GUIDELINES ON CONSTRUCTION PROJECT MANAGEMENT

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1 GUIDELINES ON CONSTRUCTION PROJECT MANAGEMENT JULY, 2011

2 FOREWORD 1.0 RITES has been handling Project Management Consultancy assignments for the past few decades. While some of the Clients, particularly Government Departments and Public Sector Undertakings, insist upon RITES adopting the Tender Document and Contract Management procedures of specific organizations such as that of Railways, CPWD, State PWD, MES, World Bank etc, there are also cases of Clients leaving it to RITES to decide on the documentation and procedures. 2.0 The need to have well documented Guidelines/Manual in an organisation to execute its construction activities in a uniform and well coordinated manner with least time and cost over-runs cannot be over emphasised. Such Guidelines are required to guide officials in their day to day work, so that there is systematic and uniform approach in decision making. The purpose behind issue of these Guidelines is to bring uniformity in dealing with various aspects of Project/Contract Management by all the Project Offices. The Guidelines on Construction Project Management were first issued in 2005 and revised in The 'Guidelines 2011' is the revised edition of Guidelines Since the issue of Guidelines 2009, a number of amendments/new clauses/new paras have been incorporated by way of issue of circulars/correction slips. RITES Standard Tender and Contract Document and GCC have since been thoroughly revised and issued in June / July A number of circulars have also been received from CVC. New CPWD Works Manual 2010 has also been published. All these changes that have taken place since the publication of 2009 edition have been considered and suitably incorporated in the Guidelines These Guidelines have been made out generally on the basis of CPWD Works Manual 2010 but also incorporate good practices in the Manuals/Instructions of other major organizations like Indian Railways, World Bank, Military Engineering Service etc. A few examples in this context are given below. These are only illustrative in nature and do not cover all such items. (i) Contract Documents of World Bank, CPWD and Indian Railways provide for Pre-qualification Criteria different to what has been indicated in this Guidebook. (ii) World Bank does not provide for any negotiations even with the lowest tenderer. (iii) In the Indian Railways Contract Documents, the practice is to go in mostly for Percentage Rate Tenders in place of Item Rate Tenders. (iv) In CPWD Contract Documents, there is no provision for a Tender Committee. 5.0 These Guidelines do not, however, supersede specific provisions, if any, in the Contract Documents. Where on any issue, specific instructions exist in the Contract Documents, they will take precedence over the provisions in these Guidelines, but the provisions in Contract which gives full powers to the Engineer-in-charge in dealing with the Contract would not override the internal

3 powers of authorities competent to take decisions in various matters vis-à-vis Engineer-in-Charge. 6.0 Revised Standard Tender Document 2011 based on CPWD Document but with some modifications has been issued separately. Where the Client leaves it to RITES to adopt its own set of Tender Documents, these Documents should be adopted and the Guidelines will be fully applicable in such cases. In other cases where the Client insists on adoption of other Standard form of Tender Documents such as of Indian Railways, World Bank, MES etc., the Guidelines should be followed subject to the stipulation that the provisions, if any, in the Contract Documents on any specific aspect of Contract Management will supersede the corresponding provisions in these Guidelines. 7.0 The Guidelines are divided into 27 Sections with Annexures kept at the end. Annexures have been numbered separately for each Section and reference has also been given therein to the corresponding Para number. Modifications made on Guidelines 2009 and incorporated in these Guidelines are attached. 8.0 The attention of RITES SBU Heads who will be involved in entering into Agreements with the Clients for Project Management is specifically invited to Annexure 2.1 of the Guidelines giving details of a Model Agreement between RITES and the Client in cases where RITES acts for and on behalf of the Client as a Power of Attorney Holder and enters into the Works Contract with the Contractor. The provisions in this Annexure are the ideal ones and may require modification depending on the scope of works of the assignment and the provisions in vogue in similar consultancy agreements which the Client organisation may insist on adoption. 9.0 The attention of all RITES Engineers is also specially invited to Para 1.6 of the Guidelines on "Essential features of Good Project Management". The provisions should be carefully gone into and efforts made to follow the same. In exceptional circumstances where they cannot be observed in totality because of exigencies of work, reasons for the same should be kept on record with proper follow up action All SBU Heads must ensure that a copy of these Guidelines is given as a personal copy to each Engineer under them in whatever grade he is and take his acknowledgement in writing. An acknowledgement should also be taken from each such Engineer after a period of three months in confirmation of the fact that he has read and understood the contents of the Guidelines. The Guidelines may be retained by the Engineer till his retirement/leaving RITES service when the copy should be taken back by SBU Head. Similar procedure should also be adopted in future at the time of induction of fresh Engineers into RITES cadre. Same procedures will be required to be followed in future when dealing with Addenda & Corrigenda that may be issued to the Guidelines SBU Heads should also organise training programmes for the Engineers in their Units so that doubts, if any, can be got clarified It will be appreciated that in Guidelines/Manual of this nature, it may not be feasible to include material to cover each and every contingency that may arise in the course of execution of works, though efforts have not been spared to make it as comprehensive as possible. In the event of any contingency that might arise requiring supplementing/deviations from what is contained in these Guidelines so

4 as to suit the conditions on a particular project, the same may be done with the approval of appropriate authority This revised Guidelines 2011 has been prepared through the efforts put in by Shri R. Balasubramanian, ex-general Manager/Metro/Kolkata/Indian Railways and presently Advisor/RITES, who was also instrumental in making out the first Edition of Guidelines in 2005, Shri G.V.Chanana, Advisor, Contract Cell and a number of senior officers of RITES. No amount of words of appreciation and gratitude to them will be adequate for the purpose It is sincerely hoped that the Guidelines 2011 would serve the needs for which it has been published. Gurgaon July 2011 B.K. MAKHIJA Managing Director RITES Ltd.

