Indian Contract Act

The Indian Contract Act, 1872 is the law relating to Contracts in India. It came into force on
September 1, 1872 and is extended to the whole of India except to the state of Jammu and Kashmir.

The Act has 238 sections altogether.

Interpretation of The Indian Contract Act, 1872

1. When one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to make
a proposal;
2. 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;
3. The person making the proposal is called the "promisor", and the person accepting the
proposal is called the "promisee";
4. When, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise;
5. Every promise and every set of promises, forming the consideration for each other, is an
agreement;
6. Promises, which form the consideration or part, of the consideration for each other are called
reciprocal promises;
7. An agreement not enforceable by law is said to be void;
8. An agreement enforceable by law is a contract;
9. An agreement which is enforceable by law at the option of one or more of the parties -
thereto, but not at the option of the other or others, is a voidable contract;
10. A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.

Contract
The term 'Contract' has been defined in Section 2(h) of the Indian Contract Act, 1872. It defines the
Contract as an agreement enforceable by law.
An agreement cannot become a contract unless it can be enforceable by law. To be enforceable by
law, a contract must contain all the essential elements of a valid contract as defined in Section 10.
According to Section 10, "All agreements are contracts, if they are made by the free consent of the
parties, competent to contract, for a lawful consideration, with a lawful object and are not expressly
declared by the Act to be void.

Essential Elements of a Contract

Essential Elements of a Contract as defined in Section 10 of the Indian Contract Act 1872
1. Agreement - Offer and Acceptance
2. Legal purpose
3. Lawful Consideration
4. Capacity to contract
5. Consent to contract
6. Lawful object
7. Certainity
8. Possibility of Performance
9. Not expressly declared void
10. Legal formalities like Writing, Registration etc.
All the above ingredients must be satisfied in every valid contract. It can be noted that all contracts
are agreements, but not all agreements are contracts.

Offer
Main Article : Offer - Indian Contract Act, 1872
Section 2(a) of the Indian Contract Act, 1872 defines the term "Proposal" as when one person
signifies to another his willingness to do or to abstain from doing something with a view to obtaining
the assent of the other to such an act or abstinence, he is said to make a proposal. The person
making the 'proposal' or 'offer' is called the 'promisor' or 'offeror', the person to whom the offer is
made is called the 'offeree'.

Acceptance
Main Article - Acceptance - Indian Contract Act, 1872
Acceptance means the expression of assent to whom the proposal is made in a Contract.
Acceptance may be expressed either by conduct or by implied circumstances. However, silence
cannot be prescribed as a mode of acceptance.

Consideration
Main Article : Consideration
Section 10 of the Indian Contract Act states Consideration as one of the essential elements to
constitute a contract.
Consideration means 'something in return'. According to section 2(d) of the Indian Contract Act,
"When at the desire of the promisor, the promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or abstain from doing something, such act
or abstinence is called a consideration for the promisee."

Capacity to Contract
Section 11 of the Indian Contract Act provides the requirements for competancy of the parties to the
contract.
It says, "Every person is competent to contract, who is of the age of majority, according to law, which
he is subject to also who is of sound mind and who is not disqualified from contracting by any law to
which he is the subject"
Disqualifications

1. An incorporated company cannot be part of contract.

2. A minor is also incompetent to enter into a contract subject to certain exceptions
3. Mental in capacity. Section 12 says "A person is said to be of sound mind for the purpose of
making a contract, if at the time when he makes it, he is capable of understanding it and of
forming a rational judgement to its effect upon his interests"
1. A person who suffers from insanity at intervals can enter into a contract, when he is
of sound mind.
 2. A person who suffers from insanity occasionally cannot enter into a contract, when
he is of unsound mind.
Quasi-Contracts
Under special circumstances, obligations resembling those created by a contract are imposed by law
although there is no contract between the parties. Such contracts are called Quasi-Contracts.
Sections 68 to 72 deal with Quasi-Contractual Obligations.

1. Claim for Necessaries supplied to a person incapable of contracting or on his account

2. Reimbursement of person paying money due by another, in payment of which he is
interested
3. Obligation of person enjoying benefit of non-gratuitous act
4. Responsibility of finder of goods
5. Liability of person to whom money is paid, or thing delivered by mistake or under coercion.

Discharge of Contract
A Contract may be discharged in any of the following ways

1. Discharge by Performance.
2. Discharge by Mutual Consent or Agreement
1. Novation - When a new contract is substituted for an existing contract
2. Alteration
3. Rescission
4. Remission - Accepting the lesser sum of amount than what was contracted for
3. Discharge by subsequent illegality or impossibility
1. Destruction of Subject-matter
2. Failure of ultimate purpose
3. Death or personal incapacity of Promisor
4. Change of Law
4. Discharge by lapse of time
5. Discharge by operation of law
6. Discharge by breach of contract
1. Anticipatory breach
2. Actual breach
A construction contract is a mutual or legally binding agreement between two parties based on
policies and conditions recorded in document form. The two parties involved are one or
more owners, and one or more contractors. The owner has full authority to decide what type of
contract should be used for a specific development to be constructed and to set forth the legally-
binding terms and conditions in a contractual agreement.[1]

Types[edit]
The six types of contracts are:

 Lump sum contract

 Item rate contract/unit price contract
 Lump sum and scheduled contract[2]
 Cost plus fixed fee contract
 Cost plus percentage of cost contract
 Special contracts[3]
Lump sum contract[edit]
In a lump sum contract an owner agrees to pay a contractor a specified lump sum after the
completion of work without a cost breakdown.[4] [5] After work no detailed measurements is required.

Lump sum and scheduled contract[edit]

In lump sum contract the complete work as per plan and specifications is carried out by contractor
for certain fixed amount as per agreement. The owner provides required information and contractor
charges certain amount. This contract is suitable when the number of items are limited or when it is
possible to work out exact quantities of work to be executed. The detailed specifications of all items
of work,plans and detail drawings, security deposit, penalty, progress and other condition of contract
are included in agreement.Though it is lump sum and scheduled contract,contractor will be paid at
regular interval of 2-3 months as per progress of work on the basis of certificate issued by engineer
in charge. A scheduled of rate is included in agreement for making payment of extra items.

Cost plus fixed fee contract[edit]

In cost plus fixed fee, the owner pays the contractor an agreed amount over and above the
documented cost of work.[6]

Cost plus percentage of cost contract[edit]

In cost plus percentage, the owner pays greater than 100 percent of the documented cost, usually
requiring detailed expense accounting.[7] In this type of contract,contractor is paid the actual cost of
work plus certain percentage as profit. Various contract documents,drawing,specifications are not
necessary at the time of signing the agreement.Contractor has to keep all records for cost of
material and labour and contractor will be paid accordingly to engineer incharge.This type of contract
is suitable for emergency work like difficulties in foundation conditions,construction of expensive
structure etc.

Special contracts
Special contracts are further classified into five types:

 Turn key contract

 Negotiated contract
  Package contract
 Continuing contract
 Running contract[8]

A construction contracts contains general and special conditions of

agreement, details of construction project work, their specifications, time
limits, payments and penalties for delivery delays etc. and ensures every
party’s rights and obligations.

