 crore and original period of completion 12 months or more, • when there is no reduction in original scope of work by more than 10%, and no extension granted on either railway or Contractor’s account, • @ rate of 1% for each 30 days early completion of work. • The period of less than 30 days be ignored while working out. • The maximum bonus be limited to 3% of original contract value. • The completion date shall be reckoned as the date of issuance of completion certificate by engineer.

Rates For Extra Items Of Works : (Clause 39) Any item of work not included in Schedule of Work, shall be executed at SOR rates modified by the tender percentage and for Non-SOR items, at rate agreed upon between the Engineer and the Contractor before the execution of such items of work and the Contractor shall be bound to notify the Engineer at least seven days before the necessity arises for the execution of such items of works that the accepted Schedule of Rates does not include rate or rates for the extra work involved.

Variations in Extent of Contract 21

41. Modification To Contract To Be In Writing After the contract documents have been signed, the modifications shall be made in writing and signed by the Railway and the Contractor. No work shall proceed under such modifications until this has been done. Any verbal or written arrangement for abandoning, modifying, extending, reducing or supplementing the contract or any of the terms shall be deemed conditional and shall not be binding on the Railway unless and until the same is incorporated in a formal instrument and signed by the Railway and the Contractor. 22

Variation in Quantities : (Clause 42(2)) Unless otherwise specified in the special conditions of the contract, The accepted variation in quantity of each individual item of the contract would be upto 25% of the quantity originally contracted, except in case of foundation work. 42(2)(ii)Contractor shall be bound to carry out the work at the agreed rates and shall not be entitled to any claim or any compensation whatsoever upto the limit of 25% variation in quantity of individual item of works. In case of earthwork, the variation limit of 25% shall apply to the gross quantity of earth work and variation in the quantities of individual classifications of soil shall not be subject to this limit. 23

Variation in Quantities : (Clause 42(2)) In case of foundation work, no variation limit shall apply and the work shall be carried out by the contractor on agreed rates irrespective of any variation. For SOR items -limit of 25% would apply to value of SOR schedule as a whole and not on individual SOR item However, in case of NS items, the limit of 25% would apply on the individual items irrespective of the manner of quoting the rate (single percentage rate or individual item rate). 24

Variation in Quantities : (Clause 42(2)) 42(2)(iii) In case an increase in quantity of an individual item by more than 25% of the agreement quantity is considered unavoidable, the same shall be executed at following rate. • Quantities in excess of 125% but up to 140% shall be paid at 98% of the awarded rate; • Quantities in excess of 140% but up to 150% shall be paid at 96% of the awarded rate; • Variation in quantities of individual items beyond 150% will be avoided and would be permitted only in exceptional unavoidable circumstances and shall be paid at 96% of awarded rate. 25

Variation in Quantities : (Clause 42(2)) 42(2)(iii)(d) Variation in Minor Value Item: An item whose original agreement value is less than 1% of the total agreement value. The limit for varying quantities for minor value items shall be 100% (as against 25% prescribed for other items) and to be paid at the awarded rate. • Variation of 100 to 200% of agreement quantity- to be paid at 98% of the awarded rate. • Variation beyond 200% will be avoided and would be permitted only in exceptional unavoidable circumstances and shall be paid at 96% of awarded rate. 26

Schedule of Powers

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Variation in Quantities : MODEL SOP (item no. 9) • For tenders accepted at zonal level, variation will be approved by the authority in whose power the revised value of agreement lies. • For increase in quantity of individual items upto 150%, only prior approval of TAA, not below the rank of JAG, is required. (Without finance concurrence) • Variation beyond 150% (for individual items) will be avoided and would be permitted with concurrence of Associate Finance and shall be paid at 96% of awarded rate. • Supplementary agreements needs to be vetted by Associate Finance.

Variation in Quantities : MODEL SOP (item no. 9) • Execution of quantities beyond 150% of overall agreement value should not be permitted and, if found necessary, should be only through fresh tender or by negotiation with existing contractor, with personal concurrence of PFA and personal sanction of GM. • For Zonal contracts, variation should not exceed 25% of contract value. • The aspect of Vitiation if any, shall be governed as per Railway Board’s Transformation Cell Letter. 31

Variation in Quantities : MODEL SOP (item no. 9 B) • Saving in Individual competent to sign concurrence. • Items upto 25% by agreement, without Executive Finance

Variation in Quantities : MODEL SOP-2018: Corrigendum No. 1 dt 17/10/18 • Vetting of Corrigendum/ addendum in case of variation is not required when all following conditions are being satisfied: Value of new items (SOR/NS) is < Rs. 5 Lakh % change in overall contract value < 10% % change in all individual NS items < 25% (100% for minor items) Not in GCC. Finance concurrence is not required subject to : value of new items is less than Rs. 5 lakh or % change in original contract value is less than 10% Full power with Finance concurrence.

Variation in Quantities : excess Variation < (+)25% on Individual items (Existing NS item. / SOR Schedule as a whole) Overall CV<10% Variation > (+)25% upto (+)50% on Individual items Variation > (+)50% on Individual items & subject to overall value to be within +50% CV >10% Admn. App. Of TAA (as per Revised CV) Not lower than JAG for Vetting of Corrigendum / addendum Finance Concurrence Sanction of Accepting Authority as per Revised Contract value (Signing of Subsidiary Agreement) Payment to contractor

Variation in Quantities : Savings Variation < / = (-)25% on Variation > (-)25% on (i)Individual Existing NS item. (ii)SOR Schedule as a whole (i) Individual Existing NS item. (ii) SOR Schedule as a whole (iii) Overall Agreement Value Approval of Contract Signing Authority Admn. App. Of AA (Not lower than SAG) [on Original CV] Vetting of Corrigendum / addendum) Finance Concurrence Sanction of VS by AA on Revised Contract Value (Signing of Supplementary / Subsidiary Agreement)

Introduction of New SOR items: MODEL SOP (item 7) MODEL SOP-2018: Corrigendum No. 1 dt 17/10/18 • The items of work proposed for inclusion should be relevant to the main scope of work. • Revision to contract value shall be proposed by way of variation statement. • Not in GCC. • Divisional officers SG/JAG/SS (independent Charge) Full Powers • Finance concurrence is not required subject to : value of new items is less than Rs. 5 lakh or % change in original contract value is less than 10%. • Full power with Finance concurrence.

Introduction of New NS items: MODEL SOP (item 8) • Not in GCC. • New NS items in a contract can be introduced without Finance concurrence to a maximum ceiling of Rs. 5 lakh or 10% of original contract value in a contract (whichever is less) • Full power with Finance concurrence. • Rate of such NS items accepted without Finance concurrence cannot be quoted as LAR. Only rates obtained through competitive tender process can be adopted as LAR.

Circulars – not part of CA unless specifically agreed to. Circulars issued after Cut off date of tendering cannot be imposed Suo-motu on Contract unless with mutual consent Fair Approach – Railway and Contractor are equal partners to the Work and unilateral Change of agreed conditions is not legally valid.

THANKS 39