Contract

 What is Contract?

 An agreement which is enforceable by law is contract.

 The contract invariably follows a proposal from one
party and its acceptances by the other.
 The term contact, so far as Public Works Department is
concerned, means a written understanding by execution
of works or supply of materials or for the performance
of any service connected therewith duly accepted and
registered by the competent authority on behalf of the
Union or State Govt.
Contractors and Their Jobs:
The term contactors means private individuals,
partnership firm, public or private limited
concerns who have made such an
understanding for the execution of works,
supply of materials, or for services concerned
therewith the respective Govt.

Following categories of contractors are

generally enlisted:
a) For Buildings and Roads
b) For Sanitary Installations and Water Supply
c) For Electrical and Air-conditioning
d) For Furniture
Contractors Qualification:
1. Every contractor has desired qualification which
work he want to do
2. Each of them is expected to have the machinery
and equipment require for the job
3. Contractors should have:
The professional ability to understand and implement
the contractual obligations and subsidiary instructions
given by the Engineer-in-charge of the Department
Financially resourceful
Capacity to control labor, particularly by way of
regular payment of fair wages and observance of
labor regulations, and
Willingness for maintaining reputation and integrity.
Essentials of Contracts:
Essentials of contracts are the following particulars by which all
agreements must be made in order to constitute a valid contact:
A. The contract shall be made by parties competent to contact;
B. The contract shall be made by free consent of the parties;
C. There shall be a definite proposal and its acceptance;
D. The contract shall be made so that the considerations and
objects are lawful;
E. The meaning shall be certain;

The above causes are described briefly as below:

A. Parties Competent To Contract: A person is competent to
contract provided,
 He is of the age of maturity according to the law. A person who is
not a mature according to law can break an agreement.
 He is of sound mind.
 He is not disqualified from contracting by any law to which he is
subject.
B. Free Consent of the Parties:
 Two or more persons are said to consent when they agreed upon
the same thing in the same sense. Consent is said free when;
 If is not caused under influence
 It is not caused by committing or threatening to commit any act
forbidden by Bangladesh Penal Code, or the unlawful detaining or
threatening to detain any person to enter into an agreement.
 It is not caused by fraud
 It is not caused by misrepresentation
 It is not caused by mistake.

C. Definite Proposal And Its Acceptance:

 Term of contract must be precise and definite and there must be
no room for ambiguity or misconstruction therein. When one
person signifies to another his willingness to do anything (contract).
He is said to make a proposal. The acceptance must be absolute
unqualified and expressed in some usual and reasonable manner.
Acceptance is made by performing conditions or receiving
conditions.
◦ .
D. The Consideration or Objects Are Lawful:
 The considerations or objects of an agreement is said to be
unlawful if forbidden by law or fraudulent or of such nature that, if
permitted it would defeat the provisions of any law or involves or
implies to the person or property of another or apposed to public
policy or regarded as immoral b the count.

E. That The Meaning Shall Be Certain:

 The meaning of Agreement shall be certain or capable of being
made certain.
Type of Engineering Contracts:

Following are the different types of contracts for

execution of Civil Engineering works;
1) Item Rate Contract
2) Percentage Rate Contract
3) Lump-Sum Contract
4) Labour Contract
5) Materials Supply Contract
6) Price Work Agreement
7) Cost Plus Percentage Rate Contract
8) Cost plus Fixed Free Contract
9) Cost plus Sliding or Fluctuating Fe-Scale Contract
10) Target Contract
Besides these there are;
 Measured Contract or Schedule Contract
 Negotiated Contract
 Rate Contract
 Turnkey or Combined Engineering and
Construction Contract
 Conditional Contract
Advantage And Disadvantages of Different
Type of Contracts:

Item Rate Contract is also known as Unit-

price Contract or Schedule Contract:
 For item rate contracts, contractors are require
to quote rate for individual items of work on the
basis of schedule of quantities furnished by the
department.
 While filling up the rates, the contractors are
required to express the amount in figure and
works and also to work out the cost against each
item.
 The final total of the amount tendered for the
work is also drawn up by them.
Advantage:

 This form of contract ensures a more detailed analysis of

cost by the contractors and as much is more scientific.
 The departmental officers are to work out the schedule of
quantities against each item of work and the contractors are
to workout the rates again each item.
 The element of uncertaingy and guess is altogether absent in
item-rate contract and the authority competent to accept
the tender can easily cheek the rates with reference to is
own calculations and decide which of the tender is favorable.
 Since the contractors are to write down their individual
rates of separate items in figures as well as in works, it is not
easy to form a ring during submission of tender and to allot
a work to one of the contractors without competition.
 The contractors work out the rates of the all items of the
schedule in order to put it in the tender.
 There unworkable rated tender may be avoided and
consequently leads to smooth progress and timely
completion of a work.
Disadvantages:

 Sometime the item wise rate may be incorrect, and

sometimes such incorrectness may be provided by a
contractor in his own interest.
 Thus the lowest position of a tender cannot be known after
opening the tender in presence of all other contractors.
 As the qualities may be increased or decreased, as by wise
anticipation or perhaps outside information a contractor may
quote high prices for items that are likely to be required in
increased qualities and low prices for items likely to be
deceased or required small quantities.
 In that case the department would stand to lose heavily due
to unbalanced tender.
 Comparative statement of item rate tenders is more
elaborate and comprehensive and intelligent seruling is
required.
 A mistake in it, may lead to the work being awarded to a
contractor who is not the lowest tenderer.
Percentage Rate Contract:
Thus the department fixes up the item rates of the tender (so called
as “item rate tender”). The contractors are required to offer to carry
out the work at per with the rates shown in the specific price
schedule or percentage above or at per or below the rates indicated
in the schedule of work attached to the tender.