A construction contract document is a valid document can be enforced under

certain authority or law.

Types of Construction Contract Documents

At early stages for any construction project, owner with his engineer or
consultant prepares necessary documents for tender process which will be
included in the contract. These documents are called contract documents.

Following are the types of documents in a construction contract:

1. General conditions
2. Special conditions
3. Drawings and specifications
4. B.O.Q (bill of quantity)
5. Letter of acceptance
6. Contractor bid

Conditions of Construction Contract

Conditions of contract are terms which rule the relationships between the
owner and the contractor, define each party’s rights and obligations, specify
method of payment and determine actions required when existing any
disputes between the owner and the contractor.

Following are the conditions of contract for construction projects:

o General conditions of contract
o Special conditions of contract

General conditions of contract

They are standard terms that suit the majority of projects, they include:

o Definition of the project

o Contract components
o Rights and responsibilities for the owner and the contractor
o Project schedule
o Payment method
o Warranty and delay penalty

Special conditions of contract

They are the modifications required to suit the uniqueness of the project,
make the contract flexible for the nature of the project and achieve project
objectives.

Selection of Type of Construction Contracts

One of the characteristics of construction projects is uniqueness. Every
project has its special circumstances, so it’s important to select the contract
type which suits the project. The process of selecting the type of contract is
developed by the owner.

Factors which affect the selection of construction contract are:

1. Project objectives
The type of contract should meet with project objectives.

2. Project constraints
There isn’t any construction project without constraints. Thus, project
constraints should be considered while selecting type of construction
contracts.

3. Project delivery method

 Project delivery method determines the relationships between parties getting
involved in the project and how they interact with each other from project
initiation to project closure.

Types of Construction Contracts

There are many types of contracts used in construction. Each type has its
advantages and disadvantages with respect to the owner and the contractor.
They are categorized in two major groups as per method of payment to the
contractor.

Following are the types of construction contracts generally used in

construction projects:

o Lump sum contract

o Unit price contract
o Cost plus contract
o Target cost contract

Price-based Construction Contracts

1. Lump Sum Construction Contract
In this type the contractor bids a single fixed price for overall activities in the
project scope. The contractor is responsible for estimating project costs from
drawings then adds overhead and his profit to determine the price of the
project.

All risks are assigned to the contractor, there isn’t any risk carried by the
owner. The contractor has incentive in this contract as he is rewarded for
early finish and there is penalty for late finish.

This contract is ideal when the project scope is well defined at the design
stage because there is limited flexibility for modifying the design during
construction period.

2. Unit Price Construction Contract

The total price of the project in unit price contract is based on the price of
each item’s unit. The contractor is paid as per the rates of items specified in
the bill of quantity.

The risk is shared with the contractor and the owner. This type of contract
has more flexibility for design changing than the lump sum contract.

The construction of the project can be started before finishing the designs so
the total cost of the project will be uncertain at the early stages of the
project.

Cost-based Construction Contracts

3. Cost Plus Construction Contract
The contractor is paid based on the actual cost of the project including direct
and indirect costs plus specific fee. This fee could be a fixed fee or
percentage of costs.

All risks are assigned to the owner and he gets involved with the contractor
in the management of the project. The contractor has no risk in case of
increasing the cost of the project, also there isn’t any incentive for early
finish.

This type of contract is ideal when the project scope is uncertain in the early
stages of the project. The contractor can start the execution of the project
before finishing the design. It is impossible to estimate the cost of the
project before the construction has been finished.

4. Target Cost Construction Contract

Target cost contract has mutual features of the lump sum and cost plus
contracts. The contractor is paid based on the actual costs plus a certain fee
either fixed or percentage of total cost in case of the cost of the project
doesn’t exceed certain target cost specified by the owner.
There is risk carried by the contractor in case of increase in cost of
construction project. The contractor is also rewarded a percentage of any
savings between target and actual cost.

Comparison Between Different Types of Construction

Contracts

DESIGN OF CONTRACT DOCUMENT:

Construction “Contract Documents” are the written documents that define the roles, responsibilities,
and “Work” under the construction Contract, and are legally-binding on the parties (Owner and
Contractor). It is very important for the person preparing the contracting requirements and other
documents in “Division 00” to fully understand the implications of what does, and does not, constitute
the “Contract Documents”; failure to properly designate the Contract Documents can be a significant
contractual flaw.
Following the contract-writing axiom espoused by the Construction Specifications Institute (CSI), “say it
once and in the right place”, what constitutes the Contract Documents should be indicated at only one
location (preferably the Owner-Contractor Agreement). To increase the potential for consistent
interpretation, the listing of the Contract Documents should be complete and unambiguous, and should
not include any documents that rightfully should not be Contract Documents.

Common examples of vagueness in this regard include phrases such as, “the Contract
Documents…include all exhibits, attachments, supplements, and all other such documents used as
contract modifications”, and the common practice of including appendices in the Project Manual but
omitting such appendices from the listing of what constitutes the Contract Documents. Such vagueness
should be avoided.

EJCDC® C-700, Standard General Conditions of the Construction Contract (2013), includes the following
definitions at Paragraph 1.01.A—note the differences in the definitions of “Bidding Documents” and
“Contract Documents”. Also note how the definition of “Contract Documents” merely refers to the
Agreement, preserving the “say it once and in the right place” principle:

Contract Documents—Those items so designated in the Agreement, and which together comprise the
Contract.

Bidding Documents—The Bidding Requirements, the proposed Contract Documents, and all Addenda.

Bidding Requirements—The advertisement or invitation to bid, Instructions to Bidders, Bid Bond or

other Bid security, if any, the Bid Form, and the Bid with any attachments.

Drawings—The part of the Contract that graphically shows the scope, extent, and character of the Work
to be performed by Contractor.

Specifications—The part of the Contract that consists of written requirements for materials, equipment,
systems, standards, and workmanship as applied to the Work, and certain administrative requirements
and procedural matters applicable to the Work.

Note in the following definition from EJCDC® C-700 that “Shop Drawings” are specifically not part of the
Contract Documents:

Shop Drawings—All drawings, diagrams, illustrations, schedules, and other data or information that are
specifically prepared or assembled by or for Contractor and submitted by Contractor to illustrate some
portion of the Work. Shop Drawings, whether approved or not, are not Drawings and are not Contract
Documents.

Another useful definition from EJCDC® C-700 is that of “Project Manual”:

 Project Manual—The written documents prepared for, or made available for, procuring and constructing
the Work, including but not limited to the Bidding Documents or other construction procurement
documents, geotechnical and existing conditions information, the Agreement, bond forms, General
Conditions, Supplementary Conditions, and Specifications. The contents of the Project Manual may be
bound in one or more volumes.

AIA standard documents include definitions of the above terms very similar to EJCDC’s (see
AIA® A101TM , AIA® A201TM, and AIA® A701TM). However, AIA documents indicate what constitutes the
“Contract Documents” in both the Agreement and in the General Conditions, creating the potential for
conflicting requirements.

