contract payment and variation

7/30/2019 contract payment and variation

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CONTRACT PAYMENTS

&

VARIATIONS

Training programme on Construction

Management & Supervision

Eng. Rangith Kulanatha

Project Director(WWDP -R/M &J/E)

28th January 2013


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Before we start

Contract

What is your first experience with a

Contract

Who are we

Essence of live contract

For what Contractors are

Roles of the Engineer, Engineers Rep and

Other officers in Engineer and Employer


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Out Line Contract Payments, Types

Authority Levels

Types of Payment

Definition of Variation Orders

ICTAD Document to be refer for VO

Authority for VO and contents of VO

Valuation procedure for VO NWSDB procedure for VO

Procurement Guile Lines


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Contract Payment - Definition

All payment to the Contractor for the completion

of entire scope of work(including Variations)


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Who has to authority to approve the payments

-EngineerThe Engineer is the person named in the Contract Data( or

any other competent person appointed by the Employer andnotified to Contractor) who is responsible for

administrating and supervising the execution of the work.

Such person may be Engineer, Architect or any other

technical person . In the absence of such appointment theEmployer himself( Defined under A. General, Section 3 of

Condition of Contract ,ICTAD/SBD/01 - page no 36)

Who actually pays: - The EmployerThe Employer is the party named in the Contract Data who

employs the Contractor to carry out the Works ( Defined

under A. General, Section 3 of Condition of Contract,ICTAD/SBD/01 - a e no 36


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Authority of Engineers Representative

- Written authority delegated by the Engineer

(Clause 5.2,ICTAD/SBD/01)

Who are we?

- Engineers Representative

A Person appointed from time to time by theEngineer under sub clause 5.1 (ICTAD/SBD/01)


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Obligation of the Engineer

Being impartial

Fair in determinations

Consistency in affairs

Administrating and supervising the execution of

the work

Issuing decisions, certificates and orders


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Obligation of the Employer

Employs the Contractor to carry out theworks. (The Contractor is carrying out

works for the Employer)

Shall give possession of all parts of the siteto the Contractor.

Timely payment

- Delay Payment


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Types of Payment

Advance Payment

IPC (monthly)On Account Payments

Need for even 0 IPC for price escalation

Final Accounts


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Advance Payment means

Interest-free loan for mobilization, when the

contractor submits a guarantee in a form by a

Bank or a Company acceptable to the Employer.


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Advance payment(clause 51) The Employer shall make advance payment to the contractor in

an amount to 20% of the Initial Contract Price excludingprovisional sums and contingencies, within 14 Days after

furnishing of an unconditional guarantee in a form and by a bank

or company acceptable to the Employer. The guarantee shall

remain effective until the advance payment has been

repaid(clause 51.1,ICTAD/SBD/01).

The Contractor is used the advance payment only to pay for

Equipment, Plant, Materials and Mobilization expenses required

specially for execution of Contract(Clause51.2

ICTAD/SBD/01).

The advance payment shall be repaid by deducting proportions

and repaid in full when total certified value of work reaches

90% of the Initial Contract Price(clause 51.3,ICTAD/SBD/01).

I t P t t t IP 42


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Inter m Payment ert cate IP -c ause 42

-Reasonable Valuation-The Contractor shall submit to the Engineer monthly

statements of the estimated value of the workexecuted.

- The Engineer shall check and certify monthly

statement within 21 days of the receipt of the

contractors statementThe Employer shall pay the amount certified within 14 Days

On Account Payments

Authority for approval in NWSDB(General

Manager)


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Final Certificate(clause 55)

Upon completion of the Defects Liability Period

the Contractor shall request the Engineer to

issue a Final Certificate and the Engineershall issue the Final Certificate upon being

satisfied that the Contractor has rectified the

Defects(clause 55.1,ICTAD/SBD/01).


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Retention

Retention money is warranty for hidden defects duringconstruction, including the 1-year defects liability

period after project completion. Retention money is

therefore released after the end of the 1-year defects

liability period and when the certificate of acceptance

is already issued. If the contractor wants the release of

the retention money before the lapse of the 1-year

defects liability period, replacement by the surety bondmay be allowed.


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Retention(clause 48)

The Employer shall retain from each payment

due to the Contractor the proportion stated in the

Contract Data subject to the limit of retention

stated in the Contract data(clause 48.1,

ICTAD/SBD/01).


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When to release?

On Completion of the whole of the Works,first half the total amount retained shall be

repaid to the contractor and second half

when the Defects liability Period has

passed(clause 48.2 ,ICTAD/SBD/01).

Releasing against a Bond at the time of

completion

Reserving money to pay after D/L period


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How they are being practiced in NWSDB

The Engineers Representative has the

authority to the extent what is specified in

the BOQ in the Contract

Variations (?) and Time extension is notdelegated

Variations: To be certified by the Engineer and

agreed upon by all parties(Engineer, Contractorand Employer.

