Management

CTM Module I
 Management
• Art of getting things done through and with people in formally organised groups.
 Project
A project as a temporary endeavour undertaken to provide unique product or
service.
• Planned set of interrelated tasks and activities to be executed over a fixed period
and within certain cost and limitations to achieve an objective.
• Effective planning can be helpful in successful completion of project.
 Construction project
• Construction project includes all materials and work necessary for construction of
finished structure.
• They involve varying manpower and their duration varies from project to project.
• Each of the project is ‘unique’ and ‘temporary’ in nature. Unique means every project is
different in some way from other, ‘temporary’ means each project has a definite
beginning and definite end.
• A project may involve single unit of one organisation or may extend across organisational
boundaries in case of joint ventures and partnering.
 Unique features of a construction project

• One time activity- Must be performed correctly the first time every time
• Complexity- It is multidisciplinary because it involves set of interrelated tasks to
be done by specialists.
• High cost and time of execution.
• High risk of failure
• Difficulty of defining quality standards
• Uniqueness of people relationship
• Feedback mechanism
• Lack of experience of client or owner
• Untrained workforce
 Phases of a construction project
• Phases can be defined as breakdown of construction project into a number of
stages during its lifetime.
• Since each construction project is unique, it is difficult to identify some
common stages across all construction projects depending on type of project.

Different project phases include:

i. Pre- project phase
ii. Project phase
iii. Post- project phase
 i. Pre-project phase
It includes three sub-phases:
a) Initiation or idea phase: Aims to identify all possible projects based on examination
of needs and possible options. Also referred as initiation or idea phase. Eg:
Addressing parking problem in a city.
b) Project concepts: Sort out all mentioned information to identify some project
concepts. Using suitable selection procedure inline with the objectives of the
organisation, several concepts are selected. This is one of the most important phase
as it affects the final cost involved. The concepts selected are used in feasibility
phase.
c) Feasibility: Aims to appraise the project concepts considering needs, capabilities
and know-how of the organisation.
 Feasibility phase is characterised into:

a) Conceptual: For selected concepts, preliminary layouts are prepared. Design briefs are
formulated.
b) Project strategy: Concerns with the selection of in-house design team or contractors design
team. Assessment of resource requirement and availability as well as contractor type,
number required and project schedule, scope etc are assessed.
c) Estimate: Preliminary estimate is prepared by breaking down the project into different
elements/ work packages. The estimate for each work package is prepared.
d) Approval: Consists of financial evaluation, identifying funding details and their timing etc
and also evaluation of different options.
Feasibility may be marketing, technical, environmental and financial feasibility studies.
Financial feasibility study is done only if the first three sub phases are found to be positive. The
feasibility phase ends when decision maker decides to transform the project concept into
project.
 ii. Project phase
(project implementation/project realization/project materialisation phase)
It consists of:
1. Basic design phase: Carried out by engineering organisation and architects. The documentation for
tendering and contracting the construction and equipment procurement are done in this phase. Basic
design calculation, preparing drawings, design and material specification are done in this phase.
2. Detailed design phase: Carried out in-house or through contracting. Item rate contract may be used
for detailed design and in some cases, other types of contracts may be used.
3. Tendering phase: Tenders are prepared if contract is to be executed through contracting. It includes
preparation of clear and precise documents on specifications and agreement conditions, preparing
BOQ etc. After evaluation of bids, successful contractor is awarded the contract.
4. Execution or construction phase: After contract is awarded construction begins. The progress of work
is closely noted for assessing cost and schedule. The variations are noted and corrective measures are
taken.
5. Closure or completion phase: Construction is handed over to the owner.
 iii. Post- project phase
Known as turnover phase or start-up phase. The responsibility of construction
is handed over to the owner from engineers, architects etc.
This phase includes:
1) Utilization phase: Client makes use of finished project and performance is
monitored at regular intervals, maintenance if necessary are undertaken
2) Close-down phase: Once the project has lived its intended life, it is
dismantled and disposed of.
 Detailed Project Report (DPR)
DPR is a document for planning the project and implementing the project.