Traditional contract

The contract documents set out the obligations and responsibilities of the parties to the contract. On a
traditionally-procured, fully-designed construction project, the contract documents for suppliers such as
the main contractor are likely to include:

 Articles of agreement and conditions of contract, for completing as a simple contract (or as a deed).
 Working drawings.
 Bills of quantities.
 Specifications.
 Schedules of work.
 Perhaps an information release schedule. Consultants can be reluctant to produce information release
schedules because of concerns about being held to the dates on the schedule (even where the
progress of construction does not require information when the information release schedule proposes
it). Failure to keep to the dates set out in the information release schedule may then be a matter for
which the contractor can claim an extension of time and loss and /or expense.
 A schedule of tender adjustments or clarifications negotiated and agreed after the receipt
of tenders and prior to the signing of the contract.
 The requirement for the contractor to provide a performance bond and to obtain collateral
warranties from any sub-contractors or suppliers.

Both client and contractor should engross the contract by witnessed signatures prior to commencement of
work. In practice the administrative effort of collating all necessarypaperwork can be overtaken by the
desire to begin construction. In such circumstances it becomes harder to sort out any disputes as to the
content. There have been cases where the courts have had to interpret an implied contract when
the contract has remained unsigned.

Design and build

On design and build projects, the contract documents may comprise:

 The articles of agreement and conditions of contract.
 The employer's requirements.
 The contractor's proposals.
 The contract sum analysis.
 Possibly bills of quantities (for some or all of the design).

Building information modelling

On projects that adopt building information modelling (BIM), the contract documents may also include:

 A model enabling amendment introducing a BIM protocol as part of the contract documents.
 A BIM protocol, which establishes specific obligations, liabilities and limitations on the use of building
information models and can be used by clients to mandate particular working practices.
 Employer's information requirements, which define information that the employer wishes to procure to
ensure that the design is developed in accordance with their needs and that they are able to operate
the completed development effectively and efficiently. Suppliersrespond to the employer's information
requirements with a BIM execution plan.

NEC3

The contract documentation under NEC contracts comprises:

 The form of agreement.

 Conditions of contract.
 Contract data.
 Prices, activities schedules, bill of quantities.
 Works information.
 Site information.

Pre-contract meeting

A pre-contract meeting is likely to take place after the contractor has been appointed. This is an
opportunity to for the project team to meet (perhaps for the first time) and to plan their activities. The
minutes of the pre-contract meeting may form part of contract documents (for all procurement routes)
subject to the agreement of both parties.
INTERNATIONAL CONSTRUCTION CONTRACTS

PREAMBLE

 The contract system: There is no universal contract form that is used for international construction
projects. If the project is funded from a private scoter, the client may choose to use the system
practiced in the home country. But for projects funded by multilateral development banks, the
contract systems usually used are those recommended by the banks.
 Parties involved in the contract: Parties involved are the same as that for any domestic contract:
(1) Owner, (2) Architect-Engineer, and (3) Contractor.
 Selection of contractor: Selection of contractor may be done using any of the following
procedures:
o Competitive bidding: The owner selects a contractor by calling a tender for the job. The
work is usually awarded to the lowest responsive bidder. It is the most widely used
method for selection of contractors. The contract stipulates that when a bid is selected by
the owner, the contractor must complete the project for the bid amount.
o Negotiated contract: The owner selects a contractor on the basis of her/his technical and
financial capabilities and negotiate a contract. This type of contract is usually limited to
privately funded projects.
o Competitive negotiation: Contractors are first prequalified on the basis of their technical
expertise and bid prices. They are then ranked in order of their technical qualifications to
do the job. The bid of the first ranked contractor is opened. If the owner is satisfied with
the price, the contractor is awarded the job. If not, they negotiate a price. In case the
negotiations fail, the owner opens the bid of the second ranked contractor and
commences negotiation with him/her. The process continues until a contractor is
selected. Fresh tenders are usually called if the negotiations with even the third ranked
contractor fails.
 Contract types: The contract types available are the same as that for domestic construction:
o Construction services only: The contractor provides only the construction services;
design is provided by an architect-engineer company. The architect-engineer acts as a
professional intermediary between the owner and the contractor and represents the
owner in matters of construction contract administration.
o Single prime contract: The owner awards construction of the entire project to a single
prime contractor. The contractor coordinates and directs the activities of the various
parties and agencies involved with the construction and assumes full responsibility to the
owner for delivery of the project within specified time. The general contractor is
 completely accountable for construction according to the contract and for all payment of
costs and performance associated with the subcontractors.

Figure 1. Contract Services Only

or Single Prime Contract


o Bridging: Bridging is a hybrid technique that merges elements of both traditional
design/bid/build and design/build. With bridging, the owner hires an architect to define the
preliminary design and performance specifications of the project, which are then used to
solicit bids from design/build entities to execute the project. Based on the owner's initial
documents, a firm price is agreed upon with the design/builder and a contract is set. The
contractor’s architects and engineers then prepare final construction documents and
specifications. The design/builder acts as the architect/engineer of record and builds the
project.
o Design-Build: The owner contracts with a single firm for providing both design and
construction services. An extension of this type is a "turnkey" project where the contractor
obtains project financing, procures land, provides design and construction services, and
hands it over to the owner ready for occupancy.
o Build-Operate-Transfer (BOT) Model: A special financing model developed for realizing
projects that require advanced technology and high capital investment. This allows for
private participation in public services, without sacrificing ownership of assets. BOT
schemes and related variants have emerged as the most important infrastructure finance
vehicles in developing countries. Other variations of the model are Build-Own-Operate
(BOO) and Build-Own-Operate-Transfer.
 o CM at Risk: It is a process that allows a client to select a Construction Manager (CM)
based on qualifications; make the CM a member of a collaborative project team;
centralize responsibility for construction under a single contract; obtain a bonded
guaranteed maximum price; produce a more manageable, predictable project; save time
and money; and reduce risk for the client. CM at Risk, a more professional approach to
construction, is taking its place along with design-build, bridging and the more traditional
process of design-bid-build as an established method of project delivery.

Figure 2. Construction Management at Risk

 Costs
o Material
o Direct and indirect labor
o Equipment
o Recruiting cost of labor when professional recruiters are used
o Transportation cost of labor, materials, and equipment from country of origin to site
o Cost of setting up a camp: living quarters, sanitary, and recreational facilities
o Cost of visas, repatriation costs
o Orientation and training
o Financing, expediting progress payments
 Payment
o Lump-sum method
o Cost reimbursable method
o Unit price method
INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS (FIDIC)

