Engineering, Economics,

Estimation and Costing

Ms. Priyanka
Ms. Akanksha Pathania

Civil Engineering SVIET,

KESHAV BOOKS
DELHI-110032
Engineering Economics, Estimation & Costing

© Authors

First Published- 2023

ISBN : 978-93-87393-63-9

Price : 1325/-

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 PREFACE

I take an opportunity to present the text book entitled “Engineering, Economics, Estimation and
Costing” to the students of Civil Engineering. The main objective of this book is to present the
subject matter in a most concise, compact, to the point, simple and lucid manner.

Each chapter gives important points, practice questions and questions asked in board
examinations. The book covers the concept of Macro Economics, Cost Control, Investment
Analysis, Tender, Specifications, Estimation, Bar Bending Schedule, Arbitration, Easement Act,
Business Law, Business Environment, Contracts, Mass Haul Diagram and Mechanical, Electrical
and Plumbing (MEP).

The advice and suggestions of our esteemed readers to improve the text are most welcomed, and
will be highly appreciated.

Ms. Priyanka

Ms. Akanksha Pathania

 CONTENTS

Chapter Book Chapter Title Author Name Page No.

No.
Mr. Arun Kumar
Assistant Professor, Swami Vivekanand
Macro Economics Institute of Engineering & Technology
6-12
1. Ms. Gurpreet Kaur
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Akanksha Pathania
Assistant Professor, Swami Vivekanand
IS-LM Model Institute of Engineering & Technology
13-17
2. Mr. Tajamul Saqib
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Aaseesdeep Singh
Assistant Professor, Swami Vivekanand
Cost Control and Investment Analysis Institute of Engineering & Technology
18-23
3. Mr. Sandeep Chauhan
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Rupali Gupta
Assistant Professor, Swami Vivekanand
Elements of a Control System Institute of Engineering & Technology
24-31
4. Ms. Omkar Kaur
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Priyanka
Assistant Professor, Swami Vivekanand
Tender Institute of Engineering & Technology
32-36
5. Ms. Sakshi Sharma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Navdeesh Kaur
Assistant Professor, Swami Vivekanand
Tendering Process Institute of Engineering & Technology
37-42
6. Ms. Gurpreet Kaur
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Ruchika Sharma
Assistant Professor, Swami Vivekanand
Specifications Institute of Engineering & Technology
43-53
7. Ms. Lata Duggal
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Harish Sharma
Rate Analysis Assistant Professor, Swami Vivekanand
54-65
8. Institute of Engineering & Technology
Ms. Vishali

3
 Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Nisha Chawla
Assistant Professor, Swami Vivekanand
Estimation Institute of Engineering & Technology
66-70
9. Ms. Sonia Gundwani
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Kanchan Verma
Assistant Professor, Swami Vivekanand
Methods of Estimation Institute of Engineering & Technology
71-74
10. Ms. Richa Verma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Tarandeep Singh
Bar Bending Schedule Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
75-80
11. Mr. Sameer Malhotra
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Sameer Malhotra
Components of Bar Bending Schedule Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
81-86
12. Ms. Nisha Chawla
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Avinash Thakur
Assistant Professor, Swami Vivekanand
Overview of Workers’ Compensation Institute of Engineering & Technology
87-92
13. Ms. Ruchika Sharma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Lata Duggal
Assistant Professor, Swami Vivekanand
Workers’ Compensation Law Institute of Engineering & Technology
93-95
14. Mr. Avinash Thakur
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Sahil Garg
Assistant Professor, Swami Vivekanand
Arbitration Institute of Engineering & Technology
96-99
15. Mr. Arun Kumar
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Abha Sharma
Assistant Professor, Swami Vivekanand
Minimum Wage Act 1948 Institute of Engineering & Technology
100-106
16. Mr. Aaseesdeep Singh
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Richa Verma
Easement Act Assistant Professor, Swami Vivekanand 107-112
17. Institute of Engineering & Technology

4
 Ms. Rupali Gupta
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Sonia Gundwani
Assistant Professor, Swami Vivekanand
Business Law Institute of Engineering & Technology
113-120
18. Mr. Harish Sharma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Priyanka
Assistant Professor, Swami Vivekanand
The Partnership Act 1930 Institute of Engineering & Technology
121-126
19. Ms. Akanksha Pathania
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Vishali
Assistant Professor, Swami Vivekanand
Types of Partnership Firms Institute of Engineering & Technology
127-134
20. Mr. Sahil Garg
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Omkar Kaur
Assistant Professor, Swami Vivekanand
Business Environment Institute of Engineering & Technology
135-138
21. Ms. Abha Sharma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Sandeep Chauhan
Assistant Professor, Swami Vivekanand
Elements of Business Environment Institute of Engineering & Technology
139-145
22. Ms. Richa Verma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Gurpreet Kaur
Assistant Professor, Swami Vivekanand
Contracts Institute of Engineering & Technology
146-155
23. Ms. Kanchan Verma
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Ms. Sakshi Sharma
Assistant Professor, Swami Vivekanand
Mass Haul Diagram Institute of Engineering & Technology
156-160
24. Mr. Tarandeep Singh
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
Mr. Tajamul Saqib 161-166
Mechanical, Electrical and Plumbing Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology
(MEP)
25. Ms. Priyanka
Assistant Professor, Swami Vivekanand
Institute of Engineering & Technology

5
 CHAPTER 1
MACRO ECONOMICS
Mr. Arun Kumar1 Ms. Gurpreet Kaur2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

1.1 WHAT IS MACROECONOMICS?

Macroeconomics is a branch of economics that studies how an overall economy—the markets,

businesses, consumers, and governments—behave. Macroeconomics examines economy-wide
phenomena such as inflation, price levels, rate of economic growth, national income, gross
domestic product (GDP), and changes in unemployment.

1.2 BASIC CONCEPTS OF MACROECONOMICS

Macroeconomics encompasses a variety of concepts and variables, but there are three central
topics for macroeconomic research. Macroeconomic theories usually relate the phenomena of
output, unemployment, and inflation. Outside of macroeconomic theory, these topics are also
important to all economic agents including workers, consumers, and producers.

1.3 HISTORY OF MACROECONOMICS

While the term "macroeconomics" is not all that old (going back to the 1940s), many of
macroeconomics’ core concepts have been the study focus for much longer. Topics like
unemployment, prices, growth, and trade have concerned economists since the beginning of the
discipline in the 1700s. Elements of earlier work from Adam Smith and John Stuart
Mill addressed issues that would now be recognized as the domain of macroeconomics.

In its modern form, macroeconomics is often defined as starting with John Maynard Keynes and
his book The General Theory of Employment, Interest, and Money in 1936. Keynes explained
the fallout from the Great Depression when goods remained unsold, and workers were
unemployed.

Throughout the 20th century, Keynesian economics, as Keynes' theories became known,
diverged into several other schools of thought.

Before the popularization of Keynes' theories, economists did not generally differentiate
between micro- and macroeconomics. The same microeconomic laws of supply and demand

6
that operate in individual goods markets were understood to interact between individual markets
to bring the economy into a general equilibrium, as described by Leon Walras.

The link between goods markets and large-scale financial variables such as price levels and
interest rates was explained through the unique role that money plays in the economy as a
medium of exchange by economists such as Knut Wicksell, Irving Fisher, and Ludwig von
Mises.

1.4 FACTORS OF MACROECONOMIC

10 macroeconomic factors to consider:

Macroeconomic factors are the broad indicators of financial growth or decline that affect an
economy. Economists, financial analysts and other professionals who help report on the
financial health of a country study these factors. These factors also aid policymakers and
economic advisers who work with governments, businesses and international markets. These
factors include:

1. Business cycle

The business cycle is the predictable economic patterns of growth, recession and recovery. This
cycle impacts economic markets, and economists observe it through periods of low
unemployment and high production rates that turn to high unemployment and low production
and back to economic growth. In a rising economy, the business cycle indicates a constant
growth of potential output over time.

2. Economic growth

Economic growth refers to an increase in aggregate production in an economy over time. As a

result, the value of these products and services rises, leading to higher business profits. It
frequently results in greater stock values and increased employment. Macroeconomists try to
understand the factors that either promote or slow economic growth so they can respond by
supporting economic policies that promote development, progress and rising living standards.

3. Fiscal policy

Large financial institutions in both the public and private sectors formulate fiscal policies. Large
banks and government agencies make decisions that impact interest rates, inflation and federal
budgets. This guides the money circulation within an economy.

Inflation refers to the general rise of the price level in an economy. As inflation rises and falls,
the currency's value also rises and falls. Studying inflation lets economists know what's causing
it and how it affects people, businesses and the currency itself.

7
Interest rates are another aspect. Individual banks and lenders can set their interest rates, but the
United States Federal Reserve sets interest rates on government bonds and securities. Interest
rates help determine the percentage of the principal lending amount that a borrower repays as
the cost of borrowing.

4. Government spending and budget

Governments play an important part in macroeconomics. For instance, many governments hold
trillions of dollars in assets aside from available cash, and the government's spending on
infrastructure can affect supply chains and other areas. Governments can also issue currency.

5. Gross domestic product

This refers to the total value of all the goods and services produced in an economy in a year.
GDP allows economists to understand an economy's profitability, what goods and services do
well or poorly and how the GDP affects the currency's value. A country's main industries also
influence GDP. Producing goods from these facilities contributes to a nation's economic
fluctuations. This macroeconomic factor can also indicate market volatility.

National income is another related term that influences macroeconomics. It's the combined
amount of money that a country generates within its economy. This figure helps economists
measure economic growth and citizens' living standards, including income distribution.

6. International trade

The international trade of goods and services impacts a country's economic health by indicating
its currency's value and demand worldwide. Economies that export more goods than they import
through international trade may raise the value of their currency since their goods are in more
demand. If a country imports more than it exports, it spends more of its currency purchasing
goods from another nation. This trade deficit causes the currency to have less value than its
economic trade partner.

7. Investments

At the macro level, economists understand where to invest money in the economy and the
strength of some industries compared to others. Investments may also include government
bonds related to the currency's value. Economists look at investments to determine which areas
of the economy are drawing financial resources and attention to determine the value of specific
goods and services.

8
8. Unemployment

Unemployment can drastically affect an economy. If people don't work, they likely won't spend
money, potentially causing a dip in the economy. Studying what causes unemployment and how
it affects both macroeconomics and microeconomics may help curb unemployment on a larger
scale.

9. Supply and demand

Microeconomics looks at supply and demand at the micro level, but it's also a factor in
macroeconomics. Understanding supply chains and general demand for goods and services can
help you gain a complete understanding of how the macroeconomy operates. Companies that
provide essential goods, such as food, need to understand how the demand changes with seasons
and economic booms or recessions.

10. Retail sales

Retail sales indicate how much consumers are spending. Retail is the direct marketplace for
domestic goods and services. Business traders watch spending reports to gain insight into the
overall health of an economy. When retail sales increase, so does economic growth.

1.5 OUTPUT AND INCOME

National output is the total amount of everything a country produces in a given period of time.
Everything that is produced and sold generates an equal amount of income. The total output of the
economy is measured GDP per person. The output and income are usually considered equivalent and
the two terms are often used interchangeably, output changes into income. Output can be measured
or it can be viewed from the production side and measured as the total value of final goods and
services or the sum of all value added in the economy.

Macroeconomic output is usually measured by gross domestic product (GDP) or one of the other
national accounts. Economists interested in long-run increases in output, study economic growth.
Advances in technology, accumulation of machinery and other capital, and better education and
human capital, are all factors that lead to increase economic output over time. However, output does
not always increase consistently over time. Business cycles can cause short-term drops in output
called recessions. Economists look for macroeconomic policies that prevent economies from slipping
into recessions, and that lead to faster long-term growth.

1.6 UNEMPLOYMENT

A chart using US data showing the relationship between economic growth and unemployment
expressed by Okun's law. The relationship demonstrates cyclical unemployment. Economic growth
leads to a lower unemployment rate.
9
The amount of unemployment in an economy is measured by the unemployment rate, i.e. the
percentage of workers without jobs in the labor force. The unemployment rate in the labor force only
includes workers actively looking for jobs. People who are retired, pursuing education, or
discouraged from seeking work by a lack of job prospects are excluded.

Unemployment can be generally broken down into several types thatare related to different causes:

 Classical unemployment theory suggests that unemployment occurs when wages are too high
for employers to be willing to hire more workers. Other more modern economic theories
suggest that increased wages actually decrease unemployment by creating more consumer
demand. According to these more recent theories, unemployment results from reduced
demand for the goods and services produced through labor and suggest that only in markets
where profit margins are very low, and in which the market will not bear a price increase of
product or service, will higher wages result in unemployment.
 Consistent with classical unemployment theory, frictional unemployment occurs when
appropriate job vacancies exist for a worker, but the length of time needed to search for and
find the job leads to a period of unemployment.
 Structural unemployment covers a variety of possible causes of unemployment including a
mismatch between workers' skills and the skills required for open jobs. Large amounts of
structural unemployment commonly occur when an economy shifts to focus on new
industries and workers find their previous set of skills are no longer in demand. Structural
unemployment is similar to frictional unemployment as both reflect the problem of matching
workers with job vacancies, but structural unemployment also covers the time needed to
acquire new skills in addition to the short-term search process.
 While some types of unemployment may occur regardless of the condition of the economy,
cyclical unemployment occurs when growth stagnates. Okun's law represents the empirical
relationship between unemployment and economic growth.The original version of Okun's
law states that a 3% increase in output would lead to a 1% decrease in unemployment.

1.7 INFLATION AND DEFLATION

Changes in the ten-year moving averages of price level and growth in money supply (using the
measure of M2, the supply of hard currency and money held in most types of bank accounts) in the
US from 1880 to 2016. Over the long run, the two series show a close relationship.

A general price increase across the entire economy is called inflation. When prices decrease, there is
deflation. Economists measure these changes in prices with price indexes. Inflation can occur when
an economy becomes overheated and grows too quickly. Similarly, a declining economy can lead to
deflation.

Central bankers, who manage a country's money supply, try to avoid changes in price level by using
monetary policy. Raising interest rates or reducing the supply of money in an economy is posited to
10
reduce inflation. Inflation can lead to increased uncertainty and other negative consequences.
Deflation can lower economic output. Central bankers try to stabilize prices to protect economies
from the negative consequences of price changes.

Changes in price level may be the result of several factors. The quantity theory of money holds that
changes in price level are directly related to changes in the money supply. Most economists believe
that this relationship explains long-run changes in the price level. Short-run fluctuations may also be
related to monetary factors, but changes in aggregate demand and aggregate supply can also
influence price level. For example, a decrease in demand due to a recession can lead to lower price
levels and deflation. A negative supply shock, such as an oil crisis, lowers aggregate supplyand can
cause inflation.

1.8 AGGREGATE SUPPLY CURVE

Firms make decisions about what quantity to supply based on the profits they expect to earn.
Profits, in turn, are also determined by the price of the outputs the firm sells and by the price of
the inputs—like labor or raw materials—the firm needs to buy. Aggregate supply, or AS, refers
to the total quantity of output—in other words, real GDP—firms will produce and sell.
The aggregate supply curve shows the total quantity of output—real GDP—that firms will
produce and sell at each price level.

Figure 1.1 shows an aggregate supply curve. Let's begin by walking through the elements of the
diagram one at a time: the horizontal and vertical axes, the aggregate supply curve itself, and the
meaning of the potential GDP vertical line.

Fig 1.1 Aggregate supply curve

11
Notice on the graph that as the price level rises, the aggregate supply—quantity of goods and
services supplied—rises as well. Why do you think this is?

The price level shown on the vertical axis represents prices for final goods or outputs bought in
the economy, not the price level for intermediate goods and services that are inputs to
production. The AS curve describes how suppliers will react to a higher price level for final
outputs of goods and services while the prices of inputs like labor and energy remain constant.

If firms across the economy face a situation where the price level of what they produce and sell
is rising but their costs of production are not rising, then the lure of higher profits will induce
them to expand production.

1.9 REFERENCES

1. https://www.toppr.com/guides/economics/national-income-accounting/some-basic-
concepts-of-macroeconomics/
2. https://www.investopedia.com/terms/m/macroeconomics.asp
3. https://en.wikipedia.org/wiki/Macroeconomics

12
 CHAPTER 2
IS-LM MODEL
Ms. Akanksha Pathania1 Mr. Tajamul Saqib2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

2.1 THE IS-LM MODEL

The model is represented as a graph consisting of two intersecting lines (fig. 2.1). On the X-axis,
we have the real gross domestic product (Y), which is simply the output of the economy. On the
Y-axis, we have nominal interest rates (i).

Fig 2.1 IS /LM model

The intersection of the IS and LM curves shows the equilibrium point of interest rates and output
when money markets and the real economy are balanced. If we move one of the two curves to
the right or the left, the model gives us a new economic output and interest rates.

IS Curve

Here, the interest rate is the independent variable, while income is the dependent variable.
Notably, the curve is downward sloping. The IS also a show the locus point where total income
equals total spending:

13
 Y = C[Y – T (Y)] +l (r) +G+NX(Y)

Where:

Y = income

C[Y – T (Y)] = consumer spending as an increasing function of disposable income

l (r) = investment. A decreasing function of interest rates

G = government expenditure

NX (Y) = net exports

Example of the IS Curve

The following equations are given for a certain American state:

Consumption function (C [Y − T(Y)]) = 1,000 + 0.5 (Y – T)

Investment function (I (r, Y)) = 100 + 0.1 Y – 30 r

Government spending (G) = 1000

Net export (NX) = 500 − 0.6 Y

Tax function (T(Y)) = – 100 + 0.3 Y

Use the equations above to find the equation that best describes the IS curve.

Solution

Using the identity

Y = C[Y − T(Y)] +I(r) + G + N X(Y)

We have,

Y = 1,000 + 0.5(Y – T(Y)) + 100 + 0.1 Y – 30 r + 1000 + 500 − 0.6 Y

Substitute the tax function and solve for Y. We get,

Y = 2304.35 − 26.092 r

This is the final equation for the IS curve. It summarizes combinations of income and the real
interest rate at which income and expenditure are equal; that is, it reflects the goods market.

14
LM Curve

In this case, the independent variable is income, while the dependent variable is interest rates.
This curve represents the money market equilibrium. Also, it represents the set of points at an
equilibrium between liquidity preference (demand for money) and the money supply function.

By using the quantity of money theory, we get a clear relationship among the nominal money
supply (M), the price level (P), and the real income/expenditure (Y):

MV = PY

Where V is the rate at which the money circulates in the economy (velocity of money). If we
assume that V remains constant, then the theory postulates that money supply determines the
nominal value of the output (PY). In other words, an increase in the money supply will increase
the nominal value of output. However, this equation does not tell us how this increase will be felt
in price and quantity.

We can rewrite the quantity theory equation in terms of the supply and demand for real money
balance as:

M/P= (M/P)D = KY


Where k=
denotes the amount of money people desire to hold for every currency unit of real
income. Using the above equation, it’s easy to see that demand for real money balances is
inversely proportional to interest rate since high interest rate encourages investors to venture into
high-yielding securities. Therefore, the demand for real money balances is an increasing function
of real income (M) and a decreasing function of the interest rate.

Equilibrium in a money market requires that:

M/P = M(r,Y)

By holding the M/P constant, it is easy to see that the real income Y and the real interest rate r
have a positive relationship. An increase in income must be followed by an increase in the
interest rate so that demand for real money increases balances equal to the supply.

Example of LM curve

To find the LM curve, we need to equate the real money supply to real money demand and
rearrange it to make Y the subject. That is,

(M/P)D = M /P

15
 ∴ - 200 + 0.25Y – 30r = M/P

→ Y = 800 + 4(M/P) + 120r

But from the real money supply function, M = 5,000 . So, the LM equation is,

Y = 800 + 20,000/P + 120r

Fig 2.2 LM curve

2.2 MACROECONOMICS VS. MICROECONOMICS

Macroeconomics differs from microeconomics, which focuses on smaller factors that affect
choices made by individuals and companies. Factors studied in both microeconomics and
macroeconomics typically influence one another.

A key distinction between micro- and macroeconomics is that macroeconomic aggregates can
sometimes behave in very different ways or even the opposite of similar microeconomic
variables. For example, Keynes referenced the so-called Paradox of Thrift, which argues that
individuals save money to build wealth (micro). However, when everyone tries to increase their
savings at once, it can contribute to a slowdown in the economy and less wealth in the

16
aggregate (macro). This is because there would be a reduction in spending, affecting business
revenues and lowering worker pay.

Meanwhile, microeconomics looks at economic tendencies, or what can happen when

individuals make certain choices. Individuals are typically classified into subgroups, such as
buyers, sellers, and business owners. These actors interact with each other according to the laws
of supply and demand for resources, using money and interest rates as pricing mechanisms for
coordination.

2.3 REFERENCES

1. https://www.khanacademy.org/economics-finance-domain/macroeconomics/aggregate-
supply-demand-topic/macro-equilibrium-in-the-ad-as-model/a/building-a-model-of-
aggregate-demand-and-aggregate-supply-cnx
2. https://analystprep.com/cfa-level-1-exam/economics/explain-the-is-lm-curves-and-how-
they-combine-to-generate-the-aggregate-demand-curve/

17
 CHAPTER 3
COST CONTROL AND INVESTMENT ANALYSIS
Mr. Aaseesdeep Singh1 Mr. Sandeep Chauhan2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

3.1 INTRODUCTION

Managerial economics is a branch of economics involving the application of economic methods

in the organizational decision-making process. Economics is the study of the production,
distribution, and consumption of goods and services. Managerial economics involves the use of
economic theories and principles to make decisions regarding the allocation of scarce
resources. It guides managers in making decisions relating to the company's customers,
competitors, suppliers, and internal operations.

Managers use economic frameworks in order to optimize profits, resource allocation and the
overall output of the firm, whilst improving efficiency and minimizing unproductive
activities. These frameworks assist organizations to make rational, progressive decisions, by
analyzing practical problems at both micro and macroeconomic levels. Managerial decisions
involve forecasting (making decisions about the future), which involve levels of risk and
uncertainty. However, the assistance of managerial economic techniques aid in informing
managers in these decisions.

Managerial economists define managerial economics in several ways:

1. It is the application of economic theory and methodology in business management practice.

2. Focus on business efficiency.

3. Defined as "combining economic theory with business practice to facilitate management's

decision-making and forward-looking planning."

4. Includes the use of an economic mindset to analyze business situations.

5. Described as "a fundamental discipline aimed at understanding and analyzing business

decision problems".

6. Is the study of the allocation of available resources by enterprises of other management units
in the activities of that unit?

18
7. Deal almost exclusively with those business situations that can be quantified and handled, or
at least quantitatively approximated, in a model.

3.2 THE TWO MAIN PURPOSES OF MANAGERIAL ECONOMICS ARE:

1. To optimize decision making when the firm is faced with problems or obstacles, with the
consideration and application of macro and microeconomic theories and principles.

2. To analyze the possible effects and implications of both short and long-term planning
decisions on the revenue and profitability of the business.

The core principles that managerial economist use to achieve the above purposes is:

 monitoring operations management and performance,

 target or goal setting

 talent management and development.

In order to optimize economic decisions, the use of operations research, mathematical

programming, strategic decision making, game theory and other computational methods are
often involved. The methods listed above are typically used for making quantitate decisions by
data analysis techniques.

The theory of Managerial Economics includes a focus on; incentives, business

organization, biases, advertising, innovation, uncertainty, pricing, analytics, and competition. In
other words, managerial economics is a combination of economics and managerial theory. It
helps the manager in decision-making and acts as a link between practice and
theory. Furthermore, managerial economics provides the tools and techniques that allow
managers to make the optimal decisions for any scenario.

Some examples of the types of problems that the tools provided by managerial economics can
answer are:

 The price and quantity of a good or service that a business should produce.

 Whether to invest in training current staff or to look into the market.

 When to purchase or retire fleet equipment.

 Decisions regarding understanding the competition between two firms based on the motive
of profit maximization.

 The impacts of consumer and competitor incentives on business decisions

19
Managerial economics is sometimes referred to as business economics and is a branch
of economics that applies microeconomic analysis to decision methods of businesses or other
management units to assist managers to make a wide array of multifaceted decisions. The
calculation and quantitative analysis draws heavily from techniques such as regression
analysis, correlation and calculus.

3.3 WHAT IS COST CONTROL?

Cost control is a practice used by finance professionals that analyzes a business's overall
expenses and reduces project costs to increase profit. Typically, a company hires finance
professionals to monitor their cost performance, plan a budget for each project and change
projects that can increase a business's financial performance.

Finance professionals also develop, maintain and organize a project's budget from start to finish
to make sure the budget is being followed closely by employees. The goal of using cost control
methods is to enhance a project's financial performance while decreasing the project's costs.

3.4 THE IMPORTANCE OF COST CONTROL

Cost control allows for businesses to maintain a strict budget, which keeps their finances steady
and can help grow the profitability of their projects. Here are some reasons using cost control
methods are essential for businesses:

Budgets help to stay on track: Cost control methods often involve setting a strict budget for a
team to follow, which is helpful with staying on track during the project. If the budget calls for a
project to be completed by a certain time, employees may feel more compelled to complete the
project by the budget's deadline.

Keeps the project's cost from growing: Using cost control methods can help keep a project's
cost from rapidly growing as the project progresses. Project members can consult a financial
professional if they feel the budget doesn't cover enough costs needed for the project.

Keeps the profitability high: Cost control methods allow for the revenue brought in from the
projects to be higher than the cost of the project, which keeps the profitability high and increases
a company's finances.

3.5 COST CONTROL FACTORS

Employment costs:

It is the sum of the wages paid to its work team, including staff development, training, and
creating an appropriate working environment.

20
Material costs:

The total cost of all tools and equipment required for the project is the cost of the materials. This
includes requested material before, during and once the project is completed.

Actual cost:

The actual cost is the total expenditure incurred by a project from the start to the end. This
includes the cost of labour and expenses related to the project.

The cost difference:

The cost difference refers to any price difference between the actual cost of the project and the
budget identified.

Return on investment (ROI):

The return on investment (ROI) is the project's profitability, compared to the amount invested.

3.6 TOP 5 TECHNOLOGIES THAT WILL HELP YOU CONTROL COSTS

1- Consider budget planning:

It will need to establish a fixed budget at the beginning of the project planning session, including
all payments and the costs to be borne during the project's life cycle.

It is also important that the budget be flexible and adjustable in anticipation of changing market
prices.

2- Tracking costs:

It is better to prepare budgets, monitor operational costs, and analyse deviations that will help
you track the project budget at each stage.

If the project is extended, it is important to track monthly, weekly, or even annual costs.

3- Time management:

Time-effective management is one of the most important methods of cost control. Although this
technique applies to different management areas, it is essential for project cost control.

Time management is important in meeting project deadlines, achieving the target, and gaining
planned income, as long as the cost set during the project period is not exceeded.

21
4- Use of change control systems:

Change control systems are vital methods necessary to consider any possible changes during the
project journey. Any change in the project implementation period would impact delivery
deadlines, affect the implementation plan, and thus cost the project.

5- Keep track of the money you've made.

To determine the value of the work carried out so far, a financial accounting technique known as
"acquired value is beneficial."

The value gained is tracked as an effective means of implementing large-scale projects and is
flexible enough for emergency changes requiring immediate intervention. However, it is
essential to constantly review the budget, ascertain financial and budgetary information, and
track costs.

3.7 ADVANTAGES OF COST CONTROL

The advantages of cost control are mainly as follows:

1. Achieving the expected return on capital employed by maximizing or optimizing profit.

2. Increase in productivity of the available resources.
3. Reasonable price for the customers.
4. Continued employment and job opportunities for the workers.
5. Economic use of limited resources of production.
6. Increased credit-worthiness.
7. Prosperity and economic stability of the industry.

