Which of the following statement is incorrect about security money deposit?a)It is 10 % of the tendered amountb)It is inclusive of earnest money depositc)This money can be forfeited if contractor fails to fulfill the terms of the contractd)It is the margin by which a contractor is allowed to make profit in a projectCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

Introduction:
Security money deposit is a financial arrangement made between a contractor and the client to ensure the fulfillment of the contractual obligations. It is an important aspect of contract management and helps to protect the interests of both parties involved in the project.

Explanation:
Let's analyze each statement and determine which one is incorrect:

a) It is 10% of the tendered amount:
This statement is generally true. The security money deposit is usually a certain percentage (often 10%) of the tendered amount. It acts as a guarantee for the client that the contractor will perform the work as per the contract terms.

b) It is inclusive of earnest money deposit:
This statement is generally true. The earnest money deposit is the initial amount paid by the contractor to show their seriousness and commitment towards the project. It is usually a small percentage of the tendered amount and is considered as part of the security money deposit.

c) This money can be forfeited if the contractor fails to fulfill the terms of the contract:
This statement is generally true. The security money deposit can be forfeited if the contractor fails to fulfill the terms and conditions of the contract. It acts as a form of penalty or compensation for the client in case of non-compliance or breach of contract by the contractor.

d) It is the margin by which a contractor is allowed to make a profit in a project:
This statement is incorrect. The security money deposit is not the margin by which a contractor is allowed to make a profit in a project. It is a separate amount that is meant to ensure the performance of the contractor and to safeguard the interests of the client. The contractor's profit margin is determined by other factors such as the contract price, project costs, and overhead expenses.

Conclusion:
In conclusion, the incorrect statement about security money deposit is option 'D'. It is important to understand the purpose and function of security money deposit in contract management to ensure a smooth and successful project execution.

Answer

Security money deposit- The contractor deposits about 10% of the tendered amount with the department after tender is accepted. This is inclusive of the earnest money already deposited by the contractor. This money is kept as a check so that the contractor fulfils all the terms and conditions of the contract and carries out the work satisfactorily in accordance with the specification and maintains satisfactory progress for completion of the work. In case of failure in fulfilling the terms of the contract, the whole of the security money or part of it is forfeited by the department. When the contractor completes the work as per drawings, specifications and directions of the department within the specified time, the security money is refunded to the contractor. Normally the security deposit is refunded after the maintenance period, which may be 6 to 12 months after the completion of work, and it's handing over to the department.

Top Courses for Civil Engineering (CE)View all

General Aptitude for GATE

GATE Civil Engineering (CE) 2025 Mock Test Series

Fluid Mechanics for Civil Engineering

General Awareness & Knowledge

Topicwise Question Bank for Civil Engineering

Top Courses for Civil Engineering (CE)

Top Courses for Civil Engineering (CE)

Suggested Free Tests

Related Content

Mock Test Series

Subject-wise Courses

Subject-wise Courses

Other Engg Branches

Company