 What is FIDIC?
o FIDIC is the International Federation of Consulting Engineers. The acronym represents
the French version of the organization’s name.
o Most of the countries around the world use the conditions of contract promulgated by
FIDIC for use in international construction contracts. The World Bank has adopted this
form with certain modifications for for procurement of works by borrowing countries.
 FIDIC Conditions of Contract
o The FIDIC conditions of contract are usually used for works that are measured and
valued using a Bill of Quantities.
o For lump-sum, cost plus, or other types of contracts, the forms are required to be
modified to suit the type of work.
o It is a comprehensive document that contains conditions of contract along with a form of
tender and a form of agreement.
o The FIDIC conditions of contract are are divided into several parts:
 Part I: Contains the general conditions of contract
 Part II: Contains the particular conditions of contract (job specific)
 Part III: Contains the particular conditions of contract (job specific) related to
dredging and reclamation works.
o Some important clauses:
 Quantities: The quantities set out in the Bill of Quantities are the estimated
quantities of the work, but they are not to be taken as the actual and correct
quantities of the works to be executed by the contractor in fulfillment of his/her
obligations under the contract.
 Maintenance: The contractor has to enter a period of maintenance (usually a
year) after the completion of works. During this period, the contractor executes
works of repair, reconstruction, or making good defects.
 Completion certificate (known as maintenance certificate) is issued to the
contractor after the expiry of the maintenance period.
 Changes in law: In the event of changes to statutes, laws, decrees, and
ordinances within thirty days of submission of bids and if these changes effect
the contract price, then the contract price will be changed accordingly.
 Rates of exchange: The contract legislates that, where it provides for payment in
whole or in part in foreign currencies, then such payments will not be subject to
variation in rates of exchange between the currencies of the home and host
countries.
  Loss due to currency restriction: In the event that after the signing of the
agreement some currency restrictions are imposed by the host country, the client
agrees to reimburse any loss or damage to the contractor resulting from such
imposition.
 Government regulations: The contractor is required to conform with all local
regulations concerning but not limited to:
 Use of explosives
 Bribery and corruption
 Taking of photographs of the works
 Religious observations
 All matters that might effect the security of the country
 Arbitration: In case of disputes, if they are not amicably settled, the rules of
conciliation and arbitration of the International Chamber of Commerce will apply.

PROCUREMENT UNDER WORLD BANK CREDIT

 Loan Agreement
o The Loan Agreement governs the legal relationship between the Borrower (i.e. the
country that receives the credit) and the Bank, and also the guidelines for procurement of
goods and works for the project for which the credit has been made available.
o The rights and obligations of the Borrower and the providers of goods and works for the
project are governed by the bidding documents, and by the contracts signed by the
Borrower and the providers of goods and works, and not by the Loan Agreement.
 General guidelines
o The responsibility for implementation of the project and the award and administration of
contracts under the project rests with the Borrower.
o The Borrower has to ensure the Bank that the proceeds of the loan are used only for the
project for which it was granted.
o In order to maintain the transparency of the procurement process, the projects are to be
awarded through International Competitive Bidding (ICB), with suitable allowance for
domestic contractors.
 Eligible contractors
o Funds from Bank loans can be disbursed only on expenditures for works provided by
contractors who are national of Bank member countries. Materials used by the
contractors have to be produced in Bank member countries.
o Nationals of non-member countries are disqualified from bidding for contracts intended to
be financed either in whole or in part from Bank loans.
 o There are more than 180 countries who are presently members of the World Bank. The
list can be obtained on-line.

INTERNATIONAL COMPETITIVE BIDDING FOR WORLD BANK FUNDED PROJECTS

 Objective: The objective of the ICB is to provide all eligible prospective bidders with timely and
adequate notification of a Borrower’s requirements and an equal opportunity to bid for the
required works.
 Notification: The Borrower is required to prepare and submit a General Procurement Notice to the
Bank for publication in the United Nations Development Business (UNDB).
 Prequalification: Prequalification of bidders is necessary for large and complex works.
 Bidding Documents: The bidding documents shall furnish all information necessary for a
prospective bidder to prepare bid for the works to be provided. They generally include:
o Invitation to bid
o Instruction to bidders
o Form of bid
o Form of contract
o Conditions of contract (both general and special)
o Specifications and drawings
o Bill of quantities
o Delivery time or schedule of completion
 Validity of Bids and Bid Security: Bids submitted are required to be valid for a specified period of
time. Bid securities are required by the borrower as protection against irresponsible bids.
 Language: Prequalification and bidding documents are prepared either in English, French, or
Spanish.
 Standards: Internationally accepted standards such as those issued by the ISO are specified, as
far as possible.
 Brand Names: Brand names, catalog numbers, or similar classifications are avoided.
 Pricing: Bidders for works contracts are required to quote unit prices or lump sum prices for the
performance of works. Such prices should include all duties, taxes, and other levies.
 Price Adjustment: Bid prices may either be fixed or the documents may allow for price
adjustments. In case of adjustments, the prices may be adjusted by the use of a prescribed
formula which breaks down the total price into different components.
 Transportation an Insurance: To be provided by the bidder.
 Currency of Bid: Bidder may express the bid price in the currency of any member country, or in
European Currency Unit (ECU or Euro).
 Currency Conversion: For the purposes of comparing prices, the bid prices are converted to a
single currency selected by the Borrower.
 Currency of Payment: Payment of the contract price is made in the currency or currencies in
which the bid price is expressed in the bid of the successful bidder.
 Payment: Bidding documents specify the payment methods and terms offered. Mobilization
advances, in appropriate cases, are usually made.
 Conditions of Contract: Scope of work, right and obligations of the parties involved, and functions
of the architect/engineer are clearly defined in the conditions of contract.
 Performance Security: Performance bond or bank guarantee is required to be furnished by the
contractor. A portion of this security extends beyond the date of completion of works to cover the
defects liability period.
 Liquidated Damages: Provisions of liquidated damages are included in the contract to cover the
extra cost or loss of revenue to the Borrower in case of delay in the completion of works.
 Force Majeure: The contract stipulates that failure on the part of the parties to perform their
obligations under the contract will not be considered a default if such failure is the result of an
event beyond the control of the parties involved.
 Arbitration: Settlement of disputes are encouraged to be resolved using international commercial
arbitration methods.
 Time for Bid Preparation: Not less than six weeks from the date of invitation to bid.
 Bid Opening: Bids are opened at the stipulated time and place in presence of the bidders or their
representatives.
 Examination of Bids: Bids are required to be responsive to the bidding documents.
 Evaluation and Comparison of Bids: All bid prices are converted to a single currency for the
purpose of bid evaluation. The bid with the lowest evaluated cost is usually selected for award.
 Domestic Preferences: Domestic contractors are allowed a margin of preference of 7.5 per cent.
 Award of Contract: Contract is awarded to the lowest evaluated responsive bidder.
 Price revision formula (used only when there is provision for revision of contract prices):
o P1 = (P0/100)*[a+b*(M1/M0)+c*(W 1/W 0)]
o Where:
 P1 = price payable under index clause
 P0 = initial price as stipulated in the contract
 a = percentage of price excluded from adjustment
 b = percentage of price of materials covered by this weighting
 c = percentage of price of wages covered by this weighting
 M0 = base level of price indices for materials specified under ‘b’
 M1 = comparable level of price indices for materials specified under ‘b’
 W 0 = base level of price indices for wages specified under ‘c’
 W 1 = comparable level of price indices for wages specified under ‘b’
 a+b+c = 100% of price payable under index clause
Law of torts
“Torts are civil wrongs for which the injured party may seek legal redressal for.” The
injured party in case of torts is entitled to claim ‘unliquidated damages', the judgment of
which is given by the judge of a court based on the facts, circumstances and the amount
of injury suffered which is actually suffered by the injured party. Tort law is largely based
on common sense and the understanding prevalent between people in their everyday
interactions with each other. The purpose of tort law is to ensure that people reasonably
coexist with each other. In case of a tort case there are two parties involved in it i.e.
plaintiff and defendant. Plaintiff is the person whose rights have been violated, the one
who has been injured. He is the one who is the complainant, who comes to the court
seeking remedy. On the other hand defendant is a person who has violated the rights of
the other person and has injured the other person.