3.8 DISADVANTAGES OF COST CONTROL

These are disadvantages of cost control:

1. Reduces flexibility and process improvement in a company.

2. Restriction on innovation.

3. Requirement of skillful personnel to set standards.

3.9 REFERENCES

1. https://en.wikipedia.org/wiki/Managerial_economics#:~:text=The%20theory%20of%20
Managerial%20Economics,of%20economics%20and%20managerial%20theory.
2. https://www.indeed.com/career-advice/career-development/cost-control-methods

22
3. https://www.lpcentre.com/articles/top-5-cost-control-techniques-you-can-implement-
today!
4. https://www.geektonight.com/cost-control/

23
 CHAPTER 4
ELEMENTS OF A CONTROL SYSTEM
Ms. Rupali Gupta1 Ms. Omkar Kaur2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

4.1 ELEMENTS OF A GOOD CONTROL SYSTEM

Every decent control system must possess certain basic elements. Since they all play a major role,
the absence of any one of them can make the whole system weak. Hence, managers must ensure
that their control systems contain the following basic elements andconsiderations:

1) Feedback

Feedback is the backbone of all control systems. This feedbackis nothing but the information that
managers use to correct their organization’s actual performance.

The aim of feedback is basically to adjust future actions using previous experiences. Managers use
the information they receive from feedbacks to implement correctivemeasures. Such measures
generally help in bridging the gap between the actual performance of the organization and its goals.

Feedback may be either formal or informal. Formal feedback consists of sources likefinancial
statements, statistics, reports, other written communication, etc. On the other hand, informal
feedback includes personal opinions, informal discussions and an individual’s observations.

2) Control must be objective

The second essential requirement of a good control system is that it must always be objective. A
subjective criterion should never be the basis of evaluating actual performances.

For example, evaluation of an employee’s performance should comprise of standards like working
hours, productivity, efficiency, etc. Managers should not evaluate employees using subjective
prejudices.

3) Prompt reporting of deviations

This element of the controlling system basically requires quick reporting ofdeviations and
discrepancies. If some work is not going according to plans, relevant managers must take notice of
this immediately. This is because any delay in reporting problems and taking corrective measures
can lead to financial losses for a business.

24
4) Control should be forward-looking

Control systems can often suffer from the defect of delays in reporting of deviations and taking of
corrective measures. As we saw above, this problem can lead to financial losses for a business.

Hence, managers must ensure that their control systems are forward-looking. This will help in
predicting deviations in advance as well as giving adequate time for course correction.

5) Flexible controls

A rigid control system can often make it ineffective in extraordinary and unpredictable situations. It
should, thus, be flexible and open to changes. Managers must be able to adapt their control
measures as per the requirements of every possible scenario.

6) Hierarchical suitability

Almost all business organizations possess management hierarchies comprising of managers at

various positions and levels. Since each manager performs controlling functions at his level, the
system itself must suit his organization’s hierarchy. Every manager must have adequate powers for
this purpose and the flow of information for evaluation should be effective.

7) Economical control

Every good controlling system has to be economical when it comes to its implementation and
maintenance. In other words, its benefits should outweigh its costs. An organization must be ableto
afford it and also derive all possible advantages from it.

8) Strategic control points

Not all deviations require the same level of attention and importance. For example, if an
infrastructure company loses one government tender for constructing roads, ti can work on other
projects.

However, if the government blacklists it altogether due to its financial irregularities, this can be a
huge issue.

A good control system must be able to deal with every deviation as per its seriousness. No
organization can afford to accord equal importance to each and every problem. This is basically the
whole aim of strategic control points.

9) Control must be simple to understand

Sophisticated policies can often make elements of control systems difficult to understand and
implement. A good system, however, is always simple to comprehend and work on.

25
Thus, before launching controlling measures, managers should first check whether their employees
will be able to understand them. They should also try to resolve any ambiguities and confusion that
may arise later.

10) Control should focus on workers

Good control systems always focus on workers instead of the work itself. Since it is workers who
implement these systems, everybody should be able to work with them effectively.

4.2 BENEFITS OF COST CONTROL MANAGEMENT

Cost control management offers numerous benefits to your organizations.

Fig 4.1 Benefits of cost control

1. Cost savings

Effective cost control management helps identify areas of excessive spending, inefficiencies, and
waste. By implementing cost-saving measures, businesses can reduce expenses, optimize
resource allocation, and improve their financial position.

26
2. Improved profitability

By reducing costs and increasing efficiency, cost control management directly contributes to
improved profitability. It enables businesses to generate higher revenues, enhance profit margins,
and achieve sustainable financial growth.

3. Enhanced cash flow

Proper cost control management ensures that cash flow remains healthy and stable. By
minimizing unnecessary expenses and managing payment cycles effectively, organizations can
maintain a steady flow of funds, meet financial obligations, and invest in growth initiatives.

4. Competitive advantage

Cost control management allows organizations to offer competitive prices while maintaining the
highest level of quality. This pricing strategy helps attract customers, retain market share, and
gain an edge over competitors in the marketplace.

5. Resource optimization

It helps ensure that resources, including materials, labor, and equipment, are utilized efficiently,
eliminating any instances of underutilization or excess capacity.

6. Strategic decision-making

Cost control management provides decision makers with valuable insights and data that helps
immensely in the strategic decision-making processes. With accurate cost information,
organizations can make informed choices regarding pricing strategies, product development,
market expansion, and investment decisions.

7. Operational efficiency

Effective cost control management streamlines processes and improves overall operational
efficiency. What’s more, it helps identify bottlenecks, implement process improvements, and
optimize workflow, resulting in higher productivity and smoother operations.

8. Risk management

Organizations can mitigate financial risks by actively monitoring and controlling costs. It helps
identify potential cost overruns, budget deviations, or unforeseen expenses, allowing proactive
measures to be taken to prevent or minimize such risks.

27
9. Improved financial stability

It’s no secret that maintaining a strong financial position is vital for business sustainability. Cost
control management helps in financial stability by reducing unnecessary expenses, avoiding
inessential debt, and enabling organizations to weather economic uncertainties or market
fluctuations.

10. Long-term growth

By optimizing costs and improving profitability, cost control management frees up financial
resources that can be reinvested in growth initiatives. This capital can be utilized for research and
development, marketing campaigns, talent acquisition, technological advancements, or market
expansion, fostering long-term growth and success.

4.3 IMPORTANT TECHNIQUES OF COST CONTROL

There are two other techniques which are sometimes used by firms for cost control and
reduction.

These are:

(i) Value Analysis

(ii) Method Study

(i) Value Analysis:

Value analysis is an approach to cost saving that deals with product design. Here, before buying
any equipment or materials, a study is made as to what purpose these things serve? Would other
lower- cost design work as well? Is there a cheap material which can serve the same purpose? So
value analysis is a procedure which specifies the function of products or components, establishes
appropriate costs, determines the alternatives and evaluates them.

Thus the objective of value analysis is the identification of such costs in a product that do not in
any manner contribute to its specification or functional value. Thus, it is the process of reducing
the cost without sacrificing the predetermined standards of performance. It is a supplementary
device in addition to the conventional cost reduction methods.

Value analysis is closely related to Value Engineering. It is very helpful in industries where
production is done on a large scale and in such cases even a fraction of savings in cost would
help the firm significantly.

28
Some examples of savings through value analysis are:

(i) Discarding tailored products where standard components can do.

(ii) Dispensing of facilities not required by the customer.

(iii) Use of newly developed materials in place of traditional materials.

(iv) To examine the use of alternatives which are available at a lower price.

(ii) Method Study:

Method Study is a systematic study of work data and critical evaluation of the existing and pro-
posed ways of undertaking the work. This technique is known as work study and organization
and method Work study helps to investigate all factors which enable the management to get the
work done efficiently and economically.

The prime objective is to analyze all factors which affect the performance of a task, to develop
and install work methods which make optimum use of human and material resources available
and to establish suitable standards by which the performance of the work can be measured.
Method study aims at analyzing and evaluating all those conditions which influence the perform-
ance of a task. It is the creative aspect of work study.

4.4 WHAT IS INVESTMENT ANALYSIS?

Investment analysis is a broad term for many different methods of evaluating investments,
industry sectors, and economic trends. It can include charting past returns to predict future
performance, selecting the type of investment that best suits an investor's needs, or evaluating
individual securities such as stocks and bonds to determine their risks, yield potential, or price
movements. Investment analysis is key to a sound portfolio management strategy.

4.5 FINANCIAL ANALYSIS

In most respects, investment in energy efficiency is no different from any other area of financial
management. So when your organization first decides to invest in increasing its energy
efficiency it should apply exactly the same criteria to reducing its energy consumption as it
applies to all its other investments. It should not require a faster or slower rate of return on
investment in energy efficiency than it demands elsewhere.

The basic criteria for financial investment appraisal include:

• Simple Payback - a measure of how long it will be before the investment makes money, and
how long the financing term needs to be.
29
• Return on Investment (ROI) and Internal Rate of Return (IRR) - measure that allow
comparison with other investment options

• Net Present Value (NPV) and Cash Flow - measures that allow financial planning of the
project and provide the company with all the information needed to incorporate energy
efficiency projects into the corporate financial system.

Initially, when you can identify no or low cost investment opportunities, this principle should
not be difficult to maintain. However, if your organization decides to fund a rolling program of
such investments, then over time it will become increasingly difficult for you to identify
opportunities, which conform to the principle. Before you'll reach this position, you need to
renegotiate the basis on which investment decisions are made.

It may require particular thoroughness to ensure that all the costs and benefits arising are taken
into account. As an approximate appraisal, simple payback (the total cost of the measure
divided by the annual savings arising from it expressed as years required for the original
investment to be returned) is a useful tool.

As the process becomes more sophisticated, financial criteria such as Discounted Cash Flow,
Internal Rate of Return and Net Present Value may be used. If you do not possess sufficient
financial expertise to calculate these yourself, you will need to ensure that you have access,
either within your own staff or elsewhere within the organization, to people who can employ
them on your behalf.

There are two quite separate grounds for arguing that, at least long after their payback pe riods.
Such measure does not need to be written off using fast discounting rates but can be regarded as
adding to the long term value of the assets. For this reason, short term payback can be an
inadequate yardstick for assess in long after their payback periods. Such measure does not need
to be written off using fast discounting rates but can be regarded as adding to the long term
value of the assets. For this reason, short term payback can be an inadequate yardstick for
assessing longer term benefits. To assess the real gains from investing in saving energy, you
should use investment appraisal techniques, which accurately reflect the longevity of the returns
on particular types of technical measures.

Protecting Energy Investment

It is essential to keep a careful watch on your organization's maintenance policy and practices in
order to protect any investment already made in reducing your organization's energy
consumption. There is a clear dependence relationship between energy efficiency and
maintenance.

30
This operates at two levels:

• Initially, improving energy efficiency is most cost-effectively done in existing facilities

through normal maintenance procedures

• Subsequently, unless maintenance is regularly undertaken, savings from installed technical

measure, whether in new-build or existing facilities, may not be realized.

4.6 REFERENCES

1. https://www.toppr.com/guides/business-management-and-entrepreneurship/controlling-
cs/elements-of-a-good-control-system/
2. https://www.yourarticlelibrary.com/economics/cost-control-meaning-tools-techniques-
and-estimation-of-cost-control/28730
3. https://www.investopedia.com/terms/i/investment-
analysis.asp#:~:text=Investment%20analysis%20involves%20researching%20and,creatin
g%20an%20overall%20financial%20strategy.
4. https://beeindia.gov.in/sites/default/files/1Ch6.pdf

31
 CHAPTER 5
TENDER
Ms. Priyanka1 Ms. Sakshi Sharma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

5.1 WHAT IS TENDER

The term tender refers to an invitation to bid for a project. Tendering usually refers to the
process whereby governments and financial institutions invite bids for large projects that must
be submitted within a finite deadline. The word tender can also refer to the acceptance of a
formal offer, such as a takeover bid.

5.2 IMPORTANCE OF TENDER

To request bids for a plan, or to recognize an official offer such as a takeover bid. Tender also,
typically refers to the procedure whereby governments and financial institutions request bids for
large projects that must be presented within a restricted time limit. The expression also refers to
the procedure whereby all the shareholders put forward their shares or securities to a conquest
offer. For development or procurement, most institutions have a specific procedure, as well as
processes to preside over the opening, assessment and final assortment of the vendors. This
makes sure that the assortment process is just and clear.

In the case of a takeover, most offers specify that a certain percentage of shares must be
tendered by the time limit in order for the contract to continue. Discontented shareholders who
believe the takeover bid is too low often decline to tender their shares; they may also try to
assemble support from other shareholders against the takeover in a bid, to chunk the deal.
Countries like UK use compulsory competitive tendering (CCT) techniques to ensure any public
sector work undertaken by private companies is done at a lower cost and higher output.

The procedure is generally utilized for procurements or contracts connecting significant

amounts of wealth. This process is generally utilized by:

1. Government sections, offices and agency

2. Private division corporations and businesses

3. Out of the country markets and businesses

32
The concept of tendering can effortlessly be tackled by having a plan of attack. When becoming
concerned in a process, it is significant to understand your business' appropriateness for the
scheme; whether your company current situation will allow for you to tender, as well as your
aptitude to administer the agreement if you are successful in attracting the tender.

5.3 TYPES OF TENDERS

A client can choose different types of tendering based on the expertise needed, the nature of the
contract, and the complexity of the construction. There are three main types of tendering: open
tendering, selective tendering, and negotiated tendering.

Open tendering

In the open tendering, the client advertises the proposed project publicly and is available to all
interested contractors. The client may require a refundable deposit from all applicants. Open
tendering is common in both government and public sectors, and is widely used in the
construction industry.

Below are the pros and cons of open tendering.

PROS

 All interested contractors are allowed to apply, thereby increasing the ease of entry for
new players in the market.

 The client obtains the best bargain possible.

 The selection of contractors is without bias or favoritism.

 Open tendering encourages competition among potential contractors without obligating

the client to accept bids.

 It is suitable for the construction industry.

CONS

 The tender list may be too long because the tendering applications are open to all
interested contractors.

 Contractors’ resources go to waste when they spend time preparing tender documents but
are not selected.

33
  The contractors may offer a price without fully considering the details of the contract.
Therefore, the client may get seemingly reasonable prices that do not reflect the actual
price point of their project.

 The client runs the risk of choosing a contractor offering the lowest price and not getting
the highest quality of work.

Selective tendering

In selective tendering, the client only invites a shortlist of contractors to submit their bids for the
tender. Selective tendering is designed to mitigate the limitations of the open tendering method.
Since a shortlist of qualified contractors is drawn in advance, participation is restricted to only
competent and skilled contractors.

Below are the pros and cons of selective tendering.

PROS

 It promotes the economical use of contractors’ resources.

 Reduces tendering costs because the client invites fewer contractors to submit their bids.

 It helps to save time because the tender process is shorter.

 The client can select the lowest offer because only qualified contractors are considered.

 The tender process is easier to manage.

 Reduced tender documentation because only a shortlist of contractors is invited.

CONS

 It presents a barrier or entry for other contractors, especially new contractors.

 It increases favoritism.

 The tendering period may be longer.

 There is a risk that contractors may overprice their services.

 There is a risk that contractors may collude.

34
Negotiated tendering

Negotiated tendering is commonly used in the construction industry, as negotiation starts from
the tendering process to the dispute resolution stage. Negotiated tendering involves two phases:
the pre-contract negotiations and the post-contract negotiations.

This tendering process typically involves a single contractor but has an allowance for a
maximum of three contractors.

The negotiated tendering process begins when the employer identifies a suitable contractor to
deal with. The employer can select the contractor from their list of preferences or through the
guidance of the professional team.

Once the client identifies a contractor, they give them the project details. Negotiation tendering is
suitable for types of contracts where:

 The contractor is involved in funding the construction project.

 The employer and the contractor have a long-term business relationship.

 The construction project is urgent, and the work must be fast-tracked.

Below are the pros and cons of negotiated tendering.

PROS

 Negotiated tendering minimizes the risk of failure in the construction industry.

 The tendering process is significantly shortened as the most suitable contractor can be
selected much faster.

 The contractor is brought into the project early and can contribute their expertise to the
design.

 It is the best tendering method for particular circumstances, such as during emergencies.

CONS

 This method increases the barrier of entry for new contractors and reduces the availability
of work for non-selected contractors.

 Contractors are likely to quote higher prices than in more competitive tendering
processes.

35
5.4 REFERENCES

1. https://www.investopedia.com/terms/t/tender.asp#:~:text=Investopedia%20%2F%20Laur
a%20Porter-
,What%20Is%20a%20Tender%3F,submitted%20within%20a%20finite%20deadline.
2. https://sitemate.com/resources/articles/finance/tender-documents-construction/
3. https://proest.com/construction/process/types-of-tenders/
4. https://www.cvc.gov.in/sites/default/files/3%20Tender%20Stage.pdf

36
 CHAPTER 6
TENDERING PROCESS
Ms. Navdeesh Kaur1 Ms. Gurpreet Kaur2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

6.1 WHAT IS TENDERING PROCESS?

Tendering is the process of inviting bids for significant projects, which is typically used by
government entities. The primary goal of the Tendering Process in Construction is to eradicate
bias and corruption in the granting of construction contracts.

It is an invitation from the proprietor to the contractor to perform particular work at a given cost
and within a specified time frame. It is advertised in the form of a tender notice in newspapers,
notice boards, etc.

The tender permits the client to compare different prices quoted by various contractors for work.
The tender is always won by the lowest bidder, who is also the most experienced. The tendering
process in construction is critical in determining the lowest and highest-quality bidder for work.

This form of tendering is the process whereby shareholders submit their shares or securities in
response to a takeover offer.

Tender stage in public procurement can be sub-divided under four headings:

i) Preparation of tender document

ii) Inviting and opening of tenders

iii) Pre-qualification

iv) Evaluation of bids and award of work

6.2 PREPARATION OF TENDER DOCUMENTS

Preparing tender documents can be a project in itself for construction companies, and reconciling
and making procurement decisions can be quite the effort for asset owners and operators as well.

37
The best way to prepare and handle tender documents is to break them down into packages. Each
package should be for a specific area, phase of piece of work or product, so that the parties
submitting tender documents can prepare accurate bids.

Breaking down your tender documents effectively also enables the party receiving the package
and selecting the vendors to more easily sort the vendors into groups, assess them properly, and
make better and more informed decisions.

The time and level of sophistication required in preparing tender documents will vary greatly
based on the size of the project and companies involved. Some of the typical tender documents
for construction include:

 An invitation to tender letter like this or request for tender

 The form of tender or 'tender submission'

 Preliminary documents and information around pre-construction and site management

 Contracts and contract conditions

 A tender pricing and specs document

 Employer's information requirements for BIM

 Design drawings and project specs

 Tender return slip

As you can see, the tendering process is pretty comprehensive in construction, and can start to
eat into the project preparation and specification stage. This is great for clarity around the
project, but means that construction companies can spend a lot of time on tenders which they
may not win.

Out of these tender documents, the most comprehensive is usually the form of tender or tender
submission and the part that the construction companies are most concerned with getting right
and formatting correctly.

6.3 INVITING & OPENING OF TENDERS

The award of Public Contract through open tender is to ensure - transparency in public
procurement, to maximize economy and efficiency in public procurement, to promote healthy
competition among tenders, to provide for fair and equal treatment to all the tenders and to
eliminate irregularities, interference and corrupt practices by authorities concerned.

38
This is also required by the Article 14 of the Constitution of India.

An invitation to tender (ITT) is a formal document that is issued by a company or an

organization inviting suppliers or contractors to submit a bid for a project or service.

This process, a legal obligation in many countries, is part of the procurement cycle and is
commonly used in public sectors such as construction, large-scale manufacturing, information
technology and government projects.

The goal of an ITT is to ensure fair and open competition for the contract, allowing the issuing
organization to compare different providers and select the one that offers the best value for
money.

An ITT document specifies all requirements of the organization, including goods, services and
timelines, as well as the evaluation process that will be followed.

The ITT document usually includes the following:

 Project overview.
 Technical requirements.
 Tendering procedure.
 Selection criteria.
 Terms and conditions.

6.4 PRE-QUALIFICATION

The success of a project largely depends on the capability of the contractor/vendor. Pre-
qualification is a process to select competent contractors having technical and financial
capability commensurate with the requirements of the particular procurement (Project / supply of
goods/ hiring of services).

The pre-requisites of pre-qualification process are-

-Transparency

-Fairness

-Maintenance of competition

39
6.5 TENDER EVALUATION AND AWARD OF WORK

This is the most sensitive area susceptible to corruption. Corruption is inversely proportional to
transparency and fairness. To ensure that evaluation is done in most transparent and fair & open
manner, following points should be taken care of

 Evaluation of tenders exactly as per the notified criteria.

 Timely decision within validity period.
 Complying with commission’s circular regarding negotiation.
 Ensuring that conditions / specifications are not relaxed in favour of contractor to whom
the work is being awarded.
 Ensuring that L1 is not ignored on flimsy grounds.
 Compliance with the purchase preference policy of the govt.
 Ensuring that work order / supply order is placed within justified rates.

6.6 CHARACTERISTICS OF TENDERING PROCESS

1. All prospective contractors and suppliers submit their proposals by the client’s deadline.

2. The bid shall include all necessary information regarding the materials to be used, the
estimated cost of the project, etc.

3. After the deadline has passed, the client evaluates all offers based on a set of established
criteria such as price and quality.

4. The tendering process starts with an invitation to tender or request for tender (RTF) and
concludes with a public evaluation procedure in which one of the firms that made a bid wins the
project or contract.

5. Tenders are widely marketed in several media before the client floats them.

6.7 ADVANTAGES AND DISADVANTAGES OF TENDERING PROCESS

Advantages

1. No Nepotism

Tenders or bids are reviewed based on established criteria such as price, quality, and value for
money. In other words, the company that offers the highest quality product or service at the
lowest price will be awarded the contract because most tender documents are examined and
assessed in public.

40
2. Value for Money

From the client’s perspective, tenders provide the best value for the money spent. It is due to the
client’s ability to select from a large pool of possible suppliers who can deliver the greatest
quality product or service at the lowest price point.

It enables the firm, establishment, or organization to save money without sacrificing quality. As
a result, despite being time demanding, tendering is a profitable long-term procedure from the
perspective of an organization.

3. Encourages Competition

The tendering procedure promotes a competitive market. This is because each project allows
many possible contractors, firms, or suppliers to bid on it.

And, because the selection is based on both quality and price, each bidder makes every effort to
remove operational inefficiencies and redundancies as much as feasible to cut costs and increase
quality.

This entire process promotes healthy market competition and discourages complacency and
sloth, promoting creativity and new ideas.

4. Easier Entry

The tendering procedure makes it easier and simpler for new firms to enter the market or a
specific industry. This is because contracts under this system are given based on predetermined,
objective criteria.

As a result, even a new entry to the market with no industry connections or contacts might win a
prestigious and lucrative contract by giving the best value for the client’s money.

As a result, this method assists new firms in quickly establishing a footing in the market or
industry, drastically lowering traditional barriers to entry.

Disadvantages

1. Use of low-cost, low-quality materials and/or labor

The contractor who is compelled to play the competitive bidding process may feel pressured to
keep costs low to maintain a reasonable profit margin. Using cheaper labor and materials is one
method a contractor might cut costs. If the cheaper labor and materials are of poor quality, the
client will likely receive inferior goods or services.

41
2. Shortcuts for safety:

Safety requirements are another area where contractors may be motivated to cut costs. A
contract’s safety costs might quickly spiral out of control. Reduced safety costs are a definite
method to keep the bidding price low.

3. Competitive bidding can be exceedingly time-consuming

When the government, as well as private firms, uses competitive bidding, the awarding of the bid
can take years. As a result, customers may have to wait for extremely long periods of time.

4. Bidders are being threatened

Genuine bidders are sometimes threatened and prevented from submitting their bids.

5. Insufficient profit margin to allow for R&D, modern technology, or equipment

investment

Competitive bidding may compel a contractor to accept a relatively small profit margin. Because
of these poor margins, a contractor may have little or no money to spend on R&D, new
technology, and equipment.

6.8 REFERENCES

1. https://www.investopedia.com/terms/t/tender.asp#:~:text=Investopedia%20%2F%20Laur
a%20Porter-
,What%20Is%20a%20Tender%3F,submitted%20within%20a%20finite%20deadline.
2. https://sitemate.com/resources/articles/finance/tender-documents-construction/
3. https://www.techtarget.com/whatis/definition/invitation-to-tender-
ITT#:~:text=The%20ITT%20process%20ensures%20all,better%20value%20for%20publ
ic%20money.
4. https://www.cvc.gov.in/sites/default/files/3%20Tender%20Stage.pdf
5. https://dailycivil.com/tendering-process-steps-types-advantages-
disadvantages/#:~:text=The%20tender%20permits%20the%20client,highest%2Dquality
%20bidder%20for%20work.
6. https://www.mbaskool.com/business-concepts/operations-logistics-supply-chain-
terms/15608-tender.html

42
 CHAPTER 7
SPECIFICATIONS
Ms. Ruchika Sharma1 Ms. Lata Duggal2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

7.1 WHAT IS A SPECIFICATION IN CONSTRUCTION?

Specifications in construction, also called construction specifications or specs, are details within
a construction service contract that outline all the important aspects necessary for project
fulfillment. Throughout the project’s duration, contractors and construction crews may use
specifications as a reference for questions that arise and to ensure the correct fulfillment of each
project requirement.

Specifications often include information about:

 The scope of work

 The materials for the project
 The timeline and important project milestones
 Methods of installation
 Quality of workmanship
 Testing requirements
 National, state and company safety standards

Contractors often use specifications to supplement architectural drawings and blueprints to

describe and document information they may not be able to provide visually.

7.2 TYPES OF SPECIFICATIONS;

There are two types of Specifications as follows.

1. General Specifications.

2. Detailed Specifications.

1. General Specifications

General Specifications are also known as Brief Specifications.

They are used to show aspect, standard, and type of constructional work.

43
They would describe the general classifications of the construction work of the project.

These specifications are used to establish the standards of the construction work that will help in
establishing a Detailed Estimate.

2. Detailed Specifications

Detailed Specifications shows, in the detailed description, characteristics, quantity, ratio and
formation method of the material used in construction work.

Each component of the constructional work is described in details separately with the help of
Detailed Specifications.

Therefore, all features establishing standards and quality of the construction work are disclosed,
which will be used later in Detailed Estimate.

Detailed Specifications of the items used in ordinary projects are printed that are used for
contracts.

These Specifications are called Standard Specifications.

Detailed Specifications have two major types as follow.

a) Standard Specifications.

b) Special Specifications.

a. Standard Specification

This type of Specification of constructional work is written down and published in departments
of engineering that will eliminate the need of writing Specifications in details.

These Specifications are merely referenced when required.

So, these are known as Standard Specifications that are published in the form of books and
generals.

Whenever tender is required for constructional work, then these Specifications are merely
referenced in the tender that will ease the preparation of tender documents.

And possible mistakes can be avoided occurred during frequent writing of same Specifications.

Standard Specifications have to be written and published by Public Works Department (PWD),
Military Engineering Services (MES) and Irrigation Departments.

44
However, other departments can reference Standard Specifications that are organized and
published by mentioned departments and organizations.

Standard Specifications subject to change as changes and evolution occurs in science and
engineering with the passage of time.

These changes and evolution must be reflected in Standard Specification to reflect the best
practices in work.

b. Special Specification

Some specifications of the construction work are of the special form, and they are not officially
written and published in Standard Specifications.

These specifications are known as Special Specifications.

Special Specifications are written by the in-charge engineer of the constructional project which
will usually be a divisional officer (XEN).

These specifications are included in tender documents and captioned as Special Specifications.

7.3 15 REASONS WHY SPECIFICATION IS CRUCIAL TO

CONSTRUCTION

Let’s look at some of the primary reasons why specification is essential to the construction
process:

1. The specification provides clear instructions on project intent, performance and

construction.

2. It can reference the quality and standards which should be applied.

3. Materials and manufacturers’ products can be clearly defined.

4. Installation, testing and handover requirements can be identified.

5. Classification within the specification can be used to support handover and asset
management.

6. It eliminates the need for information overload on the drawing or model, making
identifying information easier.

7. A specification can support project costing, not only the materials and products but the
performance and workmanship.

45
 8. Along with the drawings, the specification forms part of the contractual documents,
helping minimise project risk and providing support should there be any legal disputes.

9. It supports client brief interpretation and gives the client assurance that their
commissioned asset is the one being delivered.

10. It is essential for the construction phase and an important part of the soft-landing process,
subsequent asset management and the lifecycle plan.

11. By being clear, concise and information-rich, a specification provides answers to many
onsite construction questions, saving the project team, client and contractor time and
money.

12. After project finish, office masters can incorporate best practices and lessons learnt,
improving efficiency, providing quality assurance and ensuring project consistency.

