What is a contract?

• A contract is a written or expressed agreement

between two parties to provide a product or service.
• In order for a contract to be enforceable, it must contain:
– An offer.
– Acceptance.
– Consideration.
– Legally enforceable.

Types of contracts:-

• In Railways, we enter into:

– Supply Contracts
– Works Contracts
– Service Contracts

• Types of Supply Contracts;

Rate Contracts
Running Contracts
Fixed Quantity/Delivery Contracts
Rate Contacts - features:

 Supply materials on demand, irrespectively of quantity

 Supplying the materials during the period of currency of the Contract

 Fixed unit rates

Running Contracts - features:

 Specified quantity - with a percentage of tolerance either way

 Supplying the materials during the period of currency of the Contract

 Fixed unit rates

Fixed Quantity Contracts - features:

 Definite quantity (in one or more installments)

 Supplying the materials by a definite date

 At the agreed rates.

Comparison of Stores Contracts

Type/Feature Rate Contract Running Contract Fixed Quantity

Contract

Quantity Irrespective of Specified Fixed

(Whatever, the Purchaser (with a % tolerance either (Definite)
demands) way)

Rate Fixed Fixed Agreed

Delivery As and when ordered As and when ordered By a Definite Date

Date (During the period of (During the period of (in One or more
currency) currency) installments)
 SERVICE CONTRACTS

Service Contracts A “service” is defined as any subject matter of procurement other than
goods or works, except those incidental or consequential to the service, and includes
physical maintenance, housekeeping, professional, intellectual, training, consultancy and
advisory services or any other service classified or declared as such by a procuring entity
but does not include appointment of an individual made under any law, rules, regulations
or order issued in this behalf. In other words, it is the procurement of a public good for its
intangible material benefit. It is the newest class of contract in the Railways. In recent
years, Railways has seen a rise in the number of service contracts in non-operational areas
such as cleaning, facilities management, consultancy etc. Given their diverse nature, a
need was felt to reclassify these and deal with them using a simplified mechanism focussed
on outcomes and delivery operated separately from a Works Contract. Service contracts
have thus got their own SOP and GCC.

ANNUAL MAINTENANCE CONTRACT

An annual maintenance contract (AMC) in Indian Railways is a service agreement between the railways
and a contractor to maintain railway equipment. The contract covers the cost of labor and materials
required for maintenance, updates, and upgrades.

What's included in an AMC?

 Maintenance: The contractor is responsible for maintaining the equipment, including preventive
maintenance
 Updates and upgrades: The contractor is responsible for updating and upgrading the equipment
 Engineer visits: The contractor is responsible for visiting the equipment as needed
 Support: The contractor is responsible for providing support, including 24/7 support on holidays and
weekends
How does an AMC work?
 The contractor is paid on a quarterly basis
 The contractor submits a bill after each quarter
 The contractor maintains a record of maintenance and preventive maintenance
 The contractor provides a history sheet for each system, which is signed by each user
 The contractor provides a copy of the history sheet with the quarterly bill
 Stages of tender

Notice Inviting Tender (NIT)

Brief specification/description of
work Estimated cost of work
Place and time for obtaining tender
papers/downloading Cost of tender paper and
mode of deposit
Place and time submission of offers and time of
opening Amount and form of earnest money if
not exempted
Eligibility Criteria
Uploaded on web site of the outsourcing
organization Address of website to be
printed in NIT
Components of a Tender Document

➢ General Instructions – TD Cost, EMD, SD, Date of publication, date of

closing, Date of tender Opening, General details
➢ Notice Inviting Tender (NIT)
➢ General Conditions of Contract (GCC)
➢ Special Conditions of Contract (SCC)
➢ Scope of work and Schedule
➢ Rate Schedule
Tender Notice Publication & Opening Date

➢ 21 days between NIT in paper and Opening Date (Model SOP Page A17,
see also Engg Code Para 1238)
➢ Can be reduced, but with prior approval
➢ Publication of NIT in Newspapers (Rly Bd Letter dt 07.01.2019)
➢ Paper Clippings should be available
➢ CPRO must be contacted in each Tender Publication
 Tender Offer Validity