For the society to peacefully coexist, each member of the society has to fulfill some
duties towards the other people of the society. Duties to respect people's private
spaces, not to do things that unfairly disturb others, be careful and diligent when we
deal with fellow beings, etc. just as we have such duties, others have the right to expect
us to do these duties. Similarly, others also have duties towards us, and we have the
right to expect them o fulfill these duties. Thus all people are interlinked to each other
for these rights and duties towards each other, creating a world of rights and duties. We
have the right to things like private spaces, the right not to be unfairly disturbed etc. we
have the duty of respecting the above rights of others. The law of torts deals with the
violation of these rights by the people. These rights are not mentioned in the written
laws generally, but these have become the part of the legal system by common law and
by the acceptance of the masses.

For explaining this I would like to demonstrate an example, a man was walking in a
garden on a bright sunny day and started swinging the umbrella while walking in the
park. Unfortunately, the umbrella ended up smashing the other pedestrian on his nose.
The person injured was very upset with this act. So when the injured man took up this
issue with the first man, first man replied that he has the right to walk in a public place
in the manner which suits him. The second man replied to the first man saying that the
first man's rights end where the rights of the second man begin.

Few examples of the torts or civil wrongs are: nuisance, negligence, trespass,
defamation, etc. Now in the next section I would discuss some definitions which are
used very commonly in the law of torts.
Civil wrongs mean those wrong actions that are not recognized by the state as being
criminal wrongs. Criminal wrongs are more serious and are harmful for the whole
society. On the other hand the civil wrongs are against private parties. Suppose a person
walks in to the private property of other person then he commits a trespass. This act
concerns only one person and does not concern the public so it is a case of tort. On the
other hand, if a person murders someone, then such a person is danger to the whole
society, because the whole society is concerned with the lives of community members.
In this case the wrong is a criminal wrong as opposed to a civil wrong. Therefore, civil
wrongs are usually defined in distinction to criminal wrongs and deal with private rights
that arise by the virtue of being a member of a community, rather than dealing with
public rights that the public has as a whole against every individual.

Damages are compensation payable to the injured party for injuries sustained because
of the wrong committed by the wrongdoer. It is usually the most common remedy of
torts. This is so because in torts it is very rare, and almost impossible, to undo the
damage done and restitute a person as they were before suffering the damage. The only
way of soothing the injury is by awarding damages, which, though monetary in nature,
are compensation, nevertheless. By this I mean that it is the most common remedy in
torts.

Unliquidated damages are those damages, the amount or extent of which has not been
predetermined or decided before the wrong has committed. In civil wrongs such as torts
there are no agreements as the parties are mostly unlikely aware of the fact that
something like this will happen, for example when a person trespasses into land of
another by unknowingly or in case a person plays loud music which causes harm to
someone else, so the damages are not predetermined and are therefore unliquidated.

Law Of Torts In India

India has inherited the law of torts from the English legal system. Barring a few civil laws,
there are no written laws that specifically and comprehensively deal with the law of torts.
It is up to the Indian courts to apply an English tort principle if justice demands it in a
certain situation, either entirely, or with appropriate modifications, as is the demand of
the case or the facts. But it is of great importance to remember that it is upon the court
to decide that such principals are applicable or not. Very few tort claim cases comes to
the courts, primarily people are not because people are not aware of their rights, and
also because fighting a court case, in Indian scenario, is often not worth the time and
effort. This is completely different from countries like America and United Kingdom
where the tort claims are frequent as the people are aware of their rights.

Quasi-contract: “When a person receives some benefit that was to be given to other,
than the law says that the person is contractually bound to correct recipient to
compensate him for misplaced benefit.” There is no actual contract between wrong
recipient and the right recipient, but law implies contract under which the wrong
recipient has to pay back the compensation to the right person. This assumed contract
is known as quasi-contract.

Difference Between A Tort And Quasi-Contract

In case of tort duty is owed to all members of the public (though only one may be affected) whereas in a
quasi-contract, a duty is implied as being owed to a specific person i.e., the rightful recipient. In tort the
duty is present at all the times, whereas in case of a quasi-contract is formed because of a particular
situation i.e., the wrongful recipient of the benefit etc. also in case of tort the damages are unliquidated,
but in case of a quasi-contract the damages may be liquidated damages. Conditions which are necessary
for a tort are:

1. There must be an act or an omission on the part of the defendant or the alleged wrongdoer. In
order to be liable for a tort, a person must have done some act which he was not supposed to do.
2. The act or omission should result in a legal damage, which means that the act or omission must
result in the violation of a legal right of the plaintiff or the complainant. The legal damage is called
injuria which means ‘legal injury'. One can be injured but he has to be legally injured.

Also there is no general rule in tort law that one must have intended to the wrongful act in order to be held
liable. In some torts, such as assault, deceit and conspiracy, the mental condition is relevant, while in
most of the other torts the mental condition of the wrongdoer is irrelevant. The reason for this is that tort
law requires not just that people not attempt to hurt others, but also that people do their best not to allow
their actions to accidently hurt others. So basically tort law primarily wants to catch careless people in
order to avoid future misfortunes.

There are two terms which are used to determine whether a party has a valid claim in tort law, i.e.
whether the other person could be held liable in a court of law or not. They are:

Injuria sine damno: this means the violation of the legal right without the cause of actual damage. This is
a valid claim in a court of law. For example, if someone trespasses upon the property, he can be held
responsible, even if the trespass did not cause any actual damage to the person. The person has a right
to non-violation of the bounds of his property and it is this right which has given rise to a tort claim.

Damnum sine injuria: this means causing of death without the violation of legal right. Such a case will not
be valid in the court of law. For example, the fact that a man is injured by another man's act is not
sufficient cause; this might be even if the injury-causing act is intentional or deliberate. A violation of legal
right is necessary in order for a valid cause of legal action to exist. Now I would like to clear the meaning
of three words, these are:

Damage: actual harm suffered by the plaintiff

Injury: the violation of a legally-recognized and protected right

Damages: it means the compensation payable to the plaintiff for the harm caused

General Defenses To Tort Claims

If someone sues one person claiming that the other person has violated the rights of his and has
committed a tort, then certain defenses could be taken. The extent to which they apply against different
torts, may, however, differ. Some of the defenses which can be used in torts are:

1. Volenti Non Fit Injuria: this means ‘voluntary taking of a risk'. It's when a person chooses to be in
the situation that causes the injury. For example, suppose you are a spectator at a cricket match ,
the batsman hits a six, and the ball lands on your head, then you cannot claim for compensation
either from the stadium authorities or the batsman because when you took a seat in the stadium,
you accepted the risks while sitting in the stadium. Therefore if the defendant can prove that the
plaintiff voluntarily put himself in that situation, he can escape liability. The most important thing to
remember is that the action must be voluntary i.e. with the informed consent of the relevant
person. There must not be any cheating or use of any type of force and so the person must put
himself in the situation by his own choice. There are two things which should be established in
order to use this defense. (a) That the plaintiff knew or could have expected the risks involved in
such a situation. (b) That the person agreed by a statement or conduct, to suffer the
consequence of the risk without force or compulsion or threat.

