Contract management - PowerPoint Presentation by niusheng11

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									CONTRACTS AND CONSTITUTION-LAW
        OF CONTRACTS



       K.N. VENKATA RAMAN
    PROCUREMENT CONSULTANT

                             1
    CONTRACT MANAGEMENT

• CONTRACTS;
• AND ITS MANAGEMENT




                          2
          CONTRACTS

• THE WORD CONTRACT IS DERIVED
  FROM LATIN WORD „CONTRACTUM’
  WHICH MEANS DRAWN TOGETHER;
• EVERY PROMISE OR EVERY SET OF
  PROMISES FORMIMG THE
  CONSIDERATION FOR EACH OTHERS
  IS AN AGREEMENT;

                                  3
        CONTRACTS (CONTD)

• CONTRACT IS AN AGREEMENT BETWEEN
  TWO OR MORE PARTIES, WHICH IS
  ENFORCEABLE BY LAW;
• TO FORM AN AGREEMENT THERE MUST
  BE A PROPOSAL OR OFFER BY ONE PARTY
  AND ITS ACCEPTANCE BY ANOTHER;
• AGREEMENT= OFFER + ACCEPTANCE;


                                        4
 ESSENTIALS OF A VALID CONTRACT

• A VALID CONTRACT IS ONE WHICH IS
  ENFORCEABLE AND BECOMES BINDING ON THE
  PARTIES;
• THERE MUST BE A PROPOSAL AND ACCEPTANCE
  OR MEETING OF MINDS;
• AGREEMENT MUST BE BETWEEN PARTIES
  COMPETENT TO CONTRACT;
• PARTIES MUST GIVE THEIR FREE CONSENT;
• AGREEMENT MUST BE SUPPORTED BY
  CONSIDERATIONS WHICH MUST BE LAWFUL;


                                            5
 ESSENTIALS OF A VALID CONTRACT
             (CONTD)
• OBJECT OF AGREEMENT MUST BE LAWFUL;
• AGREEMENT MUST NOT HAVE BEEN
  EXPRESSELY DECLARED VOID BY ANY LAW IN
  FORCE IN THE INDIA;
• AGREEMENT MUST BE CERTAIN AND NOT
  VAGUE OR INDEFINITE;
• LEGAL FORMALITIES (STATUTORY
  REQUIREMENTS OF MAKING IN WRITING, IN
  PRESENCE OF WITNESSES OR REGISTERED OR
  SIGNED BY AUTHORIZED PERSONS) MUSST BE
  COMPLIED WITH;

                                           6
      REQUIREMENTS OF A VALID
             CONTRACT
• MUST BE UNCONDITIONAL;
• MUST BE MADE AT THE PROPER PLACE;
• MUST CONFORM TO THE TERMS OF OBLIGATIONS;
• MUST BE MADE AT THE PROPER TIME;
• MUST BE MADE IN PROPER FORM;
• PARTIES MUST BE ABLE AND WILLING TO
  PERFORM ITS OBLIGATION;
• THERE MUST BE REASONABLE OPPORTUNITY FOR
  INSPECTION;
• MUST BE MADE TO THE PROPER PERSON;
• MUST BE FOR FULL AMOUNT;

                                              7
    OVERVIEW OF CONTRACT LAW

• LAW OF CONTRACTS MAY BE DESCRIBED AS THE
  ENDEAVOUR OF PUBLIC AUTHORITIES TO
  ESTABLISH A POSITIVE SANCTION FOR THE
  EXPECTATION OF GOOD FAITH WHICH HAS
  GROWN UP IN THE MUTUAL DEALINGS OF MEN;
• IN CIVIL LAW OR THE LAW OF THE STATE OR
  THE LAND, LAW SIGNIFIES A COMMAND FROM A
  SUPERIOR AUTHORITY PRESCRIBING A COURSE
  OF ACTION, DISOBEDIENCE WHICH WOULD
  ENTITLE PUNISHMENT;
• THE OBJECT OF THE LAW OF CONTRACTS IS TO
  REGULATE THE DEALINGS BETWEEN
  INDIVIDUALS/ PARTIES;
                                         8
  OVER VIEW OF CONTRACT LAW
           (CONTD)