13. Office masters also save the team time and money because they can be developed over
time and adapted to suit a project's specifics, drawing on specialist knowledge when
needed.

14. The specification is a living document to be used by the complete project team
throughout the construction phase; its value does not end at the design phase.

15. Along with any variations or value engineering, it becomes a part of the project audit trail
and a crucial part of the handover documents, forming the basis for asset management,
asset maintenance, and even feeding into staff training and human resources policies.

7.4 ESSENTIAL REQUIREMENTS OF SPECIFICATIONS

Subject matter

The subject matter of the specification should relate to the information required for the contractor
after the contract is given to him.

The requirements which are to be enforced only should be included in the specification.

Grammar

All sentences should follow the rules of grammar.

Abbreviations:

Well known abbreviations in the building industry should be used.

46
Development of style:

The main aim is to resent a clear picture of facts. The style of arranging of ideas should be clear
and brief.

Selection of words:

Suitable words in the desired meaning should be used. Words having more than one meaning or
unfamiliar words shall not be used.

Accuracy:

The information given in the specification should be complete and correct. Information should
not be repeated.

Clearness

As far as possible the information should be clear. It should state whether the contractor shall or
shall not do. In fact the parties, owner and contractor should follow the same sense.

Brevity:

Sentences should be short simple and concise. Straight forward specification would be clearly
understood by the persons filling the tenders. The brevity is the essence of specifications.

Practical limits & commercial sizes:

The specification should be framed within the practical limitation of the materials and workman
ship. It should not specify practical impossibilities. It should specify the use of commercial sizes
and pattern of materials available in the market.

Fairness:

The specification should be fair and should not be framed in such a way so as to throw all the
risks on the shoulders of the contractors. Likely hazards, difficulties should be specified so as to
give a clear picture of the work to the contractor.

Brief Specifications of Clearing, Grubbing and Dismantling:

The brief specifications of Clearing and Grubbing and Dismantling of a given land are to be done
by mechanical means or by physical means.

47
7.5 DETAIL SPECIFICATIONS OF CLEARING, GRUBBING AND
DISMANTLING:

CLEARING AND GRUBBING:

Scope:

This work shall consist of cutting, removing and disposing of all materials such as trees, bushes,
shrubs, stumps, roots, grass, weeds, top organic soil not exceeding 150 mm in thickness, rubbish
etc., which in the opinion of the Engineer are unsuitable for incorporation in the works, from the
area of road land containing and embankment, drains, cross-drainage structures and such other
areas as may be specified on the drawings or by the Engineer. It shall include necessary
excavation, back-filling of pits resulting from uprooting of trees and stumps to required
compaction, handling, salvaging, and disposal of cleared materials. Clearing and grubbing shall
be performed in advance of earthwork operations and in accordance with the requirements of
these Specifications.

Preservation of Property/Amenities:

Roadside trees, shrubs, any other plants, pole line, fences, signs, monuments, buildings,
pipelines, sewers and all highway facilities within or adjacent to the highway which are not to be
disturbed shall be protected from injury or damage. The Contractor shall provide and install at
his own expense, suitable safeguards approved by the Engineer for this purpose.

During clearing and grubbing, the Contractor shall take all adequate precautions against soil
erosion, water pollution, etc., and where required, undertake additional works to that effect vide
Clause 306. Before start of operations, the Contractor shall submit to the Engineer for approval,
his work plan including the procedure to be followed for disposal of waste materials, etc.

Methods, Tools and Equipments

Only such methods, tools and equipment as are approved by the Engineer and which will not
affect the property to be preserved shall be adopted for the work. If the area has thick
vegetation/roots/trees, a crawler or pneumatic tyred dozer of adequate capacity may be used for
clearance purposes. The dozer shall have ripper attachments for removal of tree stumps. All
trees, stumps, etc., falling within excavation and fill lines shall be cut to such depth below
ground level that in no case these fall within 500 mm of the sub grade. Also, all vegetation such
as roots, under-growth, grass and other deleterious matter unsuitable for incorporation in the
embankment/sub grade shall be removed between fill lines to the satisfaction of the Engineer. On
areas beyond these limits, trees and stumps required to be removed as directed by the Engineer
shall be cut down to 1 m below ground level so that these do not present an unsightly
appearance.

48
All branches of trees extending above the roadway shall be trimmed as directed by the Engineer.

All excavations below the general ground level arising out of the removal of trees, stumps, etc.,
shall be filled with suitable material and compacted thoroughly so as to make the surface at these
points conform to the surrounding area.

Ant-hills both above and below the ground, as are liable to collapse and obstruct free subsoil
water flow shall be removed and their workings, which may extend to several meters, shall be
suitably treated.

Disposal of Materials:

All materials arising from clearing and grubbing operations shall be the property of Government
and shall be disposed of by the Contractor as hereinafter provided or directed by the Engineer.

Trunks, branches and stumps of trees shall be cleaned of limbs and roots and stacked. Also
boulders, stones and other materials usable in road construction shall be neatly stacked as
directed by the Engineer. Stacking of stumps, boulders, stones etc., shall be done at specified
spots with all lifts and up to a lead of 1000 m.

All products of clearing and grubbing which, in the opinion of the Engineer, cannot be used or
auctioned shall be cleared away from the roadside in a manner as directed by the Engineer. Care
shall be taken to see that unsuitable waste materials are disposed of in such a manner that there is
no likelihood of these getting mixed up with the materials meant for embankment, subgrade and
road construction.

Measurements for Payment:

Clearing and grubbing for road embankment, drains and cross-drainage structures shall be
measured on area basis in terms of hectares. Clearing and grubbing of borrow areas shall be
deemed to be a part of works preparatory to embankment construction and shall be deemed to
have been included in the rates quoted for the embankment construction item and no separate
payment shall be made for the same. Cutting of trees upto 300 mm in girth including removal of
stumps and roots, and trimming of branches of trees extending above the roadway shall be
considered incidental to the clearing and grubbing operations. Removal of stumps left over after
trees have been cut by any other agency shall also be considered incidental to the clearing and
grubbing operations.

Cutting, including removal of stumps and roots of trees of girth above 300 mm and back-filling
to required compaction shall be measured in terms of number according to the sizes given
below:-

i) Above 300 mm to 600 mm

49
 ii) Above 600 mm to 900 mm

iii) Above 900 mm to 1800 mm

iv) Above 1800 mm

For this purpose, the girth shall be measured at a height of 1 meter above ground or at the top of
the stump if the height of the stump is less than one meter from the ground.

Rates:

The Contract unit rates for the various items of clearing and grubbing shall be payment in full for
carrying out the required operations including full compensation for all labor, materials, tools,
equipment and incidentals necessary to complete the work. These will also include removal of
stumps of trees less than 300 mm in girth as well as stumps left over after cutting of trees carried
out by another agency, excavation and back-filling to required density, where necessary and
handling, salvaging, piling and disposing of the cleared materials with all lifts and up to a lead of
1000 m.

The contract unit rates for cutting (including removal of stumps and roots) of trees of girth above
300 mm shall include excavation and back-filling to required compaction, handling salvaging,
piling and disposing of the cleared materials with all lifts and up to a lead of 1000 m.

Where a Contract does not include separate items of clearing and grubbing, the same shall be
considered incidental to the earthwork items and the Contract unit prices for the same shall be
considered as including clearing and grubbing operations.

DISMANTLING CULVERTS, BRIDGES AND OTHER STRUCTURES/PAVEMENTS

Scope:

This work shall consist of removing, as hereinafter set forth, existing culverts, bridges,
pavements, Krebs and other structures like guard-rails, fences, utility services, manholes, catch
basins, inlets, etc., which are in place but interfere with the new construction or are not suitable
to remain in place, and of salvaging and disposing of the resulting materials and back filling the
resulting trenches and pits.

Existing culverts, bridges, pavements and other structures which are within the highway and
which are designated for removal, shall be removed up to the limits and extent specified in the
drawings or as indicated by the Engineer.

50
Dismantling and removal operations shall be carries out with such equipment and in such a
manner as to leave undisturbed, adjacent pavement, structures and any other work to be left in
place.

All operations necessary for the removal of any existing structure which might endanger new
construction shall be completed prior to the start of new work.

Dismantling Culverts and Bridges:

The structures shall be dismantled carefully and the resulting materials so removed as not to
cause any damage to the serviceable materials to be salvaged, the part of the structure to be
retained and any other properties or structures nearby.

Unless otherwise specified, the superstructure portion of culverts/bridges shall be entirely

removed and other parts removed below the ground level or as necessary depending upon the
interference they cause to the new construction. Removal of overlying or adjacent material, if
required in connection with the dismantling of the structures, shall be incidental to this item.

Where existing culverts/bridges are to be extended or otherwise incorporated in the new work,
only such part or parts of the existing structure shall be removed as are necessary and directed by
the Engineer to provide a proper connection to the new work. The connecting edges shall be cut,
chipped and trimmed to the required lines and grades without weakening or damaging any part
of the structure to be retained. Due care should be taken to ensure that reinforcing bars which are
to be left in place so as to project into the new work as dowels or ties are not injured during
removal of concrete.

Pipe culverts shall be carefully removed in such a manner as to avoid damage to the pipes.

Steel structures shall, unless otherwise provided, be carefully dismantled in such a manner as to
avoid damage to members thereof if specified in the drawings or directed by the Engineer that
the structure is t be removed in a conditions suitable for re-erection, all members shall be match-
marked by the Contractor with white lead paint before dismantling; end pins, nuts, loose plates,
etc., shall be similarly marked to indicate their proper location; all pins, pin holes and machined
surfaces shall be painted with a mixture of white lead and tallow and all loose parts shall be
securely wired to adjacent members or packed in boxes.

Timber structures shall be removed in such a manner as to avoid damage to such timber or
lumber as is designated by the Engineer to be salvaged.

Dismantling Pavements and Other Structures:

In removing pavements, Krebs, gutters, and other structures like guard-rails, fences, manholes,
catch basins, inlets, etc., where portions of the existing construction are to be left in the finished

51
work, the same shall be removed to an existing joint or cut and chipped to a true line with a face
perpendicular to the surface of the existing structure. Sufficient removal shall be providing for
proper grades and connections with the new work as directed by the Engineer.

All concrete pavements, base course in carriageway and shoulders etc., designated for removal
shall be broken to pieces whose volume shall not exceed 0.02 cu.M. and stockpiled at designated
locations if the material is to be used later or otherwise arranged for disposal as directed.

Back-filling:

Holes and depressions caused by dismantling operations shall be back-filled with excavated or
other approved materials and compacted to required density as directed by the Engineer.

Disposal of Materials:

All materials obtained by dismantling shall be the property of Government. Unless otherwise
specified, materials having any salvage value shall be placed in neat stacks of like materials
within the right-of-way, as directed by the Engineer with all lifts and upto a lead of 1000 m.

Pipe culverts that are removed shall be cleaned and neatly piled on the right-of-way at points
designated by the Engineer with all lifts and lead upto 1000 m.

Structural steel removed from old structures shall, unless otherwise specified or directed, be
stored in a neat and presentable manner on blocks in locations suitable for loading. Structures or
portions thereof which are specified in the contract for re-erection shall be stored in separate
piles.

Timber or lumber from old structures which is designated b the Engineer as materials to be
salvaged shall have all nails and bolts removed there from and shall be stored in neat piles in
locations suitable for loading.

All materials obtained from dismantling operations which, in the opinion of the Engineer, cannot
be used or auctioned shall be disposed of as directed by the Engineer with all lifts and upto a lead
of 1000 m.

Rates:

The Contract unit rates for the various items of dismantling shall be paid in full for carrying out
the required operations including full compensation for all labor, materials, tools, equipment,
safeguards and incidentals necessary to complete the work. These will also include excavation
and back-filling where necessary to the required compaction and for handling, salvaging, piling
and disposing of the dismantled materials within all lifts and up to a lead of 1000 m.

52
7.6 REFERENCES

1. https://www.indeed.com/career-advice/career-development/specification-in-
construction#:~:text=Specifications%20in%20construction%20documents%20typically,
%3A%20proprietary%2C%20performance%20and%20prescriptive.
2. https://civilseek.com/construction-specifications/
3. https://manufacturers.thenbs.com/resources/knowledge/15-reasons-why-specifications-
are-still-
important#:~:text=A%20specification%20can%20support%20project,there%20be%20an
y%20legal%20disputes.
4. https://sist.sathyabama.ac.in/sist_coursematerial/uploads/SAR1402.pdf
5. https://constructionduniya.blogspot.com/2012/02/brief-and-detail-specifications-
of.html#:~:text=This%20work%20shall%20consist%20of,the%20area%20of%20road%2
0land

53
 CHAPTER 8
RATE ANALYSIS
Mr. Harish Sharma1 Ms. Vishali2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

8.1 INTRODUCTION

Every construction project is divided into number of activities. Each activity consists of different
types of civil or construction works. For example, the in the construction of a building, the
activities can be excavation or earthwork, Concrete work, masonry work, Wood work such as
doors and windows, plumbing, flooring, waterproofing, finishing work such as plastering,
painting and distempering. The Activity earthwork can be divided into many types based on
depth and type of soil. For example, an excavation of 1.5m deep in soft soil, an excavation of 3m
deep in hard soil. Likewise, concrete work can be divided into many types based on its mix
proportions and its placement. For example, M25 reinforced concrete work in foundation, M30
reinforced concrete work in columns, slabs etc. Likewise, there can be many small civil works in
every construction project. The cost of any construction project is calculated based on each
works associated with every construction activity. Thus it is essential to calculate cost of each
small works. Rate analysis of Civil Works or Building Works is the determination of cost of each
construction work per unit quantity. This cost includes the cost of materials, labours, machinery,
contractors profit and other miscellaneous petty expenses required for the particular work to be
complete in unit quantity. For example, cost of 1 cubic meter of M20 RCC work in slab, Cost of
1 cubic meter of excavation in soft soil of 1.5m depth, cost of 1 square meter of plastering of
20mm, cost of 1 square meter of painting work with specified paint in 2 layers or 3 layers as
required. The cost of materials in rate analysis is calculated as combination of cost of material at
origin, its transportation costs, and tax. The rate of labor is based on skill of the labor, such as
skilled labor, semi-skilled and unskilled labor. The cost of materials and labors vary from place
to place. Thus, the cost of each construction work varies from place to place.

8.2 COMPONENTS OF RATE ANALYSIS

The Components of Rate Analysis is depending on the effect of it on rate analysis. The primary
Components of Rate Analysis are as below:

1. Material cost inclusive of wastage

2. Labor cost

54
3. Plant & machinery owning and operative charges

4. Water charges

5. Overheads

6. Profit

Fig 8.1 Components of rate analysis

1. Materials Cost:-

This is the primary Components of Rate Analysis. As per detailed specification, quantity of an
item is calculated. There are various factors like specification, composition, quality of materials
considered for deciding material cost. Transportation cost, storage & handling cost, loss of theft,
losses due to various factors also take into account while deciding cost of material for rate of
analysis. Based on market rates, per unit rate is calculated.

Following price too is considered:-

 Freight & transportation, as well as loading & unloading

 Taxes & insurance
 Profit on Cement, steel stone chips and bitumen not included if supplied departmentally.

2. Labor cost:

Following factors are considered for labor prices,

 Number of labor required as per class (Skilled or unskilled & helpers)

 Daily wedges of labor

 Quality of their work

 Capacity of work i.e. or work done per day

55
3. Equipment, Tools and Plant cost

This cost is calculated on the basis of equipment used for particular work per unit item.

For example concrete mixer as per unit of concrete.

Certain tools and plants are tough to allocate as per the specific item hence their cost are
considered in establishment charges.

For some special equipment generally we consider 1% to 5% of total estimated cost is provided
for purchasing of instruments.

4. Overhead & establishment Charges:

 These charge can be included following charges,

 Office Rent,
 Depreciation on equipment
 Salaries of office staff,
 Postage, lighting, travelling, telephone account
 Theft or loss
 Go-Down rent
 Small tools, planks, ladders, ropes, hand tools for workmen
 Repairs & depreciation for tools and plant
 Lighting at site
 Mobilization of establishment
 Public Relations
 Labor Welfare & safety
 Workmen compensation, insurance
 Interest on investment

This is actually 2.5% up to 5

Overhead charges will increase with delay in project.

5. Profits:

The percentage for profit is depending upon the type of project.

 For small to medium project profit is considered as 15%

 For large project profit is considered as 10%

56
8.3 IMPORTANCE OF RATE ANALYSIS

Rate analysis gives a well-defined picture of tools, services, and machinery involved in the
construction of a project.

Rate analysis helps in proportioning the effect of the market on the payments made for
construction work. It also helps in determining the construction costs per unit as stipulated in the
specifications. The use of rate analysis makes it possible to come up with uniform standards for
construction works.

8.4 FACTORS AFFECTING ON RATE ANALYSIS:

The Factors affecting on Rate Analysis is many and it is depend upon the varies conditions.
Factors affecting on Rate Analysis is listed below,

1. Specification of the item:

This is the main Factors affecting on Rate Analysis. Specification of item is always matter in on
rate and rate analysis. They may like dimensions (thickness, length), color, brand or trade of
material, raw materials, casting procedure, method of construction, plants and equipment has
great impact on price.

Example: For masonry, conventional clay brick is replaced with the fly ash brick or RCC blocks.
This chance in brick always has great impact on rate. As material, labour changes according to
specification.

2. Quality of Materials:

Rate of material is different for various types of quality of materials. The different quality of
materials is used for the different kinds of activity on site.

For example, rate for first class brick is more than the second class bricks. The first class bricks
are always used in load carrying masonry especially exterior wall of building. Second class
bricks can be used in masonry of compound walls.

3. Proportion of materials:

Depending on the proportion of materials, the quantity for raw materials will changes and rate
for item of work will changes?

For example, RCC in C: M 1:4 and C: M 1:5 always has different rate.

57
4. Method of construction:

This is very important concept for rate analysis. Depending on method of construction the rate
will varies as rate also varies with the different kinds of materials, tool & plant is used for
different method of construction. .

For example, using RMC concrete for construction rather than conventional manually concrete.
Or casting building using Pre-fabricated elements.

5. Daily wages of laborer:

The daily wages of laborer varies according to their skills, types, speed of work. some of the
major factors affecting ohm daily wages are listed below,

 With different categories

 With localities
 As per outputs

According to execution of any activity, the quantity of labor required is calculated. Then the
types of labor like skilled, semi- skilled, unskilled are calculated. Then the rate per laborer will
be decided according to their activity and type.

6. Tools and Plants:

Depending on method of construction, the requirement for tools and plants will be varying. The
rate for varies tools and plants also varies according to use. In every type of construction work
different types of tools and plants are required. In special cases, where special type of tool and
equipment is used, the rate of construction will be high.

7. Overheads and profits:

Overhead charges mainly include expenses of office, labor welfare, material testing, water
supply, electrification, depreciation amount etc. and profit is the contractors profit for the
construction. Usually overheads and profits combine considered from 10% to 20% depending
upon the scale of the project.

8.5 PURPOSE OF RATE ANALYSIS

 To work out the actual cost of per unit of the item.

 To work out the economical use of materials and processes in completing the particular
items.
 To work out the cost of extra items which are not provided in the contract bond but are to
be done as per the direction of the department?

58
  To revise the schedule of rates due to increase in the cost of materials and labor due to
change in technique.

8.6 PROCEDURE OF RATE ANALYSIS

Cost of materials at source and at site of construction. The costs of materials are taken as
delivered at site inclusive of the transport local taxes and other charges. The procedure of
analyzing the rate per unit of an item has been expressed as follows:

This consists of the following heads:

a. Quantity of materials needed per unit rate of work and its cost delivered at the work zone
containing first cost, freight, transportation, sales tax, and insurance charges as a question. In the
point when materials like cement, steel, stone chips, and bitumen are provided departmentally,
then gain on the cost of materials is not permitted, but the cost of carriages from go down to the
work site shall be counted.

b. Several labor or labor hours needed to achieve per unit rate of work and its cost.

c. Overhead or equipment and establishment charges needed to achieve per unit rate of work.

d. Gain while arriving at workable rates, the factors that are to be regarded have already been
conveyed.

e. In this rate analysis, all civil materials consider, and all items for various rate analysis sum
major rate analyses as per below.

1. Rate Analysis of Earth Work.

2. Rate Analysis of Brick.

3. Rate Analysis of Concrete.

4. Rate Analysis of Plaster.

8.7 RATES OF ITEMS DEPEND ON

1. Specifications of works and material, their quality, proportion and method of

constructional operation.
2. Quantity of materials and their costs.
3. Cost of labours and their wages.
4. Location of site of work and the distances from source and conveyance charges.
5. Overhead and establishment charges

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 6. Profit and miscellaneous expenses of the contractor.

8.8 HOW TO IMPROVE EQUIPMENT PRODUCTIVITY

Equipment productivity generally refers to the time during which the machine is in operation
performing productive work. The more efficiently the workers can complete their tasks, the
higher the production level is. Equipment productivity applies whether you’re an equipment
owner or you’ve rented a machine for the week.

No matter the case, whenever equipment isn’t in use for any reason, or someone is operating it
incorrectly, it’s being non-productive or not as productive as it could be.

Poor equipment productivity is a leading contributor to many problems that contractors face,
including increased and unexpected costs that cause budget creeps. Non-productive hours can
slowly add up throughout the day, week, month and year. It’s estimated that the average
contractor can expect 800 to 900 productive hours annually from a typical piece of equipment.
At best, that translates to a productivity rate of only 62%. In other words, the productivity rate of
construction equipment has an opportunity to improve by nearly 40%. Low equipment
productivity rates are preventing contractors from earning higher profits, but there are practical
solutions to curb this trend.

To increase equipment productivity, you need to ask yourself what productivity means to you.
Increased equipment productivity can refer to better work efficiency, more project profitability,
improved job site safety or higher quality work produced. There are many aspects involved in
maximizing construction equipment productivity rates. In general, every productivity solution
involves assessing your people, processes or the technology and systems you use. It requires an
investment in them to make them more productive.

With this in mind, here are 10 of the top ways you can get the most out of your equipment and
earn higher returns and production rates on each project.

1. Choose certified used equipment

Getting the highest construction equipment productivity rates doesn’t necessarily mean going out
and buying the newest and most heavy-duty model available. While there are some definite pros
to buying new equipment, there are just as many benefits to renting or buying used equipment —
as long as the equipment manufacturer certifies it for rent or sale.

Equipment breakdowns and malfunctions can have costly outcomes on a job site that’s looking
to maximize equipment productivity. To prevent unexpected downtime due to poor-performing
equipment, be sure to rent or buy used equipment from a supplier that’s authorized to sell the
brand of equipment you need. Some outlets don’t maintain their equipment by the same

60
standards others do. They don’t have the technical expertise or product knowledge required to
service and repair intricate and complex machines from some of the world’s leading
manufacturing brands.

2. Select the right equipment for the job

If you’re renting heavy equipment for your construction site, it’s essential to get the right tools
for the job. Sometimes, contractors rent equipment that’s too small, either because that’s all the
supplier had available or because they miscalculated their capacity needs. Renting equipment
that’s too small can reduce your productivity by taking longer to complete the job. On the other
hand, machinery that’s too big for the project adds unnecessary costs. Oversized equipment is
not only unnecessarily complicated for the job, but it can also cause added management time that
comes with a bigger, more intricate machine.

Even if you own your equipment, it’s still worth analyzing each project to see if it’s more cost-
effective to rent a machine that’s better equipped for the job. No two projects are the same, so
your equipment may not be as productive as a machine that’s available to rent. Choosing the
most productive equipment for the job will also ensure you produce higher quality work. High-
quality work that’s done right the first time mitigates the risk of having to perform expensive re-
work, which extends rental agreements, puts more wear and tear on the equipment and tacks on
costs for the operator’s time.

3. Schedule jobs wisely

Just as contractors prepare schedules for labor and materials delivery, they must also plan out
their equipment calendars. Make sure you know exactly when you’ll need your equipment — the
date and exact time. Block off project time based on how long the project will take to complete.
Make sure the equipment arrives at the site ahead of the scheduled work, as inspection and
preparation time can slowly erode heavy equipment production rates.

For contractors running multiple jobs at a time, smart equipment scheduling is essential to
maximizing productivity. Multiple projects can complicate things, so make sure you’re
scheduling your equipment to be productive for the majority of the week. There are plenty of
project management systems available today that can plan out a production schedule for you,
taking out the guesswork for contractors.

4. Follow a preventive maintenance program

There’s no better way for contractors to protect their investment and get the most out of their
heavy equipment than to follow a preventive maintenance program. A regular PM program can
increase a contractor’s profits by an estimated 10% due to reliable, smooth-running machines.

61
Preventive maintenance means not only scheduling regular servicing, but it also means
monitoring your equipment with every use to ensure you’re catching any issues before they
affect productivity. Check the equipment each day before beginning work to ensure its
functioning properly. Be sure to check it again at the end of the day to ensure it is free from
damage. If there are any issues, have them repaired or addressed before beginning another
production day.

As an equipment owner, you need to be aware of the service requirements of each component
and when to inspect them. Ask operators about any noticeable wear and tear they can feel during
operation, such as vibrations or heat. By ensuring all parts are functioning properly, you’ll get
maximum use from your machine on every job.

5. Keep detailed equipment operating records

When you invest in heavy equipment for your contracting business, it pays to develop excellent
record-keeping skills. Being detail-oriented about operating records and maintenance plans is
essential to maximizing production time and extending the machine’s life cycle. Comprehensive
records will include the following information you can use to increase the productivity of your
construction equipment.

Operating hours: Record how long you and your crew used the equipment on any given day,
week or month. Documenting how long the equipment was actually in use also gives you a
clearer picture of equipment downtime levels — non-productive time where the machine stood
idle.

Operating costs: When calculating operating costs, there are lots of factors to take into account.
The real cost of operating construction equipment includes not just the operator’s time, but also
fuel, insurance, wear and tear, maintenance and repairs, equipment depreciation and non-
productive time for other trades on the site.

Profitability and return on investment: When you deduct your true equipment operating costs
from the value it generated, you’ll be able to determine your return on investment from the
equipment. Measuring the profitability of your equipment gives you a job-to-job metric of your
equipment production rates and highlights opportunities to improve it.

6. Communicate hourly cost of equipment operation

In addition to bookkeeping and ensuring business profitability, there’s another critical reason for
calculating your equipment operating costs. As a job site manager or contractor, it’s your
responsibility to maximize production rates and communicate this goal with operators and trades
people.

62
It’s safe to assume most operators or workers aren’t fully aware of the genuine cost of equipment
operation the contractor incurs. Workers may be aware of the general costs associated with
equipment operation, such as rental fees, fuel and insurance, but they may not appreciate what an
investment it is to run heavy equipment on a job site. On some sites, you’ll see the hourly
operating cost of equipment posted either in the office or on the machine itself, letting everyone
know how critical production time is. By helping your operators and site workers understand the
genuine hourly cost of operating the equipment, you’ll be more likely to gain their support in
maximizing production time too.

7. Track equipment downtime

If you want to make informed decisions about how to increase equipment productivity, you must
keep track of a machine’s downtime. A machine’s idle time costs you money, as every minute it
isn’t in use is a lost opportunity for production. Downtime delays how quickly you can complete
a job and move on to the next contract. Keeping track of equipment downtime can help you see
how much productivity time you may be losing on any given job.

But it’s not enough to keep track of the downtime itself. It’s also essential to know the cause of
downtime. Equipment malfunctions, operator errors, ill-prepared job sites and countless other
possible delays all contribute to downtime. By understanding what obstacles are preventing you
from maintaining high equipment productivity rates, you can intervene and reduce the chance of
downtime.

8. Hire experienced operators

Just as getting the right machine for the job is essential to job site productivity, so is hiring the
right equipment operator. To get the most out of your heavy equipment investment or rental, it’s
necessary for the operators using the equipment to be highly skilled and fully trained in operating
the specific piece of equipment. Ensure they understand the machine control systems and
available technology tools that will help them get their job done faster, safer and more
efficiently.

Hiring trained and skilled heavy equipment operators also reduces the chance of damaging the
equipment or injuring themselves and others. Skilled operators have specialized training in
accident prevention, following key job site protocols to maintain good visibility and to ensure
plenty of room for safe operation. Staying safe on the job site is a top way to stay productive and
prevent costly delays.