Advantage:

 It is convenient in so far as the lowest rate and comparative

position amongst the contractors are readily known just on the
opening of the tender.
 There is no provision to quote contractors own rate for an
individual item, benefit due to increased quality with a beneficial
rate cannot be availed of by a contractor.
 There is no possibility of tampering with the rate by a contracto: in
order to be the lowest tenderer.
 Over writings and erasing rate can be avoided by the contractors.
 Thus tender (may be lowest) is not liable to rejection due to the
above causes.
Disadvantages:
 Contractors mostly depend on guess of the quantum of percentage
of their competitors without analyzing the workable rates of the
individual items.
 Thus an uncertain or unworkable related tender may be the
lowest.
 Therefore, there is uncertainty about quality, smooth progress and
completion of the work.
 Only write down the percentage above or at par or below, it is
very easy to write such a rate in few minutes before the time of
submission of the tender.
 Thus the tenderers can easily from a ring even up to the time of
submission of tender in order to allot the work to a particular
contractor at a high rate without actual competition.
 By negotiation among the contractors two of more of them may
quote the same rate in order to get a pat of the work at a high
rate.
Lump-Sum-Contract:
Contractor are required to quote a fixed sum for execution of
a work complete in all respect is according to the drawing,
design and specifications supplied to them with the tender
within the specified time.

Advantages:
 Owner knows beforehand exactly what the work will cost.
 Detailed measurements of the work done are not required
to be recorded except in respect of additions and
alterations.

Disadvantages:
 The work be accurately and completely shown on the
drawing and described in the specifications should be
available, otherwise dispute can easily arise.
 Difficulty arises in making intermediate payments.
Labour Contract:
This is a contract where the contractor quotes rates for item work
exclusive of the element of materials which are supplied by the
department free of cost.

Advantage:
 The materials stored by the department are thus utilizes.
 Increase in the cost of the work is checked in sprite of any rise in
the prices of such materials in the market.
 Progress with standard quality of materials can be maintained.

Disadvantages:
 May be delay in obtaining the materials by the department
consequently project is delay.
 A large storage area is required to store.
 Refund of surplus departmental materials by a contractor in a good
condition, wastage, and demurrage are also involved in this type of
contract.
Materials Supply Contract or Contracts For The Supply of
Materials:
The contractors have to offer their rates for supply of the required
quality of materials, inclusive of all local taxes, vat, and carriage and
delivery charges to the specified stores within the time fixed in the
tender.

Advantage:
Contract can be made promptly and so the contractors try to take
the supply order even at less profit resulting low cost of the
materials.

Disadvantage:
Constant control for quality of materials to be received is several
batches at different times are required.
Price Work Agreement:
Only a rate is agreed upon without reference to the total quantity of
work to be done or the quality of work to be done within a given
period. In this type of agreement detailed specifications and the total
cost of the whole work to be done are mentioned.

Advantage:
 Urgent small work may be taken up for execution without inviting
tender and considerable time is saved.
 Delay to execute the work or uses inferior quality of materials or
leaves the work partially complete, another contractor may be
engaged at any time.

Disadvantage:
 Due to small work approved contractors find little interest.
Cost Plus Percentage Rate Contract:
The contractor is paid the actual cost of the work, plus an agreed
percentage in addition, to allow for profit. This type of contract is
generally adopted when conditions are such that labour and materials
rates are liable to fluctuate.

Advantage:
 Contracts can quickly be drawn up and agreed ad also work of an
urgent nature put in hand completed without delay.
 It is suitable when work competitive rate due to uncertainty and
fluctuation in the market rates of labour and materials.

Disadvantage:
 Unsuitable for works where the necessary staff is not available.
 Contractors make the cost as high as possible by wasting materials
and employing if efficient workmen.
Cost Plus Fixed Fee Contract:
The contractor is paid by the owner an agreed fixed lump-sum amount over and
above the actual cost of the work. This fixed fee shall cover overheads and profit
to the contractor.
Advantage:
A contractor shall naturally try to complete the work speedily order to earn his
fee as soon as possible.
Disadvantage:
Contractor shall try to complete the work as early as possible even by purchasing
materials at higher rate and engaging labour at charges and thus the owner may
lose a reasonable amount to carry out the work of this type of contract.

Cost plus Sliding or Fluctuating Fee for Contract:

The contractor is paid by the owner the actual cost of construction plus an
amount of fee inversely variable according to the increase or decrease of the
estimated cost agreed first by both the parties.
Advantage:
Actual cost is thus lower and lower so both the owner and the contractor will be
benefited.
Disadvantage:
Estimated cost must be very accurately determined.
Target Contract:
The contractor is paid on a cost-plus percentage basis for work
performed under this contract and in addition he receives a percentage
plus or minus on savings or excess effective against either a prior agreed
estimate of total cost or a target value arrived at by measuring the work
on completion.

Advantage:
Contractor is encouraged to use his skill and experience in keeping the
cost as low as possible.
Disadvantage:
Contractor may show higher cost of construction and thus the gains
more amount even covering the penalty for excess expenditure.

Measured Contract or Schedule Contract:

Does not need the detailed measurement of different items of works
after its completion, but only measure the floor area.

Negotiated Contract:
Work is awarded on contract by mutual negotiation between the parties
without call of tender.
Rate Contract:
Invites tender and fixed rates of manufactured articles or materials
and makes rate contract with the manufacturer or suplier to supply
the materials for a certain period which is known as rate contract.

Turn-Key Job Combined Engineering and Construction

Contract:
Owner contemplating a construction project desires to deal with only
one party for all services, both engineering and construction, in
connecting with the work. This is a so-called “turn-key or package”
job.

Conditional Contract:
A contract is said to be conditional if its performance depends upon
some future or uncertain events or contingency, i.e. flood of fire
insurance.