Construction Contracts: Work practices and procedures through client's eye

The main objective of Contracts Department is to set guidelines for screening and shortlisting of suitable contractors for awarding contract of work.  In other words Contract department handles all the supply and apply works of construction field. Also contracts departments drafts contracts with general conditions and special conditions of contracts based on the tender document for various construction activities. Further the selection & performance evaluation of contractors and subcontractors is also in scope of contracts department.

Inter-Departmental Coordination of Contracts Department

Workflow of Contracts Department

Receiving Request -  The requests list for contractors from sites is been raised for  several construction activities. Usually this process is handled by contracts department independently at the start of project and as the project progress process is handled combinedly with site department.

Identifying Potential Contractors - It is the responsibility of Contracts department to  identify potential contractors as per scope of work as required by site execution team. Contracts department identify potential contractors through 4 major process as follows 

1. Existing & past sources who have performed well in past works with the organization.
2. Senior management sources.
3. Construction job directory.
4.  Monitoring & follow up with contractors working on similar project with competitors.

Scrutinize top 3 contractors - Once the list of contractors for specific scope is made contracts department scrutinize the top 3 contractors on predetermined parameters and past records of contractors performance.

Negotiation Meets -  Negotiation Meetings are organized with all top 3 scrutinized contractors to discuss the terms and conditions of contracts and create a win win situation for both.

Negotiation results with Comparison Sheet - Once the negotiation meetings are over with all 3 contractors a comparative sheet is prepared with determined parameters and ranking which ultimately helps to select the contractor for job.

Work Order Preparation -  Work order is prepared once the final contractors is selected. Work order includes all the general conditions and special conditions of contracts which were already discussed in negotiation meets. Mostly FIDIC standards are taken into consideration for preparing work orders.

Award & Approval of Work Order - In this stage the final award of work order is given with both parties approval and later fed into ERP system for further records.

Contractors Performance Monitoring -  It is in the scope of contracts department to monitor contractors performance at regular intervals. This performance reports helps contracts department to develop bond with high performance contractors by offering them new works in future and to blacklist low performance contractors.

 

Construction Procurement: Work practices and procedures through client's eye.

The main objective of Procurement Department is to procure goods and services designed to meet operational requirements of construction projects to meet project feasibility. Also procurement department installs procurement insurance policies to ensure their organisation operates with integrity. Purchase department plays a very crucial role in site progress as its their responsibility to make material delivered on site as per requirement, so as to avoid hindrances on project site. A part from that department registers the potential suppliers and acquire new vendors.

Inter-Departmental Coordination of Procurement Department

Workflow of Procurement Department

1. Receive Requisition - A material requisition form lists the items required at project sites and are raised in form of indent by Stores Department to procurement department in ERP i.e. Enterprise Resource Planning. The indent contains name of material, quantity required, specifications of material and lead time. 
2. Check for Approval - The indent raised at site needs to be approved from concern authority. Once the indent is been approved the indent is processed open for Quotations.
3. Request for Quotation - Once the indent is approved the procurement department requests for quotation from different vendors.  Purchase manager scrutinizes the requirement with different factors like in terms of cost, criticality of requirement, quality of product, quantity of product, availability, vendor status etc.
4. Comparing Quotations - After receiving the quotations from all vendors a comparative of all quotations is been prepared. In this comparative a minimum of 3 quotations are required for comparison to select the L1 vendor. However the L1 vendor may or may not be finalized on the lowest landed cost.
5. Negotiation with Vendor -  Once the L1 vendor is selected, negotiation meetings are arranged to negotiate price, delivery terms, advance payment etc.
6. Quotation Approval - Once the WIN-WIN situation is attended by both the parties the purchase order is drafted and approved for selected vendor. The Purchase order is approved by Purchase Head when the total price of material is below the organization decidable limit. PO above the limit are approved by Project Head.
7. Material Received on Site  - Once the material is received on site the material is checked by site supervisor as per the approved sample material. Once the material received is as per the requirement the material is stored in site stores. In case of material is rejected on site due to various reasons it is reported to purchase department also a debit note is filled on PO. A Goods Receive Note i.e. GRN is created as a communication document with Billing Department.
8. Follow Up - It is the responsibility of Procurement department to take follow up on the materials to be received on site. The material needs to be delivered on site on time for smooth operations at site. Also procurement department needs to communicate with billing department about the payments schedule for supplier as a part of Vendor- Management Relationship.