• LAW OF CONTRACTS IS NOT THE
  WHOLE LAW OF AGREEMENTS NOR
  IS IT THE WHOLE LAW OF
  OBLIGATIONS; IT IS THE LAW OF
  THOSE AGREEMENTS, WHICH
  CREATE OBLIGATION AND THOSE
  OBLIGATIONS WHICH HAVE THEIR
  SOURCE IN AGREEMENT;
                                  9
   OVER VIEW OF CONTRACT LAW
            (CONTD)
• BROAD CLASSIFICATION OF LAW- PUBLIC
  AND PRIVATE;
• PUBLIC LAW DEALS WITH THE
  ADMINISTRATIVE POWERS OF STATE AND
  ALSO CERTAIN RELATIONS BETWEEN THE
  STATE AND THE INDIVIDUAL;
• PRIVATE LAW DEALS WITH THE RIGHTS
  OF SUBJECTS INTERSE;
• INDIAN CONTRACT ACT 1872;

                                    10
    GOVERNMENT AND PRIVATE
          CONTRACTS
• MOST OF THE MAJOR INFRASTRUCTURE
  PROJECTS IN OUR COUNTRY FOR THE
  PRESENT ARE BEING EXECUTED BY
  GOVERNMENT AND HENCE MOST OF THE
  CONTRACTS ARE PUBLIC CONTRACTS
  GOVERNED BY PUBLIC LAW;
• MAJOR PART OF THE GOVERNMENT
  EXPENDITURE IS THROUGH THE
  PROCUREMENT OF GOODS, SERVICES AND
  CONSTRUCTION ACTIVITY;
                                   11
      PUBLIC PROCUREMENT


• PUBLIC PROCUREMENT IS
  ACQUISITION OF GOODS, SERVICES
  AND PUBLIC WORKS IN A TIMELY
  MANNER THAT RESULTS IN BEST
  VALUE TO THE GOVERNMENT AND
  PEOPLE


                                   12
  CONSTITUTION AND CONTRACTS

• ARTICLES 298, 299, 14 AND 19




                                 13
  ARTICLE 298, POWER TO CARRY ON
            TRADE ETC.
• Under this article, Executive power of the Union
  and States extends to carrying on of any trade,
  disposal of property and making of contracts for
  the same I.e. Public Procurement;
• For such PP, the Government does not require any
  additional powers, it can have by entering to
  contracts;
• The power to enter into contracts for PP is
  therefore expressly vested in the Government
  under this Article.
                                                 14
     ARTICLE 299: CONSTITUTIONAL
   REQUIREMENTS OF A GOVERNMENT
              CONTRACT
• ALL CONTRACTS MADE IN THE EXERCISE
  OF THE EXECUTIVE POWER OF THE UNION
  OR STATE BE EXPRESSED TO BE MADE BY
  THE PRESIDENT OR GOVERNOR OF STATE
  AND ALL SUCH CONTRACTS AND ALL
  ASSURANCES OF PROPERTY MADE IN THE
  EXERCISE OF THAT POWER SHALL BE
  EXECUTED ON BEHALF OF PRESIDENT OR
  GOVERNOR BY SUCH PERSONS AND IN
  SUCH MANNER AS HE MAY DIRECT OR
  AUTHORIZE;

                                    15
      ARTICLE 299: CONSTITUTIONAL
    REQUIREMENTS OF A GOVERNMENT
           CONTRACT (CONTD)
• NEITHER PRESIDENT NOR GOVERNOR SHALL BE
  PERSONALLY LIABLE IN RESPECT OF ANY CONTRACT
  OR ASSURANCE MADE OR EXECUTED FOR PURPOSE
  OF CONSTITUTION OR ANY ENACTMENT RELATING
  TO GOI IN FORCE NOR SHALL ANY PERSON MAKING
  OR EXECUTING ANY SUCH CONTRACT OR
  ASSURANCE ON BEHALF OF ANY OF THEM BE
  PERSONALLY LIABLE IN RESPECT THEREOF;
• IN ORDER THAT PUBLIC FUNDS MAY NOT BE
  DEPLETED BY CLANDESTINE CONTRACTS MADE BY
  ANY AND EVERY PUBLIC SERVANT THERE SHOULD
  BE DEFINITE PROCEDURE ACCORDING TO WHICH
  CONTRACTS MUST BE MADE.