Rly Bd Letter No 2017/ Trans/01/ Policy dt 08.02.2018 Para 3.2 (c)

and Para 4.0

Tender Document Cost

Payable on IREPS website depending on the NIT value (Para 1240

of Engineering Code) but e-forms are downloadable free of
cost:
(i) For works costing upto Rs. 5 Rs. 1000/-
Lakhs
(ii) For works costing above Rs. 5 Rs. 2000/-
Lakhs and upto 20 Lakhs
(iii) For works costing above Rs. 20 Rs. 3000/-
Lakhs
and upto 50 Lakhs
(iv) For works costing above Rs. 50 Rs. 5000/-
Lakhs
and upto Rs. 2 crores
(v) For works costing above Rs. 2 Rs.
crores and upto Rs. 50 crores 10000/-
(vi) For works costing above Rs. 50 Rs.
crores 25000/-
Earnest Money Deposit (EMD)
To screen non serious firms, the firm has to keep the offer open
during the validity period: Pre-mature withdrawal of offer leads
to forfeiture of EMD.
 To be submitted by the tenderer alongwith their offer and forfeited, if:
➢ The tenderer withdraws or amends their offer;
➢ If the successful tenderer fails to sign contract or furnish the required
performance
EMD Waiver

Recently (since 2020), bidders are exempt from paying EMD in

light of the financial pressure on firms due to the Covid-19
pandemic.
➢ Any firm recognized by the Department of Industrial Policy and
Promotion (DIPP) as ‘Startups’ shall be exempted from payment of
earnest money deposit detailed above.
➢ 100% Govt. owned PSUs shall be exempt from payment of earnest money
deposit
➢ Labour Cooperative Societies shall deposit only 50% of above earnest money
deposit
➢ Service/ Goods Tender for STARTUP Firm and MSE Firm
Pre-Bid Meeting

➢ Useful in High value contracts / complex work to explain the

intricacies of project/work to prospective bidders
➢ Attended by executives and finance officers
➢ Held well in advance of date of opening
➢ Clarification to Discrepancies / Omissions notified by any Tenderer shall
be available to all prospective Bidders
➢ Clarifications given during the Pre-Bid Meeting be made part of
Tender Documents
Tenderer’s Credentials

Vide Letter No. 2017/Trans/01/Policy dt 08.02.2018 & GCC-2020,

tenderer submits documents testifying tenderer previous
experience and financial status should be produced along with
the tender. All requisite documents in support of qualifying
Eligibility Criteria, Bid Capacity etc as per Tender Conditions are
to be self attested before submission.
➢ Certificate based system of credential consideration
➢ Certificate in Standard format – Annexure-V of GCC
➢ Non submission of Certificate shall result in Summarily Rejection
➢ Practice of verification of tenderers documents dispensed with
➢ Railway reserves Right to verify all statements, information and
documents and seek any information or document from tenderer
➢ Verification or lack of such verification shall not relieve bidder of its
obligations or liabilities
➢ In case of false, forged or incorrect information submitted by the
tenderer:
 ○ Agency shall be banned from doing business for upto five years
○ During the evaluation of tenders – Forfeiture of EMD
○ After the award of contract – Contract terminated. EMD,
Performance Guarantee and Security Deposit & other dues
available with the Railway shall be forfeited
Completed Works

➢ Work even though it might have commenced before the qualifying period,
but completed in the last 7 yrs. ending the last day of the month
previous to the one in which a tender is invited.
➢ Work is physically completed and completion certificate is issued by the
concerned organization though final bill is pending,
➢ If a part or a component of work is completed but the overall scope of
contract is not completed, this work shall not be considered for
fulfillment of technical credentials even if the cost of part completed
work/component is more than required.
➢ The value of final bill including PVC amount, if paid, or in case final
bill is pending, Minimum of –
○ the contract cost in last approved variation statement plus PVC
amount paid, or
○ cumulative amount paid upto last on-account bill including PVC
amount and statutory deductions
➢ Credentials in foreign currency shall be converted into US Dollar and then
into Indian Rupee by the rate of US Dollars (in INR) published by the RBI
for the last day of month previous to the one in which tender is invited.
➢ Consideration of Work experience certificate issued by
 ○ Any Private individual – shall not be considered
○ Any Govt. Organisation – shall be considered
○ Any Public listed company – shall be considered, if issued by a
person authorized by the Public listed company to issue such
certificates, provided such Company.
■Have average annual turnover of Rs. 500 crore & above in last 3
financial years excluding the current financial year,
■Is listed on NSE or BSE and incorporated / registered at least
5 years prior to the date of opening of tender,
➢ In case certificate issued by public listed company, the tenderer shall also
submit alongwith work experience certificate, Relevant copy of work
order, Bill of quantities, Bill wise details of payment received duly
certified by CA, TDS certificates for all payments received and final/last
bill paid by company in support of above work experience certificate
The tenderers shall submit an attested Certificate from the
concerned department / client and/or Audited Balance Sheet duly
certified by the Chartered Accountant/Certificate from
Chartered Accountant duly supported by Audited Balance
Sheet.
Client Certificate from other than Govt. Organization should be
duly supported by Form 16A/26AS generated through TRACES of
India’s Income Tax Department.
Eligibility Criteria