9. Encourage feedback

Running a construction job is tough. There’s a lot to account for and a lot at stake. That’s why
one of your most valuable and possibly untapped resources is your people and their feedback.

63
Getting to know what operators like and don’t like about the equipment you’ve provided can
help ensure that moving forward, your jobs are getting more productive, not stagnating.

Your operator may have a wealth of knowledge that will help you get the most out of your
equipment, including whether you’re getting the right equipment, scheduling jobs correctly,
keeping track of operation time appropriately, ordering the correct parts and giving them any
other additional tools they’ll need to get the job done.

10. Take advantage of machine data

Did you know heavy equipment today can connect with advanced data analytics systems that
offer valuable information on your machine’s productivity levels? With machine operating data,
you and your operators can know when people are running machines at their peak intended
performance or when they are managing their tasks incorrectly. This type of technology can also
alert operators to any safety issues that could cause devastating accidents and costly delays. This
type of insight can give contractors and equipment operators the peace of mind in knowing
they’re producing high-quality work, safely.

Using machine data-gathering technology, operators can also program the equipment to automate
repetitive tasks like grading, which they can do faster and with fewer passes. Machine data also
lets operators know when their equipment has reached maximum safe payload, so they can move
more material in fewer cycles. Machine automation is vital for any contractor looking to increase
equipment productivity through higher work efficiency.

8.9 REFERENCES

1. https://theconstructor.org/practical-guide/rate-analysis-of-civil-works-elements-and-
requirements/10952/#:~:text=Rate%20analysis%20of%20Civil%20Works%20or%20Buildi
ng%20Works%20is%20the,be%20complete%20in%20unit%20quantity.
2. https://constroquicks.com/components-of-rate-analysis/
3. https://proest.com/construction/estimating/rate-
analysis/#:~:text=Rate%20analysis%20helps%20in%20proportioning,uniform%20standards
%20for%20construction%20works.
4. https://constroquicks.com/factors-affecting-on-rate-analysis/
5. https://www.civilknowledges.com/rate-analysis-purpose-with-
calculation/#:~:text=The%20task%20work%20per%20day,the%20contractor%20the%20tas
k%20work
6. https://www.sathyabama.ac.in/sites/default/files/course-material/2020-10/SCI1311-UNIT-
II.pdf
7. https://www.gregorypoole.com/how-to-boost-heavy-equipment-
productivity/#:~:text=Equipment%20productivity%20generally%20refers%20to,higher%20t
he%20production%20level%20is.

64
8. https://sist.sathyabama.ac.in/sist_coursematerial/uploads/SAR1402.pdf

65
 CHAPTER 9
ESTIMATION
Ms. Nisha Chawla1 Ms. Sonia Gundwani2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

9.1 INTRODUCTION
Estimation (or estimating) is the process of finding an estimate or approximation, which is a
value that is usable for some purpose even if input data may be incomplete, uncertain,
or unstable. The value is nonetheless usable because it is derived from the best information
available. Typically, estimation involves "using the value of a statistic derived from a sample to
estimate the value of a corresponding population parameter". The sample provides information
that can be projected, through various formal or informal processes, to determine a range most
likely to describe the missing information. An estimate that turns out to be incorrect will be
an overestimate if the estimate exceeds the actual result and an underestimate if the estimate falls
short of the actual result.

9.2 REQUIREMENTS OF ESTIMATION AND COSTING

1. Estimate gives an idea of the cost of the work and hence its feasibility can be determined i.e.
whether the project could be taken up with in the funds available or not.

2. Estimate gives an idea of time required for the completion of the work.

3. Estimate is required to invite the tenders and Quotations and to arrange contract.

4. Estimate is also required to control the expenditure during the execution of work.

5. Estimate decides whether the proposed plan matches the funds available or not.

9.3 TYPES OF ESTIMATES

 Preliminary Estimate
 Detailed estimate
 Abstract
 Revised Estimate

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Preliminary Estimate

The estimate is a rough estimate which is normally be estimated on approximate square feet rate.
In this estimate the specifications and Area are only for the temporary purpose. Some times the
cost may differ upto 50%.

Detailed Estimate

The estimate which is in detail be provided with specifications of material, method of during the
work, Details measurements and drawings. The quantities of the item of the works may vary
upto 10%.

Abstract

The estimate which includes only the total quantities of the item of works, rates either as per
PWD schedule or market values and total cost of the project.

Revised Estimate

The revised estimate is the estimate which includes revised quantities or specifications and
Rates. The conditions for the preparation of Revised estimates are:

1. When the area or measurements of the approved plan changes

2. When the specification of material of method of construction changes
3. When the rates of the material, labour changes over and above 10%
4. When the location of the work changes

9.4 HOW ESTIMATION IS DONE

Estimation is often done by sampling, which is counting a small number of examples something,
and projecting that number onto a larger population. An example of estimation would be
determining how many candies of a given size are in a glass jar. Because the distribution of
candies inside the jar may vary, the observer can count the number of candies visible through the
glass, consider the size of the jar, and presume that a similar distribution can be found in the
parts that cannot be seen, thereby making an estimate of the total number of candies that could be
in the jar if that presumption were true. Estimates can similarly be generated by projecting results
from polls or surveys onto the entire population.

In making an estimate, the goal is often most useful to generate a range of possible outcomes that
is precise enough to be useful but not so precise that it is likely to be inaccurate.[2] For example,
in trying to guess the number of candies in the jar, if fifty were visible, and the total volume of
the jar seemed to be about twenty times as large as the volume containing the visible candies,
then one might simply project that there were a thousand candies in the jar. Such a projection,
67
intended to pick the single value that is believed to be closest to the actual value, is called a point
estimate. However, a point estimation is likely to be incorrect, because the sample size—in this
case, the number of candies that are visible—is too small a number to be sure that it does not
contain anomalies that differ from the population as a whole. A corresponding concept is
an interval estimate, which captures a much larger range of possibilities, but is too broad to be
useful. For example, if one were asked to estimate the percentage of people who like candy, it
would clearly be correct that the number falls between zero and one hundred percent. Such an
estimate would provide no guidance, however, to somebody who is trying to determine how
many candies to buy for a party to be attended by a hundred people.

9.5 DATA REQUIRED TO PREPARE AN ESTIMATE

1. Drawings i.e. plans, elevations, sections etc.

2. Specifications.

3. Rates.

Drawings

If the drawings are not clear and without complete dimensions the preparation of estimation
become very difficult. So, it is very essential before preparing an estimate.

Specifications

a) General Specifications: This gives the nature, quality, class and work and materials in
general terms to be used in various parts of wok. It helps no form a general idea of building.

b) Detailed Specifications: These gives the detailed description of the various items of work
laying down the Quantities and qualities of materials, their proportions, the method of
preparation workmanship and execution of work.

Rates

For preparing the estimate the unit rates of each item of work are required.

1. for arriving at the unit rates of each item.

2. The rates of various materials to be used in the construction.

3. The cost of transport materials.

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4. The wages of labor, skilled or unskilled of masons, carpenters, Amador, etc.,

9.6 COMPLETE ESTIMATE

Most of people think that the estimate of a structure includes cost of land; cost of materials and
labor, but many other direct and indirect costs included and are shown below.

Fig. 9.1 Complete estimate

9.7 LUMPSUM

While preparing an estimate, it is not possible to work out in detail in case of petty items. Items
other than civil engineering such items are called lump sum items or simply L.S. items.

The following are some of L.S. Items in the estimate:

1. Water supply and sanitary arrangements.

2. Electrical installations like meter, motor, etc.,

3. Architectural features.

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4. Contingencies and unforeseen items.

In general, certain percentage on the cost of estimation is allotted for the above L.S. items Even
if sub estimates prepared or at the end of execution of work, the actual cost should not exceed the
L.S. amounts provided in the main estimate.

9.8 WORK CHARGED ESTABLISHMENT

During the construction of a project considerable number of skilled supervisors, work assistance,
watch men etc., are employed on temporary basis. The salaries of these persons are drawn from
the L.S. amount allotted towards the work charged establishment. That is, establishment which is
charged directly to work. An L.S. amount of 1½ to 2% of the estimated cost is provided towards
the work charged establishment.

9.9 REFERENCES

1. https://en.wikipedia.org/wiki/Estimation#:~:text=Estimation%20(or%20estimating)%20is%
20the,from%20the%20best%20information%20available.
2. https://ncma.org/resource/estimating-concrete-masonry-
materials/#:~:text=ESTIMATING%20CONCRETE%20MASONRY%20UNITS,-
Probably%20the%20most&text=The%20most%20direct%20means%20of,unit%20specified
%20for%20the%20project.

70
 CHAPTER 10
METHODS OF ESTIMATION
Ms. Kanchan Verma1 Ms. Richa Verma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

10.1 METHODS OF ESTIMATION

The quantities like earth work, foundation concrete, brickwork in plinth and super structure etc.,
can be workout by any of following methods:

 Long wall - short wall method

 Centre line method.
 Partly centre line and short wall method.

LONG WALL-SHORT WALL METHOD

In this method, the wall along the length of room is considered to be long wall while the wall
perpendicular to long wall is said to be short wall. To get the length of long wall or short wall,
calculate first the centre line lengths of individual walls. Then the length of long wall, (outside
dimension) may be calculated after adding half breadth at each end to its centre line length. Thus
the length of short wall Measured into in and may be found by deducting half breadth from its
centre line length at each end. The length of long wall usually decreases from earth work to brick
work in super structure while the short wall increases. These lengths are multiplied by breadth
and depth to get quantities.

CENTRE LINE METHOD

This method is suitable for walls of similar cross sections. Here the total centre line length is
multiplied by breadth and depth of respective item to get the total quantity at a time. When cross
walls or partitions or verandah walls join with main all, the centre line length gets reduced by
half of breadth for each junction. Such junction or joints are studied carefully while calculating
total centre line length. The estimates prepared by this method are most accurate and quick.

PARTLY CENTRE LINE AND PARTLY CROSS WALL METHOD

This method is adopted when external (i.e., around the building) wall is of one thickness and the
interior walls having different thicknesses. In such cases, centre line method is applied to
external walls and long wall-short wall method is used to interior walls. This method suits for

71
different thicknesses walls and different level of foundations. This method is a popular method in
practice.

10.2 USES OF ESTIMATION

In mathematics, approximation describes the process of finding estimates in the form of upper or
lower bounds for a quantity that cannot readily be evaluated precisely, and approximation
theory deals with finding simpler functions that are close to some complicated function and that
can provide useful estimates. In statistics, an estimator is the formal name for the rule by which
an estimate is calculated from data, and estimation theory deals with finding estimates with good
properties. This process is used in signal processing, for approximating an unobserved signal on
the basis of an observed signal containing noise. For estimation of yet-to-be observed
quantities, forecasting and prediction are applied. A Fermi problem, in physics, is one
concerning estimation in problems that typically involve making justified guesses about
quantities that seem impossible to compute given limited available information.

Estimation is important in business and economics because too many variables exist to figure out
how large-scale activities will develop. Estimation in project planning can be particularly
significant, because plans for the distribution of labor and purchases of raw materials must be
made, despite the inability to know every possible problem that may come up. A certain amount
of resources will be available for carrying out a particular project, making it important to obtain
or generate a cost estimate as one of the vital elements of entering into the project. The U.S.
Government Accountability Office defines a cost estimate as, "the summation of individual cost
elements, using established methods and valid data, to estimate the future costs of a program,
based on what is known today", and reports that "realistic cost estimating was imperative when
making wise decisions in acquiring new systems". Furthermore, project plans must not
underestimate the needs of the project, which can result in delays while unmet needs are
fulfilled, nor must they greatly overestimate the needs of the project, or else the unneeded
resources may go to waste.

An informal estimate when little information is available is called a guesstimate because the
inquiry becomes closer to purely guessing the answer. The "estimated" sign, ℮, is used to
designate that package contents are close to the nominal contents.

A large number of Indian Standard (IS) codes are available that are meant for virtually every
aspect of civil engineering one can think of. During one’s professional life one normally uses
only a handful of them depending on the nature of work they are involved in. Civil engineers
engaged in construction activities of large projects usually have to refer to a good number of IS
codes as such projects entail use a variety of construction materials in many varieties of
structures such as buildings, roads, steel structures, all sorts of foundations and what not.

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10.3 ESTIMATING CONCRETE MASONRY UNITS

Probably the most straightforward material to estimate for most masonry construction projects is
the units themselves. The most direct means of determining the number of concrete masonry
units needed for any project is to simply determine the total square footage of each wall and
divide by the surface area provided by a single unit specified for the project.

For conventional units having nominal heights of 8 in. (203 mm) and nominal lengths of 16 in.
(406 mm), the exposed surface area of a single unit in the wall is 8/9 ft2 (0.083 m2). Including a
5 percent allowance for waste and breakage, this translates to 119 units per 100 ft2 (9.29 m2) of
wall area. (See Table 1 for these and other values.) Because this method of determining the
necessary number of concrete masonry units for a given project is independent of the unit width,
it can be applied to estimating the number of units required regardless of their width.

When using this estimating method, the area of windows, doors and other wall openings needs to
be subtracted from the total wall area to yield the net masonry surface. Similarly, if varying unit
configurations, such as pilaster units, corner units or bond beam units are to be incorporated into
the project, the number of units used in these applications need to be calculated separately and
subtracted from the total number of units required.

10.4 WHAT IS EARTHWORK?

When breaking down or cutting sections of the earth, such as batches of soil or large sections of
rock, these engineering processes are called earthworks. Earthworks are processes found in most

73
civil-engineering projects that alter the topography of any site. These processes are necessary for
the construction of dams, roads, bridges, homes, and more.

Two important processes to understand earthwork are cutting and filling. Cutting involves the
removal of large chunks of earth surface. For example, this could include removing a hill (or part
of one) to create a road. Filling describes the shifting and relocation of excavated material or
“fill” to another earth surface area for compacting.

10.5 WHAT IS EARTHWORK ESTIMATES?

In the construction industry, things work a little differently than the usual shop and buy. For
anyone working as an earthwork contractor, you will know that earthwork estimates are a crucial
part of any project.

If projects such as dam construction or bridge building come up, earthwork contractors that
propose accurate bids can win a contract. Contractors have to do a lot of work to correctly figure
out earthwork volumes and areas.

10.6 REFERENCES

1. https://cfexcavating.com/what-is-earthwork-
estimates/#:~:text=To%20calculate%20the%20earthwork%20estimate,of%20two%20sets%
20of%20levels.
2. https://vardhaman.org/wp-content/uploads/2021/03/ESTIMATION-AND-COSTING-2.pdf
https://www.webpages.uidaho.edu/~mlowry/Teaching/economic/FE_Ch._53.pdf
3. https://housing.com/news/bar-bending-
schedule/#:~:text=A%20bar%20bending%20schedule%20(BBS,to%20achieve%20the%20d
esired%20outcome.
4. https://kanchiuniv.ac.in/coursematerials/estimation,costingandvaluation.pdf

74
 CHAPTER 11
BAR BENDING SCHEDULE
Mr. Tarandeep Singh1 Mr. Sameer Malhotra2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

11.1 WHAT IS BAR BENDING SCHEDULE?

A bar bending schedule (BBS) is a tabular breakdown of reinforcing bars that includes details
such as bar type, total length, weight, and a drawing of the desired bending shape. Generally
speaking, a bar bending schedule is developed for every different kind of RCC operation. During
the building process, the need for bars of varying widths and lengths may be determined with the
assistance of BBS, and the bars can be organized and bent according to those specifications.

Details such as bar size and type, bending shape, number of sets or individual bars, bar length (in
running meters) and overall length and total weight are provided.

Calculation of the total quantity of TMT Steel Bar required for building construction is termed as
Bar Bending Schedule. Steel Bar reinforce in concrete structure therefore the construction
structure can withstand during the tension. How much TMT Bar required constructing your
home? What type of steel bar is best for construction? How much TMT Bar required in
RCC? These all queries can be served during Bar Bending Schedule (BBS).

It is important to learn the basics before dealing with BBS.

11.2 IMPORTANCE OF BAR BENDING SCHEDULE

The process of cutting and bending steel bars is carried out by laborers at the construction site.
Because the laborers working on site do not have a strong technical background, it is challenging
to explain what they are doing with the assistance of drawings. Mistakes in steel cutting and

75
bending are possible. Because BBS specifies both the bar’s design and its cutting length,
elucidating the concept to them is a breeze.

A supervisor is able to easily instruct the workers, and the workers are able to do the necessary
work in accordance with the needs and parameters of the structural design.

11.3 MODIFICATION IN BAR BENDING SCHEDULES

Construction industry rapidly changed in last few decades. Previously three to four-storey
building were considered to be high rise but with the rapid growth in construction industry we
could see 100+ storey buildings very often.

According to the old construction method using four steel bars in column was standard but now
we are using 15+ steel bars in column based on load analysis. Rise in world population
demanded more spaces in small area.

11.4 IMPORTANT POINTS TO BE NOTED FOR BAR BENDING

SCHEDULE

 TMT Steel Bars should be kept together in a group that can be identified for each
structural unit and list should be well distributed for each floor

 Bars should be in numeric order numbers

 Each bar in bundle should be labeled properly with length, size and shape of the bar

 In bar bending cutting schedule cutting length and bending length calculation should be
done separately.

11.5 IMPORTANT USAGE OF BAR BENDING SCHEDULE

 Bar Bending Schedule (BBS) helps to determine the quantity of steel required in
construction of your house. This helps to get the accurate estimation of steel

 Once the calculation of cutting and bending is done it reduces the wastage of steel and it
becomes economic

 Once you get the reinforcement drawings, cutting and bending can be done at warehouse
before transportation. It increases the speed of construction and the transportation cost
also reduces.

 Before placing the concrete if the bending and cutting length of TMT Steel bars are
measured it becomes easier for site engineers.

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11.6 BBS BASICS & FORMULAS TO BE REMEMBERED

 Diameter of bars (in mm) – 6, 8, 10, 12, 16, 20, 25, 28, 32, 36, 40 mm
 The standard length of reinforcement bar – 12 metre or 40 feet
 Weight of bar (Kg) per metre formula – D2/162

Extension Length Formulas

 Footing lap length formula – 40d

 Column Lap length formula – 50d
 Development length for dowel bars – 16d
 Hook Length – 9d

Concrete Cover

 Footing – 75 mm
 Column & Beam – 25-50 mm

Bend Deduction

 45° – 1d
 90° – 2d
 135° – 3d

Crank Length Formula

 45° – 0.42d
 30° – 0.27d
 60° – 0.58d
 Extra Bars Length – L/4 or L/5

11.7 PREPARATION OF BAR BENDING SCHEDULE (BBS)

Bar bending schedule or schedule of bars (BBS) is a list of reinforcement bars for a given
reinforced concrete work item, and is presented in a tabular form for easy visual reference. Table
of bar bending schedule summarizes all the needed particulars of bars - diameter, shape of
bending, length of each bent and straight portions, angles of bending, total length of each bar,
and number of each type of bar. This information is a great help in preparing an estimate of
quantities.

How to Prepare Bar Bending Schedule

Generally reinforced cement concrete works may be calculated under 2 items:

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1. Concrete work including centering and shuttering.

2. Steel reinforcement along with its bending, cutting, laying etc in Quintal or Tonnes.

The quantity of steel is very small in volume hence no deduction is made for the steel from the
volume of concrete.

Steel reinforcement is calculate as per actual requirement including overlap, hooks, cranks etc
and is determined from detailed drawing.

Generally the percentage of steel reinforcement depends on the design of structure. nu7

#Extra Length of Bar:

1. Standard Hook (180° Bend):

 Extra length for 1 hook = 9Φ

 Extra length for 2 hooks = 2 × 9Φ = 18Φ

2. For 90° Bend:

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  90° bend is generally provided for HYSD (High Yielding Strength Deformed) Bars.

 Extra Length for one 90° bend = 6Φ

 Extra length for two 90° bend = 2 × 6Φ = 12Φ

3. Bent-up Bars:

 Extra length for one bent-up =

 Extra length for two bent-up bars = 2 × 0.42 d = 0.84 d

 d = D – (top cover + bottom cover)

4. For Two Legged Stirrups:

11.8 REFERENCES
1. https://shyamsteel.com/blogs/what-is-bar-bending-schedule-bbs-of-tmt-
bar/#:~:text=Calculation%20of%20the%20total%20quantity,can%20withstand%20durin
g%20the%20tension.

79
2. https://theconstructor.org/practical-guide/preparation-of-bar-bending-schedule/7629/
3. https://housing.com/news/bar-bending-schedule/

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 CHAPTER 12
COMPONENTS OF BAR BENDING SCHEDULE
Mr. Sameer Malhotra1 Ms. Nisha Chawla2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

12.1 COMPONENTS OF BAR BENDING SCHEDULE

Different companies use a variety of formats, but they always feature the same fundamental
components, such as:

1. Item or individual or location

2. Description or Bar Code or Bar Symbol

3. Bar No.

4. Zoning

5. Shape code from

 IS 2502 – 1963

 BS 8666: 2005

6. Number of Bars

7. Trim Length

8. Number of Items

9. Overall Length

10. Weight summary

The shape code will only provide you with the standard forms of bars; thus, the shape of the bars
themselves may be of any kind. However, non-standard shapes are required to be supported by
properly dimensioned drawings.

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12.2 WHO DEVELOPS BAR BENDING-SCHEDULE?

It is dependent on the standard procedure and the kind of buildings for which the bar-bending
schedule is being developed. For instance, in building bridges, having a consultant draft BBS is
commonplace. In the construction of most typical structures, the BBS is almost always prepared
by the contractor.

12.3 GUIDELINES TO FOLLOW

Before preparing, make sure to follow the below guidelines

 Every RCC structural element should have a separate BBS. Do not group them as one.
 Ensure to follow the IS guidelines for bending, hook length, lap length & development
length calculations.
 It would be handy if you memorize the unit weight of steel bars.
 Ensure the estimation by thumb rule calculations of steel reinforcement for different
structural members.
 Keep Bar Bending Shape Codes handy for easy reference.

12.4 USES OF BAR BENDING SCHEDULE

 It is helpful in determining the overall quantities of steel that will be required for the
building of a project. Additionally, it is beneficial to indicate the cost attained by steel for
the contract.

 BBS is helpful in determining the cutting length as well as the bending length of
reinforcement. This contributes to an improvement in construction quality and a
reduction in the amount of steel that is wasted, which makes construction more cost-
effective.

 BBS makes it possible to cut and bend reinforcement at the plant before transporting it to
the construction site. It enables buildings to proceed more quickly and cuts down on the
expenses of construction.

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  Engineers on the job site may now easily double-check the length and angle of the cuts
they made.

 Creating a bar bending schedule for your construction project

 The bars utilized in the construction of the building should be categorized by structural
unit and mentioned individually per floor.

 It is important that the bars be given in numerical order.

 In order to facilitate the process of determining which bar belongs to which among the
group of bars, a distinctive label with reference specifications is affixed to each
individual bar.

 The BS 8666 specification must be adhered to in terms of the kind and form of the bar.

 Bar mark references on a label linked to a multipack of bars need to have a one-of-a-kind
connection to an acceptable set or cluster of bars with a specific form, length, thickness,
and type that are utilized in work.

 Calculating the slashing length and the bending lengths should be done independently
from one another and should not be part of the full list.

Tips for an accurate and efficient bar bending schedule

1. Reinforcement may have its cutting and bending done in the plant when there is a Bar
bending schedule available, and then it can be sent to the construction site. This results in
speedier implementation at the site, which in turn decreases development time and costs
since fewer people are needed for bar bending. Bar bending helps prevent the loss of steel
reinforcement, which may account for up to ten per cent of total project expenses.

2. When compared to fe415, the application of a bar bending schedule results in a 10%
increase in the amount of steel reinforcement that is saved.

3. As a result, quality control on the job site is enhanced since reinforcement is installed in
accordance with a bar bending schedule devised by making use of the requirements of the
relevant detailed standard codes.

4. It offers a more accurate calculation of the proportion of reinforcement steel required for
each individual structural part, which can be used to compute the maximum quantity of
reinforcement that is required for the whole project.

5. This allows for more efficient management of reinforcement stocks. We can now
accurately predict the amount of steel we will need for the next stage of building and

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 begin sourcing materials. Because of this, reinforcing steel in coastal locations won’t
have to be stocked at the location for as long, reducing the risk of corrosion. This method
of concrete building ensures that there is never a halt due to a lack of reinforcement for
continuing work, thanks to precise estimates.

6. An effective bar bending schedule may prevent theft and sabotage by limiting the number
of times workers have to bend bars between inspections.

7. Before a structural component can be positioned in the desired location, it must first be
cut, bent, and formed into the framework of the structure it will support. A bar bending
schedule may be utilised for all of these processes. It is possible for other operations,
such as digging, PCC, and so forth, to continue in tandem with this activity. As a result,
total project activity management is simplified, which in turn speeds up the building
process. It proves useful in averting any harm that may be caused by an extended period
of building time.

8. It offers standards for the number and quality of requirements for works involving
concrete and reinforcement.

9. The bar bending schedule gives the steel amount needed in a more exact manner, and as a
result, it offers the possibility of optimizing the design in the event that costs exceed
expectations.

10. Using a bar bending schedule facilitates greater quality control by making it simpler for
project team members to accept the cutting length and bar bending prior to concrete
pouring during the inspection.

12.5 ADVANTAGES OF BAR BENDING SCHEDULE

Bar bending schedule provides details of reinforcement cutting and bending length. Advantages
of bar bending schedule is when used along with reinforcement detailed drawing improves the
quality of construction, cost and time saving for concrete construction works. Advantages of bar
bending schedule in concrete construction are:

1. When bar bending schedule is available, cutting and bending of reinforcement can be done at
factory and transported to site. This increases faster execution at site and reduces construction
time and cost due to less requirement of workers for bar bending. Bar bending also avoids the
wastage of steel reinforcement (5 to 10%) and thus saves project cost.

2. Using bar bending schedule for when used for Fe500, it saves 10% more steel reinforcement
compared to fe415.

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3. It improves the quality control at site as reinforcement is provided as per bar bending schedule
which is prepared using the provisions of respective detailing standard codes.

4. It provides the better estimation of reinforcement steel requirement for each and every
structural member which can be used to compute overall reinforcement requirement for entire
project.

5. It provides better stock management for reinforcement. Steel requirement for next phase of
construction can be estimated with accuracy and procurement can be done. This prevents
stocking of extra steel reinforcement at site for longer time, preventing corrosion of
reinforcement in case of coastal areas. It also prevents shortage of reinforcement for ongoing
work by accurate estimation and thus concrete construction works can proceed smoothly.

6. Bar bending schedule is very much useful during auditing of reinforcement and provides
checks on theft and pilferage.

7. Bar bending schedule can be used for reinforcement cutting, bending and making skeleton of
structural member before it can be placed at the required position. Other activities such as
excavation, PCC etc can proceed parallel with this activity. So, overall project activity
management becomes easy and reduces time of construction. It becomes helpful in preventing
any damages due to construction time overrun.

8. It provides benchmarks for quantity and quality requirements for reinforcement and concrete
works.

9. Bar bending schedule provides the steel quantity requirement much accurately and thus
provides an option to optimize the design in case of cost overrun.

10. It becomes easy for site engineers to verify and approve the bar bending and cutting length
during inspection before placement of concrete with the use of bar bending schedule and helps in
better quality control.

11. It enables easy and fast preparation of bills of construction works for clients and contractors.

12. The quantity of reinforcement to be used is calculated using engineering formulas and
standard codes, so there is no option for approximate estimation of steel reinforcement.

13. With the use of bar bending schedule, mechanization of cutting and bending of reinforcement
can be done, again reducing the cost and time of project and dependency on skilled labor
requirement. It also improves the reliability on accuracy of bar cutting and bending.

14. When mechanized bar cutting and bending is used, the cost of reinforced concrete work per
unit reduces and helps in cost optimization of construction project.

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12.6 REFERENCES
1. https://civilengineeringnotes.com/bar-bending-schedule/
2. https://civilplanets.com/bar-bending-schedule/

86
 CHAPTER 13
OVERVIEW OF WORKERS COMPENSATION
Mr. Avinash Thakur1 Ms. Ruchika Sharma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

13.1 WHAT IS WORKERS’ COMPENSATION?

Workers’ compensation, commonly referred to as “workers’ comp,” is a government-mandated

program that provides benefits to workers who become injured or ill on the job or as a result of
the job. It is effectively a disability insurance program for workers, providing cash benefits,
healthcare benefits, or both to workers who suffer injury or illness as a direct result of their jobs.

