Contract Management

Methods of work execution

National Competitive Bidding
- All the eligible bidders are invited to participate in bidding.
- Tender noticed is published in national newspaper giving a period
of at least 30 days.
- It is necessary if the estimated amount of work is greater than 20
lakhs or estimated goods is greater than 10 lakhs.

International Competitive Bidding

- Eligible bidders from all over the world are invited if the amount
of work cannot be performed by domestic contractors.
- Tender notice should be published in national newspaper giving
at least a period of 45 days.

Sealed Quotation
- According to Public Procurement act, the goods and other
services valuing up to 1 million rupees and construction work
valuing up to 2 million rupees may be procured by inviting a
sealed quotation. - Sealed quotation means the statement,
accompanied by the quoted price, in a sealed envelope, submitted
by an interested person, firm or organization in respect of
provision of any goods or other services in response to a notice of
a public entity.

- The provision related to sealed quotation are as follows:

1. Before inviting a sealed quotation, a form stating every
specification clearly shall have to be prepared.
2. A notice shall be published in national or local newspaper giving
at least a period of 15 days.
3. The sealed quotation, once submitted, cannot be withdrawn or
amended.
4. The sealed quotation with the lowest cost estimate shall have to
be approved.

Direct Procurement
- Capital goods valuing up to 3 lakhs and construction work
valuing up to 5 lakhs rupees may be directly procured.
- Direct procurement involves procuring the necessary services
from the supplier directly without any bidding or sealed quotation
process.

Contract
- Contract is an agreement between two or more than two persons
to do or not to do something, which can be enforceable by law.
- Contract Act is formulated in 2056 BS.
- After entering a contract, if any party breaches the contract, legal
action can be taken as per the contract act 2056.

Elements of a Contract
1. Offer and Acceptance:
- Contract exists whenever a person advances a proposal to a
person, who accepts it.
- Offer can be specific or general.
- Contract does not exist if no acceptance is received within the
specified period of time.
- The person who offers a proposal cannot bind the person with the
statement that if the notice of rejection is not given then he shall be
deemed to accept the offer.
- No contract exists if the offeror dies or become insane before the
proposal is accepted.
2. Consideration:
- It includes the cause, motive or impelling influence that induces
a contracting party to enter into contract.
- It is defined as something with value that is exchanged by the
contracting parties.

3. Capacity to Contract:
- For a contract to be legal and valid, all the parties entering into
contract must be capable.
- According to contract act, idiots, drunkards, insane and children
below 16 years are not capable of signing a contract.

4. Lawful Purpose:
- The contract is invalid if the two parties agree to perform a job
against the law of country.

5. Possibility of Performance:
- If two parties agree up on impossible jobs, the contract is invalid.

6. Free Consent:
- Contract should not involve fraud, undue influence and deceit.

7. Certainty:
- The contract that cannot be carried out because of various reasons
are not valid.

8. Legal Relationship:
- There should be a clear intention of parties to enter into a contract
with all the necessary documents.
9. Written:
- Verbal agreement cannot be considered as a contract. -
Contract should be written agreement.

10. Two or More Competent Parties:

- Contract is made between two or more parties.

Types of Contract
1. Valid Contract:
- If all the elements of contract are present, it is said to be a valid
contract.

2. Voidable Contract:
- The contracts that will not be valid if the concerned party desire
to make it void are called voidable contracts.
- The following contracts are voidable:
a) Forceful contract
b) Contract due to undue influence
c) Contract involving fraud or misstatement.

3. Void Contract:
- A contract that is not considered as a valid contract is known as
void or null contract.
- The following contract are void:
a) Contrary to statutory law
b) Impossible job performance
c) Contrary to public policy and welfare
d) Signed by incompetent parties
Importance of Contract
1. It makes legal agreement between the parties.
2. It specifies what the contractor must do and what the owner
must pay.
3. It specifies what will be done if any party fails to perform.
4. It defines what is and what is not included in a contract.
5. It specifies how the contract will be terminated.
6. It states the responsibilities of all the parties involved.

Tender (Bid)
- Tender is an offer in written by the person who offers the tender
to execute some specified work or to supply some specified goods
at a certain rate within fixed time frame under certain conduction
of agreement.
- It is the first step in formulation of contract.

Necessity of Tender
1. Tender is performed to select the best contractor.
2. It helps to achieve quality output.
3. It helps in gaining work at competitive price.
4. It maintains transparency.

Tendering Process
1. Determine tender process:
- The organization requesting the tender determines the type of
tender to be used.
- It may be open tender, select tender, multi stage tender or
invited tender.
2. Prepare request for tender:
- The request for tender is prepared which must include what is
required, the contractual requirements and how the contractors
should respond.
- It is the invitations for the suppliers to provide a competitive offer
to win a contract.
- It may be RFT, RFP, EOI, CFB or ITT.
3. Invite tender:
- The invitations are sent to the contractors.
4. Suppliers respond:
- The supplier should collect all the required documents.
- The supplier then submits the response in the right format on time
and at the right location.
5. Evaluation and selection:
- Each tender will be checked for compliance.
- The tender will then be evaluated against the criteria specified in
the tender documentation.
- The tender that offers the best value of money will be selected.
6. Notification and Debriefing:
- The successful contractor will be notified and advised to write the
outcome.
- The unsuccessful tenderers are also advised and offered a
debriefing interview.
7. Contract Establishment:
- A formal agreement between the successful contractor and the
relevant agency is established.

Tender Notice
- Tender notice is the information inviting bids from competent
contractors.
- It should be published in national newspapers.
- It should include all the necessary detail information about the
project.
Information in Tender Notice
1. Name and address of the public entity inviting bid.
2. Nature of work and its location.
3. Place of delivery of goods to be supplied, the services to be
delivered and the construction work to be performed. 4. The
amount of bid security and validity period of the bid.
5. Data, time and place where and when the tender document is
available.
6. Cost of tender document.
7. The place, manner, deadline for the submission of the bidding
documents.
8. Provision of e-bidding and its process
9. The place, date and time for the opening of bids
10. Expected date of acceptance of successful bids

Bidding Document
- Bidding document is a document prepared by the concerned firm
making invitation to bid for submission by bidders by filling up the
price or rate.
- It includes instructions for bidders, specifications, evaluation
criteria, conditions of contract and other similar documents.
Earnest Money
- Earnest money is the amount of money deposited while bidding a
tender as a guarantee of a party's interest in performing the work
awarded to him/her.
- Bidder shall have to submit the bid along with bid security of 2 to
3 % of the estimated amount of the bid in cash or equivalent bid
security issued by a commercial bank.
- Earnest money is refunded to the unsuccessful bidders.
Performance Security
- Performance security is the amount of money deposited by a
successful bidder as a security for satisfactory performance. -
Successful bidder should submit 5 % of the contract amount as
performance security.
- It is refunded after defect liability period.
- It is forfeited if the contractor fails to perform his/her duty.

Pre-Qualification
- Pre-qualification is the process in which assessment is done by
the implementing agency to check the suitability of the firms to
carry out a particular contract before inviting for a bid.

- It is the process of short listing of eligible bidder that ensures that

the invitation to bids are provided to only perspective bidders with
adequate capability and resources to perform the contract. - It
includes assessment with respect to experience, past performance,
capabilities, financial position and litigation (process of taking
legal action) history.