                                             16
   EQUALITY OF OPPORTUNITY IN THE
  MATTER OF GOVERNMENT CONTRACTS
• ARTICLE 19(1)(G) CONFERS ON ALL CITIZENS A
  FUNDAMENTAL RIGHT TO PRACTICE ANY
  PROFESSION (INCLUDES TAKING AND EXECUTING
  GOVT CONTRACTS) CARRY ON ANY OCCUPATION,
  TRADE OR BUSINESS;
• FAIRPLAY IN ACTION MUST BE THE BASIS OF THE
  POLICY OF THE STATE- ART 14 APPLIES ALSO
  MATTERS OF GOVERNMENT POLICY AND IF THE
  POLICY OR ANY ACTION OF GOVERNMENT EVEN IN
  CONTRACTUAL MATTERS FAILS TO SATISFY THE
  TEST OF REASONABLENESS IT WOULD BE
  UNCONSTITUTIONAL; BASIC REQUIREMENTS OF ART
  14 IS FAIRNESS IN ACTION BY STATE;


                                            17
   SUMMARY OF GENERAL PRINCIPLES
       EMBODIED IN CONSTITUTION
• PROFESSION OF DOING GOVT CONTRACTS IS A
  FUNDAMENTAL RIGHT UNDER CONSTITUTION;
• PERSONS PRACTICING GOVT CONTRACTS
  CANNOT BE TREATED ARBITRARILY OR
  CAPRICIOUSLY;
• GOVT CANNOT LIGHTLY BRUSH ASIDE A
  CONTRACTOR WHOSE TENDER IS THE LOWEST;
  REASONS FOR REJECTIONS SHOULD BE
  REASONABLE, COGENT AND ACCEPTABLE
  WITHOUT ARBITRARINESS OR DISCRIMINATION;


                                         18
PRINCIPLES OF PUBLIC PROCUREMENT

• PUBLIC PROCUREMENT SYSTEM CAN
  BE SAID TO BE WELL FUNCTIONING
  IF IT ACHIEVES THE OBJECTIVES OF
  TRANSPARENCY, COMPETITION,
  ECONOMY AND EFFICIENCY
  FAIRNESS AND ACCOUNTABILITY;


