PROJECT PLANNING in RITES Ltd.

(Summer Internship Project)

“Submitted in the Partial Fulfillment for the Requirement of

Bachelor’s of Business Administration”
of
Guru Gobind Singh Indraprastha University

Submitted to: Submitted by:

Ms.Monica Sehrawat Manpreet Kaur
Enrol No: 05621201814

Maharaja Surajmal Institute

Janakpuri, Delhi - 110058

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 ACKNOWLEDGEMENT

I would like to take an opportunity to thank all the people who helped me in collecting necessary
information and making of the report. I am grateful to all of them for their time, energy and wisdom.

Getting a project ready requires the work and effort of many people. I would like all those who have
contributed in completing this project. First of all, I would like to send my sincere thanks to MS.
MONICA SEHRAWAT for her helpful hand in the completion of my project.

DATE:

MANPREET KAUR

BBA(BANKING AND INSURANCE)

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 FACULTY CERTIFICATE

I declare that the whole information of this major project report is totally pure, true
and based on organization site, place, customer information and website information.
I hereby declare that the project report entitled has been completed and submitted by me
and is original and is the outcome of my own efforts and the guidance and suggestion
received by Ms. Monica Sehrawat

I further declare that the training is taken up for the requirement of B.B.A(banking and
insurance) 5th Semester.

DATE:

MANPREET KAUR Ms. Monica Sehrawat

[BBA(Banking and insurance) 5th SEM.]

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 TABLE OF CONTENTS

Chapter 1

1.1 OVERALL GOAL OF RESEARCH

1.2 OBJECTIVE OF THE STUDY

1.3 METHODOLOGY

Chapter 2

2.1 COMPANY PROFILE

2.2 SERVICES PROVIDED

2.3 JOINT VENTURES OF COMPANY

2.4 ORGANISATION STRUCTURE

2.5 SECTORS OF OPERATION

2.6 SWOT ANALYSIS OF RITES LTD.

2.7 PROJECT PLANNING

2.8 CONTRACT MANAGEMENT

2.9 PROJECT COSTING

Chapter 3

3.1 PROJECT MANAGEMENT IN RITES LTD

3.2 QUALITY MANAGEMT IN RITES LTD

3.3 COMPARISION WITH PEERS

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Chapter 4

4.1 FINDINGS

4.2 LIMITATION

4.3 CONCLUSION

4.4 RECOMMENDATION

Bibliography

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 EXECUTIVE SUMMARY
RITES Ltd. (Rail India Technical and Economic Service Limited). RITES is a PSU (Public
Sector Undertaking), International multi-disciplinary Consultancy organization
rendering comprehensive professional services in various sectors including Highways,
Railways, Bridges, Urban development, Airports, Inland waterways and Ports sector.
It undertakes consultancy business along with export lease of locomotives, rolling
stock, Project Management Consultancy etc.

While working in RITES limited, I have got the opportunity to understand the nuances
of a PSU consultancy firm. The multi-disciplinary areas of operations in the company
has given me an opportunity to understand in detail the business models involved in
operating in different sectors, services offered along with the execution strategy
involved in a particular contract. Project Planning in Pre-award stage, Execution
stage and Completion stage is studied. Detailed study of FMIS has helped me to
know how the company manages the information in the form of data in its system to
do its day to day operations.

An important aspect during framing a tender is Profit planning which is a process of

making project estimates for quoting to get contracts. The conceptual basis for the
same is project costing where I made an attempt to identify the major heads of the
direct expenditure for major contract types depending on the nature of work in each.
Along with that certain other concepts prevalent in costing in RITES are also studied.

I understood how the company makes use of self –generated Financial Management
Information System to record and execute all the financial calculations and
generation of MIS reports, financial reports and costing requirements. Project coding
basis and recording is another area where I got a lot of knowledge.

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CHAPTER -1

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1.1 OVERALL GOAL OF RESEARCH

The proposed topic is “PROJECT PLANNING in RITES”. This project would give the understanding of
the project planning in RITES Ltd. The study also focuses on the various factors that play role in
planning or decisions for any project and how much it is feasible to start the project. It also forecast
the return of any project. It will be helpful to make sound decisions for a project.

1.2 OBJECTIVE OF THE STUDY

Project planning is a core activity so as to maximize the wealth for the stakeholders by which the
project is executed in an efficient manner by optimum utilization of resources and executed in a
controlled environment which are in built.

To fulfill above requirements following are my project objectives:

 To understand contract management in the company- involving both the financial and legal
aspects in addition to technical aspects, parties involved and guidelines for different types
of projects undertaken by the company from the time of acquiring the project, during the
operation of the project and the proper closure of the project.

 To prepare a comprehensive checklist for the major contract types for a quick reference
covering above aspect. These can also be used for new recruits in RITES during their
induction program.

 To make Proper financial analysis with the help of project estimates and the methodology
of allocating the costs and overheads to different heads.

 Understanding how costing methods vary with the type of business segments (like
Consultancy, Export, Lease etc.) and other costing concepts being used in RITES.

 To understand various aspect of financial management including contract management,

accounting procedures, consolidation of accounts & construction management in context of
rites ltd.

1.4 METHODOLOGY

 Understanding the nature of consultancy industry and the business of the company, the
working of the company by going through the company journals, annual reports, official
circulars, contract documents, tenders and other documents.

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  Discussions with the company mentor and other key persons concerned.

 Attending the discussions involved if feasible.

 Analysis of secondary data of projects from the company’s Financial Management

Information System (FMIS) generated reports and statements.

BRIEF APPROACH FOR STUDY

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CHAPTER -2

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 2.1 COMPANY PROFILE: About RITES Ltd.

RITES Limited was incorporated in India in 1974 under the Companies Act, 1956 for rendering
consultancy services for railways in India and abroad. It was incorporated as a private limited
company with the name ‘Rail India Technical and Economic Service Private Limited’ was converted
into a public limited company on February 5, 2008. The company soon transformed itself from a
mere railway consultancy firm to the activities connected with other modes of transport, with
multidimensional activities. Today RITES Ltd. is a multi-disciplinary organization engaged in various
areas related to consultancy at home and abroad ranging from concept to commissioning as well as
project management.

It is a PSU, International multi-disciplinary consultancy organization rendering comprehensive

professional services in various sectors including Highways, Railways, Bridges, Urban Development,
Airports, Inland Waterways and Ports Sector. It undertakes consultancy business along with export,
lease of locomotives, rolling stock, project management consultancy etc.

The company has been accorded the ‘Mini Ratna Grade-1’status by the Govt. of India by virtue of
operational efficiency and financial status. It is an ISO 9001:2000 certified. It has operational
experience in over 55 countries across Africa, Southeast Asia, Middle East and Latin America. Most
of Rites’ foreign assignments have been for governments and other apex organizations.

Evolution of RITES

RITES has evolved from being a primarily railway related consultant to a multi-service firm with
presence in various infrastructure sectors. The figure below presents a snapshot of the evolution of
the firm in this regard.

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2.2 RITES provides following services:

 Pre-Project planning involving project identification, feasibility studies and project

appraisal
 Project support activities comprising surveys, environmental & social impact
assessment, geo-technical and other investigations
 Project preparation activities of detailed engineering, design, tender documentation,
bid evaluation
 Project implementation / management covering contract administration, field
engineering and construction supervision, procurement services, product certification,
quality assurance.
 Commissioning, operation, maintenance of rolling stock & workshop management.
 Training, Quality assurance & management
 Multimodal Transport studies & materials management
 Financial, business plan, privatization & concessioning
 Property development
 System Engineering
 Economic and financial evaluation.

