Para 9.8.6 — NONCONSULT_MANUAL

Monitoring of NC Services Contracts – Risks and Mitigation

Risks Mitigation 1. Substitution of key experts in implementation: When the contract progresses, over a period of time, the request for substitution of key staff is The Procuring Entity needs to deal with such requests strictly in terms of contract provisions which permit substitution of key experts in exceptional circumstances such as “death or medical incapacity”. Substitution of a person

9.8.6. Limitation of Liabilities Except in cases of criminal negligence or willful misconduct: 1. neither Party shall be liable to the other Party, whether in contract, tort, or otherwise, for any indirect or consequential loss or damage, loss of use, loss of production, or loss of profits or interest costs, which may be suffered by the other Party in connection with the Contract, provided that this exclusion shall not apply to any obligation of the Contractor to pay liquidated damages to the Employer and 2. the aggregate liability of the Contractor to the Procuring Entity, whether under the Contract, in tort or otherwise, shall not exceed the total Contract Price, provided that this limitation shall not apply to any obligation of the Contractor to indemnify the Employer with respect to patent infringement. 3. the aggregate liability of the Employer to the Contractor except for patent infringement, whether under the Contract, in tort or otherwise, at any point of time during the execution/performance of the Contract, shall not exceed the ‘total Contract Price less payments already released to the Contractor’.

Risks Mitigation made by the firm citing reasons of nonavailability, health, and so on. “of equivalent or better qualification and experience” should receive utmost scrutiny and compliance, as diluting such a provision leads to loss of quality of work and a serious integrity issue. Such substitution should not give any undue financial benefit to the contractor. 2. Cost overruns in time-based contracts: Time and Cost over-run is a major risk in Time-based contracts, as the payment is based on time and delay may result in unanticipated benefit to the service provider and the assignment may get delayed. This type of contract should include an upper limit of total payments to be made to the service providers for the assignment to safeguard against excessive prolonging of time and payments. After this limit is reached, or the period of completion is exceeded, CA should review justification for extension of the contract. One of the ways to prevent cost overruns in time-based contract is to require Procuring Entities acquire contract management capacity to manage service contracts before contract is signed. It is Procuring Entity’s mandate to monitor service provider’s contracts and also to request service providers to keep producing progress reports and highlighting the status of their contract as it reaches milestones such as 50% and 80% progress. Procuring Entity must carefully authorise mobilisation and demobilisation of key experts and examine the time sheets and other reimbursable expenditures. 3. Advance payments: This is an area of risk in public procurement with undue and unintended benefits to the contractor, which vitiates the original selection criteria. Any mobilisation or other advance payments should be interest bearing and should be only for justifiable cases. Terms of such advances should be expressly stated in the NIT/tender documents. The advance payment may be released in not less than two stages depending upon the progress of the contract. Advance should be progressively adjusted against bills cleared for payment. Interest should be charged on delayed recoveries irrespective of the reason stated. 4. Contract changes and renegotiations: This is also a risk area, where the procuring entity may not get what it contracted and paid for or may pay for what it has not received. On the other hand, the contractor may not get timely or Contract modifications and renegotiations should not substantially alter the nature of the contract. It should not vitiate the basis of the selection of the contractor. It should not give undue or unintended benefits to the contractor. However, for any changes caused by the procuring entity, the contractor should be

Chapter 9: Monitoring Non-consultancy Services Contract

Risks Mitigation proper amendments due to changes asked by the procuring entities. adequately and timely compensated within the contractual terms. 5. Supervising agencies/individuals are unduly influenced to alter the contents of their reports so changes in quality, performance, equipment, and characteristics go unnoticed. A contract management manual or operating procedure should be prepared for large value contracts. There should be inbuilt systems of checks and balances. All large contracts should be formally reconciled for closure to ensure that the scope of the work is completed. This should include the dispute resolution forum for resolving disputes in a fixed timeframe with provision of escalation level. All payments/recoveries should also be reconciled. It should also be ensured that material/assets loaned to him including security passes are accounted for. 6. Contractor’s claims are false or inaccurate and are protected by that incharge of revising them. 7. Payment to the contractor is delayed intentionally or otherwise. 8. Contractor gets final payment, but contract closure has not been formally done. As a result, material/assets loaned to him are not accounted for. 9. Every dispute lands up in arbitration or court cases since the procuring entity is reluctant to grant compensation for its own lapses to the contractor. 10. Agents/ Sub-contractors and partners, chosen in a non-transparent way, are unaccountable or are used to channel bribes. Normally Procuring Entity should deal with the contractor directly and not though agents. If foreign contractors in GTE contracts use agents, then the relationship between contractor and Agent should be as per the contract (and Integrity Pact Annexure 12, if applicable) in conformity with paras 3.3.3-2-b) and 3.9. Sub-contracting should be regulated as per the contract and paras 3.2.3-1, 5.2.2-3- c), and 9.2.5-7.

Manual for Procurement of Non-Consultancy Services, 2025