Showing posts with label Construction management. Show all posts
Showing posts with label Construction management. Show all posts

Saturday, 20 January 2018

What do you mean by Voucher ?

Voucher is a written document with details which is kept in record as a proof of payment. For any payment, a bill is prepared and payment is made on the bill, duly checked and acknowledged by the payee, by signature or revenue stamp as required and after payment is made, bill becomes voucher which is kept in record.

What do you mean by Bill ?

Bill is the account of work done or supply of materials made and includes the particulars and quantities of work done or material supplied and amount due. Reference to the agreement number, order number are also given in the bill.

Continuing Contract and Running Contract

Continuing Contract 
In this type of contract, new or additional work is awarded to the contractor on the basis of agreed terms and conditions of an existing contract. Such contracts do not require re-tendering and hence can save time and money.

Running Contract
Such contracts provide goods and services at specified intervals or as and when required by the owner. The contract price is not fixed and payment is based on goods supplied and services rendered as specified in the contract documents.

Negotiated Contract

In this type of contract, negotiation across the table takes place between representatives of the owner and the main contractor for project cost and other conditions of contract. In this type of contract,

Package Contract

In a package contract, two or more related jobs, each of which could form a separate contract are combined in a single contract. In the field of civil engineering, generally, design and development are combined with construction and supply or maintenance. In this type of contract, plan of work and standards are established and the work is carried out accordingly by the contractor. The main contractor is responsible for safeguarding the owner’s interest and for this reason, prior approval of design and technical aspects have to be taken from the owner. Responsibility for correctness of the design lines with the main contractor.

Turn-key Contract

A turn-key contract is an integrated contract in which all works pertaining to various disciplines such as civil, electrical, mechanical etc. are in the hands of a single contractor called the main contractor. The main contractor can sublet the contact to subcontractors who are specialists in their respective fields. In this contract, the main advantage to the owner is that he need not coordinate the work of different contractors. The main contractor is responsible for all kinds of jobs starting from planning to commissioning stage. The owner takes over the entire work (which is fully operational and of proven performance) from the main contractor.

Cost Plus Percentage of Cost Contract

In this type of contract, instead of awarding the work on lumpsum or item rate basis, it is given on certain percentage over the actual cost of construction. The actual cost of construction is reported by the contractor and is paid to him by the owner together with a certain percentage as agreed earlier.
The contractor agrees to do the work in accordance with the drawings, specifications and other conditions of contract. In this type of contract, proper control has to be exercised by the owner in
the purchase of materials and in arranging labour. The suitability merits and demerits of this type of contract are similar to cost plus fixed fee contracts. An additional demerit is the tendency of the contractor to increase the cost of work to earn profit by way of percentage of enhanced actual cost.

Cost Plus Fixed Fee Contract

Cost Plus fixed fee contract is desirable when the scope and nature of the work can atleast be broadly defined. The amount of fee is determined as a plump sum from a consideration of the scope of work, its approximate cost, nature of work, estimated time of construction, manpower and equipment requirements etc. In order to negotiate such a type of contract, it is essential that the scope and some general details of the work are defined. The contractor in this type of contract is selected on the basis of merit rather than the fee alone. In case of cost plus percentage contract, the contractor has a tendency to increase his profit by increasing the cost of work. But this drawback is overcome in cost plus fixed fee contract because here the contractor’s fee is fixed and does not fluctuate with actual
cost of work. Once this fee is fixed, the contractor cannot increase the cost of work.

Lumpsum and Scheduled Contract

This is similar to the lumpsum contract except the schedule of rates is also included in the contract agreement. In this type of contract, the contractor offers to do a particular work at a fixed sum within a specified time as per plans and detailed specifications. The schedule of rates for various items is provided which regulates the extra amount to be paid or deducted for any additions or deletions made during the progress of work. Measurements of different items of original work are not required but extra items are required to be measured for payment. The original work shall however be checked
and compared with the drawings and specifications.

Tuesday, 9 January 2018

Item Rate Contract

Item rate contract also called a schedule contract, in this contract, the contractor undertakes the execution of work on an item rate basis. The amount to be received by the contractor, depends upon the quantities of various items of work actually executed.

The payment to the contractor is made on the basis of detailed measurements of different items of work actually done by him.

The item rate contract is most commonly used for all types of engineering works financed by public or government bodies. This type of contract is suitable for works which can be split into various items and quantities under each item can be estimated with accuracy.

Lumpsum Contract

In this type of contract, the contractor offers to do the whole work as shown in drawings and described by specifications, for a total stipulated sum of money.

There are no individual rates quoted, thus it becomes difficult to make adjustments in the contract value if any changes are to be made in the work later on. The schedule of different items of work is not provided and the contractor has to complete the work as per drawings and specifications for the agreed lump sum amount.

Deposit of 10 % security money and other conditions of the contract are included in the contract agreement. Upon the completion of work, a fixed lumpsum amount is paid to the contractor. Detailed measurements of different items are required but the whole work is compared and checked with drawings and specifications before releasing the payment. In large projects, part payments are made to the contractor at different stages of work on money agreed terms. In case the contractor stops the work in
between he is not entitled for any further payment.

A lumpsum contract is more suitable for works for which contractors have prior construction experience. This experience enables the contractors to submit a more realistic bid. This type of contract is not suitable for difficult foundations, excavations of uncertain character, and projects susceptible to unpredictable hazards and variations.

Friday, 5 January 2018


When two or more persons have a common intention communicated to each other to create some obligation between them, there is said to be an agreement. An agreement which is enforceable by law is a “Contract”.

According to section 10 of the Indian Contract Act, 1872 only those agreements are enforceable by law which are made by the free consent of parties competent to contract, for a lawful consideration
and with a lawful object and are not expressly declared to be void.


Contracts for the execution of civil engineering works are of following types:

a. Lumpsum contract
b. Item rate contract
c. Lumpsum and schedule contract
d. Cost plus fixed fee contract
e. Cost plus percentage of cost contract
f. Special contracts