ECM307

CHAPTER 2
CHAPTER 2
INTRODUCTION TO THE CONSTRUCTION INDUSTRY

2.1 Current Construction Industry Scenario

Construction industry plays an important role in the development of Malaysian economy.

It accounts for only 3.9 % of the gross domestic product (GDP) in second quarter 2008.
The industry is critical to national wealth creation as it acts as a catalyst for, and has
multiplier effects to the economy and also enables other industries namely
manufacturing, professional services, financial services, education and others. Recent
years’ decline in the performance of the Malaysian construction industry has resulted in
the urgent need for the Malaysian construction industry to chart its direction towards
strengthening its foundation to face current and future challenges (CIDB, 2008).

The construction projects can be sourced from Public sector and Private sector, and
government being the biggest key player (owner).

The construction projects can be grouped into two, which are Civil Engineering (CE)
Works and Building Works. CE Works includes the construction of road and highway,
railway, wharf, airfield, drainage, power station, dam, and etc. Building Works include
residential house, office, shop lot, factories, schools, hospital, and etc.

There are many stages and parties involved in a particular construction project. The
problems facing by construction industry currently (2004) are:

a) Highly traditional and fragmented

b) Slow to embrace new technology
c) Restrictive / outdated building codes
d) Labour agreements and craft jurisdictional issues
e) Liability and legal considerations
f) Lack of profit motive or other incentive

Malaysian construction industry strategic and operational challenges are as follows:

a) Inefficient and ineffective method and practices in contractor’s registration and
administration procedure, procurement methods and practices, contracting
approaches, construction methods, planning submission and building plan approval
procedures.
b) Inability to attract and develop local workforce for the industry mainly due to the
Dirty, Dangerous, Difficult image of the industry.
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c) Difficulty in securing timely and adequate financing at the various stages of
construction, and difficulty in repatriating profits/dividends.
d) Inability to provide total integrated solutions in foreign projects, unlike Japanese,
Korean and German construction companies which could provide total solutions that
include financing package and equipment.

Construction industry directly or indirect, involves many industries/sectors/parties as

below:
a) Financial institution
- The sector that provides credit and financial facilities to various parties in the
construction industry.
- They include banks, finance companies, and credit corporations.

b) Owner / client / developer

- The sector that initiates the project, assumes risk, and enjoys the profit or meets
the loss.

c) Consultant
- The sector that plans and designs projects, prepare tender documents, advice on
the award of contracts, supervises implementation and administers contract.
- They include architect / engineer / quantity surveyor (QS) / Project Management
Consultant (PMC)

d) Main contracting sector

- The First-Hand-Contractor sector that physically translates the project from their
blue print stage to reality, by co-ordinating the works of various contractors
through the construction programme.
- They are the sole (the only one) main contractor (MC) for a project.

e) Sub-contracting sector
- The sectors that actually carry out the physical work.
- They include the sub-contractor (SC), supplier, nominated sub-contractor (NSC)
who is normally a specialist sub-contractor, nominated supplier (NS), labour sub-
contractor.

f) Local government agencies / relevant authority department

- The sector that represents the government approving authorities for the various
documents approval.
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2.2 Types and Roles of Institution and Parties Involved in Construction Industry
A civil engineering graduate may be attached to one of the following:
a) Owner or client or developer firm
b) Consultant firm
c) Contractor firm
d) Sales and marketing company
e) Relevant authorities / departments

2.2.1 Type of Institution and Parties Involved

Those work with a developer firm may be a project coordinator / project manager. They
should be familiar with the role of consultant and contractor. Those serve the relevant
authorities may be categorized as project co-coordinator. Their job includes:
a) Incorporate function of consultant and contractor.
b) Engage of consultants and contractor.
c) Co-ordinate and supervise project.
d) Prepare memorandum of a project.
e) Prepare progress report.
f) Prepare payment to consultant and contractor.

Graduates attach to a consultant firm may be a consultant with the designation of design
engineer, civil & structural engineer, draughtsman, resident engineer, or clerk of work
(COW). They have to carry out the:
a) Feasible study
b) Site Investigation
c) Preliminary study
d) Design work (reinforced concrete, timber, and etc.)
e) Preparation of specifications and report
f) Quantity take-off and estimate

If they were attached to a contractor company, they may be a site agent, site engineer,
site supervisor, technical assistant, and etc. their works include preparing:
a) Feasible study
b) Site investigation
c) Specification and report
d) Quantity take-off and estimate
e) Construction program
f) Progress report (weekly/monthly)
g) Progress payment to sub-contractors
h) Supervise day-to-day work in site

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Some graduates may work as sales personnel or sales representative. Those with
technical background may be sales engineer. Their main duty is promote the material
supply.
Those serve with the relevant authorities (JKR) may start as a design engineer, rise into
project co-coordinator. Their functions include:
a) Design work
b) Co-ordinate and supervise project
c) Other function as a consultant and client representative.