Major revenue generation areas for the company are:

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 Some interesting facts about the company:

1. RITES Limited is the first Indian company to operate railways systems abroad on concession
basis.
2. Its services have been instrumental in getting the first ever ISO 9001:2000 certificate in
Afghanistan for ARDS.
3. One of the consortiums for the Delhi, Mumbai and Kolkata Metro.
4. Its clients include various Central and State government ministries, other government bodies,
public sector undertakings including IRCON, NALCO, Konkan Railway Corporation Limited,
DMRC, IOCL, NTPC Limited, SAIL and NHAI as well as various private companies including Jindal
Steel Limited.
5. As a public sector undertaking, the company has been accorded the ‘Mini Ratna Grade-I’
status by the Government of India by virtue of operational efficiency and financial status.
6. RITES Limited was upgraded from Schedule ‘B’ to Schedule ‘A’ on July 11, 2007.

2.3 Subsidiaries and joint ventures of RITES Ltd:

SUBSIDIARY COMPANIES 1) M/s RITES (AFRIKA) (Pty) Ltd., Established in Botswana

2) M/s Tanzania Railway Limited, Established in Tanzania.
1) M/s RICON - Established in India
2) M/s Ganga Expressway Consultants Private Limited
(“GECPL”), Established in India
JOINT VENTURES
3) M/s Companhia Dos Caminhos De Ferro De Beira, SARL,
Beria (CCFB) - Established in Mozambique

2.4 Organization Structure

RITES Ltd. is a wholly owned government organization with the President of India as its 100%
shareholder. The company is organized under a number of divisions, each of which caters to one or
more sectors. The key business divisions are classified under Director (Technical), Director (Projects)
and Director (Finance), while the others fall directly under the Managing Director.

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 2.5 Sectors of operation

SECTORS OF OPERATION

 RAILWAYS  URBAN TRANSPORT

 HIGHWAYS  URBAN DEVELOPMENT
 BRIDGES & TUNNELS  PORTS & WATER RESOURCES
 GEOTECHNOLOGY  ROPEWAYS
 AIRPORTS  INFORMATION TECHNOLOGY
 BUILDINGS  FINANCIAL SERVICES

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RITES SERVICE SPECTRUM

 Airport Engineering  Information Technology

 Architecture & Design  Material System Management
 Bridge & Tunnel Engineering  Operation & Maintenance
 Design – Mechanical, Civil, Electrical  Ports & Harbours
 Electrical Engineering  Privatization & Concessions
 Engineering Survey  Quality Assurance
 Environmental Engineering  Ropeways
 Export and Leasing  Signaling & Telecom
 Financial Management  Traffic Logistics & Economics
 Geo-technology  Training
 Highway Engineering  Urban Development & Transport
 Human Resources Development  Water Resources & Waterways

Risk Management System

To strengthen the risk management system, a committee of the Board of Directors consisting of two
Independent Directors, Director (Finance) and one whole time Director has been constituted to
review the risk management aspects of our business. Further, we have a currency risk management
policy approved by our Board which prescribes the guidelines and processes to be followed to
minimize currency risk. Various aspects of currency risk management approach, benchmarking,
hedging and risk appetite, permissible instruments, hedging policy, structure of the risk
management committee and treasury group, reporting procedures have been covered in the policy.

2.6 SWOT analysis of RITES Ltd.

STRENGTH: - RITES strength lies with its total infrastructure solution capabilities and experienced
team of professionals & technical experts for providing multi disciplinary services from concept to
commissioning. The company deploys state-of-art technology and has sound financial health. The
qualities of products and services provided have resulted in immense satisfaction among various

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clients including Railways of other countries. Company has an extensive international experience in
developing countries particularly in Africa, Asia, and Middle East Latin America.

 RITES expertise in handling export, maintenance and rehabilitation of rolling stock and
railway equipments strengthen its position to embark new geographical markets and clients
in Asia and Africa region. Comprehensive range of services.
 Diversified sector portfolio in infrastructure consultancy services.
 Technical expertise and specialized domain knowledge.
 Key position in Goal plans.
 Wide International Experience.
 Strong financial position.
 Experienced and qualified management team and technical personnel.

WEAKNESS: - Company has limited experience in managing mega projects for rendering of

consultancy in overseas and has remained restricted in railway and highway sectors only. In the
overseas business, the major areas of operations have been in Africa where the economy is highly
volatile and open to political and financial risks.

OPPORTUNITIES: - Opportunities are available in near future on modernization of railways

workshop on turnkey basis and the company has already embarked upon on such projects through
RCF Kapurthala. Growth in existing business in Rail Infra, Urban Infra and QA divisions continue to
secure prestigious projects despite tough competition.

In addition to above, opportunities also exist for export of rolling stock, spare parts, railway
equipments rehabilitation and modernization of workshops in the international market particularly
third world countries. In addition to export, there are tremendous leasing business opportunities of
rolling stock available especially in African region.

THREATS: - There is a stiff competition in consultancy and BOT businesses from private and

multinational companies who at times prices their services aggressively to enter the booming Indian
market. At the same time, the company also faces unhealthy competition from several small
consultancy companies / agencies who are quoting low prices in view of their small set up.

Other threats include increased competition from local firms with foreign associates, slowdown in
new investments in infrastructure and entries of multinationals in the Indian railway sector.

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2.7 PROJECT MANAGEMENT

Project management is the discipline of planning, organizing, and managing resources to bring about
the successful completion of specific project goals and objectives. It is sometimes conflated with
program management, however technically a program is actually a higher level construct: a group of
related and somehow interdependent projects.

The primary challenge of project management is to achieve all of the project goals and objectives
while honoring the preconceived project constraints. Typical constraints are scope, time, and
budget. The secondary challenge is to optimize the allocation and integration of inputs necessary to
meet pre-defined objectives.

A project is a temporary endeavor, having a defined beginning and end (usually constrained by date,
but can be by funding or deliverables, undertaken to meet unique goals and objectives, usually to
bring about beneficial change or added value. The temporary nature of projects stands in contrast to
business as usual (or operations), which are repetitive, permanent or semi-permanent functional
work to produce products or services. In practice, the management of these two systems is often
found to be quite different, and as such requires the development of distinct technical skills and the
adoption of separate management.
Facets of project analysis:

The important facet of project analysis is:

a) Market analysis

Market analysis is concerned with a better estimation of demand of the proposed project/ services
in the future, as well as assessing the market share of the project under appraisal. A wide variety of
information and a better forecasting method is needed for better market analysis, an analyst must
require following,

 Consumption trend in past and present consumption level. This also ascertains the
importance of project initiation and requirement.
 Competition structure, which briefs about the existing players in the same particular field.
 Elasticity of demand, which briefs about the estimated demand arises at the particular
location.
 Cost structure

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 Administrative, technical and legal constrains.
b) Technical analysis

To proper analysis of technical and engineering aspects of a project is needed to be done at a

continuous level when a project is formulated. This is done inorder to assess whether the pre
requisites for the successful commissioning of the project has been considered and reasonably god
choice has been made with respect to the location, size, machine, process etc.

c) Financial analysis

This is the most important phase for a project. This would help to seek that whether the proposed
project will be financial viable for the company in terms reducing the debt burden and in turn
generating returns to the company or not. It would include following;

 Cost of the project & investment outlay

 Modes of financing (DEBT/ EQUITY)
 Cost of capital
 Projected profitability.
 Cash flow estimation.
 Level of risk
 Project financial position.