I would like to thank my mentor Mr. Vikas Sawant sir  for providing me the opportunity to work in Procurement Department in my Internship at JP Infra Pvt Ltd. 

Construction billing: Work practices and procedures through the client's eye.

Billing Department is considered as one of the most important department in construction firms. Ensuring implementation of proper billing cycle and timely payments of contractors, subcontractors and suppliers results in maintaining a proper work progress on site. At times when the work progress is it's peak at site client organizations have to ensure that the suppliers and vendors are getting timely paid. Well planned billing cycle till completion of project will help the firm to calculate the actual cost incurred in the project.  

Types of Bills

Inter Departmental Coordination of Billing Department

Billing department has to coordinate with four major departments i.e. Site Department, Purchase or Procurement Department, Contracts Department and Accounts Department to ensure a proper workflow in the firm.

1. The site billing department verifies the material received on site is as per the quantity sanctioned in Purchase order (PO). Also Site billing team verifies the amount of work done on site is as per contract terms.
2. The billing team verifies the standy by supply bills from procurement department.
3. Billing department coordinates with accounts department with all payments related issues.
4.  If the percentage of work/ percentage of material quantity allotted to contractor/supplier exceeds in bill then contract department/ procurement department are consulted.

Bills Certification

• Supply Bills are generated after the materials are received on site and running account service bills are generated after till the completion of work.
• Service Bills are generated once a part of  the total work is completed till its full completion.
• Site-in-charge/ project manager and contractor representative will prepare the joint measurement sheet for all service bills and the submitted measurement sheet shall be cross checked at any time by the site billing team.
• Once the client representative certified the measurement sheet, then the contractor is allowed to prepare a abstract sheet. 
• Abstract sheet will comprise rate, quantity, amount, project details, start date, completion date, percentage work done with a format to be signed by site billing team.
• It is the duty of site billing team to look at all necessary details required and if any corrections are found then site billing team have to guide vendor for resubmission of the bill.
• The format of bill must be suitable with proper bifurcation of quantity amount and taxes
• All the details on bill (i.e. Tax invoice No) like Bill date, GST No, Pan No, Name and address of service provider, Breakup of GST on Bill, Value of taxable services, amount of taxes, amount of levies, HSN code etc must be mentioned with stamp and signature of the authorized of the contractor/vendor.
• Copy of TAX INVOICE will be generated after the attachment of all the documents by the contractor.
• Once the site billing team certify the bill, the bill is then send to HO with all the necessary documents attached to bill. The documents attached would be work order, measurement sheet, material challans,drawings, test reports, contract compliances etc.
• When HO receives the bill, and the bill is rechecked by the HO billing team if there will be any error in the quantity or amount then debit/credit note will be generated and same will be sent to the contractor seeking for credit/debit note form contractor as well
• The bill is forwarded for ERP Entry and approvals after receiving the manual certifications
• The bills are then transferred to Accounts department where bills are rechecked and the correction bills are resend to HO billing department and correct bills are forwarded for payments.
• Retention money is processed after successful work completion and once the defect liability period mentioned in work order is over.

I would like to thank Mr. Vikas Sawant sir for providing me the opportunity work in Billing Department in my Internship at JP Infra Mumbai Pvt Ltd  and would also like to thank Ms Dhanashri Wankar and Ms Sonam Rajak for guiding me throughout the post.

Series on "Work Flow Process of Construction Departments"

A workflow is a repeatable set of steps performed in a sequential manner over time which enables a system to achieve a goal. As the construction projects are getting way more complex these days it is very important to have a proper workflow to execute projects on time and in successful manner. Therefore it is very important for every fresher to know about the basic workflow of all the departments of construction organization. In construction sector there are 3 major categories which includes Client firm, Contractor firm and Consultant firms and the common departments found in this firms are Planning Department, Design Department, Execution Department, Liasoning Department,Procurement Department, Billing Department, Contracts Department, MEP Departmnet, Human Resource Department, Finance Department, Marketing and Sales Department and the new department coming up is Research and Development Department. 

Therefore in the First Series of "WORK FLOW PROCESS OF CONSTRUCTION DEPARTMENTS"  we would be focusing on 3 departments 

1. Procurement Department 
2. Billing Department
3. Contracts Department 

The above listed departments workflow process will be explained in terms of Client's Perspective, Contractor's Perspective and Consultant's Perspective respectively.