By this I want to say that it is not enough to defend by saying that the plaintiff knew the risk; it is also
necessary to show that the plaintiff voluntarily agreed to suffer the harm which might be possible in the
risky situation. But in case of a master servant relation there might be some sought of pressure on the
servant. I would like to give an example, a master orders his servant to go and work in a mine, if one shaft
is not in a proper condition, this cannot be assumed that the servant and so in case if there is an accident
than the master cannot claim that the servant knew and went voluntarily as there is pressure from the
master.

2. Plaintiff is the wrongdoer: the most important thing in this case would be that the plaintiff did
something wrong which caused him the injury. Since he plaintiff did something wrong so he
cannot claim damages from someone else for the injury caused to him. For example, if a person
walks into someone's house and if it is written on the gate that ‘beware of dog', the dog bites him
 then the plaintiff entered the house after knowing the risk, as a result he cannot ask for
compensation, also he was the wrongdoer.
3. Inevitable accident: When an injury is caused to a person by an event that could not be foreseen
and avoided despite reasonable care on the part of the defendant, the defense of inevitable
accident can be used. For instance, by ‘inevitable' it is not meant that the accident was bound to
happen, but rather, that the accident could not have been avoided despite reasonable care. After
all, how can a person be blamed for something that he had no control whatsoever over or could
not prevent? For example, a situation where the defense could not be used is that of a person
who, while trying to separate two people fighting, hits another person accidentally. Here the injury
is negligence and no negligence is involved.
4. Act of God: This defense is similar to the defense of inevitable accident according to me. The only
difference is that in the defense of Act of God the accident happens to occur because of
unforeseen natural event. The requirements which are to be satisfied are (a) the injury most be
caused by the effect of natural forces, (b) the natural forces must be unforeseen, or the effects
must be unavoidable. So even if a natural event like a storm is taking place, if one can take
precautions and avoid the damage, the defense cannot be used.
5. Private defense: If one injures someone, or something that belongs to someone else, while
defending self or own property, then one can be excused if the force used to protect self was
reasonable. For instance, if someone punches you on stomach and you shoot him that would be
an excessive use of force which is not necessary for defending yourself. The following must be
satisfied in order t claim this defense: (a) the defendant must be under threat or under attack, (b)
the defense must be for self-defense and not for revenge, (c) the response must be proportional
to the attack or threat. The principle for this is that the law will not hold you responsible for an
action that you performed in order to save or protect yourself. If, however, it was not necessary to
use force for protection, the law will not protect, and you can't use this defense.
6. Mistake: Mistake is not usually a defense in tort law. It's not good enough to say that you didn't
know you were doing something wrong. This defense can be used in case of malicious
prosecution. In malicious prosecution it must be shown that the prosecution was acting with
malice.
7. Necessity: In necessity, you have to show that the act you did was necessary in the
circumstances. For instance, if one enters someone's private land in order to collect water from
his well to put out a fire in his house, that the person was prompted by necessity and the defense
could be used in tort claim and it could be used against trespass of property. The level of
necessity should be very high. Basically the wrong done should be smaller while comparing it to
the importance of right done.
8. Act under Statutory Authority: If the act done was under the authority of some statute that is a
valid defense. For example, if there is a railway line near your house and the noises of the train
passing disturbs then you have no remedy because the construction and the use of the railway is
authorized under a statute. However, this does not give the authorities the license to do what they
 want unnecessarily; they must act in a reasonable manner. I have an example for this from my
own life, there was a telephone exchange in my locality and the generators which were used
were of very high frequency which was permitted in a residential area, the court asked the
exchange to be removed from that place.

Every person has a right to sue another person and every person can be sued by another person. In India
a minor can sue just like an adult, the only difference is that the tort action will have to be put forth and
proceeded with, in court, by an adult acting on behalf of a minor. In case a minor is sued than, his parents
or guardian will have to pay damages to the plaintiff, also the minor could be held liable. Also companies
can be sued for the actions of its employees committed when acting as employees of the company i.e. on
duty. The judicial authority cannot be sued if they are acting with their capacity. Also the government
cannot be sued for any tort claim arising while it is acting within its governmental or sovereign capacity.

Vicarious liability: This deals where a person is liable for the acts of others. This happens where the
person who committed the act did it on behalf of someone else. In this case of vicarious liability, both, the
person at whose behest the act is done as well as the person who does the act is liable. Vicarious liability
can arise from the following relationships:

1. Master- Servant Relationship

If a servant does a wrongful act in the course of his employment, than both the servant and the master
can be held liable for such an act. Since the servant acts under the authority of the master, the latter
should also be held liable. An act is considered to be in the course of employment if the act has been
directly authorized by the master or even if the act comes within the group of acts that the master
impliedly requires the servant to perform. But a master cannot be held liable for a contract.

2. Principal-Agent Relationship

An agent is someone who is authorized to do an act by another person (principal) also the acts on his
behalf. Both the principal and the servant are held liable. The difference between the master servant
relation and principal agent relation is that in case of the latter the agent does not pass the direction and
control test.

3. Partners

In a partnership, the partners are responsible for each other's during the course of employment i.e. during
the conduct of the business. The partners can be held responsible jointly and severally for each other's
actions. By the term jointly I mean ‘together' and by the term severally I mean ‘separately'. This means
that the partners can be separately or all together for the actions of one partner.
Nuisance

“In tort law, causing ‘nuisance' means ‘unreasonably interfering' with a person's right over, and in
connection, with his property or his land.” Nuisance may be caused in various ways, such as the causing
of unnecessary noise, heat, smoke, smell and other such disturbing activities. For example, your neighbor
unnecessary is in the habit of setting on fire the morning piles of the dead leaves. He burns these in his
garden, but the smoke from this fire blows into your house, and this is a type of general disturbance for
you. Such behavior would constitute nuisance and since you are denied the right to live in your property
and enjoy their safely, so you could complain about this nuisance, even a tenant could complain in a fixed
time frame. There are two types of nuisances, public nuisance and private nuisance.

1. Public Nuisance: This type of nuisance occurs when the right of the general public is interfered
with. For instance, if a person deliberately blocks a road with his vehicle, then he interferes with
the right of the public in general, and that would be a public nuisance. This is because the road is
a public property, and by blocking it, the person interferes with the public exercise or enjoyment of
that property.

Public nuisance is a sort of crime and it is not merely a civil wrong committed against the rights of a
person, and commission of a public nuisance results in punishment by the state, which may impose a fine
or even put behind bars i.e. punishment. The damages cannot be sought through a civil suit.

2. Private Nuisance: This is the kind of nuisance that is ground for a tort action for nuisance by a
private party. The damages could be sought through a civil suit. There are certain requirements
which need to be met for this, these include unreasonable interference by the defendant, also the
interference must be with the use or enjoyment of the plaintiff's property, the plaintiff should have
suffered some damage as a result.