5 MODIFICATIONS MADE IN THE GUIDELINES FEBRUARY 2009 AND INCORPORATED IN THE GUIDELINES JULY 2011 The following are the salient changes made in the Guideline 2009 and incorporated in these Guidelines. i) Section 4 Para Detailed procedure to be followed in making out the Estimate for specialized Works like Box Pushing, Construction of PSC Girder Bridge over Railway Track etc., where the cost of enabling work is substantially high and also dependant on site conditions, has been indicated. ii) Section 5 Para GCC will not be available as a Priced Document and will be issued as a part of the Tender Document. Para 5.3 the details. This deals with Lump sum Contracts with an Annexure explaining iii) Section 6 Para The existing provision that Press Notification is compulsory for all Open Tenders has been modified to restrict to only Tenders costing over Rs. 50 lakhs. Also it has been made clear that Addenda/Corrigenda to Tender Document will only be uploaded on RITES website with no individual communication to the Tenderers. Para 6.7 The Minutes of the Pre-bid meeting etc. will be displayed only on RITES website. Also queries from Bidders should be sent at least 10 days in advance of the deadline for submission of Tender. Para 6.8 Annexure 6.5 relating to this para has been simplified to reflect the methodology to be followed in laying down the qualification criteria. iv) Section 8 Para Procedure to be followed on a relook of the Estimate etc. in case of persistent high rates received on re-invitation of Open Tenders has been stipulated. Para 8.14 Stress has been laid on the need for maintenance of copies of agreements in bound volumes with page numbering and date / initials with seal of both RITES and Contractor.

6 v) Section 10 Para 10.4 Performance Guarantee can be released even on Provisional Certificate of Physical Completion. Additional Performance Guarantee can be released even earlier on completion of items of works with unbalanced rates. vi) Section 12 Para This lists out the sequence of events on completion of work starting from Contractor s Notice on completion of work till preparation of Final Bill. Para Clause 10CC on Price variation will be applicable only for works costing over Rs. 100 lakhs and not linked to the time of completion. Para Indices to be used for Price Variation have been modified in light of the Indices published by the Economic Advisor, Ministry of Commerce & Industry. Para The concept of making payment to the Contractor at 97% of BOQ rates for some quantity in excess of Deviation Limit has been introduced. Para 12.9 Clause 14 of GCC has been re-introduced with the Heading Taking away part work due to default of the Contractor and recovery of additional cost. vii) Section 17 Para In case of quantities executed beyond the limit for which rates are available in Clause 12.2 of GCC, provisional payment may be made to the Contractor at 75% of BOQ rate pending approval of the revised rates by the Competent Authority. viii) Section 19 Para Stress has been made on the need for invoking Arbitration/Court Proceedings within the Limitation period laid down in the Limitation Act. ix) Section 21 Para There is no need for maintenance of two separate printed format of MBs. The Abstract of Measurements may be recorded in manuscript form in the same MB in which the measurements are recorded. Para 21.6 The concept of Computerised Measurement Book as an alternative to conventional printed MB has been introduced. In the event of resorting to use of Computerised Measurement Book, the billing will also be computerized.

7 GUIDELINES ON CONSTRUCTION PROJECT MANAGEMENT JULY 2011 CONTENTS SECTION PARA SUBJECT PAGE NO. 1 INTRODUCTION 1.1 Preamble 1.2 RITES Documents 1.3 Integrity Pact 1.4 Types of Project Consultancy Assignments 1.5 Financial Liability of RITES 1.6 Essential Features of Good Project Management 2 CONTRACT WITH CLIENT 2.1 Signing of Contract with Client 2.2 Definition of Deposit Works 2.3 Realization of Contribution for Deposit Works 2.4 Execution of Deposit Works 2.5 Endorsement of Copies of Documents to the Client 3 PROJECT ORGANISATION AND RESPONSIBILITY FOR PROJECT IMPLEMENTATION 3.1 Organisational Set up 3.2 Field Organisation 2.3 Organisation at SBU Office 3.4 Desirable Level of Organisation 3.5 Field Activities for which Controlling Site Engineer will be responsible 3.6 SBU Office Activities for which the Project Coordinator will be responsible 4 PREPARATION OF ESTIMATES 4.1 Preliminary Estimate / Abstract Estimate 4.2 Detailed Estimate / Technical Sanction 4.3 Detailed Estimate for Technical Sanction Procedure for Preparation

8 SECTION PARA SUBJECT PAGE NO. 4.4 Detailed Estimate-Non Schedule items-market Rate Analysis 4.5 Detailed Estimate Compilation 4.6 Technical Check of Detailed Estimates 4.7 Supplementary Estimate 4.8 Revised Estimate 4.9 Market Rate Analysis 5 CONTRACTS AND FORMS 5.1 Definition of Contract 5.2 Contract Documents 5.3 Lumpsum Contract 6 PREPARATION OF TENDER DOCUMENTS AND PUBLICIT 6.1 Tender System 6.2 Single Tender 6.3 Limited Tender 6.4 Contents of Tender Documents 6.5 Invitation of Tenders for Component Parts 6.6 Publicity of Tenders 6.7 Pre Bid Conference 6.8 Pre Qualification of Tenderers Joint Ventures 6.9 One Packet and Two Packet Systems 6.10 Time Limit for Publicity of Tenders 6.11 Re-invitation of Tenders Extension of Period 7 SALE OF TENDER DOCUMENTS 7.1 Documents to be ready in time 7.2 Supply of Duplicate set of Tender Documents 7.3 Time Interval between Sale of Tender Documents and Opening of Tenders 7.4 Scale of Charges for Tender Documents 7.5 Supply of Drawings 7.6 Precautions in Sale of Tender Documents 8 RECEIPT, OPENING AND ACCEPTANCE OF TENDERS 8.1 Procedure to be adopted 8.2 Delayed and Late Tenders