In the United States, workers’ compensation is handled primarily by the individual states. The
required benefits vary greatly state by state.

13.2 UNDERSTANDING WORKERS’ COMPENSATION

Workers’ compensation benefits may include partial wage replacement for the period during
which the employee cannot work. The benefits may also include reimbursement for healthcare
services and occupational therapy.

Most workers’ compensation programs are paid for by private insurers, from premiums paid by
the individual employers. Each state has a Workers’ Compensation Board, a state agency that
oversees the program and intervenes in disputes.

There are federal workers’ compensation programs that cover federal employees, long shore and
harbor workers, and energy employees. Another federal program, the Black Lung Program,
handles death and disability benefits for coal miners and their dependents.

13.3 WORKERS’ COMPENSATION BENEFITS

Requirements for workers’ compensation vary from state to state, and not all employees are
covered in some states. Some states, for example, exclude small businesses from the mandate for
coverage. Others have different requirements for various industries. The National Federation of
Independent Business (NFIB) maintains a summary of each state’s worker compensation
requirements.

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Salary Replacement

The salary replacement paid to an employee under workers’ compensation is typically less than
the person’s full salary. The most generous programs pay about two-thirds of the person’s gross
salary.

Workers’ compensation benefits are not usually taxable at the state or federal level,
compensating for much of the lost income. Taxes may be due to recipients who also have income
from the Social Security Disability or Supplemental Security Income programs.

Healthcare Cost Reimbursement and Survivor Benefits

Most compensation plans offer coverage of medical expenses only related to injuries incurred as
a direct result of employment. For example, a construction worker could claim compensation for
an injury suffered in a fall from scaffolding, but not for an injury incurred while driving to the
job site.

In other situations, workers can receive the equivalent of sick pay while they are on medical
leave. If an employee dies as a result of a work-related incident, workers’ compensation makes
payments to the worker’s dependents.

Recipients Waive the Right to Sue

By agreeing to receive workers’ compensation, workers give up their right to sue their employer
for negligence.

This compensation bargain is intended to protect both workers and employers. Workers are
giving up further recourse in exchange for guaranteed compensation, while employers consent to
a degree of liability while avoiding the potentially greater cost of a negligence lawsuit.

13.4 WHAT ARE THE DIFFERENT TYPES OF WORKERS'

COMPENSATION

Fig. 13.1 Types of workers compensation

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The worker’s compensation insurance scheme provides the below types of benefits:

 Medical Treatments: It covers doctor’s appointments, hospital visits, medication, therapy,

and recovery equipment during workplace injury.
 Disability Benefits: In the case of temporary disability, the insurance policy can help
employees with some of their lost income until they cannot return to work. In the case of
permanent disability, the insurer can provide disability benefits for life.
 Rehabilitation: The worker’s insurance can provide ongoing care to the employees
concerning physical therapy or rehabilitation.
 Death and Funeral Services: If the employee loses life due to injury at the workplace, some
insurance policies can also provide coverage for death and funeral expenses. The limit on the
cover for this expense differs from state to state.

13.5 DIFFERENT TYPES OF WORKERS COMPENSATION CLAIMS

Type 1 – Medical Treatment Only

The worker is injured and receives medical treatment, but the injury is not serious enough to
cause the injured worker to miss any time from work. In many of these situations, the worker can
remain at work with the employer once he or she has recovered from the injury.

Type 2 – Medical Treatment with Lost Time from Work

The worker is injured and receives medical treatment, and misses some time from work due to
the injury, for which he or she receives weekly income benefits at the rate of 2/3 of his or her
average weekly wages. After some period of missed time from work due to the injury, the
worker recovers and returns to work.

In some such situations, the worker can return to work with the pre-injury employer, but the
longer the worker is out from work due to the injury, the more likely it becomes that he or she
will be terminated by the employer.

Type 3 – Medical Treatment & Injuries That Prevent Employee from Returning to Their
Pre-Injury Job

The worker receives medical treatment, but his or her injuries are severe enough that he or she
will not be able to return to the pre-injury job, and he or she may have difficulty finding any job
due to the injuries. In these cases, the worker can be eligible to continue receiving weekly
benefits at the rate of 2/3 of his or her average weekly wages, with adjustments in some cases,
out to a ceiling of either 350 or 400 weeks, depending on whether or not the injured worker is
released to any type of light duty work by the treating physicians.

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Type 4 – Medical Treatment & Injuries That Prevent the Employee from Returning to
Any Type of Work

The worker receives medical treatment, but his or her injuries are severe enough that he or she
will not be able to return to any type of work generally available in large numbers in the national
economy. These are very severe injuries (ex: severed limbs, blindness, paralysis) or other
injuries so catastrophic that the worker will never be able to return to any type of work.

For these types of cases, which are the most serious, there is often no ceiling on the number of
weeks of income benefits that the injured worker can receive. Such benefits may continue, with
adjustments in some cases, for the remainder of the injured workers' life.

13.6 BENEFITS OF DIFFERENT TYPES OF WORKERS’

COMPENSATION

Workers’ compensation insurance gives your employees benefits if they get a work-related
injury or illness. This type of insurance is required in most states, and employers are responsible
for buying and providing it to their employees.

Workers’ compensation insurance benefits usually help employees by covering:

 Medical treatments

 Disability benefits

 Vocational rehabilitation

 Death and funeral services

Insurers don’t typically offer different types of workers’ compensation policies. The state fund
workers’ comp plan or workers’ comp plan you can get from an insurance company are
generally standard in the industry. Although some companies, like The Hartford, offer
endorsements that can extend coverage. Additionally, your benefits and coverage requirements
can vary depending on the state you’re in.

Medical Treatment

If your employee gets an injury or illness caused by their work, they can file a workers’
compensation claim to help pay for their medical treatment. This can include helping pay for
their:

 Doctor’s appointments

 Hospital and emergency room visits

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  Medications

 Therapy and rehabilitation

 Recovery equipment

To help recover from a more severe injury or illness, your employee may need ongoing care.
These costs are usually covered by workers’ comp, but it may not cover some types of
alternative care, such as:

 Acupuncture

 Naturopathic treatment

 Homeopathic medicine

If a work-related injury or illness causes another medical issue for your employee, workers’
comp can still help them. Let’s say your employee injures his ankle after tripping over an office
chair. His ankle injury causes him to limp, which leads to back pain. Workers’ comp can help
cover his back treatment because it was a result of his original ankle injury.

Disability

Sometimes a work-related injury or illness can leave your employee disabled. Work-related
disability usually falls into one of these four categories:

Temporary total disability means your injured employee is completely unable to work for a
certain amount of time, but will return to work at full capacity.

Temporary partial disability means they can work at a reduced capacity without needing time
off. For example, an employee who slips in the office and breaks her wrist may be partially
disabled and continue to work, but only for half days until it heals.

Permanent total disability leaves your employee completely unable to work, never returning to
their previous role.

Permanent partial disability means your employee can return to work, but they will never work at
the same capacity as they did before the injury.

If your disabled employee has to take time away from work to recover, workers' compensation
can help them recover some of their lost income until they return to work. If your employee has a
permanent disability, workers' comp can give them disability benefits for life. This benefit is
different in each state, so make sure you know how disability payments work in yours.

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13.7 REFERENCES

1. https://www.investopedia.com/terms/w/workers-compensation.asp

2. https://www.kaleitalawfirm.com/workers-compensation/4-types-of-workers-comp-
claims/

3. https://www.wallstreetmojo.com/workers-compensation/

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 CHAPTER 14
WORKERS’ COMPENSATION LAW
Ms. Lata Duggal1 Mr. Avinash Thakur2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

14.1 INTRODUCTION TO THE WORKERS’ COMPENSATION LAW

Workers’ compensation is insurance that provides cash benefits and/or medical care for workers
who are injured or become ill as a direct result of their job.

Employers pay for this insurance, and shall not require the employee to contribute to the cost of
compensation. Weekly cash benefits and medical care are paid by the employer’s insurance
carrier, as directed by the Workers’ Compensation Board. The Workers’ Compensation Board is
a state agency that processes the claims. If Board intervention is necessary, it will determine
whether that insurer will reimburse for cash benefits and/or medical care, and the amounts
payable.

In a workers’ compensation case, no one party is determined to be at fault. The amount that a
claimant receives is not decreased by the claimant's carelessness, nor increased by an employer’s
fault. However, a worker loses the right to workers’ compensation if the injury results solely
from their intoxication from drugs or alcohol, or from the intent to injure them self or someone
else.

A claim is paid if the employer or insurance carrier agrees that the injury or illness is work-
related. If the employer or insurance carrier disputes the claim, no cash benefits are paid until the
workers’ compensation law judge decides who is right. If a worker is not receiving benefits
because the employer or insurance carrier is arguing that the injury is not job-related, that worker
may be eligible for disability benefits in the meantime. Any payments made under the Disability
Program, however, will be subtracted from future workers’ compensation awards.

If you can return to work but your injury prevents you from earning the same wages you once
did, you may be entitled to a benefit that will make up two-thirds of the difference. You may also
return to work in light or alternate duty before you are fully healed.

14.2 WHAT DOES WORKERS’ COMP COVER?

If your employee suffers a work-related injury or illness, workers’ compensation benefits can
help cover their:

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  Medical expenses

 Lost wages

 Ongoing care costs

 Funeral expenses

These workers’ comp benefits aren’t available if your employee gets hurt or sick outside of
work. Benefits may also not be available for intoxicated employees that get into an accident, or
employees that intentionally hurt themselves.

Medical Expenses

Workers’ comp insurance provides coverage to help your employee pay for medical expenses
related to a work-related injury or illness. This can include emergency room visits, necessary
surgeries and prescriptions. For example, if one of your electricians cuts their hand at a
customer’s home, workers’ compensation insurance can help cover their hospital visit.

Lost Wages

Workers’ comp helps replace some of your employee’s lost income if they need time off to
recover from a work-related injury or illness. So, if your restaurant chef spills a pot of boiling
water on her arm and can’t work for two weeks, workers’ compensation coverage can help
replace some of her lost wages.

Ongoing Care

Some work-related injuries or illnesses can be so severe that they need more than one treatment.
For example, if your warehouse employee hurts their back while lifting heavy boxes, workers’
comp insurance can help cover their ongoing care costs, like physical therapy.

Funeral expenses

In the unfortunate event your employee loses their life from a work-related accident, workers’
compensation coverage can help cover their funeral costs and provide death benefits to your
employee’s beneficiaries.

Illness

Sometimes, working conditions can expose your employees to harmful chemicals or allergens
that lead to illness. If your employee gets sick due to a work-related incident or condition,
workers’ comp insurance can help cover their costs for necessary treatment and ongoing care.

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Repetitive Injury

Not all work-related injuries are the result of a single traumatic incident. Repetitive injuries, like
carpal tunnel syndrome, can take months or years to develop. If your receptionist develops carpal
tunnel syndrome after years of typing with poor ergonomics, workers’ comp can help cover
treatment costs and ongoing care bills.

Disability

Some work injuries may be severe enough to temporarily or permanently disable your employee.
Workers’ compensation coverage can give your disabled employees benefits to help pay their
medical bills and replace some of their lost wages.

14.3 CALCULATE COST OF WORKERS COMPENSATION INSURANCE

The formula to determine the cost of worker’s compensation insurance is as follows:

Workers’ Compensation Cost = (Annual Employee Payroll ÷ 100) × Worker’s Compensation

Insurance Rate.

For calculating the cost of the insurance as per the above formula, the company will have to
determine the following as well:

Class codes of the employee: It is assigned per the industry and based on the duties and risks
involved in the workplace.

Premium rate: Every class code is assigned with a premium rate.

Annual payroll of the employee: Finally, determine the annual payroll of the employee before
employing the formula.

14.4 REFERENCES

1. https://www.thehartford.com/workers-compensation/types-of-workers-compensation-
insurance

2. https://www.wcb.ny.gov/content/main/Workers/what-is-workers-
compensation.jsp#:~:text=Workers'%20compensation%20is%20insurance%20that,to%2
0the%20cost%20of%20compensation.

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 CHAPTER 15
ARBITRATION
Mr. Sahil Garg1 Mr. Arun Kumar2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

15.1 ARBITRATION

Arbitration, no judicial legal technique for resolving disputes by referring them to a neutral
party for a binding decision, or “award.” An arbitrator may consist of a single person or an
arbitration board, usually of three members.

Arbitration is most commonly used in the resolution of commercial disputes and is distinct
from mediation and conciliation, both of which are common in the settlement of labour disputes
between management and labour unions. In mediation, the parties resort to a third person to offer
a recommendation for a settlement or to help them to reach a compromise. Such intervention by
a third party, which also occurs in international disputes between states in the form of diplomatic
intervention and good offices, has no binding force upon the disputants, unlike the arbitrator’s
ruling.

15.2 CHARACTERISTICS OF ARBITRATION

Its principal characteristics are:

Arbitration is consensual

Arbitration can only take place if both parties have agreed to it. In the case of future disputes
arising under a contract, the parties insert an arbitration clause in the relevant contract. An
existing dispute can be referred to arbitration by means of a submission agreement between the
parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

Under the WIPO Arbitration Rules, the parties can select a sole arbitrator together. If they
choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those
two persons then agree on the presiding arbitrator. Alternatively, the Center can suggest potential
arbitrators with relevant expertise or directly appoint members of the arbitral tribunal. The
Center maintains an extensive roster of arbitrators ranging from seasoned dispute-resolution
generalists to highly specialized practitioners and experts covering the entire legal and technical
spectrum of intellectual property.

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Arbitration is neutral

In addition to their selection of neutrals of appropriate nationality, parties are able to choose such
important elements as the applicable law, language and venue of the arbitration. This allows
them to ensure that no party enjoys a home court advantage.

Arbitration is a confidential procedure

The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any
disclosures made during that procedure, and the award. In certain circumstances, the WIPO
Rules allow a party to restrict access to trade secrets or other confidential information that is
submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.

The decision of the arbitral tribunal is final and easy to enforce

Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal without
delay. International awards are enforced by national courts under the New York Convention,
which permits them to be set aside only in very limited circumstances. More than 165 States are
party to this Convention.

15.3 TYPES OF ARBITRATION

There are various types of arbitration depending upon the nationality of the parties, the arbitral
award or the arbitrators involved. They are discussed as follows:

Ad Hoc Arbitration

Ad hoc arbitration is the type of arbitration where the parties mutually agree to resolve their
disputes by arbitration proceedings conducted by mutually appointed arbitrators but not by an
institution. This is one of the most common forms of arbitration in India where the parties
themselves agree to and arrange for arbitration. Here, in this method of arbitration, both the
parties and the arbitrators mutually and independently decide the procedures of arbitration,
without the involvement of an arbitral institution. Example: When the parties decide to keep the
arbitration seat in India, the dispute would be resolved as per the provisions of the Arbitration
and Conciliation Act, 1996.

Institutional Arbitration

Institutional Arbitration is the form of arbitration where an institute, which has been set up for
the purpose of settling disputes by arbitration or other ADR methods, is employed to conduct
arbitration. Such institutes may be national or international in character and they usually lay
down their own rules of arbitration. But such rules cannot override the provisions of the

97
Arbitration and Conciliation Act, 1996. These institutes maintain a panel of arbitrators from
which arbitrators are recommended to the parties. Besides that, these institutes also offer
administrative and consultancy services. So, with the proper infrastructure and experience that
these institutes bring to arbitral proceedings, some parties really find institutional arbitration
beneficial. Some of the prominent institutes that offer institutional arbitration are as follows:

 Chartered Institute of Arbitrators,

 The London Court of International Arbitration,
 The National Arbitration Forum USA,
 Singapore International Arbitration Centre,
 The International Court of Arbitration,
 International Arbitration and Mediation Centre, Hyderabad
 Delhi International Arbitration Centre
 Permanent Court of Arbitration

Domestic Arbitration

When the arbitration takes place in one jurisdiction and both the parties come under that
jurisdiction, then such arbitration is called domestic arbitration. In other words, both the parties
must be nationals of the same jurisdiction as that of the seat of arbitration and in case of body
corporate; they must be incorporated under the same jurisdiction as that of the seat of arbitration.
Example: when the seat of arbitration is in India to resolve a dispute between two Indian
companies, then it is a domestic arbitration.

International Arbitration

International arbitration is the type of arbitration where at least one of the parties at dispute is a
foreign national or in the case of a body corporate, has been incorporated in a foreign country. In
other words, at least one of the parties must be a foreign national or habitually resident in a
foreign country. And in case of a body corporate or an association or body of individuals, the
core control and central management must be operated from outside India. Also, one of the
parties may be a foreign government too. Then such an arbitration is construed as international
arbitration. Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 has defined
international commercial arbitration in the light of international arbitration for commercial
disputes.

Emergency Arbitration

Emergency arbitration is a form of arbitration where interim relief is given by the arbitral
tribunal to a party who wants to protect their assets and/or evidence from being otherwise lost or
altered. It can be roughly compared to the concept of interim injunctions granted by civil courts.

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In India, there is no mention of the term ‘emergency arbitration’ in the Arbitration and
Conciliation Act, 1996 till date, and regarding the enforceability of the same, the picture is still
unclear. But the concept of emergency arbitration has been adopted in India by various arbitral
institutions like Delhi International Arbitration Centre, Court of Arbitration of the International
Chambers of Commerce-India, International Commercial Arbitration (ICA), Madras High Court
Arbitration Centre (MHCAC), Mumbai Centre for International Arbitration etc. within their
rules.

15.4 REFERENCES

1. https://www.britannica.com/topic/arbitration/International-arbitration

2. https://www.wipo.int/amc/en/arbitration/what-is-
arb.html#:~:text=Arbitration%20is%20a%20procedure%20in,instead%20of%20going%2
0to%20court.

3. https://blog.ipleaders.in/what-is-arbitration/

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 CHAPTER 16
MINIMUM WAGE ACT 1948
Ms. Abha Sharma1 Mr. Aaseesdeep Singh2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

16.1 INTRODUCTION
Indian constitution has defined ‘Living wage’ as the level of income which helps the worker in
securing a basic standard of living. This further includes comfort, good health,
dignity, education etc.

It also provides for contingencies which might arise all of a sudden. Fair wage helps in
maintaining a level of employment. It even tries to increase the same by considering the
industry’s ability to bear this expense.

The Central Advisory Council appointed a Tripartite Committee of Fair Wage during its first
session organized in November 1948. This committee devised the concept of minimum wage for
preserving efficiency and guaranteeing bare subsistence which can cater to the requirements of
medicine, education, and comfort.

The minimum wage rate of scheduled employment varies across sectors, regions,states, skill set as
well as occupations due to a difference in the capacity of regional industries to pay, cost of living as
well as consumption patterns.

It is impossible to get a uniform rate of the same across India. While the lowest minimum wage rate
has been reported as 38 INR/day in Tripura, the highest is 322 INR/day in Andaman and Nicobar
according to 2012 estimates.

16.2 WHAT IS THE MINIMUM WAGES ACT 1948?

The Minimum Wages Act 1948 is a legislative labor law that stipulates wages for both skilled
and unskilled laborers in India. It is an Act to provide for fixing minimum rates of wages in
certain employments. Whereas it is expedient to provide for fixing minimum rates of wages in
certain employments;

16.3 DEVELOPMENT OF THE CONCEPT OF MINIMUM WAGE

The living wage is specified as a level of income for a worker by the Constitution of India that
can ensure a minimum standard of living that includes good health, comfort, education, dignity

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and can cater for any emergency. In view of the willingness of the employer to pay, the idea of a
decent wage has been introduced into the constitution, which is a standard of wage that is not
only capable of keeping a certain work, but can be improved depending on the ability of the
employer to pay.

The Central Consultative Committee appointed a working committee on fair wages during its
November 1948 session in order to set the concept of fair wages in motion. To provide the basic
needs of the employee and other requirements such as childcare, medical care and a level of
comfort, this committee introduced the Minimum Wage concept.

In order to give both the central and state governments of India a degree of competence in the
fixing and payment of salaries, the minimum wages Act of 1948 was implemented. Forced labor
is any salary by the employee at the mandated minimum wage rate. Wage boards are responsible
for annually evaluating the minimum salaries so that they can include basic necessities such as
food, housing, schooling, clothes, medical care, and entertainment for the minimum needs of a
family of four.

16.4 MINIMUM WAGES

The Minimum Wages Act, 1948 is a Central legislation aimed at statutory fixation of minimum
rates of wages in the employments where sweated labor is prevalent with possibility for
exploitation of unorganized labor. The provisions of the Act are intended to achieve the object of
doing social justice to workmen employed in the scheduled employments by prescribing
minimum rates of wages for them. The Act aims at statutory fixation of minimum wages with a
view to prevent exploitation of labor. The Government of Telangana have fixed minimum rates
of wages in (73) Scheduled employments so far under Minimum Wages Act, 1948 in which 65
employments (industry related) (Agriculture related) Scheduled employments. Presently, the
wages have been fixed to each and every category under the above specific employments and as
a result wages are fixed covering nearly for 20 to 40 categories of workers in each employment,
creating confusion among the working class about their wages. Due to a large number of
Scheduled Employments much time is being consumed for revision of wages without uniformity
causing discrimination among the workers. It is becoming very difficult to the Inspectors
notified under the Act for implementation of wages due to innumerable schedules. Moreover, in
the existing G.Os, there is a variation in wages from employment to employment for similar
category of worker. Variation in wages to similar categories of workers in various scheduled
employments leads to anomalies and discontentment among the workers doing same and similar
type of work.

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16.5 POINTS TO CONSIDER IN THE MINIMUM WAGE RATE

 The total number of hours for which a laborer works in a normal day needs to comprise of
at least one or more interval periods.
 One full day leave should be granted to all employees weekly.
 The remaining day’s payment rate should not be below the overtime rate.
 An employee’s wage rate should include the respective rates of different work performed
by him and for the specified number of hours at each task if he is engaged in two or more
scheduled employments.
 The appropriate government will appoint inspectors for examining the matter in detail.
 An employer is liable to maintain records pertaining to the work, wages and receipts of
employees.

16.6 EXCLUSIONS FROM THE MINIMUM WAGES ACT

 Wages paid to disabled workers and to the dependent family of the employer.
 Un-scheduled industries.

16.7 PENALTIES & OFFENCES

The Central Act treats all violation of the working hours, minimum wages and similar conditions as
an offence. These are punishable by penalties which can take the shape of 10000 INR fine or five
years of imprisonment.

The appropriate government can appoint a labor commissioner, an officer having experience as a
Stipendiary Magistrate judge, Commissioner for Workmen’s Compensation or an officer ranked
above a Labor Commissioner for processing the complaints lodged.

16.8 PROCEDURE FOR FIXING AND REVISING MINIMUM WAGES

(1) In fixing minimum rates of wages in respect of any scheduled employment for the first time
under this Act or in revising minimum rates of wages so fixed, the appropriate Government shall
either-

a) Appoint as many committees and sub-committees as it considers necessary to hold

enquiries and advise it in respect of such fixation or revision, as the case may be, or

b) By notification in the Official Gazette, publish its proposals for the information of
persons likely to be affected thereby and specify a date, not less than two months from
the date of the notification, on which the proposals will be taken into consideration.

(2) After considering the advice of the committee or committees, appointed under clause

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 a) As the case may be all representations received by it before the date specified in the
notification under clause

b) Of that sub-section, the appropriate Government shall, by notification in the Official

Gazette, fix, or, as the case may be, revise the minimum rates of wages in respect of each
scheduled employment, and unless such notification otherwise provides, it shall come
into force on the expiry of three months from the date of its issue:

Advisory Committees and sub-committees

Repealed by the Minimum Wages (Amendment) Act, 1957 (30 of 1957), section 5 (w.e.f 19-9-
1957).

Advisory Board

(1) For the purpose of coordinating the work of committees and sub-committees appointed
under section 5 and advising the appropriate Government, generally in the matter of fixing and
revising minimum rates of wages, the appropriate Government shall appoint an Advisory Board.

Central Advisory Board.

(1) For the purpose of advising the Central and [State Governments] in the matters of the
fixation and revision of minimum rates of wages and other matters under this Act and for
coordinating the work of the Advisory Boards, the Central Government shall appoint a Central
Advisory Board.

(2) The Central Advisory Board shall consist of persons to be nominated by the Central
Government representing employers and employees in the scheduled employments, who shall be
equal in number, and independent persons not exceeding one-third of its total number of
members; one of such independent persons shall be appointed the Chairman of the Board by the
Central Government.

Composition of committees

Each of the committees, subcommittees, and the Advisory Board shall consist of persons to be
nominated by the appropriate Government representing employers and employees in the
scheduled employments, who shall be equal in number, and independent persons not exceeding
one-third of its total number of members, one of such independent persons shall be appointed the
Chairman by the appropriate Government.

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Correction of errors

(1) The appropriate Government may, at any time, by notification in the Official Gazette, correct
clerical or arithmetical mistakes in any order fixing or revising minimum rates of wages under
this Act, or errors arising therein from any accidental slip or omission.

(2) Every such notification shall, as soon as may be after it is issued, be placed before the
Advisory Board for information.

Wages in kind

(1) Minimum wages payable under the Act shall be paid in cash.

16.9 FIXING HOURS FOR A NORMAL WORKING DAY

(1) In regard to any scheduled employment minimum rates of wages in respect of which have
been fixed under this Act, the appropriate Government may-

a) Fix the number of hours of work which shall constitute a normal working day, inclusive
of one or more specified intervals

b) Provide for a day of rest in every period of seven days which shall be allowed to all
employees or to any specified class of employees and for the payment of remuneration in
respect of such days of rest.

c) Provide for payment for work on a day of rest at a rate not less than the overtime rate.

The provisions of sub-section

(1) In relation to the following classes of employees, apply only to such extent and subject to
such conditions as may be prescribed.

a) Employees engaged on urgent work or in any emergency which could not have been
foreseen or prevented.

b) Employees engaged in work in the nature of preparatory or complementary work which

must necessarily be carried on outside the limits laid down for the general working in the
employment concerned.

c) Employees whose employment is essentially intermittent

d) Employees engaged in any work which for technical reasons has to be completed before
the duty is over.

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For the purposes of Clause

Employment of an employee is essentially intermittent when it is declared to be so by the

appropriate Government on the ground that the daily hours of duty of the employee, or if there
be no daily hours of duty as such for the employee, the hours of duty, normally include periods
of inaction during which the employee may be on duty but is not called upon to display either
physical activity or sustained attention.

Overtime

(1) Where an employee, whose minimum rates of wages is fixed under this Act by the hour, by
the day or by such a longer wage-period as may be prescribed, works on any day in excess of the
number of hours constituting a normal working day, the employer shall pay him for every hour
or for part of an hour so worked in excess at the overtime rate fixed under this Act or under any
law of the appropriate Government for the time being in force whichever is higher.

(2) Nothing in this Act shall prejudice the operation of the provisions of section 59 of the
Factories Act, 1948 (63 of 1948),

Wages of worker who works for less than normal working day

If an employee whose minimum rates of wages has been fixed under this Act by the day, works
on any day on which he was employed for a period less than the requisite number of hours
constituting a normal working day, he shall, save as otherwise hereinafter provided, be entitled
to receive wages in respect of work done by him on that day as if he had worked for a full
normal working day provided

However, that he shall not be entitled to receive wages for a full normal working day

i. In any case where his failure to work is caused by his unwillingness to work and not by
the omission of the employer to provide him with work, and

ii. In such other cases and circumstances as may be prescribed.

Wages for two or more classes of work

Where an employee does two or more classes of work to each of which a different minimum rate
of wages is applicable, the employer shall pay to such employee in respect of the time
respectively occupied in each such class of work, wages at not less than the minimum rate in
force in respect of each such class.