Negligence

It is one of the most important in case of torts. This is because it is frequently committed and also there is
some type of negligence in most of the tort cases according to me. Tort is negligently committed, i.e.
negligently causing nuisance, negligently trespassing on someone's land, etc. in order to establish the tort
of negligence, it must be proved that:

1. The defendant owed a duty of care to the plaintiff

2. The defendant breached that duty, either totally or partially.
3. The plaintiff suffered damage as a result of this breach of duty.

Duty of care: for showing an act of negligence, the plaintiff must show that the defendant owed the
plaintiff a legal duty of care. A legal duty is different from moral, social or religious duty. In case of
Donoghue vs. Stevenson, the plaintiff filled an action for negligence against the manufacturer claiming
that she had been seriously injured by the contents of the drink. The defendant claimed in his defense
that he had no duty as she did not buy the bottle. But the court held that the manufacture owed a duty of
care to the plaintiff and to all its consumers. The court also held that the manufacturer had breached the
duty and caused damage, and was therefore negligent. I would like to also state that the duty is only there
where the injury is foreseeable.

Breach of duty: After having established that the defendant owes the plaintiff a duty of care it must then
be proven that the duty was breached. For seeing whether due care was taken, one must what was the
standard of care required in that situation. If the care taken is less than standard care than there is a
breach of duty.

Damage as a result of Breach of Duty: in order to succeed in a legal action based on negligence, it is
necessary to show that the plaintiff suffered some damage. The plaintiff has to show the incident
happened and it caused injury to him. Also the defendant was in control of or responsible for whatever
caused the incident.

The Tort Of Trespass

Trespass means illegally entering in someone else's property. There are two kinds of trespass, Trespass
to a person and Trespass to land.

Trespass to person: This category of torts deals with the threat of, or actual use of unlawful force against
a person. There are three types of torts in this category: Battery, Assault, False Imprisonment.

1. Battery: It basically deals with actual use of unlawful force against a person. In order or a person
to prove a tort of battery, one needs to show the following things: one needs to show that there
was a use of force. The force need not have to be great. For example throwing water or spitting
on a person is a battery. Also it must be proven that the use of force was without any legal
justification and the use of force was intentional. By this I mean that an accident will not constitute
battery as long as there was no negligence involved.
2. Assault: the tort of assault occurs when the defendant does something that causes a reasonable
fear of battery in the mind of the plaintiff. By this I mean that assault occurs when something
scares the plaintiff that he is going to be subjected to use of force. Also the defendant should
have the ability to harm the plaintiff. . for example if a person in a hospital having fractures in his
body and is plastered and he says you ‘I will bash you', it is not an assault. Also assault comes
before battery takes place.
3. False Imprisonment: This is tort that constitutes trespass against a person. This takes place when
a person is deprived his liberty or he totally restrained from it. False imprisonment occurs when a
 person is locked in a lock up i.e. n a jail or even in a room. The restraint must be imposed without
any lawful justification, then only he can be said to be falsely imprisoned.

Trespass To Land

There are different signboards which could be seen at different places stating “NO TRESSPASSING”. In
law of torts, trespass to land means to interfere with someone's possession of land without any lawful
justification. Trespass can be committed by the trespasser himself entering the land, or by the trespasser
doing it by using some object. An example of this would be a person throwing stones in the property of
another person while remaining physically out of the property. Trespass can be committed intentionally,
negligently or even accidently. Tort of trespass does not require any actual damage.

Strict Liability

The rule was laid down in the famous Ryland vs. Fletcher (1868) case. In this case, the defendant
constructed a reservoir on his land to provide water to his mill. The defendant did not know that there
were some disused mineshafts just next to his reservoir. The water burst through the reservoir into the
disused mineshafts, and flooded coal mines in the adjoining land. The defendant did not know of the
shafts, and there was no negligence on his part though there was negligence on the part of the
contractors he had hired to build the reservoir. Yet the court held him liable. The court said the principal
governing such a situation is one of “strict liability”, because if a person brings a potentially dangerous
thing on his land and if such a thing escapes and does damage, then such person should be held
responsible, even if he were not negligent. Here the reservoir was said to be the potentially dangerous
thing. The criterion for strict liability is that, a dangerous thing must have been brought by the person on
his land; such a thing must have escaped the land. Also the thing must have been intended to be used for
some non-natural purpose.

The defenses for escaping strict liability are: if the plaintiff himself did something which resulted in
damage to him by the defendant's property, then that is a defense. If there is an act of god than it is also
defense. Also in case if there is an act of third party i.e. some stranger, than that is a defense. Also in
case a government keeps dangerous thing under a statute, then there is no question of strict liability.

Absolute Liability

This is similar to strict liability, except for the fact that there is no defense to it. In effect, there are no
excuses for the harm caused. The rule of absolute liability evolved in the famous Indian case M.C. Mehta
vs. Union of India (1987). In this case the court said that there are no defenses as were there in the case
of Ryland vs. Fletcher. The court came out with a logic that a person a person who carries on a
dangerous activity for profit is responsible for any harm that may flow from such activity. The rule of
absolute liability was followed in Bhopal Gas Leak case and is also used in environmental pollution cases.
Conclusion

After reading articles on the law of torts and discussing this topic with my friends I feel that the law of torts
is not much developed in India. But the tort law has provided physical security to the people. “Tort law
evolved through the common law. Historically, basic common law principles were applied to solve legal
problems. In the nineteenth century, there was a movement towards systematizing tort law.”

Tort is conduct that harms other people or their property. It is a private wrong against a person for which
the injured person may recover damages, i.e. monetary compensation. The injured party may sue the
wrongdoer (tortfeasor) to recover damages to compensate for the harm or loss incurred. The conduct that
is a tort may also be a crime. Some torts require intent before there will be liability and some torts require
no intent. In other words, in some cases, there is liability for a tort even though the person committing the
tort did not have any intent to do wrong.

Types of Torts

There are basically three types of torts: intentional torts,torts based on negligence and strict liability torts.
An intentional tort is a civil wrong that occurs when the wrongdoer engages in intentional conduct that
results in damage to another. Striking another person in a fight is an intentional act that would be the tort
of battery. Striking a person accidentally would not be an intentional tort since there was not intent to
strike the person. This may, however, be a negligent act. Careless conduct that results in damage to
another is negligence. The intent element of these torts is satisfied when the tortfeasor acts with the
desire to bring about harmful consequences and is substantially certain that such consequences will
follow. Mere reckless behavior, sometimes called willful and wanton behavior, does not give rise to the
level of an intentional tort. If a person commits an intentional tort, this means that he intentionally violated
a legal duty he owed to the victim. This is different from a negligent tort, in which the tortfeasor violated
the duty that every member of society has to exercise reasonable care in their actions with others. The
distinction between an intentional tort and a negligent tort is important for several reasons. First, if an
individual wants to sue for an intentional tort, he must prove that the tortfeasor acted with "intent." This is
a separate legal requirement that the plaintiff must fulfil, in addition to proving all the other facts of the
case and proving actual damage. Strict liability, sometimes called absolute liability, is the legal
responsibility for damage, or injury, even if the person found strictly liable was not at fault or negligent –
the injured party is not required to prove fault – liability is strict. An example of strict liability is injury
caused by wild animals in the care of the tortfeasor; because the tortfeasor owns tigers, the tortfeasor is
responsible for any injury, without the need for the injured party to prove negligence.
 TENDERS

prequalification-of-bidders

Screening of potential contractors, suppliers, or vendors (on the basis of factors such as experience,
financial ability, managerial ability, reputation, work history, etc.) to develop a list of qualified bidders who
will receive the invitation-to-bid (ITB) documents.

