Execution of Long Duration Contracts
1.0 Brief Introduction:
A long term contract for composite works was placed on a vendor.
The contract prices were firm and fixed till the execution of the contract. The contract got delayed due to various reasons. Over a period of time it was difficult to establish whether the delay was attributable to MDL or the Contractor or the other agencies involved in approval of drawings and other interdependent activities at site. This resulted in loss to both MDL as well as the Contractor as claimed by both the parties. The matter was resolved through DRM (Dispute Resolution Mechanism).
As a systemic improvement, the following was suggested and accepted for implementation in all future contracts through a memorandum from the Functional Directorconcerned.
(a) For all long duration contracts, price escalation clause to be included so as to avoid future complications. Escalation should always be related to the relevant indices so as to avoid any ambiguity or subjectivity during the execution of the contract and subsequently during payment.
(b) Hindrance Register should be maintained during the execution of contracts so that the impact of delay on the project can be assessed, attributability of delay can be fixed and LD can be imposed accordingly.
1.3 Impact and Benefits:
With the implementation of the above mentioned Systemic improvement, the contracts will be handled efficiently to the satisfaction of purchaser as well as seller and possibility of any dispute in future can be eliminated.