9 SECTION PARA SUBJECT PAGE NO. 8.3 Instructions for Tender Opening Officers 8.4 Evaluation of Tenders 8.5 Preparation and Scrutiny of Briefing Note for Technical Bids (Applicable for both Single Packet and Two Packet Systems) 8.6 Evaluation of Technical Bids by Tender Committee (Applicable for both Single Packet and Two Packet Systems) 8.7 Opening of Financial Bids 8.8 Preparation and Scrutiny of Briefing Note and Comparative Note for Financial Bids (Applicable for both Single Packet and Two Packet Systems) 8.9 Evaluation of Financial Bids by Tender Committee (Applicable for both Single Packet and Two Packet Systems) 8.10 Tender Committee s Recommendations and Action by the Tender Accepting Authority 8.11 Purchase Preference to Public Sector Enterprises 8.12 Acceptance of Single Tender 8.13 Procedure for Conducting Negotiations 8.14 Communication of Acceptance of Tender 8.15 Time Limit for Finalization of Tenders 8.16 Reinvitation of Tenders 9 EARNEST MONEY 9.1 Necessity for Earnest Money 9.2 Rates of Earnest Money 9.3 Mode of Deposit 9.4 Refund of Earnest Money 9.5 Forfeiture of Earnest Money 10 PERFORMANCE GUARANTEE AND SECURITY DEPOSIT 10.1 Performance Guarantee 10.2 Validity of Performance Guarantee 10.3 Claim under Performance Guarantee 10.4 Refund of Performance Guarantee 10.5 Recovery of Security Deposit 10.6 Claims under Security Deposit 10.7 Validity Period of Security Deposit and Refund 10.8 Miscellaneous Provisions

10 SECTION PARA SUBJECT PAGE NO Refund of Security Deposit Guarantee on Specialised Items of Works SBUs Responsibility for Prompt Refund of Security Deposit and Performance Guarantee 11 AGREEMENTS/CONTRACTS ESSENTIAL FEATURESG 11.1 General Features 11.2 Power to Sign Agreements 11.3 Recording of Date of Acceptance of Tender in the Agreement 11.4 Supply of Copies of Contract to Contractors 11.5 Certification and Custody of Agreements 11.6 Contents of Agreements 11.7 Safe Custody of Contract Agreement and Related Documents 12 GENERAL GUIDANCE FOR OPEATION OF CONTRACT CLAUSES 12.1 Clause Clause Clause Clause Clause Clause 10 (C ) and Clause 10 CA 12.7 Clause 10 (CC) 12.8 Clause Clause Clause A Clause Clause Clause A Clause 45A Clause Performance for Notices to Contractor under various Clauses of Contract and for Completion Certificate

11 SECTION PARA SUBJECT PAGE NO. 13 EXTENSION OF TIME AND COMPENSATION FOR DELAY 13.1 General Principles 13.2 Requirements of Clause Powers of Officers for Grant of Extension of Time 13.4 Grant of Extension of Time without Application 13.5 Form of Application for Extension of Time 13.6 Procedure for Granting Extension of Time 13.7 Compensation under Clause Section 74 of the Indian Contract Act, Proforma for Intimating Extension under Clause 2 14 PAYMENT FOR SUB STANDARD WORK 14.1 Procedure for Acceptance of Substandard Works 14.2 Acceptance of Substandard Work 15 ISSUE OF MATERIALS TO CONTRACTOR 15.1 Issue of Materials to be an Exception 15.2 Issue, Supply and Recovery of Cost of Materials 15.3 Issue Rates 15.4 Return of Surplus Materials 15.5 Instructions regarding Storage of Cement in Godowns 15.6 Issue of Materials against Bank Guarantee 15.7 Recovery towards materials issued for verification of defects/reclosing of work 16 MATERIALS ARRANGED BY CONTRACTOR AND MANDATORY TESTS 16.1 General Principles 16.2 Mandatory Tests CPWD Specifications 16.3 Design Mix Concrete Acceptance Test 16.4 Nominal Mix Concrete Action in case of Failure of concrete in Mandatory Concrete Cube Tests 16.5 Design Mix Concrete Action in case of Failure of Concrete in Cube Tests

12 SECTION PARA SUBJECT PAGE NO. 17 EXTRA, SUBSTITUTED AND DEVIATED ITEMS OF WORK 17.1 Deviation 17.2 Prior Sanction of Competent Authority Necessary 17.3 Extra / Substituted Items 17.4 Fixation of Rates for Deviated / Extra /Substituted Items 17.5 Rates for Deviation (Extra / Substituted / Deviated Quantities) Items allowing Profits and Overheads on Stipulated Materials supplied to the Contractor 17.6 Measurements for Inadmissible Items 17.7 Deviations in Quantities of BOQ Items 18 FAIR WAGE CLAUSES AND CONTRACTOR S LABOUR REGULATIONS 18.1 Provisions of Act 18.2 Acts / Omissions 18.3 Fair Wages 18.4 Responsibilities of Field Officers 18.5 Responsibilities of Contractor 18.6 Deductions to be made from Contractor s Bills 18.7 Procedure in case of Accidents to Contract Labour 19 ARBITRATION AND LITIGATION 19.1 Application of Arbitration Claus 25 of Standard Contract Form 19.2 Application for Appointment of Arbitrator 19.3 Preparation for Arbitration Cases 19.4 Processing of Contractor s Application 19.5 Appointment of Arbitrator 19.6 Action Subsequent to Appointment of Arbitrator 19.7 Engagement of Lawyers 19.8 Production of Official Documents before Court/Arbitrators 19.9 Default of a Party Making of Award Acceptance of Award Review of Arbitration Award Setting Aside of Awards Period of Limitation Court Cases Judgements in Court Cases