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Minimum time rate wages for piece-work

Where an employee employed on piece-work for which minimum time rate and not minimum
piece rate has been fixed under this Act, the employer shall pay to such employee wages at not
less than the minimum time rate

16.10 REFERENCE

1. https://www.legalserviceindia.com/legal/article-3820-minimum-wages-act-1948-
objectives-components-case-law-s.html

2. https://labour.telangana.gov.in/content/minimumWages/Brief_Note_on_Minimum_Wage
s.pdf

3. https://www.toppr.com/guides/fundamentals-of-laws-and-ethics/minimum-wages-
act/introduction-to-minimum-wages-act/

4. https://maitri.mahaonline.gov.in/pdf/minimum-wages-act-1948.pdf

5. https://clc.gov.in/clc/sites/default/files/MinimumWagesact.pdf

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 CHAPTER 17
EASEMENT ACT
Ms. Richa Verma1 Ms. Rupali Gupta2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

17.1 MEANING AND NATURE OF EASEMENTS

The concept of easement has been defined under Section 4 of The Indian Easements Act, 1882.
According to the provisions, an easementary right is a right possessed by the owner or occupier
of the land on some other land, not his own, the purpose of which is to provide the beneficial
enjoyment of the land. This right is granted because without the existence of this right an
occupier or owner cannot fully enjoy his own property.

It includes the right to do or continue to do something or to prevent or to continue to prevent

something in connection with or in respect of some other land, which is not his own, for the
enjoyment of his own land.

The word ‘land’ refers to everything permanently attached to the earth and the words ‘beneficial
enjoyment’ denotes convenience, advantage or any amenity or any necessity. The owner or
occupier referred to in the provision is known as the Dominant Owner and the land for the
benefit of which the easementary right exists is called Dominant Heritage. Whereas the owner
upon whose land the liability is imposed is known as the Servient Owner and the land on which
such a liability is imposed to do or prevent something, is known as the Servient Heritage.

17.2 ILLUSTRATIONS

 ‘P’ being the owner of certain land or house has a right of way over Q’s house, adjacent
to his house, to move out of the street. This is known as right of easement.
 A voluntary dedication of right by ‘X’ to the public for passing or re-passing over a
surface of certain land is not a right of easement.
 X’s right to go on his neighbour Y’s household for fetching water from the well for the
purpose of his own household is a right of easement. Here, the way to the well is through
Y’s land only. Hence, X has an easementary right to pass through Y’s household.
In the words of great jurist Salmond, easement is that legal servient which can be exercised on
some other piece of land specifically for the beneficial enjoyment of one’s own land. Right of
easement is basically a form of privilege, the integral part of which is to do an act or prevent
certain acts on some other land for enjoyment of one’s own land.

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17.3 ESSENTIALS OF EASEMENTS

1. Dominant and Servient Heritage

For the enjoyment of right of easement, necessary existence of two properties that is dominant
and servient heritage is a must. This is because as per the definition, it is the right exercised by
the owner or occupier of one land for enjoying the benefit of his/her land, over the land of some
other person. Dominant and servient heritage cannot be one. Thus, the existence of two
properties and that to be separate from each other is essential.

2. Separate owners

For exercising the right of easements, owners of the two properties shall be different and not a
single person.

3. Beneficial Enjoyment

The object of easements is that the dominant owner enjoys it in a way which includes express
and implied benefits.

17.4 POSITIVE OR NEGATIVE

Easements can be both positive and negative. Former refers to a right through which the
dominant owner does some act to exercise the right over the land of the servant owner. Whereas,
the latter denotes an act of prevention. In a negative easement the dominant owner prevents or
restricts the servient owner from doing certain act or acts.

In a right of easement an owner of dominant heritage can do an act or prevent the servient owner
from doing something but he cannot bind the servient owner to do something for him.

The easementary right exists only when two heritages are adjacent to each other. It is a right
in rem, which means a right available against the whole world. Easement as a right is
always annexed to the dominant tenement. It is a right of re-aliena which means a right over a
servient tenement and no on one’s own land.

17.5 KINDS OF EASEMENT –

There are four different types of easement. According to section 5 of Indian Easement Act, the
types easements are –
• Continuous Easement
• Discontinuous Easement
• Apparent Easement
• Non- Apparent Easement

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 Fig 17.1 Types of easement

1. Continuous Easement –

 Easements which are of continuous of nature are called as continuous Easement.

 It can be made without any interference.

 It adds a special quality to the property.

 Continuity doesn’t means that continuity of enjoyment however means to require the
property permanently.

 For example: - Right to receive light and air ; to flow water on others land by drainage;
drainage passing through others land; right to repair etc.

2. Discontinuous Easement –

 The easement for whose enjoyment human act is necessary is known as discontinuous
Easement.

 It is necessary that human act should be done on the land of servient owner.

 Act of man does not mean that it is such an act only which is necessary for the use of
easement.

 For example - Right to passage, right to throw garbage on others land, right to flow water
etc.

3. Apparent Easement

 It is known as express easement.

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  Its existence is appears form any permanent sign.

 It is such right which can be expressed or referred by external permanent sign of

property.

 For example - Right to flow water from drainage; doors , windows and rains are some
such things that are visible to all or any persons if any drain is underground and might be
seen by a competent person is apparent easement.

4. Non-Apparent Easement –

 It is also known as invisible easement.

 It is in use but there is no visible sign or proof of the being used.

 It cannot be seen by a competent person.

 For example - right to stop construction above certain height, rite of passage, right to
receive support.

17.6 EASEMENT AND PUBLIC RIGHT CONTRASTED

An easement is a private proprietary privilege appurtenant to a dominant tenement. Apart from

statute, it must be founded against common right on a grant express or implied in a transaction or
presumed from long user by prescription. By contrast a public right is enjoyed by the public at
large, irrespective of any interest they may have in the tenement. An indeterminate and
fluctuating body of persons, such as the public, or the community, or a section of the public, or
section of the community, cannot have any right of easement. For instance, public rights of way
which every citizen is entitled to use at his pleasure are not dependant on the ownership of any
estate; and even a public road or highway is taken to be a dedication to the public of the
occupation of the surface of the land for the purpose of passing and repassing. So far as the
ordinary easement is concerned, the occupation remains with the owner of the servient heritage,
subject to the easement.

17.7 EASEMENT DISTINGUISHED FROM CUSTOMARY RIGHTS

Easements are distinguished from that class of rights which exist in particular localities under
special local customs whereby a wholly undefined and fluctuating body of persons is entitled to
utilize the land of another person in a particular manner and for a particular purpose. Such rights
founded on custom do not appertain to many persons as a class, and not as grantees, nor do such
rights require the existence of a dominant tenement. They are analogous to easements, but are
not really easements, since some necessary elements of easements are wanting.

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A customary right is a right in gross while an easement is always appurtenant to a tenement.
Customary rights are claimed for a large or fluctuating body of persons in respect of a locality
and it is unnecessary to look out for their origin from grant or otherwise. Private easements, on
the other hand, are claimed by defined persons and arise from a grant, which is either express or
implied or by prescription.

17.8 PROFITS A PRENDRE

According to the Easements Act the right to "Profits a Prendre" is part of the definition of
Easement, e.g. Right to take earth from another person’s land, for making earthenware is a profit
a prendre. This is the "benefit made out of land" of the other person. Right of a person to raise
paddy seedlings on B's land, & after wards transplanting on his own land, was held a "profit a
prendre. Right to fishery, Right to take fruits of trees during seasons example = tamarind,
mangoes etc. are examples. The right is exercised on the "land appurtenant", to the dominant
tenement. Hence, there should be dominant & servient heritages; it is dominant owner, who
exercises this right of profit a prendre over the servient heritage. It is the right to do "something",
on the land of the servient tenement for the more beneficial enjoyment of the dominant heritage,
by the dominant owner.

17.9 DIFFERENCE BETWEEN EASEMENT UNDER THE ENGLISH AND

INDIAN LAWS

1. Easement rights are not admissible in India for incorporeal rights; only corporeal
property, such as land, is eligible. However, under English law, an easement may also be
asserted in relation to an incorporeal right.
2. A right to an easement is a privilege without compensation under English law. It allows
for the exercise of a few rights in relation to the dominant tenement while prohibiting the
dominant tenement’s owner from taking a cut of the wealth generated by the servient
legacy. Thus, profits a prendere are not included in an easement. An easement also
includes earnings a prendere under Indian law. An easement also includes earnings a
prendere under Indian law. It includes the right to take pleasure in the income generated
by another owner’s soil. The Explanation to Section 4 makes this clear by stating that the
phrase “to do something” includes removal and appropriation by the dominant owner for
the purpose of enjoying the dominant heritage in a beneficial manner sssof any portion of
the soil of the servient heritage, or anything growing or existing thereon.
3. According to Indian law, two tenements are not required to be next to one another
because “certain other land” that is not owned by the dominant owner is required for the
servient legacy. However, according to English law, the heritages must be close

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17.10 REFERENCES

1. https://blog.ipleaders.in/an-overview-law-of-easements-in-india/

2. https://www.lawcolumn.in/kinds-of-easement-under-indian-easement-
act1882/

3. http://law.uok.edu.in/Files/5ce6c765-c013-446c-b6ac-
b9de496f8751/Custom/Easement.pdf

4. https://lawnotes.co/easement/

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 CHAPTER 18
BUSSINESS LAW
Ms. Sonia Gundwani1 Mr. Harish Sharma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

Business law is a section of code that is involved in protecting liberties and rights, maintaining
orders, resolving disputes, and establishing standards for the business concerns and their dealings
with government agencies and individuals. Every state defines its own set of regulations and
laws for business organizations. Similarly, it is also the responsibility of the business concerns to
know the existing rules and regulations applicable to them.

18.1 OBJECTIVES

Some objectives related to business law are as follows:

Defines taxation law:

This kind of law gives details and procedures of the business-related tax system.

Defines employee rights and duties:

An organization’s employees have some legal rights and responsibilities towards their
employers. The business law notes provide the details of the same.

Make business environment friendly:

Any business entity becomes a great place to work if the domain is friendly and has good work
culture. This law of a business ensures such an environment.

Defines roles of various entities:

It elaborates on the parts of different types of businesses like sole proprietors, partnerships, big
corporations, or LLCs.

Define laws on various business cases:

A business might face many situations like contract drafting, work delegation, contract breach,
the penalty for agreement violation, etc. Each of them is dealt with in different ways. However,
the business law notes give details of the same.

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Ensure healthy competition:

Any law or rule ensures that things run smoothly, healthily, and transparently.

Formulate legal and ethical rules:

It formulates business-related legal and ethical regulations, procedural and substantive laws,
court structure, etc.

Define property or technology-related matters:

This law analyses the effect of technology and property-related matters in business. A business
law attorney can give expert advice regarding this.

Formulate bankruptcy laws:

Formulating laws related to bankruptcy is essential because it is a crisis where a company has
more liabilities than assets. As a result, the court declared that the company could not manage its
business, and there are several ways to deal with it.

Sale and reorganization laws:

A company may sell its business to another organization or reorganize it for better management
or the company’s infrastructure development. The laws of a business state the rules related to
such situations.

18.2 TYPES

The various types of business law are given below:

Employment law–

An employment law covers the rights and duties of the employer and employee. It deals with
issues like health and safety, workplace harassment, wages, workplace discrimination, etc. The
law establishes employment rules to adhere to and deal with such circumstances.

Tax law –

All businesses must pay taxes to the government, regardless of type. If not paid on time, there are
serious consequences.

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Antitrust law –

Antitrust laws ensure there is healthy competition in the market without unnecessary dominance.
It helps to avoid market allocation, which creates a geographic area for operation so that other
similar firms can also operate. Antitrust law also avoids price fixing and monopoly.

Litigation law –

A company might face litigation due to consumer complaints due to dissatisfaction or any other
adverse situation. These legal actions are expensive, and settling them with a formal agreement is
necessary.

Bankruptcy law–

Bankruptcy happens when the liabilities are more than the assets. Thus, a business cannot pay
the dues, and the court declares it bankrupt. There are methods to reorganize or file for
bankruptcy detailed in the law.

Formation law –

Promoters should follow some legal steps to form or set up a new company, which are detailed in
the formation law of a business.

Intellectual Property law –

Intellectual property is related to any invention or innovation the business might make to expand
in this rapidly changing digital world. Thus, any trademark, logo, design, or creative art the
company uses for its growth is intellectual property that it should protect from exploitation.

Negotiation law:

The company may enter into a contract or merger with another company to grow, expand, or
reduce competition. Such rules are elaborated in the contract in business law.

18.3 IMPORTANCE OF BUSINESS LAW

Business law plays a vital role in regulating business practices in a country. Here are some points
that prove why business law is so relevant:

Compensation Issues:

Business law is essential to handle various compensation issues in an organization. A

professional business attorney in Santa Rosa can help companies in settling issues related to
compensation and salary management. It is the responsibility of the attorney to ensure that his or

115
her client does not violate compensation and benefits laws at any cost. The consequences can be
fatal in case of any discrepancies.

Safeguard the Rights of Shareholders:

Business law plays a vital role when it comes to safeguarding the rights of a company’s
shareholders. An experienced business law attorney can successfully handle such issues along
with conflicts related to minority shareholders, constitutional documents, and resolution by
arbitration, and more.

Business Formation:

Business law plays the role of a foundation stone for any business concern. Establishing business
includes a lot of legal processes, leasing, and permits. A business law attorney is well-versed
with all the relevant regulations, and can help the concern establish its operations successfully.

18.4 FUNCTIONS OF BUSINESS LAW

Every business concern, either large-scale or small-scale, is bound to comply with their
respective legal regulations. Here are some significant functions of business law that can help
you in understanding it better.

 Includes laws related to business ethics, substantive law, procedural law, court system
structure, and so on.
 Business law entails the taxation system for different types of businesses.
 The level of competition and antitrust are also involved.
 Business law also includes regulations about employee rights and privileges, workplace
safety, overtime rules, and minimum wages law.
 It strives to alleviate the impact businesses have on the environment and nature. It aims to
regulate pesticides, limit air and water pollution, chemical usage, and so on.
 Business law determines the formal process of establishment of a business organization
and regulations related to the selling of corporate entities.
 It also includes rights assignment, drafting, and work delegations, breach of contract,
transactions, contracts, and penalties for violation of the agreement.
 Business law defines laws related to business partnerships, entities, sole proprietorships,
liability companies, and corporations.
 It describes laws related to business and real property.
 Business law analyses the overall impact of computer technology on other business
domains.
 Includes laws related to bankruptcy and governance of the securities.

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18.5 INDIAN CONTRACT ACT, 1872

The Law of Contract constitutes the most important branch of Mercantile or Commercial Law. It
is the foundation upon which the superstructure of modern business is built.

It affects everybody, more so, trade, commerce and industry. It may be said that the contract is
the foundation of the civilized world.

The Indian Contract Act is divisible into two parts.

 The first part (Section 1-75) deals with the general principles of the law of contract and
therefore applies to all contracts irrespective of their nature.
 The second part (Sections 124-238) deals with certain special kinds of contracts, namely
contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency.

18.6 CONTRACT

According to section 2(h) of the Indian Contract Act, 1872 “An agreement enforceable by law is
a contract.

A contract is a combination of the two elements:

 There must be an agreement

 Agreement must be enforceable by law (obligation)

Contract = Agreement + Enforcement by law

Agreement

Section 2(e) “Every promise and every set of promises, forming the consideration for each other,
is an agreement.” Thus it is clear from this definition that a ‘promise’ is an agreement.

Agreement = offer + Acceptance

Promise

Section 2(b) “when the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise.“

An agreement, therefore, comes into existence when one party makes a proposal or offer to the
other party and that other party signifies his assent thereto.

Following are the characteristics of an agreement:

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Plurality of persons: There must be two or more persons to make an agreement because one
person cannot enter into an agreement with himself.

Consensus ad idem: The meeting of the minds is called consensus-ad-idem. It means both the
parties to an agreement must agree about the subject matter of the agreement in the same sense
and at the same time.

Legal obligation

As stated above, an agreement to become a contract must give rise to a legal obligation i.e. a
duty enforceable by law.

18.7 ESSENTIALS OF A VALID CONTRACT

1 Two Parties

So you decide to sell your car to yourself! Let us say to avoid tax or some other sinister purpose.
Will that be possible? Can you have a contract with yourself? The answer is no, unfortunately.
You can’t get into a contract with yourself.

A Valid Contract must involve at least two parties identified by the contact. One of these parties
will make the proposal and the other is the party that shall eventually accept it. Both the parties
must have either what is known as a legal existence e.g. companies, schools, organizations, etc.
or must be natural persons.

For Example: In the case State of Gujarat vs Ramanlal S & Co. – A business partnership was
dissolved and assets were distributed among the partners as per the settlement. However, all
transactions that fall under a contract are liable for taxation by the office of the State Sales Tax
Officer. However, the court held that this transaction was not a sale because the parties involved
were business partners and thus joint owners. For a sale, we need a buyer (party one) and a seller
(party two) which must be different people.

2 Intent of Legal Obligations

The parties that are subject to a contract must have clear intentions of creating a legal
relationship between them. What this means is those agreements that are not enforceable by the
law e.g. social or domestic agreements between relatives or neighbors are not enforceable in a
court of law and thus any such agreement can’t become a valid contract.

3 Case Specific Contracts

Some contracts have special conditions that if not observed would render them invalid or void.
For example, the Contract of Insurance is not a valid contract unless it is in the written form.

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Similarly, in the case of contracts like contracts for immovable properties, registration of
contract is necessary under the law for these to be valid.

4 Certainty of Meaning

Consider this statement “I agree to pay Mr. X a desirable amount for his house at so and so
location”. Is this a valid contract even if all the parties agree to this term? Of course, it can’t be
as “desirable amount” is not well defined and has no certainty of meaning. Thus we say that a
valid contract must have certainty of Meaning.

5 Possibility of Performance of an Agreement

Suppose two people decide to get into an agreement where a person A agrees to bring back the
person B’s dead relative back to life. Even when all the parties agree and all other conditions of a
contract are satisfied, this is not valid because bringing someone back from the dead is an
impossible task. Thus the agreement is not possible to be enforced and the contract is not valid.

6 Free Consent

Consent is crucial for an agreement and thus for a valid contract. If two people reach a similar
agreement in the same sense, they are said to consent to the promise. However, for a valid
contract, we must have free consent which means that the two parties must have reached consent
without either of them being influenced, coerced, misrepresented or tricked into it. In other
words, we say that if the consent of either of the parties is vitiated knowingly or by mistake, the
contract between the parties is no longer valid.

7 Competency of the Parties

Section 11 of the Indian Contract Act, 1872 is:

“Who are competent to contract — Every person is competent to contract who is (1) of the age of
majority according to the law to which he is subject, and who is (2) of sound mind and is (3) not
disqualified from contracting by any law to which he is subject.”

 Refers to the fact that the person must be at least 18 years old or more.
 Means that the party or the person should be able to fully understand the terms or
promises of the contract at the time of the formulation of the contract.
 States that the party should not be disqualified by any other legal ramifications. For
example, if the person is a convict, a foreign sovereign, or an alien enemy, etc., they may
not enter into a contract.

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8 Considerations

Quid Pro Quo means ‘something in return’ which means that the parties must accrue in the form
of some profit, rights, interest, etc. or seem to have some form of valuable “consideration”.

For example, if you decide to sell your watch for Rs. 500 to your friend, then your promise to
give the rights to the watch to your friend is a consideration for your friend. Also, your friend’s
promise to pay Rs. 500 is a consideration for you.

9 Lawful Considerations

In Section 23 of the Act, the unlawful considerations are defined as all those which:

 It is forbidden by law.
 Is of such a nature that, if permitted, it would defeat the provisions of any law, or is
fraudulent.
 involves or implies, injury to the person or property of another
 the Court regards it as immoral or opposed to public policy

18.8 REFERENCES

1. https://johnstonassociateslaw.com/what-is-business-law-and-why-is-it-
important/
2. https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-
i/essentials-of-a-contract/
3. https://www.wallstreetmojo.com/business-law/

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 CHAPTER 19
THE PARTNERSHIP ACT 1930
Ms. Priyanka1 Ms. Akanksha Pathania2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

Partnership results from a contract and is governed by the Partnership Act 1932. The partnership
is also governed by the general provision of the Indian Contract Act on such matters where the
Partnership Act is silent. It is expressly mentioned that the provision of India Contract Act which
is not repealed will be applicable on Partnership until and unless such provision is in contrary to
any provision of Partnership Act, 1932. The rules of contract regarding the capacity to contract,
offer, acceptance etc will also be applicable to the partnership. But the rules regarding the status
of minor will be governed by the Partnership Act, 1932 since Section 30 of the Act talks about
the position of the minor.

19.1 NATURE OF BUSINESS

It is a business organization where two or more persons agreed to join together to carry out the
business for the purpose of earning the profits. It is an extension of a sole proprietorship. It is
better than sole proprietorship because in sole proprietorship the business is carried out by the
individual with limited capital and limited skill. Due to the limited resources of a single
individual carrying a sole proprietorship, a larger business requiring more resources and
investment than available to the sole proprietor cannot be thought of such business. On the other
hand in partnership, a number of partners join together with their capital to form an agreement
and carry out a business jointly.

Meaning

According to Section 4 of the Partnership Act,1932

“Partnership is the relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all”.

19.2 ESSENTIAL REQUIREMENTS OF A PARTNERSHIP

 It must be an association of two or more persons.

 There must exist an agreement between the partners.
 There must be a business undertaking or a commercial activity that is lawful.
 The motive must be to earn the profit and share between the partners.

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  The agreement must be to carry out the business jointly or by any of them acting on the
behalf of all i.e., there must be mutual agency.

Examples: A and B buy 100 tons of oil which they agree to sell for their joint account. This
forms a partnership and A and B are considered as partners.

A and B buys 100 tons of oil and agreed to share it among them. It does not form a partnership as
they had no intention to carry out business.

Number of members

Any two or more persons may form a partnership. There is no limit imposed on the minimum
and the maximum number of partners under the Partnership Act, 1932. According to Companies
Act 2013, the maximum number of 100 must not exceed in case of partnership and minimum is 2
partners.

If in any case, it exceeds the maximum limit then it will amount to the illegal association under
Section 464 of Companies Act, 2013. According to Section 11 of Companies Act the maximum
number of partner in case of:

 Banking purpose-10 persons

 Other purposes- 20 persons

Agreement

The partnership is an agreement in which two or more person has decided to carry out business
and share the profit and losses equally. To create a legal relationship it is necessary to form a
partnership agreement.

The partnership agreement becomes the foundation or the basis on which it is based. It can be
either written or oral. The written agreement is known as a partnership deed. Partnership deed
mainly consists of the following details:

 Name and address of its firm and business

 Name and address of its partner
 Capital contributed by each partner
 Profit and loss sharing ratio
 Rate of interest on capital, loan, drawings etc
 Rights, duties and obligation of partners
 Settlement of accounts on the dissolution of the firm
 Salaries, commission payable to partners
 Rules to be followed in case of admission, retirement and death of a partner

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  Mode of settlement on disputes among partner.
 Any other affecting the rights of the partners

Business (Section 12)

The partnership must be created for the purpose of carrying the business which is legal in nature.
Co-ownership of property does not amount to the partnership. As per the definition given in
Section 2(b), a business includes any trade, occupation or profession. It is any kind of occupation
that is not something done just for pleasure. It is an operation conducted by a particular method
that is continuous, and from which income or profits can be derived.

Mutual agency (Section 13)

The business is to be carried by all of them or by any one of them on behalf of all. It gives two
assumptions. Each partner is entitled to carry out the business. The mutual agency exists between
the partners. Each partner is a principal as well as an agent for the other partner he is bound by
the acts of other partners as well as can bind others by his own act.

Sharing of profit

The agreement is to share profit and losses among the partners. The sharing of profit and losses
can be according to the ratio of the capital contributed or equally.

It helps to distribute the burden among the partners in the case when the partnership suffers
losses.

Liability of partnership

All the partners are jointly liable for paying the debts of the firm. The liability is unlimited which
means that the partner’s private assets can be disposed of for the purpose of paying the debts of
the firm.

19.3 TYPES OF PARTNERS

Here we will look at six types of partners we come across on a regular basis. This list is not
exhaustive; the Partnership Act does not restrict any unique kind of partnership that the partners
want to define for themselves. Let us take a look at some of the important types of partners.

Active Partner/Managing Partner

An active partner is also known as Ostensible Partner. As the name suggests he takes active
participation in the firm and the running of the business. He carries on the daily business on

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behalf of all the partners. This means he acts as an agent of all the other partners on a day to day
basis and with regards to all ordinary business of the firm.

Hence when an active partner wishes to retire from the firm he must give a public notice about
the same. This will absolve him of the acts done by other partners after his retirement. Unless he
gives a public notice he will be liable for all acts even after his retirement.

Dormant/Sleeping Partner

This is a partner that does not participate in the daily functioning of the partnership firm, i.e. he
does not take an active part in the daily activities of the firm. He is however bound by the action
of all the other partners.

He will continue to share the profits and losses of the firm and even bring in his share of capital
like any other partner. If such a dormant partner retires he need not give a public notice of the
same.

Nominal Partner

This is a partner that does not have any real or significant interest in the partnership. So, in
essence, he is only lending his name to the partnership. He will not make any capital
contributions to the firm, and so he will not have a share in the profits either. But the nominal
partner will be liable to outsiders and third parties for acts done by any other partners.

Partner by Estoppels

If a person holds out to another that he is a partner of the firm, either by his words, actions or
conduct then such a partner cannot deny that he is not a partner. This basically means that even
though such a person is not a partner he has represented himself as such, and so he becomes
partner by estoppels or partner by holding out.

Partner in Profits Only

This partner will only share the profits of the firm, he will not be liable for any liabilities. Even
when dealing with third parties he will be liable for all acts of profit only, he will share none of
the liabilities.

Minor Partner

A minor cannot be a partner of a firm according to the Contract Act. However, a partner can be
admitted to the benefits of a partnership if all partner gives their consent for the same. He will
share profits of the firm but his liability for the losses will be limited to his share in the firm.

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Such a minor partner on attaining majority (becoming 18 years of age) has six months to decide
if he wishes to become a partner of the firm. He must then declare his decision via a public
notice. So whether he continues as a partner or decides to retire, in both cases he will have to
issue a public notice.

19.4 REGISTRATION OF FIRMS

Partnership is a form of business entity where two or more persons come together to provide the
requisite resources and share the profits in an agreed ratio.

Section 4 of the Indian Partnership Act 1932 defines partnership as: The relation between
persons who have agreed to share the profits of a business carried on by all or any of them acting
for all.

Persons who have entered into partnership with one another are called individually, partners and
collectively a firm, and the name under which their business is carried on is called the firm-
name.

Every partner can carry on business on behalf of the other. Partnership firms are not separate
legal entity while the partners are. A partnership firm cannot be a debtor or creditor and cannot
own any property.

19.5 WHO MAKES DECISIONS IN THE PARTNERSHIP FIRM?

Under partnership form of business, there is no separation of ownership and control. The partners
act in confidence to each other and act of one partner is binding on another. Partners monitor and
manage the firm without any interference. The decision making in case of a firm is relatively a
fast process in comparison to that of the Private Limited company, Limited Liability Partnership
(LLP).

19.6 MINIMUM REQUIREMENTS OF PARTNERSHIP FIRM

Minimum Two People:

A minimum of two persons is required to become partners of the firm. However, maximum 20
partners are allowed in a firm (10 in banking business). The partners must come together to carry
on any legal business with the motive of earning profits.

A partnership agreement can be applied between two or more persons who are qualified to
contract for the business plan i.e.

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Every person in the age of majority according to the law:

A person not suspended from contracting by any law to which he is eligible to enter into a
partnership.

No FDI is allowed:

Foreign investment in a partnership firm is not permitted. In the firm, only Indian citizen can
become the partner and start the partnership firm.

No Minimum Capital:

No minimum capital is prescribed; it must be based on the business requirements. The Stamp
Duty on the deed is based on the capital of the firm. However, the firms constituted with a capital
up to two thousand rupees are not eligible to claim set-off or other proceedings to enforce a right
arising from the partnership.

Unique Name:

Name of the firm should be unique, and it must not same or similar to the name of any existing
trademark which is registered or applied.

19.7 REFERENCES

1. https://johnstonassociateslaw.com/what-is-business-law-and-why-is-it-important/
2. https://www.geektonight.com/indian-contract-act-1872/
3. https://blog.ipleaders.in/the-indian-partnership-act-1932/
4. https://www.toppr.com/guides/business-laws/the-indian-partnership-act/types-of-
partners/

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 CHAPTER 20
TYPES OF PARTNERSHIP FIRMS
Ms. Vishali1 Mr. Sahil Garg2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

20.1 TYPES OF PARTNERSHIP FIRMS

The partnership business is regulated under Indian Partnership Act, 1932 which prescribes
possibility of two types of partnership firms: unregistered firm, and registered firm.