• It is a complete document for investment, decision making, approval and

planning.
• DPR is always prepared based on guidelines and standards of a company.
• It is a time-consuming process and costly as specialists from various streams
such as engineering, market research, finance etc are involved.
 Objectives of DPR preparation are:

1. It gives an assurance that the project performance of a reliable quality and

within optimum cost.
2. To appreciate that the project is site specific and help to achieve the required
performance.
3. To understand the method of project appraisal i.e. various types of analysis be
it financial, economic or technical.
 DPR should include all the following aspects in a
detailed manner

a. Technology and design aspects

b. Economic aspects
c. Social and political aspects
d. Financial aspects
1) Technology and design aspects:
• The specialists findings should ensure that there are minimum technical
uncertainties and deal with technology and design which are tested and proven.
• Overseas technical consultation should be explored preferably after the existing
technology within the country are assessed as they will be cheaper and eco-
friendly.
2) Economic aspects:
These aspects of a project includes: -
• Location of the project, benefits of the location and the volume of work
involved
• Availability and utilisation of resources in the most beneficial manner
• Cost benefit analysis is also done, and investment criteria may be based
on payback period or cash flow techniques such as IRR, Benefit- cost
ratio, Net present worth.
3) Social and political aspects:
• The public attitude towards the project is important as it may
involve displacement of people to a large extent.
• The environmental pollution and ecological balance before and
after completion are to be assessed.
• A favourable political condition has to be ensured for successful
completion of project.
4) Financial aspects:
• Timely availability of funds and continuous cash flow are the most
important aspects for completion of work in a time bound manner.
• The availability of resources are also to be ensured throughout i.e
during implementation period and during the revenue generation
period.
• The income generated has to be beneficial in repayment of principal
and pay interest for the amount borrowed. The risks encountered
during work execution are to be minimum.
 The DPR should consist of following main points:

 Salient features of the project.

 Statistics
 Statements, tables and charts if any
 Maps, photographs etc. giving necessary physical data
 Detailed plans and estimates
 Schedule of rates (SoR) used to find cost of work
 Tender
Tender is an offer in writing for executing certain specified work
or for supplying specified materials subject to certain terms and
conditions like rates, time limit etc.
Open Tenders
• Open tender is a tender in which bids are invited from all
contractors. An open advertisement in the important news
papers and Indian trade journal will be published.
Limited Tenders
• In this kind of tender, only selected contractors are invited to
bid or quote the rates for the supply of articles or to execute
the work
Single Tender
• Only a single firm or contractor is invited for the tender. If the
quoted rates are high, negotiations prior to agreement are done
with the contractor.
Rate Contract
• This type of contract is used mainly for the supply of stores of
items. The quantities are not mentioned. According to this
contract, items are supplied at fixed rate during the period of
contract.
 Tender Documents

i. Tender notice
ii. Tender form with standard conditions of contract.
iii.Schedule of quantities.
iv. Special terms and conditions.
v. Complete specification of work.
vi.Special specification and additional condition of contract.
vii.Approved drawings where necessary.
 Invitation of Tender

• Tender notice is published to get sufficient number of bids for

an attractive offer. Approved contractors can participate in the
tender.
• A notice inviting tender is published in newspapers and
journals. Tender is also informed by post and posting on notice
board in the office.
 Contents of a Tender notice
The contents of a tender notice are:
• Name of place and time where the contract documents can be
seen and obtained.
• Name of place and date, receipt and opening.
• EMD mode and amount to be paid
• Amount of security.
• Authority of Acceptance of tenders.
 Opening of Tenders

• On the date of opening of tender, the sealed tenders are

opened in the presence of contractors or their representatives.
• Officers have to read out the rates/amounts offered.
• The comparative statement showing the quoted rates all
participated contractors must be published.
• Tenders that are not received in proper form duly filled can be
rejected.
 Acceptance of tender

• After investigating the comparative statement, the lowest

tender shall be accepted.
• If the lowest tender is not accepted‐ reasons are recorded
confidentially.
 Letter of Acceptance

• Letter of acceptance is the letter communicating the

acceptance, after the decision to accept a tender.
• It is issued on behalf of President of India or Governor of State.
• Its a notification of the opportunity to complete the formalities
of contract.
• Further directions are also provided.
 Work Order

• A work order is issued after the intimation of the acceptance.