                                 19
PRINCIPLES OF PUBLIC PROCUREMENT
             (CONTD)
• PP INCLUDES PROCUREMENT BY GOVERNMENT
  AND BY STATUTORY BOARDS AND NON-
  MINISTERIAL BODIES;
• PP MUST FOLLOW PRESCRIBED COMPETITIVE
  PROCEDURES AND THE RULES GIVE A MAJOR
  WEIGHT TO FAIRNESS AND EQUITY;
• PP IS ALSO SUBJECT TO OVERSIGHT BY
  LEGISLATURE AND AUDIT (IN ADDITION TO
  INTERNAL ACCOUNTABILITY MECHANISMS);
• MISTAKES IN PP CAN HAVE VAST POLITICAL
  REPERCUSSIONS OWING TO THE FOCUS THAT
  THE MEDIA AND THE PUBLIC PLACE ON THE
  SUBJECT;
                                           20
PRINCIPLES OF PUBLIC PROCUREMENT
             (CONTD)
• A KEY PRINCIPLE OF GOOD GOVERNANCE
  PRESUPPOSES CONSISTENT PRINCIPLES
  AND REGULATIONS FOR PROCUREMENT;
• INFORMATION AND DOCUMENTATION ON
  THESE RULES SHOULD BE WIDELY
  AVAILABLE AND THE RULES SHOULD BE
  ENFORCED FAIRLY AND CONSISTENTLY;
• THERE SHOULD BE A WELL UNDERSTOOD
  SYSTEM FOR REGISTERING AND
  RESOLVING COMPLAINTS SPEEDILY;
                                   21
PRINCIPLES OF PUBLIC PROCUREMENT
             (CONTD)
• THERE SHOULD BE A WELL
  FUNCTIONING SYSTEM FOR DISPUTE
  RESOLUTION AND CHECKS ON THE
  ARBITRARY BEHAVIOUR OF
  PROCUREMENT ENTITIES AND ON
  THE INCONSISTENT EXERCISE OF
  DISCRETIONARY POWERS IN
  CONTRACT AWARD, ENFORCEMENT
  AND MANAGEMENT;
                               22
PRINCIPLES OF PUBLIC PROCUREMENT
             (CONTD)
• ACCOUNTABILITY AND TRANSPARENCY
  ARE VITAL TO PROCUREMENT
  MANAGEMENT;
• LACK OF OVERSIGHT MECHANISM TO
  ENSURE ACCOUNTABILITY UNDERMINES
  THE CAPACITY OF GOVERNMENTS TO
  SECURE THE CONFIDENCE OF
  CONTRACTORS AND SUPPLIERS IN THE
  PUBLIC PROCUREMENT PROCESS AND
  THE TRUST OF CITIZENS IN THE PROPER
  USE OF PUBLIC FUNDS;
                                        23
PRINCIPLES OF PUBLIC PROCUREMENT
             (CONTD)
• TRUST AND CONFIDENCE CAN BE ESPECIALLY
  ERODED BY SECRECY IN PROCUREMENT
  TRANSACTIONS AT THE LOCAL LEVELS
  (ALTHOUGH A DEGREE OF CONFIDENTIALITY IS
  ESSENTIAL TO PROTECT BUSINESS PRIVACY AND
  THE LEGITIMATE INTERESTS OF INDIVIDUAL
  BIDDERS)
• TRANSPARENCY REDUCES UNCERTAINTY AND
  INHIBITS CORRUPTION IN PROCUREMENT BY
  ASSURING EQUALITY OF ACCESS TO INFORMATION
  FOR ALL BIDDERS BEFORE, DURING AND AFTER
  THE BIDDING PROCESS;
• THE SYSTEM SHOULD ALSO PROTECT THE
  INTERESTS OF THE CITIZENS;
                                           24
PRINCIPLES OF PUBLIC PROCUREMENT
             (CONTD)
• SOUND PP POLICIES AND PRACTICES ARE
  THUS AMONG THE ESSENTIAL ELEMENTS
  OF GOOD GOVERNANCE;
• GOOD PRACTICES REDUCE COSTS AND
  PRODUCE TIMELY RESULTS;
• POOR PRACTICES LEAD TO WASTE AND
  DELAYS AND ARE OFTEN THE CAUSE FOR
  ALLEGATIONS OF CORRUPTION AND
  GOVERNMENT INEFFCIENCY;
                                    25
     KET ELEMENTS OF PUBLIC
          PROCUREMENT
• CLEAR, COMPREHENSIVE AND
  TRANSPARENT LEGAL FRAMEWORK;
• CLEAR CUT FUNCTIONAL
  RESPONSIBILITIES AND
  ACCOUNTABILITIES FOR PROCUREMENT
  FUNCTION;
• EFFICIENT INSTITUTIONAL FRAMEWORK;
• ROBUST MECHANISM FOR ENFORCEMENT
  OF POLICY, RULES AND REGULATIONS;
• WELL TRAINED PROCUREMENT STAFF