This would be ascertained by applying capital budgeting techniques, which is elaborated in the
latter part of the project.

d) Economic analysis:

It also referred to as social cost benefit analysis. It basically means judging the project from the
larger social point of view. In this the focus is on the social cost and benefits of the project in terms
of monetary costs and benefit.

e) Ecological analysis

In the recent years, environmental concern has assumed a great deal of significance. Ecological
analysis is to be done for major projects which have significant ecological implications like power
plant, irrigation scheme and environmental polluting industries.

f) Financial viability

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Financial viability is about being able to generate sufficient income to meet operating payments,
debt commitments and, where applicable, to allow growth while maintaining service levels.
Assessment of financial viability is an integrated process involving a review of a provider‘s audited
financial statements, Financial Performance Reports, business plan and other information that
supports financial analysis.

The initial focus of the financial viability assessment is a provider‘s audited financial statements for
the previous financial year. The results are assessed with the budget and financial projections in the
business plan.

 Assessing viability – what we look for

In assessing financial viability, both short term and longer term viability are taken into account.

 Assessing profitability and cash flow:

Longer term financial viability concerns the ability of a provider to meet future financial obligations
as they fall due. The ultimate financial basis of viability is adequate profitability and cash generation
over the asset cycle together with the management of long term debt. Although registered providers
may be ‗not for profit‘entities, the profitability of a provider is important from a number of
perspectives, including:

Providing a ‘buffer‘against future adverse circumstances say reserve maintained for unforeseen
instances, allowing for the long term replacement/refurbishment of stocks.

Funding growth (where applicable). Each provider‘s profitability is affected by its environment,
growth projections and client requirements.

In analyzing profitability and cash flows, the focus is on:

Sustainability – the extent to which historical cash flows and profits are sustainable, and not reliant
on non-recurring items or capital grants

Growth – where applicable, the potential for growth and also the impact of growth on profitability
and surpluses.

Stability – the extent to which cash flows and profits provide a stable base for growth and debt
service.

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The assessment of profitability and cash flow ensures a provider‘s operations offer sufficient
resources to enable growth where applicable, replacement of assets as required and protection
against adverse situations.

 Assessing capital structure

Capital structure refers to a provider‘s long term funding structure and reflects the sources of
funding the provider has utilized to acquire fixed assets. Providers may be funded from a number of
sources including: external borrowings, capital grant contributions, cash and asset contributions
from parent or associated entities. For the BARH project phase II a DEBT/EQUITY 70:30 is considered
as per the thumb rule of the power industry guided by CERC.

 Overall financial assessment

In assessing overall provider financial viability, the following aspects are considered:

History and management - the traditional and future clients of the provider, financial and
management policies adopted by the provider and the provider‘s business risks and mitigation
strategies.

Operating environment - the strategic response of management to factors operating within that
environment and the impact of those strategies on the scale of the operation.

Profitability - in particular looking at operating margins and financial efficiency after removing the
impact of capital grants and other one-off financial impacts

• Cash flow dynamics - and a provider‘s ability to meet its financial obligations

• Capital structure and debt management

2.8 PROJECT PLANNING

Project Planning is a core activity and a relevant context in RITES Ltd in order to wealth maximization
of the stakeholders by which the project is executed in an efficient manner by optimum utilization of
resources and executed in a controlled environment which are in built.

RITES Ltd is a construction and infrastructure based organization. Therefore it is obvious that it
undertakes various projects. Thus project planning is a core activity and a relevant context in RITES
Ltd.

Proper project planning leads to wealth maximization of the stakeholders. It leads to incur the trust

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of the investors, contractors and the stakeholders. Further it helps to increase the goodwill and
market value among the stakeholders. Hence proper project planning is done in order to
maximization of wealth.

For the above achievement, project planning is executed in an efficient manner by optimum
utilization of resources. The main resource is the human resource. As RITES being a consultancy firm.
The major cost i.e. 50% is required for manpower and rest includes transportation,
material/services, other direct costs and indirect expenditures. Hence optimum utilization of
resources is done such that project planning is executed in an efficient manner.

Thus project planning is a very important context in this organization; hence I have chosen this as my
project topic.

 Project Planning has five stages which are as follows:

1. Pre Bidding

2. at Award

3. in Execution

4. on Completion.

5. Post completion

These are the four stages, and each stage is involved in different activities which are as follows.

 Pre Bidding involves budget and estimation.

 AT Award stage involves contract management and project costing.
 In Execution stage involves control and variance analysis.
 On Completion stage involves final project, client account and closure documents.
 Post completion stage involves maintenance and is the final closure of the project.

The corporate objective of growth of the company can be attained only when the company enters
into more and more projects. Any project management starts with signing and entering into a
contract with the client. However proper planning is required before committing deliverables and
executing a contract with client. A good project management therefore has to start with a contract
planning and well drafted contract document where the responsibilities and scope of the work of
RITES and the client are well defined.

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Thus, the concept of contract management is extremely important in respect of the company.

On the basis of the functions and activities of different departments the brief process of Project
Management System is defined below:

Pre Project Activities

1. Tracking Business opportunities from already existing/ new clients in existing & new area of
operations.
2. Analysis of work/tender/contract.
3. Self Analysis, Resource availability & its planning.
4. Techno commercial study of the offer and detect inconsistencies in tender documents.
5. Resource budgeting and costing for offer.
6. Preparation, submission of Bid & follow up till securing of contract.

Project Definition, Planning and Budgeting

1. Contract review on award of contract through technical and commercial viability.

2. Documentation and Planning (Milestone definition, Cash Flow Planning of input estimate,
defining payment terms, etc.)
3. Resource Deployment, task delegation and planning hardware and software requirement.
4. Procurement / Sub contracting for Project - Selection of consultants and tendering (Process
of tendering is specified later in the subsection 1.3 of this Part).
5. Identification and arrangement of services required from other Group / Divisions of RITES
Ltd. or organizations such as Indian Railways and its units, RDSO etc as per requirement.

Project Control and Execution

1. Mobilization of resources and establishment of site office.

2. Client meeting and liaison with client.
3. Collection of information, review and analysis of data.
4. Project Monitoring - Milestone comparison, Inspection of officials to review progress of
work.
5. Budget Structure, Budget Monitoring and Resource accounting
6. Raising of invoices, receipt of payments from client & processing payments of sub
contractors /supplier.
7. Compliance of all statutory requirements.

Project Completion and Closure

1. Documentation and data control of specific documents / data / drawings of a project

2. Prepare a summary report highlighting the major problems, their remedial actions.
3. Assess Customer Satisfaction-project completion certificate from client, determine level of
achievement of planned targets, and client feedback
4. Closure of accounts of the project
5. Management Review of financial performance, offers sent, contract secured, pending
contracts, rolling stock performance, resource management and training, improvement of
present system

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Post Project Completion-Maintenance

1. Action plan for the remedial action taken in case of follow up activities during maintenance.
2. Final closure of project

2.9 CONTRACT MANAGEMENT

a) What is a contract?

A contract is an agreement between two or more persons (individuals, businesses, organizations or

government agencies) to do, or to refrain from doing, a particular thing in exchange for something of
value. Contracts generally can be written, using formal or informal terms, or entirely verbal.

b) What is contract management?

Contract management is the process that enables both parties of a contract to meet their
obligations mentioned in the contract. The central aim of contract management is to obtain the
services as agreed in the contract and achieve value for money. This means optimizing the efficiency,
effectiveness and economy of the service or relationship described by the contract, balancing costs
against risks and actively managing the customer–provider relationship.

Contract management consists of following major activities. They are:

 Service Delivery Management

 Relationship Management
 Contract Administration

c) Pre-requisites of a contract

 Defining the parties involved.

 Understanding their interpersonal roles.
 Defining the responsibilities and expected results in addition to scope of work involved.

d) Critical success factors of a good contract

 Clarity in the contract terms.

