Tenders, Contracts and Arbitration

246 Pages·2012·2.08 MB·English

Tenders,
Contracts and
Arbitration

For Indian Railways; Government &
Civil Organizations and Contractors
By:
Pramod P. Goel
Tenders, Contracts and Arbitration

By

Pramod P. Goel
BSc, MBA, Member IETE
Former Deputy Chief Signal & Telecom. Engineer,
Central Organisation For Railway Electrification.
(E-mail: [email protected])

2011

Published by:
M/s Astha Publication
F-8, Panch Pushp Apartments,
Ashok Nagar,
Allahabad-211001
Phone:[phone]

Distributers:
M/s Universal Book Corner
20, Mahatma Gandhi Marg,
Civil Lines,
Allahabad-211001
Phones:919335154452
© Pramod P. Goel

Other books by the same author:

Already published:
1. Indian Railway Signal Engineering, Volume-1, History, systems of
working, signals in general.
2. Indian Railway Signal Engineering, Volume-1V, Multi Aspect Colour
light Signal Engineering including Solid State Interlocking.

Under publication:
1. Indian Railway Signal Engineering, Volume-1I, Designing of Signal
Engineering Plans and drawings.
2. Indian Railway Signal Engineering, Volume-III, two and three aspect
Mechanical Signal Engineering.
3. Electronic Interlocking By:
S.C. Mishra & Pramod P. Goel

Published: September, 2011

Price : ` 220.00
: U.S. $ 20.00
PREFACE

Having been associated with and having gathered experience in contractual
system of getting the work executed, formulating the rules, conditions of
contracts, tender documents and all associated techno legal matters along with
post contractual issues for more than for twenty one years and also being lone
arbitrator & as member of many Arbitral panels and having successfully contested
multi-crore valued claims arbitrations representing railways, while working in
Indian Railways, I decided to share my experiences with people concerned and
people at large.

The book running in 229 pages covered under seven chapters and ten annexure.
First digit of the number of the paragraph denotes the number of the chapter while
second, third and fourth digits depict main, sub and sub to sub paragraph
numbers; further sub groups have been numbered in Romans & alphabets;
Chapter Three is in two main sections, Section-I & section-II, while Section-I is
further grouped in subsections A, B, C & D. The numbering within each
subsection starts from zero such as first number of each such subsection of
Chapter-III shall be 3.0, continued as 3.1, 3.2 and so on.
First five chapters cover defining Tenders, Contracts & Acts and structure of
firms; companies and joint ventures; type of services and system of contracting;
Process of Tendering & Entering in to Contract. Section-I of the Chapter-III
covers works contracts, procedures for preparing tender document, receipt &
evaluation of tenders, evaluation of bids, tender committee recommendations,
acceptance of tender committee recommendations and award of contract read with
provisions of associated Acts and rules and Section-II, the Project Management
Consultancy Contracts for railways, evaluation under QCBS & CQCCBS
methods which is a new concept drawn from Ministry of Finance, Government of
India. Remaining chapters cover post contractual matters, from financial
advances, variation in cost of work to vitiation of the contract with the variation,
measurements and release of payments; General Conditions of Contract framed
and issued by the Railway Board to be universally implemented on All Indian
Railways and framing of Special Conditions of Contract by the zonal railways to
match the requirements of the site and speciality of the work under the contract,

Chapter VI deals with matters on Arbitration associated Arbitration and
Conciliation Act, 1996, from demand of arbitration, appointment of Arbitral
Tribunal & Excepted Matters, arbitration proceedings, award and appeal for
setting aside the award. Railway Board’s directives to deal with arbitration
matters have also been covered here.

Chapter VII deals with matters related to Vigilance, causes and remedies and
some important tips to deal with the situation when involved.
As an added advantage to the reader, relevant Acts and rules are annexed as ready
reference. Ten annexure placed amongst last pages of the book, provide relevant
sections of The Constitution of India; Railway Act 1989; Indian Contract Act
(IX) 1872; Contract Labour (Regulation & Abolition) Act 1970, Indian
Railway Act, 1989; Contract Labour (Regulation & Abolition) Act 1970,
Arbitration And Conciliation Act, 1996.