13 SECTION PARA SUBJECT PAGE NO Legal Charges on Civil Suits / Arbitration Cases Documentation for Arbitration Cases Disposal of Old Records 20 RECORDS TO BE MAINTAINED AT SITE OF WORK 20.1 General Provisions 20.2 Site Order Book 20.3 Periodic Inspection of Works Inspection Record 20.4 Hindrance Register 20.5 Daily Progress Record 20.6 Cement Register 20.7 Steel Register 20.8 Non Conformance Items Record 20.9 Quality Audit Record Site Coordination Meetings Record Guarantee Bonds Record Insurance Policies Record Drawings Record Record of Mandatory and Non Mandatory Tests Carried out Paint and Chemicals Record 21 MEASUREMENT BOOKS 21.1 Measurement Book General Instructions 21.2 Test Checking of Measurements 21.3 Recording Levels for Earth Levelling Works 21.4 Loss of Measurement Book 21.5 Proforma for Measurement Book 21.6 Compressed Measurement Books (CMBs) and Bills to be submitted by the Contractor 22 PAYMENTS TO CONTRACTOR 22.1 Requirement of Clause Final Payments 22.3 Time Schedule for Payment of Bills 22.4 Inspection of Work Nearing Completion/After completion 22.5 Completion Certificate 22.6 Payment through Banks 22.7 Deduction of Income Tax at Source 22.8 Deduction of Sales Tax on Works /Vat on Works Contract at Source 22.9 Deduction of VAT and Building Workers Cess at Source Deduction of Service Tax On Works at Source

14 SECTION PARA SUBJECT PAGE NO. 23 ADVANCES TO CONTRACTOR 23.1 Types of Advances 23.2 Certificates to Accompany Bills 24 PREPARATION, EXAMINATION, VERIFICATION AND PASSING BILLS FOR PAYMENTS 24.1 Preparation of Bills 24.2 Forms of Bills for Payment 24.3 Authorities to Pass the Bills 24.4 Payment for Work done 24.5 Deviation Statement 24.6 Bank Guarantees Check and Custody 24.7 Documents to Accompany Bills 24.8 Check of Bills at SBU Office 25 QUALITY ASSURANCE AND CHECK LISTS 25.1 Introduction 25.2 Quality Assurance Plan 25.3 Methods Statement 25.4 Responsibility for Quality Assurance 25.5 Checklists 25.6 Testing Laboratory 26 CHIEF TECHNICAL EXAMINER S ORGANIZATION AND COMMON IRREGULARITIES OBSERVED 26.1 Functions of CTE Organisation 26.2 Returns 26.3 Inspection by CTE 26.4 Recoveries of Over Payments pointed out by the CTE 26.5 Common Irregularities pointed out by the CTE 27 OPENING, CUSTODY AND FINAL DISPOSAL OF ESSENTIAL PROJECT DOCUMENT 27.1 Preamble 27.2 Common Deficiencies Observed in System of Maintenance and Disposal of Records 27.3 Procedure Order on Opening, Custody and Final Disposal of Essential Project Documents. ANNEXURES

15 1.1 PREAMBLE SECTION 1 INTRODUCTION RITES has been handling Project Management Consultancy assignments for the past few decades. While some of the Clients, particularly Government Departments and Public Sector Undertakings, insist upon RITES adopting the Tender Document and Contract Management procedures of specific organizations such as that of Railways, CPWD, State PWD, MES, World Bank etc, there are also cases of Clients leaving it to RITES to decide on the documentation and procedures. Some organizations such as Indian Railways, CPWD, MES, World Bank etc, have also printed their Standard Tender Documents and Manuals for the guidance of the officers and field Engineers and these are followed in execution of works in their organizations. 1.2 RITES DOCUMENTS For dealing with Projects in which the Clients permit RITES to adopt any System considered good by RITES, the following documents have been made out by RITES for uniform application by all RITES Offices while handling such projects. (i) Guidelines on Construction Project Management 2011 This document is based mainly on CPWD Works Manual 2010 but with substantial modifications by incorporating the good practices of other organizations like Indian Railways, World Bank etc. The guidelines are comprehensive and cover almost all aspects of Contract Management of particular interest to the Site Engineers and officers in SBUs. The Guidelines should be read along with the Standard RITES Tender Documents referred to in item (ii) below. Various instructions/circulars/guidelines issued by different Deptts like CVC, Railway Board etc in the past have also been taken into consideration in preparing this revised edition. The provisions contained in this book can be adopted also in the Management of Contracts based on the formats of other organizations like Indian Railways and World Bank in so far as they don t contradict each other. (ii) Standard Tender Document 2011 The Standard Tender and Contract Document 2011 with components indicated below has been made out basically adopting CPWD Format but with some major modifications. It consists of three parts. Part 1 (Technical Bid) comprises of following six sections. 1) Notice Inviting Tender and Instructions to Tenderers 2) Tender and Contract Form