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 The contract should not contain contradictory clauses.
 The methodology that is to be followed for execution of the contract should be properly
planned.
 The contract should also include contingency provisions i.e. what is to be done if certain clauses
of the contract are modified during the implementation process. For e.g. Increase in the scope of
work, changes in payment terms, and extension of time, dispute resolution, foreclosing or
abandoning the work by one of the parties.
 Clearly defined deliverables and financial terms including various stages/phase etc.

2.10 PROJECT COSTING

Project Estimates and Costing is an extremely crucial activity in RITES Ltd. This activity helps the
organization in estimating what the Company should quote for a project so as to receive the
contract for that project. It includes allocation of Company’s funds efficiently to various factors that
would comprise the overall cost of the project. In short, it tells the Company how and how much to
quote for a given project. The importance of Project Estimates and Costing lies in the fact that a
company can lose or win a project based on the competitiveness and justifiability of a quote.

Project estimates are prepared for two purposes:

a) To estimate the approximate expenditure under various sub heads for submission of bids, and

b) To use it for subsequent monitoring and control purposes.

There are 5 aspects of Contract, which are as follows:-

1. Technical 2. Contractual 3. Commercial 4. Financial 5. Accounts

There are few clauses in each aspect which are as follows:-

1) TECHNICAL ASPECTS INCLUDE FOLLOWING CLAUSES:-

a) Scope of work:-

Commencement and what amount of completion of work should be clearly defined.

a) Deliverables:-

In case of consultancy contracts, deliverables should be clearly defined for converting the value of

24
deliverables into monetary terms (for the purpose of quoting a bid) and complying with them during
execution. E.g. – No. of copies of reports to be given during the project, number of presentations of
report.

c) Technological Specification

 International Projects-It is necessary to meet the particular standards specified

by the concerned authority. Say in the case of contracts funded by World
Bank, ADB funds, technological specification are written in the contract.
 Civil – CPWD, Military Engineering Services
 Highway – NHAI
 Airport – Airport authority of India
 Railways – RDSO

d) Technology

 In International or high-tech contracts –technology specifications are written

in the contract to be followed by RITES.
 In study, execution or mainly consultancy projects-technology is not specified
 In some contracts –machinery specified only

e) Testing

There may be a further condition in the contract to get the results cross checked, verified, validated
from the third parties who are pioneer in the respective fields.

E.g. Bridge designed by RITES is tested by IIT if written in the contract by undertaking of a model
study by the latter.

E.g. For railway contracts, RDSO is the testing authority

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2) CONTRACTUAL ASPECTS INCLUDE FOLLOWING CLAUSES:-

a) RITES role in a contract

TYPE OF CONTRACT RITES ROLE

a) EPC Contractor

b) Deposit works a)Agent b)RITES is Project

of client Management
Consultant for the
contractor

c) Consultancy Consultant

d) Lease Lessor

e) Export Exporter/Seller

f) Inspection Inspection Agency

g) Execution Contracts Project Management Consultant

h) With the contractor Owner

i) Procurement (MSM) Procurement Agency

Depending on the role of RITES in a contract, other obligations with regard to liabilities, scope, taxes,
compliance of labour laws, will change.

b) Date of start

The date or activity which would mark the start of the work whichever is later should be clearly
stated in the contract terms. It is the pre-condition to be met by the client so that the contract can
be started. For e.g. - 10 days or site clearance whichever is later is treated as date of start.

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c) Date /Act of completion

Either the completion date of the contract is mentioned or the act which will be treated as
completion. Following are some of such acts:

 In case of construction supervision, handing over of the completed

infrastructure will amount to act of completion
 In case of Detailed Project Report, Feasibility Studies, Surveys etc,
submission of the final report or acceptance by the client will be treated as
completion.
 In certain cases, final approval of regulatory authority is required

d) Duration /validity of the contract

Duration of a contract must be clearly stated in the contract terms which varies with the type of
work undertaken by RITES. In case of any delay, there would be a clause under what conditions the
contract term can be extended & whether the contract price will change and accordingly amend it.

Contract Type Duration

Consultancy 6 months to 2 years

Export 6 months to 1 year

Lease 5 to 7 years

Inspection 3 months to 1 year

Detailed project report (DPR) 6 to 9 months

Project Management Consultancy 2 to 3 years

(PMC)

Procurement (MSM)
1 to 3 years

e) Basis of fee

The bases of fee in a contract vary as per following:

I. In Report preparation contracts-Lump sum fee is paid, once the report is

prepared and submitted by RITES.

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 II. In Export contracts- Fee is according to the cost of material to be exported
(taxes may be inclusive or exclusive)
III. In O&M contracts–Fee is decided with respect to the deployment of particular
manpower having a requisite qualification.

 Maintenance focused-without reference to manpower deployment. In such contracts. RITES has

to send a particular number of personnel to the client and client will decide when to use them
for maintenance work.
 Scope and manpower specified-In such case, the work of maintenance is stated and requisite
numbers of people are employed.
IV. Inspection –Fee is as on the basis of % of material inspected

f) Dispute resolution

All disputes should be attempted to be settled amicably within the framework of the contract.

CLIENT/PARTY CONCERNED DISPUTE RESOLTION MECHANISM

Central govt PSEB

State govt State mechanism

Private party Arbitration and Reconciliation Act of

1996

Foreign Party International Council of Arbitration

Indian railways Guidelines issued by Indian Railway

Board

Contractor Expert from RITES

g) Conditional Clauses

Certain conditions are to be included in the contract subject to acceptance and approval from client:

 Deviation, substitution & extra item when said material is not available.
 Client’s involvement in choosing outsourcing party before and sometimes
during the work which is general in deposit works

28
h) Compliance to labour rules

 Consultancy contracts –Labour laws compliance is not required.

 EPC, Execution – Principal Employer is responsible for taking care of the
labour laws.

i) Support required from the client

Based on the experience of the management and previous reports on the subject this clause is
determined for the contract. The contents of this clause are:

 Office and accommodation – In case of foreign projects or projects that

require deployment of manpower, the client should provide for the same.
 Vehicles
 Computers
 Permit required if any, to enter a particular forbidden area (in case of defence
projects, powerhouse, forests, and airports) by the concerned authority.
 Visa & work permit in case of foreign projects.

For e.g. Like in the case of contracts of ministry of defense, there must be a confirmation from the
govt. that the Govt. will provide support to RITES in the form of satellites and GIS pictures.

j) Restrictive clauses

The client may impose some restrictive clauses in certain contracts:

 Work in running system in case of highly sensitive operations which cannot be

stopped. E.g. In railway tracks, gap period between train arrivals are utilized
for the concerned work.
 Seasonal Working hours (Ratan Pass; No work of rivers done in rainy season)
and depending on hours of the day(Work is restricted to night in case of JNU
campus)
 Extra remuneration, insurance charges borne by the client in case of difficult
areas. For e.g. In Afghanistan procurement contracts, client had offered double
salary to personnel; J&K, north eastern states.
 Other restrictions:

In case of man-month based- the number of years of experience and qualification of men.

29
In case of material - A particular make of a product if is to be used, is specified in the contract.

In case of export – shipping agency may be specified in the contract.

k) Force Majeure

Force majeure conditions can be defined as:

 Any cause which is beyond the reasonable control of both the parties.
 Natural phenomena such as floods, drought, earthquakes and epidemics
 Act of govt. authority, domestic or foreign, such as wars declared or undeclared
quarantines, embargoes, licensing control on production or distribution restrictions.
 Accident or disruptions such as fire, explosion, increase in power cut, breakdown of
essential machinery or equipments etc.
 Strikes, slow down and lockouts

3) COMMERCIAL ASPECT INCLUDE:-

a) Statutory taxes
A precaution needs to be taken that reference to rates applicable is covered along with the
contingency with regard to change in rates and change in taxes.