An unregistered firm is formed by entering into an agreement between two competent persons,
known as partners, where the firm is not registered with the registrar of firms.

Registered Partnership Firm Whereas the firms which subsequently get registered with the
registrar of firms by submitting the copy of partnership deed and KYC of partners and the
registered office is known as the Registered Partnership Firm.

The application for registration of partnership firm is filed with the Registrar of Firms having
jurisdiction over the place of business of the partnership firm. The registrar of firms after receipt
of the application complete in all aspects with all required documents registers the firm within 1-
2 weeks and issues the Certificate of Registration of Firm.

20.2 ADVANTAGES OF REGISTERING

Though the Indian Partnership Act, 1932 does not make registration of partnership mandatory,
section 69 places certain disadvantages to an unregistered firm.

Following are the disadvantages of an unregistered firm:

 Only a registered partnership firm can claim a set-off .

 An unregistered partnership cannot recover any sum due from third parties if the amount
in question is more than Rs. 100/-
 The partners of an unregistered firm cannot file suit against another partner of the firm or
the firm itself.

Hence, it is strongly recommended to register the partnership firm with the registrar of firms
(ROF). An unregistered firm can be registered at any time. Every state government has
established the office of the registrar of firms, which is vested with the powers to register the

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firm and issue the Certificate of Registration of the Firm and a copy of the extracts of the register
of firms where the partnership name has been entered.

20.3 LITERATURE REVIEW

Section 58 of the Partnership Act speaks regarding the matters of application for registration i.e.
a statement is to be sent in the prescribed form, along with the prescribed fee and a true copy of
the deed of partnership, by post or delivering to the Registrar of the area in which any place of
business of the firm is situated or proposed to be situated.

There is no one-stop application portal for registering your firm. Each state follows its own
registration process - in some states it can be done online and for others application needs to be
filled manually. For manual applications, the process time can get extended up to 1 month.

Each stage of the registration process is discussed in detail, along with its pre-requisites, in the
portion to follow.

1. Documentation

The process starts with documentation of the partners and the place of business where from
where the firm shall be operating its business in India.

Documents Required For Partnership Registration

Documentation plays a pivotal role to fast partnership registration. Registered address proof
(Electricity, Mobile, Telephone Bill) of the partnership firm must be recent.

a. Basic Documents to Start a Partnership

 Notarized Partnership Agreement

 Proof of Registered Address (not older than 2 months)
 NOC from the Owner of Premises

b. Documents of all partners of the Firm

 Two Photographs
 Copy of PAN Card
 Valid Identity Proof
 Latest Address Proof

The submitted documents must be authentic as they are under high scrutiny at all points of time.
Before the registration, the registrar verifies them and files a statement only when he is satisfied
and after recording the statement, they are open to everyone. Section 66 of The Partnership Act

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mentions the inspection of Register and filed documents. The Register of Firms is open to
inspection by any person on payment of the prescribed fee. Further, all statements, notices and
intimations filed under this are open to inspection, subject to the previously stated conditions.

2. Selection of Name

 The selection of a suitable name for the firm is the next step. A Partnership is started by
its partners with a separate name in the deed, which is known as the name of the firm.
While deciding a name, care should be exercised to check the distinctiveness.
 As per section 58(3) of the Indian Partnership Act, 1932:
 A partnership firm's name should not contain words like Crown, Emperor, Empire,
Empress, and Imperial, King, Queen, Royal or any other words that indicate sanction or
approval by the government.

The name should not be too similar to any of the names of the existing firms engaged in similar
businesses. The idea behind such a rule is to avoid injuring the reputation or goodwill of the
existing firm if the new firm adopts a similar business name.

Any name which, in the opinion of the Registrar, for reasons to be recorded in writing, is
undesirable.

The name of the partnership firm should be cross-checked with the trademark registry to avoid
any infringement of someone else's Trademark or brand name. A trademark is a unique mark or
sign that represents a business and it is used to distinctively identify a company from another and
build its credibility among the consumers. If one does not register its trademark, brand name,
logo, tagline etc then an imitator cannot be stopped from confusing the public by using the same
or similarly deceptive name or mark, which may result in financial and economic loss to the
business in the long-term.

3. Drafting of Partnership Deed

Section11 of Indian Partnership Act, 1932 talks about a contract between the partners'. This is
popularly known as a Partnership Deed. The Partnership Deed is the main document of the firm
and is also considered as the Constitution of the firm in which the mutual rights and duties of the
partners, among themselves, are determined. It also specifies the capital and profit sharing ratio
and how the firm shall be operated by the partners.

Such a contract may be express or implied by a course of dealing. Thus, a partnership deed can
be written or oral, whilst it is prudent to have a partnership deed in written form, in order to
avoid any probable conflicts in the future. Further, it helps to avoid any discrepancy or
disagreement with regards to the role of each partner and the benefits that accrue to them.

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It is also stated that such contracts may restrict a partner from carrying out any business other
than that of the given firm for the duration for which he is a partner in the firm. Thus
notwithstanding any provision contained in section 27 of the Indian Contract Act, 1872.

Section 58 mandates the deed to state the following standard, key information:

 the firm-name and the nature of business of the firm;

 the place or principal place of business of the firm,
 the names of any other places where the firm carries on business,
 the date when each partner joined the firm,
 the names in full and permanent addresses of the partners, and
 the duration of the firm.

The law is flexible when it comes to the content included in the partnership deed, it is up to the
partners what they agree and reduce in writing at the time of starting their partnership firm. The
partnership once entered can be changed any number of times. However, each amendment of the
deed must be filed with the registrar for its registration.

Beyond the basics, there are additional clauses that one can include in their partnership deed,
depending on the needs or desires of the partners. Additional clauses typically cover hypothetical
circumstances that may arise over the course of the partnership and provide a process for
dissolving the partnership. Examples of some other areas are:

 Procedures for admitting or introducing a new partner

 Division of powers and responsibility among the partners
 The capital contribution of each partner
 The profit-sharing ratio among the partners
 Method of dissolving the partnership in case of termination of the business

Audit procedures

 Procedures in the event of the retirement or death of a partner

 How to resolve disputes

4. Payment of Stamp Duty for the Partnership Deed

As per section 71 of the Act, the State government is free to make rules regarding the fees to be
given to the Registrar along with the other documents for registration. Different states impose
different stamp duty on the partnership agreements/deeds, it means while creating a partnership
instrument (Deed) the partners must purchase stamp paper of appropriate value as may be
applicable in the respective state, to be annexed with the agreement.

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After the draft partnership agreement is approved and adopted by the parties the stamp duty on
the partnership deed has to be paid which varies from state to state and on the capital of the
partnership agreement.

5. Signing and Notarizing Partnership Deed

Next, the partnership deed is signed by the partners in the presence of two witnesses and
thereafter the deed should be notarized by presenting the same before a notary public.

The stamp duty on the partnership deed varies from state to state, and within one state it further
varies based on the capital of the firm. You must correctly consider the applicable stamp duty on
the partnership deed. The notary of the deed is an essential requirement for partnership
registration.

6. Entry of Statement by the Registrar

Finally, as per section 59 of the Act, the Registrar makes an entry of the Statement in a register
called the Register of Firms. The Register of Firms contains up-to-date information on all firms
and can be viewed by anybody upon payment of certain fees. After filing the Statement, a
Certificate of Registration is issued. However, this is undertaken only after the Registrar is
satisfied that the application of registration complies with all the necessary provisions.[22] The
date on which the Registrar records and files the Statement is considered as the date of
registration of the Partnership firm.

7. Post Registration Requirements:

PAN Number Allotment:

It is important to note that registration with the Registrar of Firms is not the same as the
registration with the Income Tax Department. Income Tax Return is necessary to be submitted at
the end of the financial year and within Due Date of filing. However, Unlike Limited Company
or LLP, there is no need to file the annual return for a partnership firm.

It is necessary for all the firms to apply for registration with the Income Tax Department and
obtain a PAN Card. The PAN is a ten-digit alphanumeric number allotted by the Income Tax
Department. The partnership firm needs to make an application in the prescribed form before the
Income Tax Department for the allotment of PAN. The acknowledgement of the application for
the partnership firm is received within the same day; however, the PAN is allotted within a
week's time.

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TAN Number Allotment

The TAN is a number allotted for TDS Compliance. TAN number is a permanent number
allotted to business for complying with the provisions of withholding tax. You are required to
deduct TDS while making payments; hence the next step is to obtain TAN number, which is
mandatory to submit TDS Returns.

20.4 DISSOLUTION OF PARTNERSHIP

Dissolution of partnership refers to a change in the existing relations among the various partners
of a firm. It is noteworthy that such a change in the partners’ relationship does not have any
impact on the firm. The firm continues its business. A partnership dissolves when any of the
following events occurs:

 Admission of a new partner

 Retirement of an existing partner
 Death of an existing partner
 Merger/Acquisition of the firm by another firm.

20.5 MODES OF DISSOLUTION OF A PARTNERSHIP FIRM

A. Voluntary Dissolution:

This refers to the situations where all the partners of a firm mutually agree to terminate its
operations. These are:

1. By Agreement (Section 40):

Section 40 of the Indian Partnership Act grants the authority to the partners to dissolve their firm,
provided they all provide their consent to such dissolution. An extant contract can also be used
for the purpose of officiating the dissolution.

2. Compulsory Dissolution (Section 41):

Section 41 of the Indian Partnership Act, 1932 deals with the concept of compulsory dissolution.
It states that the dissolution of a firm becomes compulsory if the occurrence of a certain event
renders its operations unlawful. In cases where a firm owns multiple business units, and one of
them becomes illegal, then it can continue to carry its operations out of the other ones.

3. On the happening of certain contingencies (Section 42):

This section states certain contingencies which lead to the immediate dissolution of a firm. These
are:

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  When the tenure for which a firm was constituted comes to an end, the firm also
dissolves.
 The death of a partner can lead to the dissolution of the firm if the partners so decide.
 Insolvency of partners.
 Upon completion of undertakings.

4. By notice of partnership at will (Section 43):

Where a partnership has been constituted as per the will of the partners, any partner can serve a
written notice to all the other partners informing them about his will to dissolve the firm. The
firm is dissolved on the date specified in the notice. If no date is specified, the date of the firm’s
dissolution is the date of notification.

B. Dissolution By Court Order:

A court may dissolve a partnership firm on any of the following grounds:

1. Insanity/Unsound Mind:

If an active partner of the firm becomes insane or of an unsound mind, and the other partners file
a suit in the court, the court may dissolve the firm, provided such illness is permanent. It is
important to note that the court may not dissolve such a firm if any dormant/sleeping partner
goes insane.

2. Permanent Incapacity:

Permanent incapacity of a partner may also lead to the court dissolving a firm. Permanent
incapacity refers to the inability of a partner to perform his duties and obligations towards the
firm and may be a result of physical disability, illness, etc.

3. Misconduct:

When a partner is guilty of conduct that may negatively impact the operations of the firm, and
the other partners file a suit against him, the court may dissolve the firm. It is important to note
that such misconduct may or may not be directly related to the business. It is for the court to
analyze the impact of such conduct upon the business.

4. Persistent Breach of the Agreement:

Where a partner has persistently and willfully breached the partnership deed, and the other
partners have filed a suit against him in court, the court may dissolve the firm. A partner can
breach the agreement by way of embezzlement, keeping erroneous accounts, holding more cash
than allowed, refusing to show accounts despite repeated requests, etc.

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5. Continuous/Perpetual Losses:

Where the firm has been making losses for subsequent years and the court believes that the firm
would keep on incurring losses in the future too, it may dissolve the firm.

6. Just and Equitable Grounds:

A court may also order the dissolution of the firm on the basis of just and equitable grounds.
Some of these are:

 Management standoff
 Partners not communicating with one another
 Loss of the very foundation of the business
 Gambling at the stock exchange

20.6 MODES OF SETTLEMENT OF ACCOUNTS ON DISSOLUTION

(SECTION 48)

The following rules, subject to agreement by the partners, are followed while the settlement of
accounts in the event of the dissolution of a firm:

1. Losses, particularly capital shortfalls, must be paid first from profits, then from the capital,
and, if required, by the partners personally in the proportions in which they were allowed to
share earnings.

2. The firm’s assets, including any sums provided by the partners to make up capital deficits,
shall be applied in the following manner:

 Firstly, the debts owed by the firm to third parties are paid off.
 Secondly, each partner is paid whatever the firm owes him for advances apart from the
partner’s capital.
 Thirdly, each partner is to be paid whatever the firm owes him on account of his capital.
 Any residue, if any, is to be divided among the partners in their profit-sharing ratio.

20.7 REFERENCES

1. https://www.geektonight.com/indian-contract-act-1872/
2. https://www.legalserviceindia.com/legal/article-3653-registering-a-partnership-firm.html
3. https://www.geeksforgeeks.org/dissolution-of-a-partnership-firm-meaning-modes-of-
dissolution-modes-o

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 CHAPTER 21
BUSINESS ENVIRONMENT
Ms. Omkar Kaur1 Ms. Abha Sharma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

21.1 BUSINESS ENVIRONMENT

The word ‘business environment’ indicates the aggregate total of all people, organizations and
other forces that are outside the power of industry but that may affect its production. According
to an anonymous writer- “Just like the universe, withhold from it the subset that describes the
system and the rest is environment”. Therefore, the financial, cultural, governmental,
technological and different forces which work outside an enterprise are part of its environment.
The individual customers or facing enterprises as well as the management, customer groups,
opponents, media, courts and other establishments working outside an enterprise comprise its
environment.

21.2 IMPORTANCE OF BUSINESS ENVIRONMENT

Just like us, business operations do not survive in confinement. Every enterprise is not an island
to itself; it subsists, endures and develops within the circumstances of the part and forces of its
situation. While an individual enterprise is able to do minute to change or manage these forces, it
has no choice to reacting or modifying according to them. Good knowledge of the environment
by business managers allows them not only to recognise and assess but also to respond to the
forces outside to their enterprises. The significance of the business environment and its
perception by managers can be understood if we contemplate the below-mentioned following
points:

It Helps in Identifying Opportunities and Making First Mover Advantage:

The environment provides numerous opportunities, and it is necessary to identify the

opportunities to improve the performance of a business.

Early identification gives an opportunity to an enterprise be the first to identify opportunity

instead of losing them to competitors. Example: ‘Airtel’ identified the need for fast internet and
took first-mover advantage by providing 4G speed to its users followed by Vodafone and Idea.

Asian paints lost market share to Nerolac because it failed to match its technology.

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It Helps the Firm Identify Threats and Early Warning Signals:

The business environment helps in understanding the threats which are likely to happen in the
future. Environmental awareness can help managers identify various threats on time and serve as
an early warning signal. Example: Patanjali products have become a warning signal to the rest of
the FMCG. The sector to develop similar products. Similarly, if an Indian firm finds that a
foreign multinational is entering the Indian market with new substitutes; it needs to prepare
accordingly.

Chinese mobile phones have become a threat for Indian mobile phone manufacturers.

It Helps in Tapping Useful Resources:

Business and industry avail the resources (inputs) from the environment and convert them into
useable products (outputs) and provide to society.

The environment provides various inputs (resources) the like finance, machines, raw materials,
power and water, labour, etc.

The business enterprise provides outputs such as goods and services to the customers, payment
of taxes to the government, to investors and so on.

Example: With the demand for the latest technology, manufacturers will tap the resources from
the environment to manufacture LED TVs and Smart TVs rather than collecting resources for
color or Black & White TVs.

It Helps in Coping with Rapid Changes:

The business environment is changing very rapidly, and the industry is getting affected by
changing market conditions.

Turbulent market environment, less brand loyalty, divisions of markets, changes in fashions,
more demanding customers, and global competition are some examples of changing the business
environment.

Example: Jack Ma started Alibaba as he could see the potential of interest in E-Commerce.

(E) It Helps in Assisting in Planning and Policy Formulation:

The business environment brings both threats and opportunities to a business.

Awareness of business environment helps in deciding future planning or decision making.

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Example: Multiple entries of Chinese phones like VIVO, Gionee, OPPO, etc. have posed a threat
to local players like Micromax, Karbonn, Lava etc. to think afresh how to deal with the situation.

It Helps in Improving Performance:

Environmental studies reveal that the success of any enterprise is closely bound with the changes
in the environment.

The enterprises which monitor and adopt suitable business practices not only improve their
performance but become leaders in the industry also.

Example: Apple has been successful in maintaining its market share due to its proper
understanding of the environment and making suitable innovations in its products.

21.3 CHARACTERISTICS OF BUSINESS ENVIRONMENT

Following are the chief characteristics of the business environment:

Totality of External Forces:

Business environment is the sum totals of all those factors/forces which are available outside the
business and over which the business has no control. It is the group of many such forces that is
why, its nature is of totality.

Specific and General Forces:

The forces present outside the business can be divided into two parts – specific and general.

 Specific: These forces affect the firms of an industry separately, e.g., customers,
suppliers, competitive firms, investors, etc.
 General: These forces affect all the firms of an industry equally, e.g., social, political,
legal and technical situations.

Interrelatedness:

The different factors of business environment are co-related. For example, let us suppose that
there is a change in the import-export policy with the coming of a new government.

In this case, the coming of new government to power and change in the import-export policy are
political and economic changes respectively. Thus, a change in one factor affects the other
factor.

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Dynamic Nature:

As is clear that environment is a mixture of many factors and changes in some or the other
factors continue to take place. Therefore, it is said that business environment is dynamic.

Uncertainty:

Nothing can be said with any amount of certainty about the factors of the business environment
because they continue to change quickly. The professional people who determine the business
strategy take into consideration the likely changes beforehand.

But this is a risky job. For example, technical changes are very rapid. Nobody can anticipate the
possibility of these swift technical changes. Anything can happen, anytime. The same is the
situation of fashion.

Complexity:

Environment comprises of many factors. All these factors are related to each other. Therefore,
their individual effect on the business cannot be recognized. This is perhaps the reason which
makes it difficult for the business to face them.

Relativity:

Business environment is related to the local conditions and this is the reason as to why the
business environment happens to be different in different countries and different even in the
same country at different places.

21.4 REFERENCES

1. https://byjus.com/commerce/business-environment/
2. https://www.javatpoint.com/business-environment-definition

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 CHAPTER 22
ELEMENTS OF BUSINESS ENVIRONMENT
Mr. Sandeep Chauhan1 Ms. Richa Verma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

22.1 ELEMENTS OF BUSINESS ENVIRONMENT

 Political Environment
 Economic Environment
 Social Environment
 Technological Environment
 Legal Environment
 Demographic Environment
 Natural Environment
 International Environment

POLITICAL ENVIRONMENT: The political environment can be one of the less predictable
elements in a business. Any business needs to monitor the changing political environment
because political change can profoundly affect an organization. Political stability can be key for
market stability. The political system prevailing in a country decides, promotes, fosters,
encourages, shelters, directs and controls the business activity of that country. The most
developed countries today, owed their success to the prevailing political situation in their
country.

Any political environment of a country can be either blessing for some business or curse for
other business. In other sense, it provides opportunity to some business and threats to others. A
businessman has to adjust his business to the prevailing political environment as he is left with
no choice.

Characteristics of Political Environment

 The first and foremost affecting environment to the business.

 The impact may be positive or negative.
 May be favorable to some business and unfavorable to other business.
 Close relationship with economic environment.
 Changing political environment always brings changes in the business.

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The Economic Environment:

Next to the Political environment is the economic environment, which affects business.

The economic environment refers to all those economic factors, which have bearing on the
functioning of a business unit. Business depends on the economic environment to buy its input as
well as to sell it.

The Economic Environment affects the demand structure of any industry / product. At the same
time Indian Economy is witnessing growth rate of 6% plus on an average per annum. In order to
assess the impact of these forces, it is necessary for the business to examine the following factors
in a greater detail.

 Gross National Product

 Per Capita Income
 Balance of trade position
 Industry life cycle and current phase through which industry is passing. (Boom,
Recession and depression)
 The inflationary or deflationary trends.
 Rate of Interest charged by commercial banks.

These factors can be threat or opportunity to a firm. The marketer needs to understand the impact
of these economic forces on his company’s products and services.

The Social and Cultural Environment:

Culture represents RELIGION, LANGUAGE, UPBRINGING AND EDUCATION of any

human being.

Social Class comprises of Income, Occupation, location of residence etc.

In India, there are 7 major religious groups such as Hindu, Muslim, Sikhs, Christians,
Zoroastrians, Buddhists and Jain. There are 17 different languages spoken in 28 different states
of the country.

In such an environment, it is crucial for businesses to fully understand the cultural values of a
society, especially where an organization is seeking to do business in a country where social and
cultural values keep changing in all areas and they are given top priorities (Daily Soap operas
work successfully in India). Attitudes to specific products/services change through time and at
any one time between different groups. Key issues relating to the social and cultural environment
include the changing role of women; the importance of leisure time and the role of the family.

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Technological Environment:

The pace of technological change is becoming increasingly rapid and businessman need to
understand how technological developments might affect them in four related business areas:

 New technologies can allow new goods and services to be offered to consumers
 New technology can allow existing products to be made more cheaply, thereby widening
their market
 Technological developments have allowed new methods of distributing goods and
services
 New opportunities for companies to communicate with their target customers have
emerged.

Demographic Environment:

Demography is the study of populations in terms of age and sex composition. Among the topics
of interest to demographers are the age structures of a country, the geographic distribution of its
population, the balance between male and females, and the likely future size of the population
and its characteristics. Changes in the size and age structure of the population are critical to
many organizations. For any business in any country, it is very important to understand the
demographic environment as “People make up markets.”

Natural Environment

 Geographical factors such as Weather, climatic conditions.

 Rainfall, minerals, soils, land forms,

These resources have enormous impact on the business of any industry.

Manufacturing activities also depend on the availability of / condition of natural environment.

Thus, business is very much affected by Natural Environment.

Legal Environment:

Legal Environment is the result of government intervention in the economic and business
spheres. A business has to operate within the framework of regulations and legal provisions
created by legal environment.

Thus, legal environment is the net result of various laws, rules procedures and regulations made
by the government in regard to the formation and operation of business enterprises.

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International Environment:

This comprises of International Elements such as

 International politics
 Economic environment at International Level
 Legal Environment at International Level
 And other environmental elements.

This environment affects businesses, which are dependent on international environment. The
exporter, importer, domestic marketer; all these gets affected by international environment.

22.2 ENVIRONMENTAL ANALYSIS

Definition: Environmental Analysis is described as the process which examines all the
components, internal or external that has an influence on the performance of the organization.
The internal components indicate the strengths and weakness of the business entity whereas the
external components represent the opportunities and threats outside the organization.

To perform environmental analysis, a constant stream of relevant information is required to find

out the best course of action. Strategic Planners use the information gathered from the
environmental analysis for forecasting trends for future in advance. The information can also be
used to assess operating environment and set up organizational goals.

It ascertains whether the goals defined by the organization are achievable or not, with the present
strategies. If is not possible to reach those goals with the existing strategies, then new strategies
are devised or old ones are modified accordingly.

Advantages of Environmental Analysis

The internal insights provided by the environmental analysis are used to assess employee’s
performance, customer satisfaction, maintenance cost, etc. to take corrective action wherever
required. Further, the external metrics help in responding to the environment in a positive
manner and also aligning the strategies according to the objectives of the organization.

Environmental analysis helps in the detection of threats at an early stage, that assist the
organization in developing strategies for its survival. Add to that, it identifies opportunities, such
as prospective customers, new product, segment and technology, to occupy a maximum share of
the market than its competitors.

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Steps Involved in Environmental Analysis

Identifying: First of all, the factors which influence the business entity are to be identified, to
improve its position in the market. The identification is performed at various levels, i.e. company
level, market level, national level and global level.

Scanning: Scanning implies the process of critically examining the factors that highly influence
the business, as all the factors identified in the previous step effects the entity with the same
intensity. Once the important factors are identified, strategies can be made for its improvement.

Analyzing: In this step, a careful analysis of all the environmental factors is made to determine
their effect on different business levels and on the business as a whole. Different tools available
for the analysis include benchmarking, Delphi technique and scenario building.

Forecasting: After identification, examination and analysis, lastly the impact of the variables is
to be forecasted.

22.3 DIMENSION OF BUSINESS ENVIRONMENT

Dimensions of or the agents forming the business environment involve economic, social, legal,
technological and political circumstances which are contemplated properly for decision-making
and enhancing the achievement of the trading concern. In distinction to the precise environment,
these aspects manifest the prevailing environment, which often affects many companies at the
same time. However, the administration of every business can profit from being informed of
these dimensions rather than being unbiased in them. A concise argument of the multiple factors
comprising the global environment of the company is provided below:

Legal Environment

It includes various laws passed by the government, administrative orders issued by government
authorities, court judgments as well as decisions rendered by the central, state or local
governments.

Understanding of legal knowledge is a pre-requisite for the smooth functioning of business and
industry.

Understanding the legal environment by business houses help them not to fall in a legal tangle.

The legal environment includes various laws like Companies Act 2013, Consumer Protection
Act 1986, Policies relating to licensing & approvals, Policies related to foreign trade etc.

Example: Labor laws followed by companies help them to keep away from penalties.

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Political Environment

It means that the actions were taken by the government, which potentially affect the routine
activities of any business or company on a domestic or at the global level.

The success of business and industry depends upon the government’s attitude towards the
business and industry, Stability of Government, Peace in the country.

Example: Political stability and central government’s attitudes towards business, industry and
employment, has attracted many national and international business entrepreneurs to invest in
India.

Economic Environment

The economic environment consists of an economic system, economic policies and economic
conditions prevailing in a country.

Interest Rates, Taxes, Inflation, Stock Market Indices, Value of Rupee, Personal Disposable
Income, Unemployment rate etc. are the factors which affect the economic environment.

Example: A rise in the disposable income of people due to a decrease in tax rates in a country
creates more demand for products.

Social Environment

Social Environment consists of social forces like traditions, values, social trends, level of
education, the standard of living etc. All these forces have a vast impact on business.

 Tradition: It refers to social practices that have lasted for decades, such as Ugadi,
Deepavali, Id, Christmas,etc.,
 Impact: More demand during festivals provides opportunities for various businesses.
 Values: It refers to moral principles prevailing in the society, such as Freedom of choice
in the market, Social Justice, Equality of opportunity, Non-discriminatory practices etc.
 Impact: The organizations that believe in values maintain a good reputation in society
and find ease in selling their products.
 Social Trends: It refers to a general change or development in the society, such as health
and fitness trend among urban dwellers.
 Impact: Health and fitness trend has created demand for gyms, mineral water etc.

Technological Environment

It consists of scientific improvements and innovations which provide new ways of producing
goods, rendering services, new methods and techniques to operate a business.

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It is very important for a firm to understand the level of scientific achievements of a particular
economy before introducing its products.

Technological compatibility of products also drives the demand for manufactured products by a
company.

Example: E-commerce has changed the scenario of doing the business, buying goods and
availing services at the click of a mouse or through mobile, Digital India initiative by the
government and move towards a paperless society.

22.4 REFERENCES

1. https://www.bms.co.in/elements-of-business-environment/
2. https://businessjargons.com/environmental-analysis.html
3. https://byjus.com/commerce/dimensions-of-business-environment/

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 CHAPTER 23
CONTRACTS
Ms. Gurpreet Kaur1 Ms. Kanchan Verma2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

23.1 WHAT IS CONTRACT?

As per the Indian contract act 1872, a contract is defined as an agreement enforceable by law.
Contract is derived from the Latin word “Contractum” which means drawn together.

A contract comes into play when there is an expression of approval of the contracting parties.
The expression of approval of the contracting parties may be established proceeding with the
formation of contract.

It should be remembered that an agreement without any obligation does not develop any sort of
legal relationship. So, it is said that “every contract is an agreement, but every agreement is not a
contract”.

23.2 WHY IS A CONSTRUCTION CONTRACT NECESSARY?

Construction contracts protect both parties in the agreement. These construction

administration documents detail what work will be completed, when it will be completed and
how much it will cost. They also outline methods of communication and how disputes will be
handled if they arise.

By including information about communication and changes, construction contracts streamline

the decision-making process. Ideally, project risks have been anticipated and the contract
outlines how best to proceed. A construction contract is, first and foremost, an agreement, but it
serves as a roadmap of sorts as well.