16 3) Special Conditions 4) Schedules A to F 5) Technical Specifications 6) Drawings Part 2 : Financial Bid Schedule (Bill) of Quantities Part 3 : General Conditions of Contract Section (7) Conditions of Contract Section (8) Clauses of Contract Section (9) RITES Safety Code Section (10) RITES Model Rules for Workers Section (11) RITES Contractor s Labour Regulations Depending on the nature and scope of work, Bill of Quantities, Drawings and site/work specific Special Conditions/Specifications will be required to be made out by NIT Approving Authority. The Standard Tender Document may be adopted in all cases other than those where the Client insists upon adoption of a specific format such as that of Railways, MES, World Bank etc. iii) Guidelines for Arbitration under Arbitration & Conciliation Act 1996 July 2007 iv) Checklist of Specifications for Civil Engineering Works for Quality Control August 2008 v) Specifications for Railway Track and Bridge Works September INTEGRITY PACT RITES in cooperation with CVC has signed MOU with Transparency International (India) for adoption of Integrity Pact (IP) as a vigilance tool for promoting integrity / transparency and competitiveness in matter of major procurements. It has been decided by RITES that to begin with, Integrity Pact shall be made part of Bid Documents to be issued to all intending bidders, for works of estimated cost above Rs.10 Crore. For works of estimated cost of above Rs.10 Crores, Independent External Monitor (IEM) shall be pre-nominated to review independently, the compliance of Integrity Pact. The Competent Authority to appoint IEM shall be MD/ RITES. The Integrity Pact is available as Annexure VIII to Section I (Part I) of Bid Document viz. NIT & Instructions to Tenderers, in all Tender Documents for works of estimated cost above Rs.10 Crores. The essential ingredients of the Pact and its implementation procedure envisage:

17 a) IP shall cover all phases of the contract i.e. from the stage of NIT / Pre-Bid stage till completion of contract. Any violation of the same would entail disqualification of bidders. b) Entering into this Pact by the bidder would be a preliminary qualification. c) IP would be implemented through a panel of IEMs appointed by RITES. For ensuring liaison between IEM and Contractor / Employer, RITES will nominate a suitable officer at HQ as Liaison Officer. 1.4 TYPES OF PROJECT CONSULTANCY ASSIGNMENTS RITES as a Premier Consultancy Organization has been handling Project Management Consultancy Works of different types as detailed below, mostly for Central Government / State Government Departments and Organizations and in a few cases, for private parties. (i) Project management on Supervision basis:- Client Organisation with adequate technical expertise, handles the Planning and Tendering phases, signs the Works Contract with the Contractor and entrusts to RITES, the complete responsibility of Project Management. Here the payments to the Contractor are effected by the Client on certification by RITES. There are some cases where the Client Organisation has taken the help of RITES in planning stage as well as in Tendering Stage. In some cases the Client, while deploying his own staff for day to day supervision, entrusts to RITES, General Supervision including Quality Control. (ii) Project management on Deposit/Turnkey basis:- Client Organization entrusts through a Power of Attorney or other instrument like a Contract, complete responsibility to RITES for the Works including Planning, Tendering and Supervision of works. The funds are made available by the Client to RITES either in a lump sum or in installments. In such cases, the Works Contract with the Contractors are signed by RITES for and on behalf of the Client and RITES makes payment to the Works Contractors. In these cases, the Client generally does not possess the technical expertise to handle major works. But in all cases, even if Client does not possess the technical expertise, the Client expects RITES to keep them apprised of any developments with financial implications. 1.5 FINANCIAL LIABILITY OF RITES The type of Project Management Contracts in 1.4 (i) above generally does not entail any financial liability on RITES since the Client is the Employer in the Works Contracts with the Contractor. But in the type of Project Management Contracts, in 1.4 (ii) above the financial liability of RITES can be of a large magnitude which may end up in disputes leading to Arbitration or Court case. With the Agreement executed between RITES and the Contractor, the legal provision is that there is no privity of Contract between the Client and the Contractor even though the Agreement may have been executed by RITES for and on behalf of the Client and the Client has granted a Power of Attorney to

18 RITES or appointed RITES as his Agent. There is hence the necessity for RITES staff to understand clearly the various aspects of Project Management in the Planning, Tendering and Supervision stages. Irrespective of whether the Works Contract is signed by RITES or by the Client, the guidelines in this document should be followed to protect the interest of RITES in Project Management Consultancy Contracts. While various aspects of Project Management from tendering to execution have been covered in detail in subsequent Sections, the basic items to be kept in view for successful implementation of a Construction Project are detailed below. Efforts should be made to ensure observance of the essential features discussed in para 1.6 below. However wherever it is not possible to observe the same in totality because of exigencies of work, reasons for the same should invariably be kept on record. Sufficient care should also be taken to ensure that follow up action on all such issues is taken up in a reasonable and defined time schedule. 1.6 ESSENTIAL FEATURES OF GOOD PROJECT MANAGEMENT (i) (ii) (iii) Work should not be awarded to the contractor until ideally all the required construction drawings are available. However, in case of any exigency, which should be recorded, it should be ensured that construction drawings of foundation and floor one above or equivalent in other types of works are available for construction activities for at least 3 to 4 months. It shall be the responsibility of the Project Coordinator to ensure that balance drawings are finalized during this period. Contract should not be awarded to the contractor until the site is available and ready for the construction with clear title deed and free from encroachments, encumbrance etc. If the Client insists on award of contract with only part land available and if RITES is to sign the works Contract as Agent / Power of Attorney Holder, the Client has to be advised in writing that if balance land is not made available as per the Project Schedule in the Tender Document, the Contract may have to be terminated and the resultant liability which may include claims from the contractor will be to Client s account. It should also be checked in advance to ensure that the approval of the Local Authorities is available for use of the land for the intended purpose. Contract may not be awarded till approval of local body to the Layout and building plans is available. Work should not be awarded till sufficient funds are deposited by the Client. Where the full contract amount is not made available in advance by the Client who desires to make available funds in installments, the Client should be advised right at the initial stage that in case funds are not made available promptly as asked for, the Works Contract will have to be terminated and the resultant liability which may include claims from the Contractor will be to Client s account. (iv) Contract conditions should not be ambiguous and vague. Proper care should be taken at the time of preparation of BOQ.