 In Study and PMC contracts- service tax and income tax is applicable.
 In execution & other similar contracts- VAT, service tax, works tax are applicable.
 In export contracts - custom duty (Taxes in this type of contract can be inclusive,
exclusive, not applicable or due in future)
 In Lease contracts– Income Tax
 In Foreign Projects – Withholding Tax is an extra tax that is included

b) Patent and copyrights

RITES must ensure whether the patents and copyrights (regarding a particular technology,
equipment to be used) are available to RITES for use. If they are available permanently, then at what
cost is it available.

Also, RITES also has to obtain copyrights for its own reports to avoid any of the results of its reports
to be used by unauthorized parties.

c) Insurance

Insurance is an important clause to be dealt with in contracts. Insurance is mainly of:

30
  Material-regarding destruction, damage etc.
 Manpower-When there is a risk of life and property of the RITES personnel due the
conditions related to site/region. For e.g.: J&K, Afghanistan

d) Deliverables

In case of consultancy contracts, deliverables should be clearly defined for converting the value of
deliverables into monetary terms (for the purpose of quoting a bid) and complying with them during
execution. E.g. – No. of copies of reports to be given during the project, number of presentations of
report.

4. FINANCIAL ASPECT INCLUDE FOLLOWING CLAUSES:-

a) Currency
The contract currency can be:

 Foreign currency as Dollar, Euro

 Rupee (In projects where funds are provided by Ministry of External affairs or
Ministry of Finance)
 Local currency of the client country
 Mix of two currencies. For e.g.in an Afghanistan project of RITES, a mix of Euro and
the local currency Afghani is used.

A new bank account is opened for each new project as per the RBI guidelines.

b) Reimbursable Expenses

c) Price Escalation

d) Liquidity damages (LD)

These are the monetary compensation for a loss, detriment, or injury to a person or a person's rights
or property, awarded by a court judgment or by a contract stipulation regarding breach of contract.

 In reports based contracts for e.g. DPR, LDs are almost negligible.
 In execution contracts, LDs are present in very less quantity.
 In case of delay in inspection, LDs are imposed.
 In case of EPC and deposit works involving construction of assets, the quantum and
implication is of the liquidity damages is more. Delay in completion of the work due
to reasons attributable to the contractor shall attract liquidated damages @ 0.5%

31
 per week of delay or part thereof for the entire value of work subject to a maximum
of 10% of the total value of work subject to a maximum of 10% of the face value of
the Letter of Award.

5) ACCOUNTS ASPECTS INCLUDE FOLLOWING CLAUSE

a) Maintenance of account: - Accounts should be maintained separately for

 Internal purpose
 Client purpose
All the transactions related to the contract should be debited or credited accordingly. Hence proper
maintenance of account is necessary for the further

b) Keep accountable of reimbursable expense: keeping acts of expenses which are reimbursable
from client.

b) Periodical submission of account(specially in deposit works)

c) maintaining of separate bank account
d) maintenance of joint venture account

The above are the clauses included in each aspect. Now further in the next chapter, I will be
explaining the types of contract in differentiating between the above clauses in each Aspect.

32
CHAPTER - 3

33
3.1 PROJECT MANAGEMENT IN RITES

a) CONTRACT MANAGEMENT IN RITES LTD.

Contract management in a transportation and infrastructure consultancy firm is a blend of analysis

and study of the concerned Strategic Business Unit (SBU)-for the engineering details along with the
work of the Finance and Accounts division of the company-for deciding on the cost structure for the
project at different stages of the project. The focus of the project is from the point of view of the
F&A division. So only the financial & part of legal aspects of contract management are studied and
the technical aspect will be kept outside the purview of the project.

Presently RITES has over 600 on-going projects in India besides over 30 projects overseas.

There are different SBUs in RITES but there are few contracts of similar nature which can be clubbed
to fall under the following 10 heads.

Fig: Major types of contracts in RITES

34
 b) BUSINESS PROCESS

Business process in different types of contract is different. The important clauses that were brought
out by the study of these different contracts are discussed in the following pages:-

 CONSULTANCY

The consultancy contract in itself is a major type of contract which can be further subdivided into 7
types of contract.

Below figure explains the business process of consultancy:-

Fig. : Classification of Consultancy Contracts in RITES

Summing up the 10 major and 7 subheads, there can be a total of around 17 types of contracts
where RITES can enter into.

Example OF CONSULTANCY

35
Type of Contract Scope of services Activities in the Payment Terms
Contract

Study Model study and I. Model study and 35%- Studies phase I,
report. Guide bund further decided in
detailed design of
design, II Conceptual stages on completion
bridge and proof
drgs/ CADs Design of par of field survey
checking
drawing of bridge, Phase II 65 %-(main
Structure design Proof bridge-40%, approach
checking of bridge bridge 5%, Model
design Submission of survey 8%, model
tender drawings along design 6%, approach
with BOQ alignment, alignment
staking and Report 6% )

Checking Proof checking Design check of bridge On submission of

report

Bridge Inspection of bridge Inspection report Proof 25%-On visit and

checking inspection by expert
10%-On ultrasonic test
25%-design & drawing
15%-Report

Rehabilitation Rehabilitation of bridge Preliminary cost 15%-On submission of

Consultancy for repair estimate Design and preliminary proposal
drawings Tender 7%-On submission of
finalization Project final proposal 7%-On
management including fixation of agency 71%
site supervision in eight monthly
installment for
supervision

DPR Consultancy for Securing feasibility 25 % - M. Fee

preparation of DPR report Approval of
25 %- secure. FR 25%-
GADs from railways
approv.

36
 Design of Wagons, side Preparation and 25 %-submission of
discharge coal hopper, submission of bid estimate, plan Addl.
bulk food grain wagons documents and Fee –on bidding docu.,
detailed estimates bid evaluation,
checking drawings etc.

40%-M. fee
Study and analysis of
requirements - Engg.
And software
Preparation of design
for prototype.

RDSO liaison and 25%-Supply of

approval approved drawings
Design

15%-Approval of
prototype

20%-On completion of

Contract

ISO ISO certification 10%-Training

20 %- Survey,data

Assistance for Collection

documentation and
40 % -Documentation
certification
30%-Auditing

 INSPECTION

37
 Scope of services Activities in the Payment Terms
contract

3rd party Inspection at Measurement basis. On completion of

inspection/quality execution stage inspection
surveillance

 OPERATION & MAINTENANCE

SCOPE OF SERVICES ACTIVITIES IN THE CONTRACT PAYMENT TERMS

Track maintenance Rail removal Based on Km of rail track

maintain. 100 % on completion
on monthly basis

Point and crossing removal

Ballasting

Operation maintenance & Operation of coal trains loading Against work executed and
management of rail transport point and exchange yard certified on monthly basis. Item
system rate as per BOQ schedule

Maintenance of locomotives,

wagons inc. POH

Track rehabilitation Associated work in marshalling Against work executed and

yard certified as per BOQ items and
rate

 EPC (Engineering Procurement Construction)

SCOPE OF SERVICES ACTIVITIES IN THE CONTRACT PAYMENT TERMS

Turnkey project of trenching, Planning Sub. Letting On completion of work as per

laying, testing Construction supervision BOQ- items and rates

38
  TRAINING

SCOPE OF SERVICES ACTIVITIES OF THE CONTRACT PAYMENT TERMS

Training Planning 25%-Advance

ITEC Faculty liaison/ appointment 75%-After organizing

ISO Training programme Organizing training Training

 LEASE

 Leasing in Rites ltd deals with the rolling stock, primarily it is in outside India. Domestic
leasing has just taken up in west Bengal.
 It has been started from last 15 yrs
 Leasing is done in a 5 yrs contract
 Billing is maintained every month
 Generally it is a wet lease :-
Procurement for rolling stock for lease is from units under Indian railways, sometimes in service: -
rolling stock are procured and customized for the specific purpose of used by clients. Example:
changing of gauge to suit client’s requirement.