                                   26
   ESSENTIALS OF GOOD PUBLIC
         PROCUREMENT
• ECONOMY: BY OPEN COMPETITION;
• EFFICIENCY: BY EFFECTIVE
  PROCESSES;
• FAIRNESS: BY NON-
  DISCRIMINATION;
• TRANSPARENCY: BY OPENNESS;
• ACCOUNTABILITY: BY ADHERENCE
  TO PROCUREMENT LAW OR ACT;
                               27
    EQUALITY OF OPPORTUNITY IN
       PUBLIC PROCUREMENT
• MERE COMPLIANCE TO THE INDIAN CONTRACT ACT
  IS NOT ENOUGH IN CASE OF GOVERNMENT
  CONTRACTS, BUT THEY MUST ALSO SATISFY
  ARTICLE 14 AND 19
• ARTICLE 14: EQUALITY BEFORE LAW- THE STATE
  SHALL NOT DENY TO ANY PERSON EQUALITY
  BEFORE THE LAW OR THE EQUAL PROTECTION OF
  THE LAWS WITHIN THE TERRITORY OF INDIA;
• HENCE TO SATISFY ARTICLES 14 &19 IN
  GOVERNMENT CONTRACTS THE PROCESS OF
  PROCUREMENT SHOULD BE FAIR &REASONABLE,
  FAIRNESS IN ACTION BEING THE BASIC
  REQUIREMENT;


                                               28
   EQUALITY OF OPPORTUNITY IN
   PUBLIC PROCUREMENT (CONTD)
• TAKING GOVT CONTRACTS IS A PROFESSIONAL
  OCCUPATION TO WHICH EVERY ONE HAS A
  FUNDAMENTAL RIGHT;
• PP HAS TO BE OPEN FOR ALL WHO ARE ELIGIBLE;
• SC HAS HELD “TODAY THE GOVERNMENT IN A
  WELFARE STATE IS THE REGULATOR AND
  DISPENSOR OF SPECIAL SERVICES AND
  PROVIDER OF A LARGE NUMBER OF
  BENEFITS,JOBS,CONTRACTS,LICENSES,QUOTAS,
  MINERAL RIGHTS ETC. THE GOVT POURS FORTH
  WEALTH, MONEY,BENEFITS, SERVICES,
  CONTRACTS, QUOTAS AND LICENSES…..”

                                            29
          PROCUREMENT LAW

• TO REGULATE PUBLIC PROCUREMENT OF
  GOODS, CONSTRUCTION AND SERVICES SO AS TO
  PROMOTE THE OBJECTIVES OF:
  – MAXIMIZING ECONOMY AND EFFICIENCY IN
    PROCUREMENT;
  – FOSTERING AND ENCOURAGING PARTICIPATION
    IN PROCUREMENT PROCEEDINGS BY SUPPLIERS
    AND CONTRACTORS, ESPECIALLY WHERE
    APPROPRIATE, PARTICIPATION BY SUPPLIERS AND
    CONTRACTORS REGARDLESS OF NATIONALITY
    AND THEREBY PROMOTING INTERNATIONAL
    TRADE;

                                              30
  PROCUREMENT LAW (CONTD)

– PROMOTING COMPETITION AMONG SUPPLIERS
  AND CONTRACTORS FOR THE SUPPLY OF THE
  GOODS,CONSTRUCTION OR SERVICES TO BE
  PROCURED;
– PROVIDING FOR THE FAIR AND EQUITABLE
  TREATMENT OF ALL SUPPLIERS AND
  CONTRACTORS;
– PROMOTING THE INTEGRITY OF, AND
  FAIRNESS AND PUBLIC CONFIDENCE IN THE
  PROCUREMENT PROCESS; AND
– ACHIEVING TRANSPARENCY IN THE
  PROCEDURES RELATING TO PROCUREMENT;