23.3 WHO IS INVOLVED IN CONSTRUCTION CONTRACTS?

Construction contracts involve two parties; owners and contractors. Owners need a job
outsourced and the contractor executes the job. The two parties work together to draw up a
contract and agree on the terms of completion and payment.

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Owners contract builders when they need to execute a specialized job they cannot perform on
their own. They may also contract builders when the scale of the project is too large for them
alone. Construction projects, in particular, often require owners to hire several different
contractors. In this case, thorough construction contracts are crucial to the successful
management of the project.

23.4 REQUIREMENT OF VALID CONTRACT

1. Contracts in writing

2. Subject Matter

3. Can be enforced in a court of law

4. Parties must be competent

5. Free consent of parties

6. Attested by the witness

1. Contracts in writing

According to the law, the contract should be in writing and should be signed by both parties. In
the case of a joint partnership, the name of the partner is written and signed by only one partner
who is having a power of attorney to sign the document. In the case of the Government
Department, the officer is duly authorized to sign the contract on behalf of the department.

2. Subject Matter

The subject matter of the contract must be legal & definite.

3. Can be enforced in a court of law

All the conditions should be according to law because the court can force only such conditions.

4. Parties must be competent

As per the Indian Contract Act, the parties signing the document should be legally competent.

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5. Free consent of parties

Both the parties to the agreement must give their free consent. The parties must agree to the same
thing in the same sense.

6. Attested by witness

The signature of both parties should be attested by another responsible person or officer.

23.5 TYPES OF CONTRACTS

Fig. 23.1 Types of contracts

1. Item rate contract

 This is also known as Unit price contract.

 In this contract, contractor quotes his rates for per unit of each item of construction.
 Bill of quantities is prepared as accurately as possible.
 Certain reasonable variations in the quantities being accepted by both the parties.
 Most of the public works are carried out under this form of the contract.

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Advantages

 Flexibility – Item-rate contracts are flexible in terms of the quantity of work. The unit
rate of work is fixed. So if the quantity of work is reduced or increased, the final amount
is worked out accordingly and there are no conflicts regarding the work or money.

 Economical – This form of contract may prove to be economical as the payment is to be

done for the actual work done by the contractor.

 Absence Of Uncertainties – If there are some changes in the initial plans, the contractor
is not worried much about it as he is going to get a fixed rate per unit of work,
actually done.

Disadvantages

 Final Cost – As said, this is a flexible form of contract. So it is tough to predict the final
quantity of the work. It can form uncertainty for the owner to arrange funds for the
payment of work to the contractor.

 Plan Changes – If a specific portion of work needs changes and is to be done again, it
may be costly for the owners. Also, the demolishing charges apply to it.

2. Percentage rate contract

 Department draws up the schedule of items according to the description of items

sanctioned in the estimate with the quantities, units, rates and amounts shown therein.
 Department fix up the rates of different items in tender.
 Contractors are offered to carry out the work as per the rates shown in bill of quantities of
tender or percentage above or below the rates indicated in the bill.
 There is no possibility of tampering or manipulating with the rates by contractor.
 As contractors are not required to quote their own rates for individual items, the
overwriting and erasing of rates can be avoided.

Advantages

As there is no provision to quote the contractor’s rate for an individual item, benefit due to
increased quantity with a beneficial rate cannot be availed of by a contractor.
The comparative statement can be prepared quickly. Overwriting and erasing rates etc. can be
avoided.

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Disadvantages

In this type of contract, contractors compete for the tender by quoting their percentage rates. In
that, an uncertain or unworkable rated tender may be the lowest. To cancel such the lowest
tender time, approval from a higher authority is required. On the other hand, if such tender is
accepted, there is uncertainty about quality, smooth progress, and completion of work.

Tenders can easily form a ring. This leads to the drainage of Government Money.

By negotiation among the contractors, two or more of them may quote the same rate to get a part
of the work at a high rate. Thus there is administrative difficulty to allot the whole work to any
one of the contractors. Also, there is a technical difficulty; more labor is required.

The total cost of work is not known unless work is completed.

3. All in contract

 It is a rare form of contract but considered first because, the owner ceases to be the
promoter and delegates a large firm or consortium/association to perform both, design
and construction.
 This type of contract is suitable for some exceptional works and is rarely adopted for
normal works.
 The work most suited for this type of contract is industrial facilities where firms are in
market with their patented processing plants.

4. Labor contract

 When the owner is in the position to purchase the required materials himself, then he
invites tenders only for the labour work.
 The contractor put up their rates for the labour per unit execution of each item.
 These rates include the use of contractor’s plant and equipment, all necessary false-work,
contractor’s supervision and contractor’s profit.
 The overall responsibility of the work is of the contractor.
 Owner has to see that the necessary materials are brought on site as per required.
 The Owner has also to keep watch that there no wastage of materials.
 Usually, the work done in this contract is of superior quality since materials of better
quality are used and there is no mischief in the proportion of mortar, concrete, etc.

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Advantages

 The materials stored by the government are thus utilised.

 Difficulty in obtaining certain materials in the open market can be minimised as the
materials are supplied by the government, so speedy execution of the work can be
achieved.

Disadvantages

 Theft from the store, difficulty during handling of materials, shortage of supply of
material, is the matter of constant worry of a department, which also includes additional
charges for storage and security.

5. Lump – Sum contract

 It is the oldest type of contract and is still popular in some countries.

 Contractors are required to quote a fixed sum for execution of a work in all respects
(according to drawing, design and specifications supplied to them with the tender within
the required time).
 Schedule Of Rates (SOR) is also provided to the contractors to workout the cost of extra
items.
 No payment can be recovered by the contractor until the whole is completed.
 There is no intermediate payment is made to the contractor.

Advantages

 Cost Effective – The contractors work out the lump sum at their rates with a certain
amount of profit. Due to the competition in the market, the contractor may quote a lower
profit, eventually resulting in the low cost of work to the client or owner.

 Fixed Amount – The amount to be paid to the contractor is fixed and is known to the
owner since the beginning of the project. So, the owner of the project is in a position to
arrange funds beforehand for the required amount to be paid to the contractor.

 Early Completion Of Work – The contractor will try to finish the work as early as
possible, to increase his profit.

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Disadvantages

 Conflicting Interests – Under this form of contract, the interests of the owner as well as
the contractor will be conflicting. The owner will try to take maximum advantage of
work for the paid amount and the contractor will try to minimize the work to increase his
profit, eventually.

 If the work in a project is not fixed or is sometimes uncertain, it is difficult to work under
this form of contract.

6. Cost Plus Percentage Rate Contract

 In this type of contract, the contractor is paid the actual cost of the work plus an agreed
percentage in addition to allow for profit.
 An agreement is prepared with all the conditions of contract in advance.
 Contractor arranges material and labour at his cost and keeps proper accounting.
 Contractor is paid by the owner the whole cost together with some agreed percentage.
 This kind of contracts is generally adopted when the conditions are such that the labour
and material costs are liable to fluctuate.
 It has a merit that the contracts can quickly be drawn up and agreed and also work of an
urgent nature put in hand and completed without any delay.

Advantages

 This type of contract is suitable when the work is required to be carried out in
extraordinary situations due to the fluctuations and uncertainty in the market rates of
labour and materials.

Disadvantages

 It is of the contractor’s interest to unnecessarily increase the cost of work, by wasting

materials and employing inefficient workmen, as his profit depends on the cost of work.
So as a result the wastage of government money occurs.

7. Cost Plus Fixed Fee Contract

 The contractor is paid by the owner with an agreed fixed lump sum amount over and
above the actual cost of the work.
 Fee doesn’t vary with the cost of the work as in case of cost plus percentage rate contract.

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Advantages

 Contractors profit and overhead charges are already included, so the contractor tries to
complete his work as soon as possible to receive easy payments.

8. Cost plus fluctuating/sliding fee contract

 The contractor is paid the actual cost by the owner of contract plus an amount of fee
inversely variable according to the increase or decrease of estimated cost agreed first by
both the parties.
 Higher the actual cost, lower will be the value of fee.
 The contractor shall not try to increase the actual cost of the work as in case of ‘cost plus
percentage rates’ or shall not be indifferent to in case of ‘cost plus fixed fee contract’
because the interest of contractor is totally involved with variations in the actual cost.
 The actual cost is thus lower and lower so both the owner and contractor will be
benefited.

9. Target Contract

 The contractor is paid on a cost plus percentage basis of work performed under this
contract, and in addition he receive a percentage plus or minus on saving of excess
effected against the agreed estimate of total cost.

10. Build-Operate-Transfer (BOT)

 The contractor undertakes the design, finance, construct, operate and maintain the works
for a concession in considerations of the exercise or to enjoy the rights, powers, benefits,
privilege, authorities and entitlements including the amount receivable from the
collection of charges levied on the beneficiaries who use the work and in some cases
annuity payment each year.
 For example, in case of a road or bridge, the contractor constructs the structure and is
entitled to collect toll from the road user for the concession period.

11. Turn key contract

 It sometimes happens that the owner contemplating a construction project desires to deal
with only one party for all services, both engineering and construction, in connection
with the work.
 Offers are invited from specialised contractors for all planning, design, specifications,
estimations, construction and supervision under one contract on competitive basis.

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12. Negotiated contract

 When work is awarded on contract by mutual negotiation between the parties without call
of tender.
 The parties selected being always reliable and financially sound, it ensures uninterrupted
work with less chance of dispute.

13. Sub-contract

 It is an agreement between two contractors (the sub contractor and the main contractor),
in which the sub contractor undertakes to carry out for the main contractor a particular
portion of the work which main contractor has undertaken from the owner.
 The main contractor is responsible for the contract, product and payment of his
subcontractor.
 The owner’s claims for damages are to be made against the main contractor.
 No claims for damage can be done against the owner by the subcontractor.

23.6 CONTRACTUAL TERMINATION

Construction contracts commonly provide for provisions relating to termination, entitling either
party to terminate the contract, and the consequences flowing from termination. Typically, there
are two types of termination clauses, “termination for convenience“, and clauses that allow for
termination where there has been a default on the part of one of the parties, “termination for
default“. The termination rights, in case of termination for default, may be exercised only upon a
breach of an obligation and where the requirements stipulated under the contract are satisfied. In
well-drafted construction contracts, the innocent party would also normally have to allow for a
certain “grace period” following a preliminary notice, during which the breaching party is given
an opportunity to rectify the breach of contract. Common contractual grounds giving the
employer the right to terminate include, inter alia:

 A contractor’s suspension without valid reason/abandonment of the works;

 A contractor’s failure to proceed with the works regularly and diligently/with due
diligence;
 A refusal to comply with an instruction requiring the Contractor to remove works/goods
not in accordance with the contract/failure to remedy defects;
 Subcontracting without prior approval of the employer;
 A failure to provide security required by contract, such as a performance bond.

Termination for convenience clauses, on the other hand, typically allows a party (usually the
employer) to terminate the contract at will (for whichever reason or for a specified reason not

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involving performance by the other party). This may happen, for instance, if the contract has
become economically unviable or due to changes in prices and materials.

Both termination for default and termination for convenience are similar in their application, but
their results and consequences might vary. In case of termination for convenience, clauses
typically make provision for the adjustment of the parties’ respective rights and obligations upon
termination, such as, for instance, that the employer is required to compensate the contractor for
wasted costs or amounts which have become due for payment up to the termination.

23.7 REFERENCES

1. https://dailycivil.com/types-of-construction-contract-what-is-contract/

2. https://technicalcivil.com/types-of-contracts/

3. https://www.acerislaw.com/termination-of-construction-contracts/

4. https://civilthings.com/percentage-rate-contract-types-advantages-disadvantages/

5. https://civilwale.com/types-of-contracts-in-construction-industry/

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 CHAPTER 24
MASS HAUL DIAGRAM
Ms. Sakshi Sharma1 Mr. Tarandeep Singh2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

24.1 WHAT IS A MASS HAUL DIAGRAM?

A mass haul diagram provides viewers with a graphical representation of the material moved. In
particular, the diagram will showcase the amount of material that’s been transported along the
centerline. It also displays the distance that the materials travel while being transported. In this
diagram, you can often see grade points, overhaul and free haul regions and balance points.

Some of the key terms you should know to read a mass haul diagram properly include:

 Haul: A haul refers to the transportation of your project’s excavated materials. The haul
includes the movement of material from the position where you excavated it to the disposal
area or a specified location. A haul is also sometimes referred to as an authorized haul.
 Overhaul: When you get authorization to haul material farther than the original free-haul
distance, the transportation of said material is called an overhaul.
 Free haul: A free project’s average haul is referred to as a free haul.
 Average haul: You can find the average haul using the mass diagram. The average haul is a
specific area in a mass diagram. It represents how many cubic yard stations are between
balances points divided by the ordinate of mass that the yardage gets hauled.

These diagrams are crafted using a mass haul view and a mass haul line. The mass haul view
refers to the grid where the mass haul line is placed. The mass haul line refers to the overhaul
and free hauls volumes in fill and cut conditions that run along an alignment.

A project is in a cut region if the mass haul line rises. In contrast, if the mass haul line drops, the
project is in a fill region. The diagram’s grade points and balance points will mark mass haul
regions. Essentially, the mass haul line’s position in relation to the balance line shows viewers
the movement of material.

On these mass haul diagrams, you can compare overhaul volume and free haul volume with the
project’s grade points and the balance points.

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Grade points

Grade points are stations on a mass haul diagram that shows when a project design shifts from
cut to fill. A grade point will reveal the lowest or highest point in a region of a mass haul. When
the grade point in a mass haul region is the highest point, it represents where the project’s profile
switched from a cut condition to a fill condition. The opposite occurs when the grade point is at
the lowest point of a mass haul region. At this lowest point, the profile goes from a fill condition
to a cut condition.

To measure free haul using grade points, you draw a horizontal line that is long enough to cover
the span of the particular free haul distance. The line is placed so it contacts the mass haul line
and runs parallel to the diagram’s balance line. The free haul is the volume of the area that’s
inside the mass haul line and the horizontal line.

Balance points

On a mass haul diagram, balance points refer to the stations where the fill volumes and the net
cut are equal. These balance points can be found on the diagram’s balance line. More
specifically, the balance points are stations where the net volume equals zero on the line.

To measure free haul with balance points, begin by duplicating the mass haul line and move
horizontally. The distance it moves will be based on the free haul distance. If the project goes
from cut to fill, you’ll shift the balance point to the right. You’ll move the balance point to the
left when the project goes from fill to cut.

24.2 CONSTRUCTION OF MASS HAUL DIAGRAM

1. Develop the longitudinal profile of the terrain, where the construction needs to be performed.

Fig. 24.1 Mass haul diagram

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2. The dotted line represents the required level of road that needs to be achieved.

3. Calculate the cross-section area that needs to be cut or filled.

4. Calculate the volume of cut and fill of each section.

5. The volume of cut is considered positive and the volume of fill is plotted as negative.

6. Calculate the aggregate or cumulative volume of cut or fill.

7. In the same scale of the longitudinal cross-section of the land, a mass curve is drawn, with
horizontal distance along the x-axis and Aggregated volume on Y-axis.

8. The corresponding point A, B, C... N in the longitudinal profile is marked in the mass haul
diagram as a,b,c,..n.

9. The point at which the curve crosses the baseline is q and p. This is marked as Q and P in the
profile curve.

24.3 CHARACTERISTICS OF MASS HAUL CURVE

Fig. 24.2 Characteristics of Mass Haul Curve

1. The rising curve indicates cutting. (abcdef)

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 2. The maximum point on the curve denotes the end of the cut or excavation called as
maxima point. (point f)

3. The falling curve indicates filling as the aggregated volume is decreasing. (f to j)

4. The peak occurring at the end of a fill or embankment is called a minima point.

5. The vertical difference between a maximum point and the following minimum point
represents the filling of the embankment.

6. The vertical difference between any two points not having a minimum or maximum
between them, represent the volume of earthwork between them.

7. If any horizontal line is drawn intersecting the curve, the volume of the cut equals the
volume of fill between these points.

8. When the horizontal balancing line intersects the curve, the area above the line indicates
the volume needs to be shifted forwards (hauling is forward) (aq)and the area below the
balancing line indicates the earthwork must be shifted backward (hauling is performed
backward) (pq). These points of intersection of the mass curve with the balance line
forms the balance points.

9. The length of the balancing line between the intersection points represents the maximum
hauling distance in that section.

10. The area cut off by the balancing line represents the haul in that section. The haul is the
volume multiplied by haul distance. From the graph, the area of the curve gives the haul.

24.4 USES OF A MASS HAUL DIAGRAM

Mass haul diagrams are primarily used to provide a more accurate representation of the materials
being moved. They give viewers key information about free haul, average haul and overhaul. For
instance, you can calculate the free haul between specified balance points. Besides just finding
the free haul between two points, you can find the free haul of the whole project.

They also have the very practical use of telling professionals and contractors the way project
material needs to be transported. The diagram can showcase how much dirt a project needs to
move. If you’re doing a significant amount of excavation or filling, the information that mass
haul diagrams can provide is invaluable.

Additionally, you can use these diagrams to compare different proposals. Since contractors and
designers can better understand where gross material movements will occur, these diagrams are
perfect for showcasing how different designs approach the project. An accurate representation of

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the material needing to be excavated and hauled can help a company create an accurate quote for
a potential client.

24.5 REFERENCES

1. https://en.wikipedia.org/wiki/Mechanical,_electrical,_and_plumbing
2. https://www.takeoffpros.com/2020/08/13/what-is-mass-
haul/#:~:text=A%20mass%20haul%20diagram%20provides,materials%20travel%20whil
e%20being%20transported.
3. https://excelize.com/blog/accuracy-of-bim-quantity-take-off-measured-through-an-
example#:~:text=A%20BIM%20model%20can%20create,BOQ%20will%20also%20be
%20updated

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 CHAPTER 25
MECHANICAL, ELECTRICAL AND PLUMBING (MEP)
Mr. Tajamul Saqib1 Ms. Priyanka2
1
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology
2
Assistant Professor, Swami Vivekanand Institute of Engineering & Technology

25.1 MECHANICAL, ELECRICAL AND PLUMBING (MEP)

Mechanical, electrical and plumbing (MEP) refers to the installation of services which provide a
comfortable space for the building occupants. In residential and commercial buildings, these
elements are often designed by specialized MEP engineering firms. The part of Mechanical in
the overall MEP system is almost 70% of the total work. MEP's design is important for planning,
decision-making, accurate documentation, performance- and cost-estimation, construction, and
operating/maintaining the resulting facilities.

MEP specifically encompasses the in-depth design and selection of these systems, as opposed to
a tradesperson simply installing equipment. In countries of Asia such as Pakistan, China and
Saudi Arabia the use of MEP is increasing in building construction projects due to extreme
climates in summer and winter. For example, a plumber may select and install a commercial hot
water system based on common practice and regulatory codes. A team of MEP engineers will
research the best design according to the principles of engineering, and supply installers with the
specifications they develop. As a result, engineers working in the MEP field must understand a
broad range of disciplines, including dynamics, mechanics, fluids, thermodynamics, heat
transfer, chemistry, electricity, and computers.

25.2 COMPONENTS OF MEP

Mechanical

The mechanical component of MEP is an important superset of HVAC services. Thus, it

incorporates the control of environmental factors (psychometrics), either for human comfort or
for the operation of machines. Heating, cooling, ventilation and exhaustion are all key areas to
consider in the mechanical planning of a building. In special cases, water cooling/heating,
humidity control or air filtration may also be incorporated. For example, Google's data centers
make extensive use of heat exchangers to cool their servers. This system creates an additional
overhead of 12% of initial energy consumption. This is a vast improvement from traditional
active cooling units which have an overhead of 30-70%. However, this novel and complicated
method requires careful and expensive planning from mechanical engineers, who must work
closely with the engineers designing the electrical and plumbing systems for a building.

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A major concern for people designing HVAC systems is the efficiency, i.e., the consumption of
electricity and water. Efficiency is optimized by changing the design of the system on both large
and small scales. Heat pumps and evaporative cooling are efficient alternatives to traditional
systems, however they may be more expensive or harder to implement. The job of an MEP
engineer is to compare these requirements and choose the most suitable design for the task.

Electricians and plumbers usually have little to do with each other, other than keeping services
out of each other's way. The introduction of mechanical systems requires the integration of the
two so that plumbing may be controlled by electrics and electrics may be serviced by plumbing.
Thus, the mechanical component of MEP unites the three fields.

Electrical

Alternating current

Virtually all modern buildings integrate some form of AC mains electricity for powering
domestic and everyday appliances. Such systems typically run between 100 and 500 volts,
however their classifications and specifications vary greatly by geographical area (see Mains
electricity by country). Mains power is typically distributed through insulated copper wire
concealed in the building's subfloor, wall cavities and ceiling cavity. These cables are terminated
into sockets mounted to walls, floors or ceilings. Similar techniques are used for lights
("luminaries"), however the two services are usually separated into different circuits with
different protection devices at the distribution board.[9] Whilst the wiring for lighting is
exclusively managed by electricians, the selection of luminaires or light fittings may be left to
building owners or interior designers in some cases.

Three-phase power is commonly used for industrial machines, particularly motors and high-load
devices. Provision for three-phase power must be considered early in the design stage of a
building because it has different regulations to domestic power supplies, and may affect aspects
such as cable routes, switchboard location, large external transformers and connection from the
street.

Information technology

Advances in technology and the advent of computer networking have led to the emergence of a
new facet of electrical systems incorporating data and telecommunications wiring. As of 2019,
several derivative acronyms have been suggested for this area, including MEPIT (mechanical,
electrical, plumbing and information technology) and MEPI (an abbreviation of
MEPIT). Equivalent names are "low voltage", "data", and "telecommunications" or "comms". A
low voltage system used for telecommunications networking is not the same as a low voltage
network.

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The information technology sector of electrical installations is used for computer networking,
telephones, television, security systems, audio distribution, healthcare systems, robotics, and
more. These services are typically installed by different trades people to the higher-voltage mains
wiring and are often contracted out to very specific trades, e.g. security installers or audio
integrators.

Regulations on low voltage wiring are often less strict or less important to human safety. As a
result, it is more common for this wiring to be installed or serviced by competent amateurs,
despite constant attempts from the electrical industry to discourage this.

Plumbing

Competent design of plumbing systems is necessary to prevent conflicts with other trades, and to
avoid expensive rework or surplus supplies. The scope of standard residential plumbing usually
covers mains pressure potable water, heated water (in conjunction with mechanical and/or
electrical engineers), sewerage, storm water, natural gas, and sometimes rainwater collection and
storage. In commercial environments, these distribution systems expand to accommodate many
more users, as well as the addition of other plumbing services such as hydroponics, irrigation,
fuels, oxygen, vacuum/compressed air, solids transfer, and more.

Plumbing systems also service air distribution/control, and therefore contribute to the mechanical
part of MEP. Plumbing for HVAC systems involves the transfer of coolant, pressurized air,
water, and occasionally other substances. Ducting for air transfer may also be consider plumbing,
but is generally installed by different trade’s people.

25.3 BIM (BUILDING INFORMATION MODELING)

BIM is a process for creating and managing information on a construction project throughout its
whole life cycle. As part of this process, a coordinated digital description of every aspect of the
built asset is developed, using a set of appropriate technology. It is likely that this digital
description includes a combination of information-rich 3D models and associated structured data
such as product, execution and handover information.

Internationally, the BIM process and associated data structures are best defined in the ISO 19650
and 12006 series of standards.

A BIM model can create a BIM quantity takeoff automatically, which means it has the inbuilt
intelligence to know about each building element and what it is made of. Therefore, if any
change occurred in the design of a model, the BOQ will also be updated.

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Generating accurate BIM quantity takeoff:

The best way to get an accurate BOQ is nothing but the adoption of Building Information
Modeling services. The possibilities of common errors in BOQs are minimal in the projects that
use BIM processes and technology. BIM represents a single and accurate design model instead
of providing several drawings. A BIM model can create a BIM quantity takeoff automatically,
which means it has the inbuilt intelligence to know about each building element and what it is
made of. Therefore, if any change occurred in the design of a model, the BOQ will also be
updated.

BIM solutions application and benefits to stakeholders:

The availability of software packages that can help prepare bills of quantities is increasing day to
day. Bills of quantities are produced with the help of building information modeling services.
They do this task using the information contained in the model. The benefits of integrated BIM
solutions are several and they are beneficial for everybody in the construction industry including
owners, cost consultants, project managers, and contractors.

Building Information Modeling services help owners take a ‘hands-on’ approach to managing
investors, stakeholders, and contractors. Using this technology, the project managers and
architects can provide their services on behalf of their clients. Cost consultants can provide
various services like rapid and credible cost planning, energy analysis and procurement services,
etc. BIM helps contractors support revaluation amendments.

25.4 EXAMPLE OF BIM (BUILDING INFORMATION MODELING)

SERVICES QUANTITY COMPARISON

Costing is one of the most important aspects of a project to the owners of the project. Controlling
cost escalation and managing material is one issue that cannot be compromised.

Quantities for architectural and structural components are extracted at the schematic, tender,
Good-For-Construction (GFC), and construction stage. At the schematic stage, it is used for
budgeting. While tender, the BIM quantities are compared against the tender costs. As the design
is refined at the GFC stage, the revised quantities are used for evaluating change requests. On
completion of execution, the BIM quantity take-offs from the model are used for bill verification.

At every stage, the accuracy of BIM quantities exceeds the accuracy of conventional thumb rule
calculation. Overall adoption of building information modeling services helps control cost
escalation and disputes during the checking process.

On average, while comparing the benefit of BIM for Accurate Quantification and material
procurement it can be summarized through our project experiences that

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 Time is taken to calculate quantity from BIM -1 day
 Time is taken to calculate quantity by site team -1 week
 The difference in the quantities is anywhere between 1% – 8%.

25.5 APPLICATIONS OF BUILDING INFORMATION MODELING

A building information model can be used for the following purposes:

Visualization: 3D renderings can be easily generated in house with little additional effort.

Fabrication/shop drawings: It is easy to generate shop drawings for various building systems.
For example, the sheet metal ductwork shop drawings can be quickly produced once the model is
complete.

Code reviews: Fire departments and other officials may use these models for their review of
building projects.

Cost estimating: BIM software has built-in cost estimating features. Material quantities are
automatically extracted and updated when any changes are made in the model.

Construction sequencing: A building information model can be effectively used to coordinate

material ordering, fabrication, and delivery schedules for all building components.

Conflict, interference, and collision detection: Because building information models are
created to scale in 3D space, all major systems can be instantly and automatically checked for
interferences. For example, this process can verify that piping does not intersect with steel
beams, ducts, or walls.

Forensic analysis: A building information model can be easily adapted to graphically illustrate
potential failures, leaks, evacuation plans, and so forth.

Facilities management: Facilities management departments can use it for renovations, space
planning, and maintenance operations.

25.6 BENEFIT OF A BUILDING INFORMATION MODEL

The key benefit of a building information model is its accurate geometrical representation of the
parts of a building in an integrated data environment. Other related benefits are as follows:

Faster and more effective processes: Information is more easily shared and can be value-added
and reused.

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Better design: Building proposals can be rigorously analyzed, simulations performed quickly,
and performance benchmarked, enabling improved and innovative solutions.

Controlled whole-life costs and environmental data: Environmental performance is more

predictable, and lifecycle costs are better understood.

Better production quality: Documentation output is flexible and exploits automation.

Automated assembly: Digital product data can be exploited in downstream processes and used
for manufacturing and assembly of structural systems.

Better customer service: Proposals are better understood through accurate visualization.

Lifecycle data: Requirements, design, construction, and operational information can be used in
facilities management.

After gathering data on 32 major projects, Stanford University’s Center for Integrated Facilities
Engineering reported the following benefits of BIM:

 Up to 40% elimination of unbudgeted change,

 Cost estimation accuracy within 3% as compared to traditional estimates,
 Up to 80% reduction in time taken to generate a cost estimate,
 A savings of up to 10% of the contract value through clash detections, and
 Up to 7% reduction in project time.

25.7 REFERENCES

1. https://ascelibrary.org/doi/10.1061/%28ASCE%29LM.1943-5630.0000127
2. https://www.thenbs.com/knowledge/what-is-building-information-modelling-bim
3. https://www.prodyogi.com/2022/07/mass-diagram-in-project-surveys.html

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