Procurement and customization may take to 6mnth to 1 n half yrs depending upon the size of the
lease.

Along with the rolling stock, rites need to post experts at the clients work shop. Availability of rolling
stock is guaranteed is specified for a specific period.

 EXPORT

The unit is engaged in export of locomotives, rolling stock, leasing, and rehabilitation of rolling stock
as well as providing management support and technical assistance to railway system abroad.

 MATERIAL MANAGEMENT SYSTEM (MSM)

 The unit provides procurement consultancy services for capacity building in public and
private partnership for the department of expenditure, govt. of India.
 The unit’s expertise and customer satisfaction resulted in getting of repeat procurement
consultancy contracts from the Ministry of Health Family and Welfare, govt. of India.

39
  REHABILITION

 This unit ensures the maintenance of locomotives, rolling stock, and repairing these in case
of any miss happening of the equipments.
 For the repair, company provides technical assistance, management support for
rehabilitation.
 CONSTRUCTION SUPERVISION:-

This include deposit works contract

Since Deposit Works Contracts are the most important types of the contracts in the Contract
Management activities of RITES as high as around 50% of all types of contracts, our next area of
focus will be Deposit Works Contracts.

What are Deposit Works Contracts?

These refer to the Works which are executed by RITES with Works Contracts signed by RITES for and
on behalf of the client and with the client making available funds to meet the Works Contract Value,
RITES fees and other related expenses come under the category of deposit works. Before taking up
any Deposit Work, an agreement has to be executed between RITES and the client indicating clearly
the Scope of Work, the financial arrangements envisaged by the client for smooth progress of works
and the items on which RITES should take prior approval of the client.

FINANCIAL & LEGAL ASPECTS WHILE ENTERING A CONTRACT

A) Tender system

The tender system is one of the most effective methods of securing competitive rates for execution
of work.

Tender can be classified into the following classes:

1. Single tender

2. Limited tender

3. Open tender

40
Single tender: The system of single tender should be resorted to only in exceptional circumstances.
This type of tender is issued when work is very urgent. This type of tender is given to those firms
which are well known and confident with experience, and they completed their work on time with
full of satisfaction.

Limited tender: The job is of a special nature which could be executed only by a few special types of
Contractors who are well versed with the job. The tender inviting Authority should make out an
approved list of such specialist contractors by ascertaining from the officials of railways. Details of
good contractors who have done similar works and as far as possible, their financial capacity. It has
to be, ensured that only Contractors whose performance has been adjudged satisfactory should be
included in the list.

Open tender: It means open to any organization dealing in similar works. These types of tenders are
published in newspapers or press note or notice inviting tender.

Open tender is in two packets-Technical Bid and Financial bid (explained later).

Salient features of tender

a) Brief scope of work

b) Estimated cost

c) Type of tender-Item rate or Percentage Rate or Lump sum

d) Stipulated Period of completion

e) Names of news papers and Dates when NIT published

f) Date and time tenders are to be opened

g) Date up to which Tender offers are valid.

B) Tender document

A Tender document can be of 2 types:

41
PART – 1:- Technical Bid Packet

i) Certificate of Auditors to assure that Special Conditions/Specifications for qualification are fulfilled
-which are discussed in the pre-qualifying criteria.

ii) Certification from the party for which the tendered has done similar kind of work in the past.

PART – 2:- Financial Bid Packet

Schedule of Quantities (Bill of Quantities)-Rates of various items unit wise to be used in the
construction.

C) Invitation of tenders

Generally open tender in two packet system (Technical bid & financial bid) are invited through
Tender Notice published in newspapers and RITES website. The contractors submit tenders to the
company.

 Pre-qualifying criteria

Criteria Normal Areas Difficult Areas

1.Work Experience(during Bidder should have Bidder should have

the past 5 years of completed one Similar work completed one Similar work
submission of the bid) of 75% of estimated cost of of 50% of estimated cost of
work work

Or Or

Completed two Similar works Completed two Similar works

of 50% of estimated cost of of 30% of estimated cost of
work work

2.Profitability The applicant firm shall be a profit(net) making firm and shall
not have made losses in any of the last 2 financial years or
any 3 out of last 5 financial years.

3.Liquidity (Estimated cost of (Estimated cost of

works*4)/Completion time in works*3)/Completion time in
Sum of available credit
months months
facility and liquid assets=

42
4.Annual Turnover in any of 2*Estimated cost of 1*Estimated cost of
the last 5 years works*(12/Completion time works*(12/Completion time
in months)*Annual Turnover in months)*Annual Turnover
of the current year of the current year

NOTE: Difficult areas are Northeast states, J&K, Andaman & Nicobar Islands.

D) Tender validity

The Tender shall be valid for a period of 90 days from the due date for submission of Tender or any
extended date as indicated by the employer.

E) Authority to sign

 If the Applicant is an individual, he should sign above his full type

written name and current address
 If the Applicant is a proprietary firm, the Proprietor should sign above
his full type written name and the full name of his firm with its current
address.
 If the Applicant is a firm in partnership, the Documents should be
signed by all the Partners of the firm above their full type written
names and current addresses. Alternatively the Documents should be
signed by a Partner holding Power of Attorney for the firm.
 If the Applicant is a limited Company, or a Corporation, the
Documents shall be signed by a duly authorized person holding Power
of Attorney for signing the Documents.
 If the Applicant is a Joint Venture, the Documents shall be signed by
the Lead Member holding Power of Attorney for signing the
Document.

F) Inspection of site by the Tenderers

Tenderers are advised to inspect and examine the site and its surroundings and satisfy themselves
before submitting their tenders, as to the nature of the ground and sub-soil (as far as is practicable),
the means of access to the site, the accommodation they may require and in general information as
to risks, contingencies etc. which may influence or affect their tender. A tenderer shall be deemed to
have full knowledge of the site whether he inspects it or not.

43
G) Earnest money deposit

It is the amount which accompanies the application for the contract which shows the contractors’
seriousness about entering into the contract. It, however, should not be confused with a down
payment.

H) Refund of Earnest Money in case of Two Packet System

The Earnest Money of the Tenderers whose Technical Bid is found not acceptable will be returned as
soon as scrutiny of Technical Bid has been completed by the Employer.

I) The Earnest Money is liable to be forfeited:

 If after bid opening during the period of bid validity or issue of Letter
of Acceptance, whichever is earlier, any tenderer withdraws his tender
or makes any modification in the terms and conditions of the tender
which are not acceptable to the Employer.
 In case any statement/information/document furnished by the tenderer
is found to be incorrect or false.
 In the case of a successful tenderer, if the tenderer

Fails to furnish the Performance Guarantee within the period specified

Fails to commence the work within 15 days after the date of issue of Letter of Acceptance or from
the date of handing over of the site, whichever is later.

The Technical Bids of only those Tenderers who have deposited the requisite Earnest Money in an
acceptable form will be opened.

