You have not mentioned what type of contract it was. Is it long-duration contract or short contract for the execution of some services? Have the labour charges mentioned in the quotation by the contractor?
If the contract is for short period and it is for providing some services then generally contractors mention clearly the material cost and labour cost. ESI is payable for the labour charges. If the labour charges are not mentioned then it is assumed that 40% is the labour cost and ESI is paid accordingly.