• Formal agreement has to be made within the specified days.
• Letter issued after formal agreement.
• Date of completion is treated from the date of issue of work
order.
CONTRACTS
 CONTRACTS

Contract may be defined as an agreement which is enforceable

by law. It is a written undertaking for execution of work or supply
of materials or performance of any service.
Parts of a contract
• Offer/Proposal
• Acceptance
• Agreed terms
 Offer / proposal

• When one person signifies to another his willingness to do a

work, he is said to make a proposal. Communication of an
Offer: By words or by actions
 Acceptance

• When the person to whom the proposal is made signifies his

assent thereto, the proposal is said to be accepted
• Acceptance must be absolute
• It must be communicated.
• It must be according to the mode prescribed.
• It must be given within the time specified or within reasonable
time.
 Essentials of a contract

• Agreement.
• Intention to create legal relationship.
• Free and genuine consent.
• Parties competent to contract.
• Lawful consideration.
• Lawful object.
• Agreements not declared void or illegal.
• Certainty of meaning.
• Possibility of performance.
• Necessary Legal Formalities.
 Parties Competent to Contract:‐

• A person is competent to contract provided

– He is of the age of majority according to the law to which he is subject. A
person who is
• not a major according an agreement No contact shall be made by a
subordinate authority who has not been directed or authorised to do
so.
– He is of sound mind. A person is said to be of sound mind for the purpose of
making contract provided he is capable of understanding it and of forming a
rational judgement as to is effect upon his interest at the time when he
performs the contract.
– He is not disqualified from contracting by any law to which he is subject.
 Free Consent of the parties:

Two or more persons are said to consent when they agreed that upon same thing in the
same sense. Consent is said free when:
a) It is not caused under influence. The relations between the two parties performing a
contract are not such that one of the parties is in the position to dominate the will of
the others and uses that position to obtain an unfair advantage over the other.
b) It is not caused by committing or threatening to commit any act forbidden by the Indian
penal code, or the unlawful detaining or threatening to detain any person to enter into
an agreement
c) It is not caused by fraud.
d) It is not caused by misrepresentation.
e) It is not caused by mistake. Where both the parties do an agreement under a mistake
the agreement is avoidable.
 Definite proposal and its acceptance:

• Terms of contact must be precise and definite and there must

be no room for ambiguity or misconstruction therein.
• When one person signifies to another his willingness to
anything, he is said to make a proposal the communication of a
proposal is complete when it comes to the Knowledge of the
person to whom it is made.
• The acceptance must be absolute, unqualified and expressed in
some usual and reasonable manner. Acceptance is made by
performing conditions or receiving conditions.
 The considerations or objects are lawful:

• The consideration or object of an agreement is said to be

unlawful if forbidden by law or fraudulent or of such nature
that, if permitted it would defeat the provisions of any law or
involves or implies injury to the person or property of another
or opposed to public policy or regarded as immoral by the
court.
 That the meaning shall be certain:

• Agreement, the meaning of which shall be certain or capable

of being made certain.
 TYPES OF CONTRACT
Following types of engineering contracts are used for execution of
civil engineering works.
• Item rate contract or unit price contract. • Schedule contract or measured contract.
• Percentage rate contract. • Rate contract.
• Lump‐sum contract. • Negotiated contract.
• Package deal or Turn‐key contract.
• Material supply contract.
• Basic price contract.
• Piece work contract or agreement. • Oral contract.
• Labour contract. • Global contract.
• Cost‐plus percentage rate contract. • All in contract.
• Cost‐plus fixed fee contract. • Illegal contract.
• Cost‐plus fluctuating fee contract. • Voidable contract.
• Contracts by minor.
• Target contract.
 1. Item rate contract
• In this type of contracts the contractors are required to quote
rates for individual items of work on the basis of schedule of
quantities given by the department.
• This schedule indicates full nomenclature of the items as per
sanctioned estimate and estimated quantities.
• This system is followed in central public works department
(CPWD) and railway department.
 Advantages
• This method is more scientific as it involves more detailed analysis of cost by the
contractor. This is because department works out the schedule of quantities against
each item and the contractors have to work out the rates against each item.
• The element of guess is altogether absent as authority competent to accept the
tender can easily check the rates with reference to his own calculations. This aspect
helps decide which of the tenders is favorable.
• Since the contractors have to give their individual rates it is not easy to form a ring of
contractors during submission of tender. This eliminates the possibility of allotting
work to one of the contractors without competition.
• The contractors work out the rates of all items so as to put it in the tender. This helps
avoid unworkable rated tender being accepted. This aspect further leads to smooth
progress and timely completion of a work.
 Disadvantages
• As the quantities may be increased or decreased a contract of this
nature requires careful consideration on the part of engineer. Engineer
must ascertain the most likely quantities of each item. Larger
quantities are generally tendered at lesser rate than smaller
quantities of work and vice‐versa.
• More than one contractor may be involved on the same work as it is
likely that rates of some items are lower for one contractor where as
rates as remaining items may be lower of other contractor.
• Comparative statement of item rate is more elaborated and
comprehensive and intelligent scrutiny is required.
 2. Percentage rate contract
• In this contract the department draws up the schedule of items
according to the items sanctioned in the estimate with
quantities, rates, unit and amount shown therein.
• In short the department prepares the item rates of the tender
known as item rate tender.
• The contractors are required to quote their rates which may be
at par with the rates shown in item rate tender or percentage
above or below them.
 Advantages