J) Bank guarantee

44
  Performance Guarantee:

It is given by the successful bidder in the form of an irrevocable bank Guarantee amounting to 10%
of the contract value. Performance Guarantee shall be released after ‘satisfactory completion of the
work and maintenance period is over. Wherever the contracts are rescinded, the Performance
Guarantee will be encased and the balance work would be got done separately.

 For security:

Bank Guarantee is a guarantee given by a bank to some third party whereby the bank undertakes to
pay the third party certain amount if the party / person for whom the guarantee is given fails to
deliver his promise. Banks charge some fees for this. Suppose a company wants to supply something
to another company, the latter may ask the former to furnish Bank Guarantee for certain amount.

K) Security deposit

It is 10% of the value of the contract value of the work .Security deposit shall be refunded after
clearance /acceptance of completed work by rites. The contractor will not be allowed to further sub-
contract any part of the work allotted to him.

Unsatisfactory performance of the contractor(s) or failure to adhere to any of the conditions

stipulated in the tender/contract documents shall attract forfeiture of the Security Deposit. In
addition, RITES reserves the right to terminate the entire contract or a part of it and get the work
executed at contractor’s risk and cost.

Security Deposit shall be refunded after clearance/acceptance of completed works by RITES.

L) Mobilization Advance

Provision of mobilization advance should essentially be need based. Decision to provide such
advance should rest at the level of Board (with concurrence of Finance) in the organization. If the
Management feels its necessity in specific cases, then it should be clearly stipulated in the tender

45
document and its recovery should be time based and not linked with progress of work. This would
ensure that even if the contractor is not executing the work or executing it at a slow pace, the
recovery of advance could commence and scope for misuse of such advance could be reduced.

M) Tender opening and their evaluation

1. After submission of tender on date as stipulated in Notice Inviting Tender (NIT), Technical bids are
opened by the Employer in the presence of the Tenderers or their representatives and financial bids
are kept in a sealed envelope.

2. Evaluation of technical bids as per the requirements stipulated in tender ,done by the tender
committee which consists of engineers of the concerned SBU and a finance person from the F&A
division. This Vetting requires seven to ten days.

3. F&A division person is the one who checks whether the profits of the contractor are as per the
specified requirements. He also checks that the company has not suffered any losses in the past
years.

4. The committee checks whether the documents are authentic and the contractor has done a
similar work in the past.

5. Finalization of technical bid requires five to seven days.

6. Price bids of the technically qualified bidders will be then opened with intimation to the qualified
bidders.

7. Comparative statement of the rates quoted by the bidders is prepared which is again sent to
finance for vetting, which requires three to five days.

8. The tenderer whose tender is accepted shall be required to submit stamp papers of appropriate
value as per the provisions of Indian Stamp Act within 15 days of the date of issue of Letter of
Acceptance.

9. The Employer will direct him to attend the Employer’s office within 28 days of issue of Letter of
Acceptance for signing the Agreement.

46
3.2 QUALITY MANAGEMENT IN RITES Ltd.

Quality Management System of RITES covers the entire RITES organization as per the organizational
structure of RITES. RITES operates through a number of Strategic Business Units (SBU’s) merging into
Divisions which report to Functional Directors. The system covers all services for clients in India or
abroad executed through SBU’s / Divisions. The Quality Management System at RITES Ltd has been
designed in line with ISO 9001:2008. All elements and sub-elements of the standard are covered
under the QMS of RITES as a whole. The scope of Quality Management System of each SBU shall be
further defined in SBU level Manuals which shall also bring out exclusions as applicable to individual
SBU / unit.

1) QUALITY MANAGEMENT SYSTEM IN RITES Ltd.

Quality Management System at RITES consists of two types of processes – Corporate Processes and
Functional processes at SBU level.

A. CORPORATE PROCESS
Corporate processes largely cover overall policy formulation, corporate planning; fixation of annual
targets; finalization of MOU Targets; organizational structuring; resource mobilization / acquisition,
budgetary approvals and controls; financial / administrative sanctions of various types including
those related to resources; personnel, administration,

HRD, Corporate level marketing and client services, financial management; performance reviews and
directions through monthly MIS; BOD & AGM; major decisions like diversifications, joint ventures;
major capital expenditure; corporate communication, liaison with major clients etc.

Common procedures which are applicable throughout RITES have been documented at corporate
level and remain applicable to all SBU’s. These also include mandatory procedures as required by ISO
9001: 2008.

B. FUNCTIONAL PROCESSES
SBU level Functional processes include business planning, expansion and diversification, marketing,
mobilization of resources, project / service planning, its execution, client liaison and feedback and
realization of fee. Support Units have their own well-defined Functional Processes covered under
their individual systems supplementing the overall QMS of RITES.

47
 The criteria and methods needed to ensure the effective operation and control of various
processes, both corporate and functional, shall be established and where necessary documented in
various Quality System Procedures of corporate & SBU level.

Necessary resources and information needed to support the operation and monitoring of these
processes shall be provided and regularly reviewed, upgraded as necessary. Project specific
resources shall be identified through activities like project planning and approval of estimates.

It shall be ensured that processes are monitored, measured and where applicable analyzed at
suitable levels for smooth operations, fulfillment of their laid down criteria and targets and meeting
customer expectations.

Continual improvement is an important part of QMS at RITES, and it shall be achieved through
customer focus, client interactions, performance reviews and improvement of resources, processes
and systems.

All those processes, which are out-sourced and affect the quality of service, shall be subjected to
effective and appropriate controls to ensure conformity to the requirements. Such controls shall be
identified and implemented as a part of Quality Management System. The type and extent of control
shall be defined as part of Quality Management System at Corporate/SBU level.

For outsourced processes, RITES shall remain responsible for their conformity to requirements.

2) QUALIITY MANAGEMENT SYSTEM DOCUMENTATION

The QMS at RITES Ltd shall be documented through the following levels of documents:

a) Corporate Quality Policy Corporate, Quality Objectives with Deployment Plans and Quality
Objectives of SBU

b) Corporate Quality Manual.

c) Corporate Quality System Procedures as per Annexure D and Quality System Procedures of SBUs
as listed with respective SBUs along with records needed there in.

d) Other documents needed for effective planning, operation and control of processes, both internal
such as Check Sheets, Record Formats, Guidelines, Work Instructions etc. and documents of external
origin such as IS / IRS / other standards, manuals and codes, customer drawings, quality plans, etc.
along with records needed there in.

48
e) Project specific documents like Project Quality Plans, Procedures, Guidelines, work instructions,
formats, Layouts/Charts/Schedule etc. along with records needed to ensure effective planning,
operation and control of projects and the project related processes.

f) Records as required

CONTROL OF DOCUMENTS:

Corporate MR at Corporate Level and SBU MR at SBU Level shall be responsible for control of
respective documents in line with a documented Corporate Procedure on the subject.

CONTROL OF RECORDS:

The responsibilities to control the records shall be as per the documented Corporate procedure on
the subject.

Records to provide evidence of conformity to requirements and effective operation of Quality

Management System as identified under various Quality System Procedures shall be controlled.
Quality Records, which are of project specific nature, shall be identified during Project Planning and
accordingly maintained. These shall also include records required to be maintained by sub-
contractors, works contractors etc.

Generation of the record shall be ensured as per the requirements. Records generated shall be
maintained legibly and readily identified. They shall be collected, compiled, maintained, properly
indexed and filed as necessary. Adequate facilities shall be provided to maintain safe condition,
custody of records in such a manner that they are easily retrievable and are prevented from
damage, deterioration or loss.