2.2.2 Roles and responsibilities of The Institution and Parties Involved

Table below summarize the role of some parties involve in a construction project.

Party Role

Anyone who has landed properties and the financial means to

Client develop them can be considered as client who required project
consultancy services.

Consultant Designs the plans to be used by the construction contractors.

Contractor’s principal business is the performance of the

construction work in accordance with the plans and specifications
Contractor
of the owner. A general contractor takes full responsibility for the
completion of the project.

Supplier Provide the raw materials used in the construction project.

Project Manager Coordinates the construction project.

The role and responsibilities of parties involved to be elaborated further are:

a) Project manager (client or sometimes consultant representative, in our context)
b) Resident engineer in the Consulting Engineer’s Site Organization
c) Key personnel in the Contractor’s Site Organization
d) The Role (duties and responsibilities) of Owner and Contractor according to JKR
203A Contract.

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2.3 Project Manager

A Project Manager (sometime project engineer) is a client representative. Sometimes a

consultant may be the project manager. The term ‘project manager’ is usually applied
to projects in the private sector, it is known as Superintending Officer (S.O.) for the
projects in the public sector. A project manger may be an architect if it is a building
work or an engineer if it is a civil engineering work.

2.3.1 Duties and Responsibilities of a Project Manager

As a client representative, the main responsibility of a project manager (or project

engineer) is to monitor, the work of RE and contractor to ensure the project complete in
the shortest period, at the lowest possible cost, with the best value for money (quality).
The other duties and responsibilities of a project manager (or project engineer) are:
a) Advising
- Advise the client over the appointment of consultant and contractor
- Responsible for calling and recommendation of tender

b) Coordinating
- Coordinate the project with the Local and Federal Authorities
- Certify progress payment to consultant and contractor

c) Leading
- Acts as a leader of the planning team

d) Liaising
- Liaise with various parties engaged to prepare project brief

e) Monitoring
- Keep the record of work progress and report to the client

f) Motivating
- Motivate various parties engaged in the design and construction

g) Problem solving
- Liaise between management and parties concerned with the project (in the design
and construction problem).

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2.3.2 Time Control

To fulfill his main responsibility regarding time control, a project manger should ensure
that:
a) Owners firm up early on all chargers
b) Shop drawings are produced early for consultant approval.
c) Construction drawings are issued early to contractors for planning and ordering of
materials.
d) Critical nominated sub-contracts are called early and concerted effort is made to
tackle the critical path areas.
e) The use of materials and equipments that need a long lead-time shall be approved
early for the procurement
f) Purchasing of equipments and materials are placed early to avoid possible factory or
shipping delay.

In the initial planning before tendering phase, a project manager can shorten the
construction period by:
a) Prevents time-consuming construction details from getting into design.
b) Prevents time-consuming sequence for constructing a particular work from being
written into the specifications and drawings.
c) Prevents unnecessary stringent conditions from getting into the specifications and
drawings.

During the construction stage, a project manager can ensure speedier completion of the
project by:
a) Give overtime – most commonly use
b) Improve productivity – the cheapest method; hire qualified people (good for long
term)
c) Increase staffs
d) Reduce works – eliminate certain works
e) Subcontract part of the works
f) Expedite owner’s decisions, and the flow of consultants’ instructions and drawings to
maintain job progress.
g) Ensure that material deliver on time to the site.
h) Ensure that priorities are given to critical areas of work to start early.
i) Ensure that proper method of construction is available to do work.
j) Encourage of settle site problems among trades.
k) Highlight and attempt to solve construction site problems with all parties.
l) Re-schedule the work of all trades if necessary to ensure that they do not hold up each
other.

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m) Think of the problems ahead anticipate the difficult and get rid of them rather than
trying to get problems.
n) Using extensive checkpoints in the sequence of work for design and construction.

2.3.3 Skills of an Effective Project Manager

An effective PM should have the following skills:

a) Technical
Technical skills involve the ability to apply specific methods, procedures and
techniques in specialized field. A PM should be able to identify, develop and improve
the technical skills according to the situation.

b) Human relationship
Human relationship skills include the dynamic ability of a PM to lead, motivate,
manage conflict and work with others.

c) Conceptual
Conceptual skills involve the ability to:
i. See the organization as a whole and recognize its relationship to the larger
business world.
ii. Understand the relationship among each department or functions or organization
(dependency among each other); and changes in one part can affect the others.
iii. Know how to diagnose and assess different types of management problems.

d) Communication
Communication shall be considered as exchange of idea or giving
direction/instruction. Communication is important as a mean to transmit and share
information between departments and individuals for the distribution of knowledge.
Effective communication is necessary at every level of an organization to ensure:
 Effective flow of information
 Accelerate work
 Avoid miscommunication
 Avoid false information
 Ensure right instruction received by all parties.