Prequalification is the first stage of the tender process. The Territory intention is to only deal with prequalified
suppliers where practical, and hence prequalification provides potential access to tender opportunities which
are not available to suppliers who are not prequalified. Prequalification is not a guarantee of
work. Prequalification shows you are capable of performing the work in the category and price range indicated.

The public must not be confused between prequalification and a tender for a contract.
The two are not the same and the difference between the two is explained here.
Prequalification is not a form of tendering. Prequalification when used, precedes the tendering for the
actual contract. Prequalification is used to identify contractors who would be allowed to tender for certain
contracts.
Therefore an advertisement for prequalification does not amount to an advertisement of a tender for a
contract because all the former does is allow those interested to express their desire to be eligible to
tender.
Once a company is pre-qualified for a particular contract it is then eligible to tender for that contract.
A firm applying for prequalification has no expectation to be awarded any contract on the basis of the
application for prequalification. Its only expectation is that once it has been approved for prequalification,
then it is free to bid for the contract.
Prequalification therefore precedes the tender and an advertisement for prequalification should not be
confused with an advertisement inviting tenders for the award of the substantive contract.
Prequalification is not used for all contracts. In fact, it is only used in certain cases where it is felt
necessary to do so.
The vast majority of contracts are publicly advertised without the need for prequalification which is often
reserved for large contracts and those with requiring highly technical expertise.
One of the advantages of prequalification is to reduce the need to evaluate unqualified contractors. It is
way of narrowing the field to only those who have the requisite ability to comply with the terms of the
contract and the financial capability to undertake the work.
Thus for certain contracts, particularly large contracts or those involving highly technical work, a
procurement entity will before advertising for bidders for the contract, first ask for invitations for pre-
qualified bidders.
Prequalification allows for unqualified bidders to be weeded out and thus helps to speed up evaluation of
bids since only a limited number of pre-qualified bids have to be examined.
This means that only those firms pre-qualified would be eligible to bid on the contract.
The prequalification is merely for companies to demonstrate that they have the ability to undertake the
work or supply of whatever it has to be sourced.
Section 6 of our National Procurement Act is in fact very precise on this point. It provides at Section 6 for
the procuring entity to engage in prequalification proceedings in order to identify, prior to the submission
of tenders , suppliers and contractors that are qualified to participate in such proceedings.
The Act goes on to indicate that a procuring entity shall solicit invitations to pre-qualify by causing an
invitation to pre-qualify to be advertised.
Section 6 (6) goes on to state, “The procuring entity shall promptly notify each supplier or contractor
submitting an application to pre-qualify whether or not it has been pre-qualified and shall make available
to any member of the general public, upon request, the names of all suppliers or contractors that have
been pre-qualified.
“Only suppliers or contractors that have been pre-qualified are entitled to participate further in the
procurement proceedings.”
The Procurement Act goes on to state that except for single sourcing, procurement through community
participation, restricted tendering single or a request for quotations, for which there are prescribed rules-
all procurement should be by open tendering.
In the case of request for quotations, there are usually limits to the amounts under which this method can
be used.
The procurement process is important for public transparency and should allow for a system that is fair
and allows for the procurement agency to reap the benefits that go with such openness.

BIDDING

Construction bidding is the process of submitting a proposal (tender) to undertake, or manage the
undertaking of a construction project. The process starts with a cost estimate from blueprints and material
take offs.

The tender is treated as an offer to do the work for a certain amount of money (firm price), or a certain
amount of profit (cost reimbursement or cost plus). The tender, which is submitted by the competing firms,
is generally based on a bill of quantities, a bill of approximate quantities or other specifications which
enable the tenders to attain higher levels of accuracy, the statement of work.

For instance, a bill of quantities is a list of all the materials (and other work such as amount of excavation)
of a project which have sufficient detail to obtain a realistic cost, or rate per described item of
work/material. The tenders should not only show the unit cost per material/work, but should also if
possible, break it down to labour, plant and material costs. In this way the individual who is selecting the
tender will be quite confident that the tender is feasible. Bids are not only chosen on cost alone.
Sometimes contractors submit lower tenders to win the contract and win the work. Either the costs that
the contractor incurs are greater than the price he is charging the client (as a consequence of a lower
tender determining the contract sum), and thus is likely to go insolvent, or he will claim for "loss and/or
expense" due to discrepancies in the contract documents (this can be done deliberately). The lowest
tender is not always a feasible tender. The lowest tender is the most likely to increase the contract sum
the most throughout the course of the project.

The tendering process can seem very complicated, and it’s understandable that this makes some
companies choose to avoid tendering for public sector work. This doesn’t mean you can always avoid
having to fill in a tender. One of your existing customers might ask you to fill in a tender document, or, to
grow your company, you find you need to bid for public sector contracts, don’t worry professional bid
writers can help you completed the bid if necessary.

Executive Compass® can help you with the biggest step of the tendering process, the invitation to tender.
We can help you understand exactly what the document entails and the procedures you need to follow,
and help you to submit a successful tender.

Invitation to tender (ITT)

You have passed the PQQ stage and have been shortlisted for the contract. The tender document is the
stage where you need to explain how you will deliver the contract, including your technical solutions and
pricing proposals. Your company must provide high quality, persuasive narrative responses to
demonstrate why you are best suited to the contract.

For guidance on structuring your narrative responses in a tender and exactly what to include,
see information on how to write a tender.

Bidding is a competition

It is also important to remember the reason behind the tender document: for the contracting authority to
identify the most economically advantageous tender. Simply put, the company who submits the highest
quality response at the best price is the company the authority will award the contract to. It’s important
that you make sure your company stands out from your competitors. Stress how your company differs
from others in order to score the most marks available; which could be through innovations, added value
and price.

Certifications and memberships

If there is a PQQ stage of the bidding process, part of the process will require you to submit any
certifications which are a requirement for the contract. However, if there is no PQQ, but just a tender
document (i.e., a one stage process) the certification requirements will be included in the tender
document. Certifications, such as ISO and Investors in People, and memberships, e.g. CQC, CHAS and
Constructionline are all examples of requirements that can be included in a tender specification and guide
questions in the narrative responses. Check the tender specification and evaluation criteria carefully for
any requirements before you begin the tender writing process.

The evaluation process

Once you have submitted your tender to the contracting authority, they will review your financial and
quality elements against the marking criteria, and alongside the submissions of your competitors.
Whatever the outcome of your submission, you should request feedback, to use as continuous
improvement or to identify why you have lost marks. Typically, the authority will produce a scorecard of all
the tender responses, so you can see where you have ranked in the evaluation process.

If you require assistance with any of the above, our team of expert bid writers are on hand to help and
offer advice at any stage of the tendering process, including after the evaluation process.

Contract & Tender Process

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