3.3 COMPARISON WITH PEERS

1) BROAD COMPARISON WITH PEER COMPANIES

Since the major area of operation of RITES is engineering and transportation consultancy, so the
companies operating in the same domain as RITES are segregated into two classes of companies:

a) PSU Engineering Consultancy Organizations of India-

 Engineers India Ltd. (EIL)

 MECON Ltd.
 Water and Power Consultancies Services (India) Ltd. (WAPCOS)

49
  Engineering Projects (India) Ltd.

b) International Engineering Consultancy Organizations-

 Atkins Global
 Halcrow
 Scott Wilson
 STUP Consultants Ltd.
 Louis Berger
 LEA Associates South Asia Pvt. Ltd.(LASA)

2) COMPARISON ON CERTAIN PARAMETERS

a) Comparison based on Sectors of operation

For technical consulting firms real estate sector is emerging as an attractive sector. Solutions offered
by these firms range from consulting to turnkey as well as the provision of proprietary technologies.
A RITES on the other hand has low presence in EPC type of contracts because of the high risk
involved. RITES is more specialized with a strong focus on the railway sector with a smaller presence
in other transportation sector.

b) Comparison based on the source of business

The source of business for technical consultancies around the world is predominantly from four
sources-Central governments, State governments, Local Governments and Private Sector. More than
40% of the business for the largest technical consultancies comes from the private sector while the
rest is contributed by the government sector. However, in the case of RITES, the level of business
from the private sector is small as compared to the Railways sector.

c) Comparison based on Method of Procurement

Technical Consultancies around the work have a variety of procurement mechanisms. Selection by
tender is the predominant source of getting work through qualification based selection; design and
build contracts and PPP based selection. RITES gets most of its business from the govt. on a
nomination basis with competition in getting business becoming prevalent now. Follow up work is
another category where the consultancy firms do not face competition.

d) Comparison based on Geographies of Operation

50
For most large consultancies, which are also based in developed countries, the biggest markets of
operation as Western Europe and North America, China.The African and South & Central American
markets are also important but are viewed as having less potential.

For RITES, the main focus internationally has been on the African and South Asian countries with
some exposure also in Latin America and the Middle East. However, the technology levels and skills
needed in the developed country markets make it difficult for RITES to tap those markets.

On the basis of the study of RITES firm as a whole, following areas of strengths can be brought out
which are an evidence of the efficient operations of the company:

 It has always been a profit making company since its inception in 1974.It has
been regularly paying dividends to the government.
 There has been a strong growth in business and in profits which can also be
attributed to diversification of the company to areas other than those related to
Railways sector.
 The company has a strong backup of Indian Railways. Hence there is no
shortage of technical manpower. The company has a low attrition rate.
 RITES is entering into countries where technology like our country prevails
mainly South Asian, African countries.

CHAPTER: FOUR
4.1 FINDINGS

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1. All legal aspect that are required starting a project.

2. All financial aspect of a project.

3. Project management and project planning in RITES.

4. Contract management for a project.

5. RITES Ltd. provides different services like consultancy, engineering and project management in
India and abroad, and in different sectors like Railways, Highways, Airports, Ports, Ropeways, Export,
etc.

6. Financial management system of RITES.

4.2 LIMITATIONS

1. The company being a PSU , cannot provide certain information like on-going
projects’ data, parties which are considered for making offers etc. as they are kept
confidential.
2. Since the present projects’ data and information could not be obtained, so the study is
based on projects completed by the company in the past.

4.3 CONCLUSION

The project has covered the contract management from the financial and bit of legal aspects. The
study has led to the formulation of quite comprehensive checklist for certain types of contracts
which also serves as findings of the project.

The costing aspects are also important parts of the contract are included in the checklist and the
determining of the direct expenses is done separately.

The project has included the qualitative aspects of the comparison with peer companies of RITES
because of unavailability of reports of all the companies especially the international firms.

4.4 RECOMMENDATIONS

Recommendations are subdivided into four major heads:

1. Contractual

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a) The checklist for some of the major contract types will serve an important objective to get a quick
view on the necessary contract clauses without going through the various contracts entered in the
past for the same head.So it can be consulted as per the requirement to save time and efforts.

b) Reference to client history may be made to ensure taking care of earlier experience with the client

c) After careful understanding the request for offer, observations with regard to acceptance of
conditions or otherwise should be brought out clearly in the offer. These may pertain to technical
parameters, financial aspects such as escalation, commercial clauses such as meeting statutory taxes

(service tax, VAT etc.)

d) Clarity about role of RITES needs to be given attention. Since implications are far reaching.

e) While execution of project certain aspects require special attention such as :-

Maintain of hindrance register – to substantiate extension of time, if required

Recording of acceptance of extra and substituted work to claim remuneration beyond contract
terms duly linking this with correspondence with client.

f) On completion of project, issues require attention are

 Commitment for maintenance period,

 Handing over report/ documents in terms of contract to client
 Obtaining completion certificate for further usage - for future offers

2. Costing

a) Adhere to strategic costing in view of client, nature of services sector, expected future business,
entry in new segment, for formation of JV with foreign partner etc.

b) Monitoring of cost under various cost heads and variation if any to be analyzed for taking
corrective action.

c) The SBU overheads are divided among all the projects of an SBU in the ratio of the direct
expenditure of each project. In case a SBU is not able to get the expected number of projects, the
SBU overhead charged per project increases. This might show loss on the part of that project which
is not a true picture. So this practice should be changed to a more rational way of overheads
absorption.

3. Legal

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a) Legal expenses in the contract are soaring high so they need to be controlled in order in achieve
efficiency in costing.

Increase in compliances, new insertions and frequent amendments in laws

Increased litigations particularly in construction supervision works and study positions

Approvals from clients are not taken in time for deviation/extra work or for time extension.

b) To avoid /minimize litigation and claims of client/contractors/other parties upon RITES following
measures may be taken:

Proper formulation of contracts in consultation with the legal cell to avoid ambiguities in the
contract clauses (ensuring that income, service tax, works tax and other liabilities are explicitly
covered)

A legal cell duly supported by legal experts especially in contract and tax laws so that they can help
during vetting the contracts, defending/filing cases against /by the company.

Any deviation should be vetted by the legal experts.

4. Others

a) Proper project/contract records are required to be maintained for taking care of:-

Succession plan – change in dealing engineers and key staff

Extra ordinary events - to use as input for future reference

Post audit – On completion of project a review needs to be made for risk management study

Maintaining records of reports, other vital documents as part of knowledge and information
management scheme in addition to future reference by client – hard copies as well as soft copies.

As part of the business development exercise, final report should cover suggestions to client for
further studies, extensions of work carried out duly justifying their requirement along with benefits
that can be derived by client

b) ERM scheme should be developed and the ERM process needs to be well integrated with the
current FMIS.

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c) Marketing of the company as a whole should be undertaken with the view to make it highly
recognizable with the general public which will be helpful in case of IPO in the future.

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 BIBLIOGRAPHY

Annual Report of RITES limited 2008-09

Contracts for Engineering and Construction Projects by P.D.V. Marsh

Corporate Plan of RITES limited prepared by PWC

Cost Control Handbook by RMS Wilson

How to make it big as a consultant by William A. Cohen

http://www.delhimetrorail.com

http://www.dpe.nic.in

http://www.efsolutionsinc.com/Common_lease_types.htm

http://fieo.org/view_section.php?lang=0&id=0,63,75,529

http://www.indianrailways.gov.in

http://www.ogc.gov.uk/documents/Contract_Management.pdf

http://www.projectsmonitor.com/detailnews.asp?newsid=13937

http://www.rites.com

http://www.thaindian.com/newsportal/business/finance-firm-to-advise-uttar-pradesh-on-township-
development-project_10097811.html

RITES Journals

The Basic Principles of Effective Consulting by Linda K. Stroh, Homer H. Johnson

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