Communication skills reflect PM ability to send and receive information, thoughts,

feelings and attitudes in every means. Therefore a PM should possess certain capacity
such as writing, oral/verbal and nonverbal (facial expressions, body posture)
communication skills. Top management may convey their message (i.e.
communicate) through face to face (talk) instruction, circulars (write), or internet.

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2.4 The Role of Owner and Contractor According to JKR 203A Contract

2.4.1 The Role of Owner

JKR 203A Condition of Contract is used where government (Kementerian Kesihatan,

Kementerian Pelajaran, etc.) is the owner and JKR officers (director, engineer, RE,
COW, TA) is the owner representative. According to JKR 203A Condition of Contract,
the owner (may be represented by JKR officers) has the following implied powers and
duties.

Duties:
a) Not to divulge (disclose) contractors’ rates and prices.
b) Be the custodian of the contract documents. [Clause 7(a)]
c) Contractor will be paid for work caused by S.O. negligence. (i.e. S.O. will bear the
cost of making good of any work due to S.O.I. (open up or re-execute) if found to be
S.O. negligence). [Clause 9(b)]
d) Pay contractor for any or additional works not mentioned in the contract documents,
i.e. V.O. [Clause 25(f)]
e) Give possession of site to the contractor on the date of possession. [Clause 38(b)]
f) Pay the contractor amount certified within period of honouring certificate.
[Clause 47(d)]
g) Pay the contractor amount awarded by the Arbitrator. [Clause 54(f)]

Powers:
a) Appoint clerk of works (COW). [Clause 1(v), Clause 2(b)]
b) Issue V.O. [Clause 5(a)(i), Clause 24(a)]
c) Interpreted the content of the contract document in case of discrepancies.
[Clause 5(a)(ii), Clause 8(b)]
d) Instruct contractor to remove any materials from site. [Clause 5(a)(iii), Clause 51(c)
(i)]
e) Instruct contractor to remove and re-execution any work. [Clause 5(a)(iv)]
f) Instruct contractor to remove any worker from site. [Clause 5(a)(v), Clause 22(a),
Clause 22,Clause 51(c)(i)]
g) Instruct contractor to open up any covered work for inspection. [Clause 5(a)(vi),
Clause 9(b)]
h) Instruct contractor to make good any defects of work. [Clause 5(a)(vii), Clause 45(a)]
i) Employ any pay other persons to do the work. [Clause 5(b)]
j) Agree with the contractor to adjust contract sum. [Clause 25(e)(f)]
k) Assign the contract. [Clause 27 (a)]
l) Defer giving possession of site to the contractor. [Clause 38 (d)]
m) Deduct liquidated damages to the contractor. [Clause 40]
n) Determine the Contractor’s employment. [Clause 51 (a)(b)]
o) Reinstate the Contractor’s employment. [Clause 51 (c)]

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2.4.1 The Role of the Contractor

According to JKR 203A Condition of Contract, the contractor has the following implied
duties and powers.

Duties:
a) Primary obligation is to execute and complete works in accordance with contract
documents (until the issuance of Certificate of Practical Completion), i.e. use contract
document for the purpose of the work. [Clause 4]
b) Forthwith carry out written instruction issued by S.O. (Architect/ Engineer). [Clause
5(b)]
c) Make specific written application to the S.O. (Architect/ Engineer) for any instruction
or drawing. [Clause 5(c)]
d) Bear cost of opening up and testing and consequential costs of making good.
[Clause 9(b)]
e) Set out the works accurately and amend at his own cost any errors. [Clause 14]
f) Keep a competent person in charge of the works at all reasonable times. [Clause 19]
g) Indemnify the owner against personal injury or death of any person and property
damage. [Clause 32(a)]
h) Begin the works when given possession of the site. [Clause 38(b)]
i) Regularly and diligently proceed with works’ and complete by date of completion.
[Clause 39(a)]
j) Pay the owner liquidated damages at the rate specified in the appendix. [Clause 40]
k) Notify in writing to S.O. (Architect/ Engineer) any cause of delay. [Clause 43]
l) Provide the S.O. (Architect/ Engineer) with sufficient information to enable him to
exercise his duties as regard extension of time. [Clause 43]
m) Make good defects, shrinkage and other faults at no cost to the owner. [Clause 45(a)]
n) Give up possession of site of work in the event of determination. [Clause 51(c)(i)]
o) Remove from works any temporary buildings equipment, goods etc when so
instructed by S.O. on determination of employment. [Clause 51(c)(i)]

Powers:
a) Inspect the contract documents. [Clause 7]
b) Sub-letting (sub-contract) any part of the works with the S.O. consent in writing.
[Clause 27(a)]
c) Assign the contract if S.O. consent is given. [Clause 27(d)]
d) Make reasonable objection to entering into sub contract with a named person.
[Clause 28(c)]
e) Determine his employment. [Clause 38(e)]
f) Serve a default notice on the owner specifying the faults alleged. [Clause 54(a)]