19 (v) (vi) All out efforts should be made to avoid any delay on part of RITES in issuance of drawings, clarifications on specifications of items, processing of bills for payment and giving decisions on matters referred to by the Contractor. No extra or substituted item should be executed at site without prior inprinciple approval from the competent authority of RITES and of the client, if the agreement with RITES requires the same. However in case of exigency the permission to execute the Substituted or Extra Item should be taken from the SBU Head or project coordinator respectively. Pending processing of the rate of Extra/Substituted Item, payment to contractor should be 75% of the rates as tentatively determined by the SBU Head of RITES. (vii) Quantities should not be executed beyond the permissible deviation limits in BOQ items for which rates have been fixed in the Contract, without the in principle approval of the Competent Authority of RITES and of the Client, if the Agreement with RITES requires the same. Payment to contractors for such deviated quantities should be made in accordance with contract provisions. Where the Contractor presses for payment for quantity executed in excess of specified limits, for which rate can be derived from BOQ rate, payment may be effected at 75% of BOQ rate with the approval of SBU Head. But expeditious action should be taken to decide on the revised rate. (viii) It should be ensured that rates of Extra / Substituted Items as well as rates for the BOQ items for quantities beyond the Limits for which rates are available in the contract are duly accepted by the Contractor, before releasing payment of Final Bill. (ix) (x) Decisions sought by Project Coordinators with regard to drawings, details, specifications, additional items, Extra / Substituted Items, operation of BOQ items beyond permitted Limit etc. shall positively be communicated to them by the respective SBUs within a reasonable time (say 15 days). Whenever there is any likelihood of increase in the cost of work beyond the Clients Expenditure Sanction figure, Revised Estimate should be prepared well in advance and submitted to the Client for revised Administrative Approval and Expenditure Sanction. (xi) All the letters and references of the Contractor should be replied to promptly. No letter or reference of the Contractor should remain unanswered. (xii) Proper records should be maintained at site with regard to handing over of the site and issue of drawings as well as daily progress reports with details of plant, machinery and equipment deployed at site by the Contractor, supervisors and labours deployed at site and hindrance details. Site Order

20 Book is an important document to be maintained at site. Signature of the Contractor should invariably be obtained as token of his acceptance in the relevant records. (xiii) All possible avenues should be explored to avoid contractual problems such as arbitration etc. All disputes should be attempted to be settled amicably within the frame-work of the Contract during the currency of the Contract. (xiv) The contract should be kept live by extending the contract, even suo-moto, without prejudice to the right of RITES/Employer to levy Liquidated Damages. The contract must be extended within the contract period/extended period.

21 SECTION 2 CONTRACT WITH CLIENT 2.1 SIGNING OF CONTRACT WITH CLIENT Any project management starts with the entering into a Contract with the Client. A good project management therefore has to start with a well drafted Contract document where the responsibilities and scope of the work of RITES and the Client are well defined. It is also to be ensured that the Contract does not result in RITES entering into long term liabilities with the Client or with the contractors engaged either by RITES or the Client. Special care needs to be taken where RITES awards and signs the Contract with Contractor for execution of work, even if these are for and on behalf of the Client. In order to ensure uniformity, a format for Model Agreement between RITES and the Client generally in line with the above stipulation is enclosed as Annexure 2.1. The Conditions in the model agreement are generally based on CPWD Practice which are the ideal ones to protect the interest of RITES. They may be relaxed to the minimum extent necessary, by the Competent Authority of RITES during discussions / negotiations with the Client, keeping in view the scope of work to be carried out. 2.2 DEFINITION OF DEPOSIT WORKS Works which are got executed by RITES where Works Contracts are signed by RITES for and on behalf of the Client and the Client makes funds available to meet the Works Contract expenditure, RITES fees and other related expenses, come under the category of Deposit Works. Before taking up any Deposit Work, an Agreement has to be executed between RITES and the Client indicating clearly the scope of work, the financial arrangements envisaged by the Client for smooth progress of works and the items on which RITES should take prior approval of the Client as well as the items on which RITES can take a decision on its own with or without advice to the Client, during the course of execution of work. 2.3 REALIZATION OF CONTRIBUTION FOR DEPOSIT WORKS Whenever a Deposit Work is to be carried out, full contribution should normally be realized before any liability is incurred on account of the work. However, in cases where RITES is satisfied that money will be forthcoming when required, RITES may accept the request of the Client to make available the funds in suitable installments. Efforts should be made to realize about 1% of the anticipated project cost before preparation of preliminary estimates In cases of deposit works of financially sound Clients from whom receipt of money is generally assured, ideally 33-1/3% of the estimated cost of the work may be got deposited as advance. Thereafter, the expenditure incurred may