For the completion of works

For improvements


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What happens when the quantity in the BOQ is not sufficient

or no provision in the BOQ

Work needed to complete the entire scope(Re-measurements)

Things that are nice to accompany( Variations)

Things that improves the long-termsustainability(Variations)

Price Escalation & others

There is BOQ provision but needs engineersapproval to proceed

Provisional sums

Remember to refer contractual provisions


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A Variation may be an addition, omission or

substitution to the design or specifications,

discrepancy between any two or more contract

documents or any statutory requirements, an error in

or omission in the contract bills etc.

Definition of Variation

Document to be referred for variation procedure


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1. Standard Bidding Document for Procurement of WorksICTAD/SBD/01

Recommended for use on works contract between Rs. 10 million and Rs.

100 million

May be used for works of higher which are not of a complex nature

2. Standard Bidding Document for Procurement of Works for Major Contracts

ICTAD/SBD/02

Recommended for use on works contracts over Rs. 100 million and forcontracts of a lesser value which are complex in nature

3. Standard Bidding Document for Procurement of Works for Minor Contracts

ICTAD/SBD/03

Recommended for use on works contracts up to Rs. 10 million

4. Standard Bidding Document for Procurement of Works for Design and BuildContractsICTAD/SBD/04

Recommended for use for works contracts where the contractor is

responsible the design and construction of the specified approvals obtained

from the Employer.

Document to be referred for variation procedure

in local contract


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Who has the authority(Clause 39 of the ICTAD)The variations may initiated by the Engineer at any time

prior to issuing the Certificate of Completion of the works.

As per the clause 39.4 ,ICTAD/SBD/01each Variation may include;

1. Changes to the quantities of any item of work included in

contract.

2. Changes to quality and other characteristics of any item of work

3. Changes to levels, positions and dimensions of any part of the

Works

4. Omission of any work unless it is to be carried out by others

5. Any additional work, plant, material or services necessary for thePermanent Works.

P t f V i ti ( l 40)


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Payments for Variations(clause 40) The Contractor shall submit quotation for carrying out variation

within 07 Days and the Engineer shall assess the quotation before

the variation is ordered(clause 40.1,ICTAD/SBD/01) The rate in the BOQ shall be used to calculate the value of

variation(refer clause 40.2 other cases, ICTAD/SBD/01)

If the Contractor quotation is unreasonable, the Engineer may fix

the price still needs to be proceed with works and then DAB(clause 40.3, ICTAD/SBD/01).

The Contractor shall not be entitled to additional payments for

costs that could have been avoided by giving early

warning(clause40.5 ,ICTAD/SBD/01).

The value of work executed shall include the valuation of Variations

and Compensation Events.(clause 42.5,ICTAD/SBD/01)


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NWSDB Procedure for VO

The NWSDB consider quantity exceed is also VO

First the contractors quotations assessed and agreed upon withthe contractor

The agreed VO shall be submitted to variations committee

approved by GM ( or the Engineer)

If the committee is approved and forwarded for GMs approval With GMs approval, it is issued to the contractor to invoice.

The Engineer, GM of NWSDB shall approve Net variationwithin 10% of the Contract Awarded Price. (Procurement

Guide Lines).


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Procurement Guide Lines Reference:8.13.4

Variations to Contracts

A: Net variation within 10% of the Contract Award Price:

Head of the Department (HD) or Project Director (PD) may approve the

variation by

revising the TCE, if required and subject to the following:

a) By obtaining explanatory note from the persons involve;b) By Satisfying that:

i. Change of scope could not have foreseen at the time of award of

contract;

ii. the change of scope is justifiable;iii. The quantity variation/s are marginal or are due to unforeseen

situation/s;

G id i f


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B: Net variation exceeds 10% of the Contract Award Price:

a) HD/PD shall forward all the relevant documents together with a

statement prepared in accordance with a) and b) above to the CAO;

HD/PD shall also submit all the documents required for the revision of

TCE.b) If the net variation is within 15% of the Contract Award Price and

CAO is satisfied with the HD/PD statement CAO may approve it;

c) If the net variation is more than 15% of the Contract Award Price or

the net variation is below 15% and CAO is not satisfied with the

statement submitted by HD/PD, CAO shall refer it to a the appropriate

PC assisted by the TEC; In this situation the appropriate PC shall be

decide on the basis of increased amount of the contract price and not

necessarily the PC relevant to the revised contract price.

Procurement Guide Lines Reference:8.13.4

Variations to Contracts


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Conclusion Contract Payments, Types

Authority Levels

Types of Payment

Definition of Variation Orders

Valuation procedure for VO

NWSDB procedure for VO

Procurement Guile Lines


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THANK YOU

contract payment and variation

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