                                      31
     VOLUME OF PROCUREMENT

• VOLUME OF PROCUREMENT IS VERY
  HIGH; SO ARE THE STAKES;
• GOK ANNUAL PROCUREMENT WAS
  ASSESSED AS ABOUT RS.13,000/- CRORES
  IN 2001;
• IRREGULARITIES IN PROCUREMENT,
  MALPRACTICES/ CORRUPTIVE PRACTICES
  IN PROCUREMENT ARE A COMMON AUDIT
  OBJECTION; VIGILANCE CASES; SOME
  EVEN LEAD TO FALL OF GOVERNMENT;
                                     32
        THE UNCITRAL MODEL
         PROCUREMENT LAW
• THE UNCITRAL MODEL LAW ON
  PROCUREMENT OF GOODS, CONSTRUCTION
  AND SERVICES WAS ADOPTED BY THE
  UNITED NATIONS COMMISSION ON
  INTERNATIONAL TRADE LAW (UNCITRAL) AT
  ITS TWENTY-SEVENTH SESSION; THE
  COMMISSION HAS ALSO ISSUED A GUIDE TO
  ENACTMENT OF THE UNCITRAL MODEL LAW
  ON PROCUREMENT OF GOODS.
  CONSTRUCTION AND SERVICES (A/CN.9/403)

                                       33
    PROCUREMENT LAW (CONTD)

• MANY COUNTRIES HAVE A PROCUREMENT LAW;
• SOME COUNTRIES INCLUDING INDIA HAVE
  CODES AND MANUALS;
• HOWEVER THESE ARE ISSUED BY
  ADMINISTATIVE MINISTRIES /DEPARTMENTS
  AND COULD BE CHANGED/REVISED RATHER
  EASILY; MAY LEAAD TO INCONSISTENCIES;
• THE REVISION/MODIFICATION OF THE LAW/ACT
  REQUIRES THE APPROVAL OF
  PARLIAMENT/ASSEMBLY WHICH IS RATHER
  TOUGH/DIFFICULT; IT WILL ENSURE
  CONSISTENCY;

                                         34
    PROCUREMENT LAW (CONTD)

• IN INDIA PROCUREMENT PROCEDURES ARE
  CONTAINED IN THE GENERAL FINANCIAL RULES
  (GFR) WHICH HAS BEEN REVISED IN 2005;
• TAMIL NADU IS THE FIRST STATE IN INDIA
  WHICH HAS ENACTED A PROCUREMENT LAW; IT
  IS NAMED THE TAMIL NADU TRANSPARENCY IN
  TENDERS ACT, 1998 AND RULES 2000;
• KARNATAKA IS THE SECOND STATE IN INDIA
  WHICH HAS ENACTED A PROCUREMENT LAW; IT
  IS NAMED THE KARNATAKA TRANSPARENCY IN
  PUBLIC PROCURMEENT ACT 1999 AND RULES
  2000; KARNATKA HAS ALSO MANDATED
  STANDARD TENDER DOCUMENTS;
                                         35
   PROCUREMENT LAW (CONTD)

• OTHER STATES SUCH AS ANDHRA
  PRADESH, ORISSA, PUNJAB ARE
  PROPOSING TO ENACT SIMILAR
  PROCUREMENT LAWS;




                                36
    OTHER LEGISLATIONS THAT AFFECT
              CONTRACTS
•   THE INDIAN CONTRACT ACT, 1872;
•   WORKMEN COMPENSATION ACT,1923;
•   THE INDUSTRIAL DISPUTES ACT,1947;
•   EPF AND MISCELLANEOUS PROVISIONS ACT,
    1932;
•   THE INDIAN PARTNERSHIP ACT, 1923;
•   THE SALE OF GOODS ACT,1930;
•   PAYMENT OF WAGES ACT, 1936;
•   MINIMUM WAGES ACT,1936;
•   EMPLOYEES‟S STATE INSURANCE ACT, 1948;
•   FACTORIES ACT, 1948;

                                             37
 OTHER LEGISLATIONS THAT AFFECT
       CONTRACTS (CONTD)
• KARNATAKA SALES ACT, 1957;
• CONTRACT LABOUR (REGULATION AND
  ABOLITION) ACT, 1976;
• MATERNITY BENEEFIT ACT, 1961;
• CHILD LABOUR (PROHIBITION AND REGULATION
  ACT, 1986;
• PAYMENT OF GRATUITY ACT,1972;
• THE PUBLIC LIABILITY INSURANCE ACT, 1991;
• ENVIRONMENTAL (PROTECTION) ACT, 1986;
• THE ARBITRATION AND CONCILLIATION ACT,
  1996; ETC.

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