For Open Tenders costing above Rs. 50 lakhs (GCC: Part-1, Clause-10)
 The criteria may be modified on a case to case basis in respect of
urgent project/works and specialized nature of work with
concurrence of FA & CAO (Associate Finance) and personal
approval of GM, and additional conditions if required may be
incorporated.
Technical Eligibility

Must have successfully completed any of the following during

last 7 years, ending last day of the month previous to the one
in which tender is invited:
➢ Three similar works each costing ≥ 30% of ATV(Advertise Tender
Value) or
➢ Two similar works each costing ≥ 40% of ATV or
➢ One similar work costing ≥ 60% of ATV
Total value of similar nature of works (defined by PHOD/CAO)
completed during the qualifying period, and not the payments
received within the qualifying period, to be considered.
Financial Eligibility

Total contractual payments received during the last three years

and in the current financial year (up to date of inviting of
tender) should be a minimum of 150% of ATV of Work.

Bid Capacity

Available Bid capacity shall be calculated as = [A x N x 2] – B, where

A = Maximum value of payment received for executed
construction works in any one financial year during the current &
last 3 financial years, up to date of Inviting of tender
 N = Number of years for completion of tendered work
B = Value of existing commitments and balance of ongoing
works with the tenderer to be completed in next ‘N’ years
For Tenders costing > Rs 20 Cr wherein eligibility criteria
includes bid capacity also, the tenderers who meet the
minimum eligibility criteria will be qualified only if their
available bid capacity is equal to or more than the total bid
value of the present tender.
The Tenderer shall furnish the details of existing commitments and
balance amount of ongoing works duly verified by CA. Non-
submission of above statement along with offer shall be
considered as incomplete offer and will be rejected summarily. In
case of no works in hand, a ‘NIL’ statement is to be submitted.

Price Variation Clause (PVC)

Desirable in
➢ Large value Contracts having value more than 5 Crore
➢ Cases of large fluctuation in price of raw materials, labour, fuel etc.
Advantages
➢ Protects interests of both the parties: Government when prices fall and
Contractor when prices rise
➢ Advantage to govt. when taxes and duties are reduced
PVC Formula – Labour

L = R x ( L–Lo)/Lo x P/100,
where L = Amount of price variation in
labour,
 R = Gross work done by contractor as per on account bill
excluding cost of materials supplied to him at fixed price and
payment made to consultants engaged by the contractor
Lo= All India consumer price index Number for industrial
workers published by RBI for the base period
L= All India consumer price index Number for industrial
workers published by RBI average for the 3 months of the
current quarters
P = % of labour components
PVC Formula – Material

M = R x (W-Wo)/Wo x Q/100,

where M = Amount of price variation in materials

Wo = index number of wholesale price – by group and sub-group
for fuel, power, light and lubricants as published by RBI for
the base period.
W = Above for average for 3 months of the
quarter Q = % of materials component
PVC Formula – Fuel

U= R x (F-Fo)/Fo x Z/100,

where U= Amount of price variation in Fuel

Fo= index number of wholesale price – by group and sub-group
for fuel, power, light and lubricants as published by RBI for
the base period.
F= Above for average for 3 months of the
quarter Z= % of Fuel component
PVC Adjustments

➢ Adjustment done once every quarter in on account payments

➢ If more than one account payment each quarter, adjustment in each
 ➢ No adjustment if variation is less than 5%
➢ Upward adjustment in the extend period only if it is on govt’s account
➢ Downward adjustment in the extended period even if it is granted
on contractors account
➢ In case of imported items adjustment in respect of exchange rate
and custom duty done subject to production of documentary
evidence
➢ Wage escalation clause to be avoided and top be done in
exceptional circumstances on the insistence of the suppliers
with financial concurrence
PVC in Supply Contract

➢ Base month and date to be indicated by the contractor along

with wage structure at that time per month of the permanent
workers only
➢ Wage will consist of basic wage, dearness allowance,
employer’s contribution to PF, employers' contribution to state
insurance scheme or any other scheme instituted by the
Government
➢ Increment in time scale not to be included
➢ Number of direct workers in the base year will only be considered.