Besides, Joint Venture agreement clauses & relevant Clauses of GCC as issued
by Ministry of Indian Railway, Railway Board; Vigilance Directorate,
Vigilance Manual- 2006, Chapter -II, Central Vigilance Commission (CVC) and
format of measurement book with guide lines for filling the same including
record of Measurements, from Engineering Code, issued by Ministry of
Railways have also been provided. Valuable Circulars issued by Ministry of
Railways, Railway Board have been referred to as guidelines used and followed
by Indian Railway. While using the information, reference to the relevant circular
number has been given with the date, to ensure that the information so furnished
is updated up until the date of circular.

Indian Railways has its own merit with rich experience in dealing with contracts
equipped with highly learned and experienced officials from Ministry of
Railways, the apex body and down below the line, as such is most successful in
organising contracts with minimum possible abrasions, peaceful execution and
settlement of the contracts. Accordingly it shall be of great interest to the
organisations other than railways to emulate part of the healthy and useful
practices followed by the railways, in dealing with contractual system of working.

I do not know to what extent the effort has been successful as such any
suggestions for its improvement shall be my privilege.

ACKNOWLEDGEMENTS

This book is the result of persistent encouragement of Shri Madan Mohan
Agarwal, Ex Chief Engineer Northern Railway and author of many books on
railway engineering to his credit. I am deeply indebted to him and extend my
sincere thanks to him.

Debts of gratitude are owed to Shri Anup Kumar, Chief Electrical Engineer
(P&D), Central Organisation for Railway Electrification, Allahabad, not only for
providing me with support through many important documents which otherwise
would not have been available to me as well as reading the proof against time
available, word by word and giving valuable suggestions of major significance

I am thankful to Shri Asit Hajela Chartered Accountant and conferred with IFRS
(International Financial Reporting standard) certified by the Institute of Chartered
Accountants, who helped me in defining Company, Firm & related rules.
I am also thankful to Shri P.L. Srivastava Ex SSTE, CORE who, having gone
through entire text of the book painstakingly has not only screened out many
typographical mistakes but also has been instrumental in modification of text; to
Shri Kashi Ram Verma, SSTE Central Organisation for Railway Electrification
for supporting me with material on the subject as related to the contracts for
Signal & Telecommunication works; to Shri Amit Kesarwani, working as Design
Engineer with M/s The Goel Associates, who has taken keen interest having gone
through the contents of the book and editing it so as to bring the document to the
stage of publication.

Lastly, but not the least, I thank my family members, my wife Pratibha Goel
without whose unqualified support it would not have been possible to devote time
in writing the book; and to my children Vaibhava, Chhavi and Vipul and their
spouses, my son in law Amitabh Singhal, and daughters in law Sumedha Goel and
Nimita Goel, who have always been extending moral support, to enable me to
reach this point.

Pramod P. Goel
(Ex) Deputy Chief Signal &
Telecommunication Engineer
337-C/ 1, Newada, Indian Railways.
Ashok Nagar,
Allahabad -211001.
Ph: 919415237899;
[email protected].

Place: Allahabad.
Date: 11.09.2011
CONTENTS
Page Number
CHAPTER-I; TENDERS, CONTRACTS & ACTS: 1-9
1.0 Contractual system and Acts: 1
1.1 Contracts for Execution of work and associated Acts
Provisions of Constitution of India, Provisions of
Railway Act 1989, Provisions of Contract Labour
(Regulation & Abolition) Act 1970: 1-2
1.2 Contract for Procurement of material for issue to
the contractor: 2
1.3 Tenders defined: 2
1.4 Contract & Act: 2-3
1.5 Agreement & Corresponding Act: 3
1.6 Indian Contract act (Act IX of 1872), History &
references, Clause 2 -Interpretation clause, Proposal,
Acceptance & Promise, promisor and Promisee,
Consideration, Agreement, Reciprocal promises, Void
agreement, Contract, Voidable contract: 3-4
1.7 Type of Tenderers: Firms, Proprietorship Firm,
Partnership Firm, Limited Liability Partnership (LLP)
Firm: 4-5
1.8 Company, Private Limited Company, Public Limited
Company: 5-6
1.9 Change of Firm/ Company name by the tenderer and
retention of credentials: 6
1.10 Firm or Company as Subcontractor: 6-7
1.11 Joint Venture (JV) Firm, consortium, Participation of
Joint venture firms in works tenders: 7-9