22 be got reimbursed through monthly bills simultaneously with rendering of monthly accounts on the progress of work. The deposit of 33-1/3% or any other percentage mutually agreed to between RITES and the Client; obtained as the first installment should be retained for adjustment against the last portion of the estimated expenditure. With regard to Deposit Works involving Clients who have earlier defaulted in payments, or where the works outlay is predominantly for purchase of capital equipments and machineries, the entire deposit should be obtained in advance Where delays are experienced in obtaining funds and where expenditure has to be incurred out of the 33-1/3% or agreed percentage reserve to keep the works going, the matter should be brought up by the Project Coordinator to the notice of SBU Head promptly for taking up the matter with the Client. It is reiterated that no expenditure is to be incurred on Deposit Works out of RITES funds To enable the Client to provide additional funds in time, Revised Estimates should be sent to the Client, at the appropriate stages during the execution of works wherever required It should be ensured that in no case deposits received in respect of one Deposit Work are diverted to other Deposit Works even for the same Client. The only exception will be in case when the Client specifically authorizes in writing such diversions The Client on whose behalf the work is to be done is also to be made clear that RITES does not bind itself to complete the work within the amount of estimate and that the Client should agree to finance the excess that may occur. An acknowledgement of this clear understanding is required to be obtained from the Client before the work is taken in hand It should be ensured that the expenditure is not more than the deposits received for the work. Where the SBU Head is doubtful about the timely receipt of the deposits, matter should be taken up with the Client by giving notice that if further deposit is not received, work may be stopped and any contractual liability arising out of such stoppage of work will have to be borne by the Client. Efforts should also be made by higher officers, if need be, to follow up with the Client. In exceptional circumstances, if the work has to be continued, permission of the Divisional Head should be obtained While submitting preliminary estimates for Deposit Works for obtaining Administrative Approval and Expenditure Sanction from the Client, a copy of the terms and conditions under which the works would be taken up by RITES generally as given in Annexure 2.1 should also be enclosed with the estimate. Alternatively these provisions should be incorporated in the Agreement between RITES and the Client.

23 2.4 EXECUTION OF DEPOSIT WORKS With regard to design, estimation and execution of work, instructions as contained in subsequent sections should be followed. The scope of work should not be altered without written permission of the Client SBU Heads should keep a close watch on the progress of expenditure on Deposit Works, particularly on the estimated cost of work, RITES fees and related expenses, the total deposit received and the progressive expenditure. A copy of the monthly expenditure statement should be forwarded to the Client by the SBU Head indicating the additional funds, if any, to be made available, keeping in view the trend of progress of works. Ideally a separate Bank account should be maintained for each Deposit Work which should be credited with all deposits of the Client and debited with payments to the Contractor, RITES fees and other expenses as per provisions in the Agreement between RITES and the Client. This will facilitate easy reconciliation of accounts, monthly and on completion of works. It is desirable that in case of opening of such Bank Account, the Agreement between RITES and the Client clearly stipulates whether interest accruing out of short term deposits from the surplus funds if any available in the Account from time to time will be retained by RITES or refunded to the Client. The consultancy fee to be quoted by RITES should take into consideration this factor. Where the Client does not agree for the interest on such short term Fixed Deposits being credited to RITES account, keeping in mind the Income Tax implications on accrued interest and expenditure in management of such short term fixed deposits, the Client s funds may be kept in current account without any conversion into Short Term fixed deposits. 2.5 ENDORSEMENT OF COPIES OF DOCUMENTS TO THE CLIENT The Agreement between RITES and the Client will indicate what items will require prior approval of the Client, what items will require post facto approval of the Client and what items can be decided by RITES and the Client just kept advised Irrespective of the provisions in the Agreement between RITES and the Client, copy of the following documents should be endorsed to the Client without any delay. (i) (ii) Detailed Estimate as sanctioned by RITES Detailed drawings as approved by RITES (iii) (iv) (v) (vi) Tender Document Letter of Acceptance to the selected Contractor Contract with the Contractor / Supplementary Agreement Letters of Extension of Time issued to the Contractor (vii) Deviations and Rates as approved by RITES for Extra items, Substituted items and Deviation in Quantity of BOQ items

24 (viii) Notice to Contractor on Termination / Rescission / Foreclosure of Contract. (ix) (x) (xi) (xii) Running Account Bills and Final Bill with supporting documents As built drawings / Maintenance & Operation Manuals (where applicable). Completion Certificate Maintenance Certificate

25 SECTION-3 PROJECT ORGANISATON AND RESPONSIBILITY 3.1 ORGANISATIONAL SET UP FOR PROJECT IMPLEMENTATION Every project involving field supervision will have : i) A field unit headed by a Controlling Site Engineer designated as Controlling Engineer/Project Manager/Chief Project Manager, who may be assisted by one or more Engineers and Technical Assistants designated as Site Engineers. ii) One of the officers at SBU office designated as Project Coordinator for liaison with the field office and who will be responsible for all actions to be taken in the SBU office in connection with that project. 3.2 FIELD ORGANISATION The strength of field organization will depend on the magnitude of the project in terms of its financial value and the complexity of works involved. The staff strength will be deployed on the basis of the funds provided in the approved input estimate and the average monthly expenditure for different grades of staff. In cases where a definite commitment has been given to the Client on the number and grades of staff that will be deployed by RITES for the Project, this requirement should be kept in mind while deciding on the field organization. Where required, deployment of Technical staff on contract terms for limited periods may be resorted to. The senior most officer in the field organization irrespective of his grade, will be designated as the Controlling Engineer/Project Manager /Chief Project Manager and the technical staff working under him will be designated as Site Engineers. While the Controlling Site Engineer will be overall responsible for all the field activities as defined in a subsequent para 3.5, he can allocate specific duties to his supporting technical staff depending on the number available and their grades. 3.3 ORGANISATION AT SBU OFFICE The SBU Head who may be of the grade of GGM, GM or CPM will be dealing with a number of projects at any one time. He will also be assisted by officers and staff in both technical and financial matters. SBU Head will allocate projects among his senior technical officers who will work as Co-ordinating Officers for the Project or Project Coordinators. Each such technical officer who may be G.M, Addl.GM, Jt.GM, Sr. Dy.GM, Dy.GM or Manager may be required to deal with one or more projects and it will be his responsibility to take care of all activities related to the Project for which the SBU office is responsible as indicated in

