What Are the Best Terms & Conditions of an Effective PRW Contract?

PRW or or Piece Rate Compensation is a term used mostly for small contracts in the Construction and Manufacturing Industry. Under this system, construction workers or small contractors are paid based on the number of units, or pieces, they have completed/constructed, rather than on the basis of the number of hours or days required to complete work. The workmen to be deployed in a PRW contract should be appropriately qualified, skilled, experienced and trained in their respective trades.

Why PRW System Needed Today?

Power and fuel costs for 2nd quarter of FY 22–23 have jumped between 10–15 per cent. As a result, fast-rising fuel prices are cutting into civil construction and other construction contractors’ profits. Thus cost effectiveness in construction is very important. There are many strategies that civil contractors and other construction contractors can implement now to reduce cost of construction. To remain competitive, awarding PRW contracts is one of the most effective strategies today. All contracts should be awarded on a PRW compensation basis. In this system, Project Authority should ensure availability of construction drawings, construction materials, sufficient quantity of work or construction fronts, supervision and quality should done by own engineers/ technical manpower and labour payment is based on the number of units/quantity of the BOQ they complete, rather than on the number of days present.

Terms & Conditions of any Effective PRW Civil construction & other Contracts:

1. Payment Terms: PRW Contractor shall submit Invoice by 26th of every month. Contractors are liable to pay their worker’s wages as per latest minimum wages act into the workers bank accounts and have to submit the proof of remittance to the Client on or before 5th of every month. The client will support the contractors by providing advance for wage payment, which shall be regularized within 30 days. Balance Contractor payment after adjusting labour wages advance will be released within 30 days after submission of the all relevant document following the client’s standard terms. PRW Item rate work i.e 97.5 % amount of bill shall be released as progressive payment & 2.5 % shall be kept as retention and which shall be released within 3 months from the date of completion of the work and final bill settlement. PRW Contractor should ensure delivery of standard productivity from the workers. Client reserves the right to make necessary deductions from contractor’s bills as applicable for loss of productivity attributable to the contractor/ worker.

2. Company (or Client) Obligations:

a) Labour accommodation shall be provided by the Client.

b) Supervisor charges, cook charges in contractor scope.

c) Safety material shall be provided by the client on a returnable basis, however material shall be reconciled. If the worker/ contractor has not returned the materials, reissuing PPE’s within 6 months an amount as per client’s decision may be deducted from contractor invoices.

d) Tools & tackles, materials, consumables shall be provided by the client free of cost/returnable basis.

e) Employer’s Contribution in EPF shall be in the scope of client.

f) Charges for medical check-up, for Processing of gate pass for workers shall be the client’s scope. If a worker leaves the site within 3 months after completion of medical/gate pass, the amount incurred by client towards the process shall be debited to contractor account.

g) Transportation from labour camp to work location is in client Scope.

3. Contractor (PRW Contractor) Obligations:

a) Contractor has to return gate passes & RFID Cards of their workers after completion of entire scope of works/workers left from site. If the contractor is not able to return gate passes an amount as per client’s norms shall be recovered from the bill for each gate pass.

b) Any other expenses shall be under contractor’s scope.

c) No advance for labour mobilization shall be paid.

d) Food for labour shall be in the Contractor’s scope. No ration advance shall be paid. If provided by the client, a canteen/mess facility for workers may be utilized as per rates fixed by client.

e) Travelling expenses of workers from hometown to project site is in contractor’s scope.

f) Housekeeping of work premises shall be in contractor’s scope.

g) Contractor responsible to maintain attendance of their labour minimum 90 % on daily basis.

h) Contractor is liable to pay their worker’s bonus, leave wages, full & final settlements etc.

4. Scope of work: The total scope of work comprises Civil/Mechanical/Electrical Item rate works as per SCHEDULE OF ITEMS, QUANTITIES & PRICES. The whole job is to be completed as per client’s specifications.

5. Price Basis: PRW contract is a unit rate Contract and the contractor shall be paid based on actual quantities executed. The unit rates shall be firm & fixed during the contractual period and not subjected to any escalation during execution of the contract.

6. Time for Completion: The entire scope of Works/ Services shall be completed within the stipulated time [DATE]. If required, suitable amendments will be issued by the client.

7. Taxes & Duties: The unit rates / Total Contract Price is inclusive of all applicable taxes, duties, levies and cess except GST, which shall be extra as applicable. Further, (a) If there is a loss of credit or additional liability and/or interest etc., arising due to non-compliance of GST provisions by the PRW contractor, the same shall be paid by the contractor to the client. (b) If there is any delay in remittance of GST liability to statutory authorities by the contractor, the same shall be withheld from the due amounts, and the same shall be paid only after submission of documentary proof pertaining to such remittances.

8. Insurance: Workmen compensation policy or ESI shall be in client’s Scope.

9. Warranty/DLP: The PRW contractor shall ensure that the workmanship and quality of the site works, fixing and commissioning work is of high standards and warrant that all the works executed by them would be free from any defects due to poor workmanship during fixing and up to 15 days.

10. CPBG: Contract Performance Bank Guarantee not applicable

11. LD: Not Applicable.

Also Read: How to Control Real Estate Prices during Rise in Civil Construction Materials Prices on Higher Input Costs

Conclusion

When in a PRW contract, the contractor or workers try to complete many units within a short time, they may not achieve the required product quality. This may result into substandard products or construction. This might bring losses to the organization or the workers having to redo the work, reducing their income. Some workers may not be satisfied with what they get.