CHAPTER-II; TENDERS & TYPE OF SERVICES: 10-30
2.0 Tenders: 10
2.1 Type of tenders based on purpose, Execution of works of
General nature, Nature specific to Railway requirement,
Labour oriented only, Consultancy contracts,
procurement of major material, Procurement of labour: 10
2.2 Execution of work, Execution of work where major
material specific to technical requirements of the work
is supplied by railways, Execution, where the contractor
has to complete the work ready to be used i.e.
Turn Key contract, Special purpose works: 10-11
2.3 Labour oriented works; labour contracts, governed
by The Contract Labour (Regulation and Abolition)
Act, 1970, Act No. 37 Of 1970, Section 10,
Prohibition of employment of contract labour, Contract
Labour defined, GCC 55, Sham contract & conditions: 12-15
2.4 Consultancy Contracts, Project, Project management
i Pramod P. Goel
Tenders, contracts and arbitration

& Project Management Consultancy, Project, Consultancy: 15-16
2.5 Project Management Consultancy (PMC) contract by
Railways, grouping management consultancy services as
Consultancy prior to award of contract, consultancy
post award of contract, Consultancy for complete
Management of Project, Role of PMC, when work is
awarded to an agency for execution, quality, time cost and
documentation management, Advantages of engaging
consultant: 16-20
2.6 Type of tenders Based on system of contracting,
lowest and valid bidder, Single packet system of tendering,
Two packet system of tendering, Limited tender, List
of Approved contractors-preparation of, Financial groups
of categories D1,C1,B1 &A1, Committee for
Examining the Applications, Registration Charges,
Eligibility criteria category-wise, Standing Earnest money,
Powers for calling of limited tenders, procedure for
formation of approved list of contractors, Maintenance of
the approved list of contractors, Special limited tender,
Single tender, Emergent situations, Short notice tender: 20-28
2.7 Procurement of material for works contracts: 29
2.8 Procurement of proprietary items by railways: 29
2.9 Dispensation of tender; powers, Quotation: 29-30

CHAPTER-III; PROCESS OF TENDERING & ENTERING INTO
CONTRACT: 31-99
SECTION – I; WORKS CONTRACTS: 31-90
3.0 Tendering process: 31