26 subsequent Para 3.6. The nominated Project Coordinator will also keep the SBU Head advised fully on the Project and initiate action for referring through SBU Head to the higher authorities in the Head Quarters, proposals which require sanction of higher authorities at Head Quarters level. The nominated Project Coordinator will take the assistance of the officers and staff in the Technical Section of the SBU office for dealing with all technical matters related to the project. He will liaise with the Accounts Officer dealing with all financial matters related to the Project. 3.4 DESIRABLE LEVEL OF ORGANIZATION The table below gives the desirable level of organization for projects of different values. The SBU Head can modify them suitably depending upon the nature and complexity of the project and the availability of engineering personnel under him: Project Size Project Coordinator Controlling Site Engineer Site Engineer For Projects costing upto 5 Cr. Rupees Manager Engineer NIL For Projects costing between 5 & 20 Cr. Manager AM Engineer Rupees For Projects costing between 20 & 50 Cr. DGM Manager Engineer Rupees For Projects costing above 50Cr. Sr.DGM/ DGM/ Sr. Engineer Rupees Jt. GM/ AGM DGM 3.5 FIELD ACTIVITIES FOR WHICH CONTROLLING SITE ENGINEER WILL BE RESPONSIBLE PRE-CONSTRUCTION STAGE a) Check the Good for Construction Drawings with the site conditions and see if any modification will be required to be made in the drawings such as change in the layout, type of foundation, increase in depth of foundation, increase in plinth height etc. If any such modifications are called for, the same should be brought to the attention of SBU office promptly for taking necessary action. b) Do a general check of the BOQ in the Contract Agreement with the Good for Construction Drawings and see if there are any obvious errors such as missing items of work, incorrect estimation of quantity of any item, rates in figures and words not tallying for any item etc. If any such error is noticed, it should be brought to the attention of SBU office promptly for taking necessary corrective action.

27 c) Check if the Contractor has submitted the following documents and if so, xerox copies of the same should be retained in the Site Office and the originals sent to SBU Office. The list given below is based on CPWD General and Special Conditions of Contract and may require modification depending on the provisions contained in GCC & SCC of other type of contracts such as that of World Bank, Indian Railways etc as will be required to be followed for that work. i) Performance Guarantee Bond. ii) Insurance Policy on Secured Advance on perishable materials. iii) Bank Guarantee Bond on Mobilization Advance. iv) Hypothecation deed on Plant, Machinery Advance v) Insurance Policy on Plant & Machinery Advance vi) Bank Guarantee Bond on free supply of materials. vii) License under the Contract Labour (R&A) Act and Rules. viii) Indemnity Bond against patent rights. ix) Indemnity Bond on Employer s Plant & Machinery hired to the Contractor. x) Registration with Sales Tax Department for Sales Tax on Works Contracts. xi) Insurance Policy on Cost of Works. xii) Third Party Insurance. xiii) Workmen s Insurance. xiv) Indemnity Bond on damages to persons and property. xv) Registration with Service Tax Department xvi) Registration with Labour Department d) Check with the provisions in the General and Special Conditions of Contract and see if the following requirements have been complied with i) Site Laboratory fully equipped and manned by adequate numbers of technically qualified staff. ii) Availability of qualified and experienced technical personnel at site. e) Check the quality of construction materials arranged by the Contractor by arranging tests where required and see if the Manufacturers Test Certificates have been furnished, where the Contract provides for the same. f) Check if proper storage arrangements for Cement, Steel and other materials have been provided by the Contractor CONSTRUCTION STAGE (WORKS IN PROCESS)

28 a) Maintenance of records at site of work as detailed in Sections 20 and 27 of this book. b) Conducting mandatory and other tests on materials and workmanship as indicated in Section 16 of this book, and as per Checklists of Specifications for Civil Engineering works for Quality Control issued separately. c) Quality control and Technical Audit on works. d) Keeping a watch on the Contractor s compliance with Labour Regulations as detailed in Section 18 of this book. e) Taking measurements of work including test checking as detailed in Section 21 of this book. f) Submission of Running Account Bills with all accompanying documents as stipulated in Section 24 of this book. g) Processing Contractor s submissions with his recommendations to SBU office on the following:- i) Rates for deviated quantities of BOQ items, substituted items and nonscheduled items. ii) Extension of Time with or without compensation. iii) Acceptance of substandard work and reduced rates for the same. iv) Contractor s claims. h) Issue of notices to the Contractor on progress of work, quality of work, number and competence of technical personnel deployed, functioning of Site Laboratory etc. i) Keeping a watch on deviation of quantities, reasons thereof and recommend to SBU office, measures to minimise deviations CONSTRUCTION STAGE (ON PHYSICAL COMPLETION ) a) Inspect the works on receipt of report from the Contractor that the works are completed, point out the deficiencies, if any, and issue Provisional Certificate of Physical Completion/ Completion Certificate. b) Submission of Final Bill with all accompanying documents as stipulated in Section 24 of this book. c) Furnish to SBU office comments on the claims, if any, submitted by the Contractor along with the Final Bill. d) Ensure that the Contractor cleans up the area before handing over the completed works.

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