• Comparative positions amongst contractors are immediately known just on the

opening of the tender and work may be allotted to the lowest bidder.
• There is no possibility of unbalanced tender. This is because there is no
provision to quote contractors own rate for an individual item and benefit due
to increased quantity with a beneficial rate cannot be availed of by the
contractor.
• Comparative statement is very easily prepared and there is no likelihood of
rates being tampered with.
• There is almost no chance of over–writings and erasing and as such the tender
is not liable to rejection due to this.
 Disadvantages
• Contractors mostly depend on guess for their rates and not on analysis
of workable rates of the individual items. Thus it is likely that
unworkable rated tender may be the lowest.
• If unworkable rated tender become lowest there is always uncertainty
about quality, smooth progress and timely completion of the work.
• The contractors can easily form a ring even up to the last moment of
submission of tender as they have simply to write down the percentage
above, or at par or below the rates of item rate tender. This leads to
allotment of work to a particular contractor at a high rate without
actual completion. This causes drainage of government money.
 3. Lump‐sum contract:
• For this type of contract, tenders are required to quote a fixed
sum for execution of the complete work according to the
drawings, designs, and specifications supplied to them with the
tender within the specified time.
• Payment of items of work involved for any additions and
alterations not covered by the original work is done according
to the departmental schedule of rates.
 Advantages
• Cost of the work becomes known beforehand and as such
owner gets sufficient time to arrange for the required finance.
• Except in respect of additions and alterations detailed
measurements of the work done is not required to be
recorded.
• Since total cost of the work and work to be done are known
beforehand better planning and management for execution of
work is possible.
 Disadvantages
• In this contract the work to be done has to be accurately and
completely shown on the drawing and described in the specifications.
In absence of any information in this respect disputes are likely to
crop up.
• It is not suitable form of contract as considerable additions or
variations are expected in the works.
• Difficulty arises in making intermediate payment. However this can
be done on the certificate given by responsible officer to the effect
that the value of the work done is not less than the amount asked for
in conformity with contract agreement.
 4. Package deal or Turn‐key contract:
• Sometimes, the owner contemplating a construction wants to
deal with only one party for all the services both engineering
and construction.
• The owner gives his requirements in broad outline to the
contractors together with the side data.
• The contractors then proceed to prepare their own design of
the construction and finally, submit the same to the owner
with the estimated cost of the project as per their design on a
lump‐sum basis.
• Thus the owner receives a number of competitive designs and
after studying the details, financial aspects and various other
factors, the owner decides the design most suitable to him.
• The construction work is then given to the contractor whose
design has been accepted by the owner.
• In short this contract involves all planning, design, plans
specification, preparation of estimates and construction
services under one contract on competitive basis.
 Concession agreement
• A concession agreement is a contract that gives a company the
right to operate a specific business within a government's
jurisdiction or on another firm's property, subject to particular
terms. Concession agreements often involve contracts
between the nongovernmental owner of a facility and a
concession owner, or concessionaire.
• The agreement grants the concessionaire exclusive rights to
operate their business in the facility for a stated time and
under specified conditions.
• A concession agreement is a contract that gives a company the right to
operate a specific business within a government's jurisdiction or on
another firm's property, subject to particular terms.
• Concession agreements cover mining concessions valued in the
hundreds of millions of dollars, as well as small food and beverage
concessions in a local movie theater.
• At their best, concession agreements are a form of outsourcing that
allows all parties to benefit from comparative advantage.
• Concession agreements are sometimes used to take advantage of
other nations.
 Build-Operate-Transfer (BOT) Contract
• A build-operate-transfer (BOT) contract is a model used to
finance large projects, typically infrastructure projects
developed through public-private partnerships.
• The BOT scheme refers to the initial concession by a public
entity such as a local government to a private firm to both
build and operate the project in question. After a set time
frame, typically two or three decades, control over the project
is returned to the public entity.
• BOT projects are normally large-scale, greenfield infrastructure
projects that would otherwise be financed, built and operated
solely by the government.
• Under a build-operate-transfer (BOT) contract, an entity—
usually a government—grants a concession to a private
company to finance, build and operate a project for a period of
20-30 years, hoping to earn a profit.
• After that period, the project is returned to the public entity
that originally granted the concession.