A) FIRST IN-HOUSE PROCESS: 31-61
3.1 First in-house process before issue of tender notice: 31
3.2 Bill of Quantities (BOQ): 31-32
3.3 Schedule of rates, Rate analysis and preparation of
Schedule of Rates (SOR): 32-36
3.4 Non SOR (NS) items: 36-37
3.5 Preparation of tender documents, working out prevalent
cost of work, Last accepted rates (LAR) based on SOR,
Last accepted rates based on non-SOR items, new items
which did not find place in preceding contracts,
Cost of work, Tender document’s cost: 37-40
3.6 Earnest Money Deposit (EMD) & finalisation of the
tender in time stipulated in the tender documents, EMD
through Regulation for Tenders and Contracts, Earnest
Money Deposit by PSU, Finalisation award of tender
within stipulated time, precautions to be taken,
may calling for extension of validity period
ii
become inescapable, Adjustment of Earnest
Money towards security deposit, Form in which
Earnest money to be deposited, Schedule for timely
finalisation of the tender: 40-43
3.7 Eligibility criteria, no specific eligibility criterion
prescribed for the works costing `20 lakh or less,
Technical Eligibility Criteria, The documents as listed
hereafter shall be specified for submission along with the
tender, Financial eligibility criteria, Eligibility criteria
specific to Joint Venture firms, Technical eligibility
criteria for JV firm, Financial eligibility criteria of JV
firms, Documents to be enclosed by the Joint Venture
firm: 43-47
3.8 Schedule for execution of work: 47-49
3.9 Turnkey contract and its Schedule for execution and use
of material, Work content has to be detailed and
quantified, Cost of Turn Key Contract work, cost of work
schedule covered under SOR, cost of work schedule
covered under non-SOR, cost of work schedule to cover
balance part of the work, material to be supplied by
railway procurement of the material through works
contract, Specifications for execution of work,
Specifications for each material to be used by the
contractor, Authority for inspection of material, Planning
& designing if entrusted to the contractor, Planning and
designing done by railway’s in-house resources, include
planning and designing in the work contract, planning &
designing done by railway through outside organisations,
planning and designing
done availing PMC, Milestones for payment: 49-54
3.10 Conditions of contract, General Conditions of
Contract (GCC), Special Conditions of Contract (SCC): 54-55
3.11 Artificial Splitting work for floating of tender, Further
considerations dictate splitting or uniting the work,
artificial splitting defined: 55-56
3.12 Works contract tender notice, Circulation of the tender
notice, Tender notice on Internet, Inter railway
circulation of the Tender notice, Short tender notice,
Availability of tender documents before issue of tender
notice, Information to be provided in the tender notice, A
typical Tender Notice, The typical sample tender notice: 56-60
3.13 Prequalification of tenders, Civil Engineering works,
Electrification works, Signal & Interlocking works: 60-61
3.14 Invitation of prequalification bids: 61

iii Pramod P. Goel
Tenders, contracts and arbitration

B) SECOND IN-HOUSE PROCESS FIRST STEP: 61-67
3.0 Second in-house process of receipt & evaluation of bids,
first step: 61
3.1 Receipt of tenders, Receipt of tenders by post,
Transparency in dealing with tenders, typical situations,
Unscrupulous and antisocial elements, late tenders,
Delayed tenders, Receipt of lone tender: 61-64
3.2 Opening of tenders, two packet system, Opening of main
packets, Credential bids shall be opened first, Opening of
price bids, single packet system: 64-66
3.3 Comparative statement and Briefing note, under
two packet system, under single packet system: 66
3.4 Purchase preference: 67

C) SECOND IN-HOUSE PROCESS, SECOND STEP: 67-77
3.0 Second in-house process of evaluation of bids, second
step: 67
3.1 Constitution of tender committee, Constitution of the
tender committee for works contract: 67-68
3.2 Tender committee recommendations (TCR),
Commandments for the tender committee: 68-69
3.3 Evaluation of the bids, Evaluation of the bids under two
packet system, Evaluation of credential bid, Evaluation
of price bid, Evaluation of the bids under single packet
system, Fixing of Estimated cost of the work, Discussing
the offer, Evaluation of bidders for validity, Evaluation of
individual items of schedule, Evaluation of overall cost
basis, Reasonableness of rates, fundamental reason for
recommending reasonableness, Unworkable rates,
Negotiations, tenderer to be addressed as, Counter offer,
Offer to be examined for vitiation, Formation of cartel: 69-77

D) SECOND IN-HOUSE PROCESS, THIRD STEP: 77-90
3.0 Acceptance of Tender Committee Recommendations
TCRs), under two packet system of tendering, under
single packet system of tendering, Recommendations for
negotiation Final recommendations, unanimous or with a
note of descent: 77
3.1 Power for acceptance of tender committee
recommendations within the zonal railways, delegation of
powers: 77-78
3.2 Decision by Accepting Authority on TCR: 78-79
3.3 Tenders to be accepted by Railway Board members or
Minister of Railways: 79
iv