CONFIDENTIAL EC/JUN 2015/ECM575/547

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE CONTRACT ADMINISTRATION

COURSE CODE ECM575/547
EXAMINATION JUNE 2015
TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. po not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) an Answer Booklet- provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 3 printed pages
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QUESTION 1

a) Explain how contract administration can assist in the following:

i) Planning for contract

Plan for legal framework transaction that is to be entered into by the parties to a project.

ii) Putting Contract in Place

Putting into place of the legal framework for regulating the relationship between the
parties as to their future performance.

· iii) Managing the Contract

Management of formal legal framework or agreement reached between the parties.

iv) Enforcing provisions/Procedures of Contract

Administration and enforcement of the provision, procedure and practice in the formal
agreement (contract) entered into by the parties.

v) Managing Parties to the Contract

Management of roles, responsibilities, power, rights, duties and liabilities of the
contracting parties and ensure purposes of endeavour are fulfilled.

(10 marks)

b) Discuss the nature of Cost plus fixed fee and Cost plus percentage in cost
reimbursement contracts of a construction project.

Cost plus fixed fee and cost plus percentage are two types of cost reimbursement
contracts that are commonly used in construction projects.
A cost plus fixed fee contract is a type of cost reimbursement contract where the
contractor is reimbursed for their actual costs, plus a fixed fee for their services. The fixed
fee is determined beforehand and is not subject to change based on the actual costs
incurred. This type of contract is typically used when the scope of the project is uncertain
or when the cost of the project is difficult to estimate.
A cost plus percentage contract, on the other hand, is a type of cost reimbursement
contract where the contractor is reimbursed for their actual costs, plus a percentage of the
total cost of the project. This type of contract is typically used when the scope of the
project is well defined and the cost of the project is easier to estimate. The percentage fee
is usually a markup on the actual costs and is used to compensate the contractor for their
services and to cover any profit.
Both cost plus fixed fee and cost plus percentage contracts have advantages and
disadvantages. Cost plus fixed fee contracts provide more stability to the contractor, as
they know in advance what their fee will be regardless of the actual costs incurred.
However, cost plus fixed fee contracts can result in lower profit margins for the contractor
if the actual costs are higher than expected. Cost plus percentage contracts, on the other
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hand, can result in higher profit margins for the contractor if the actual costs are higher
than expected. However, this type of contract also has more financial risk for the
contractor, as they are not guaranteed a set fee.
In conclusion, the choice between a cost-plus fixed fee or cost plus percentage contract
will depend on the specific needs and circumstances of the construction project. It is
important to carefully consider the advantages and disadvantages of each type of contract
and to choose the one that is best suited to the project requirements.

(10 marks)

QUESTION 2

a) One method of contract administration used in monitoring contract performance is

through site meetings. Make a comparison between Site Possession and Site Progress
meeting in a construction project.

Site possession and site progress meetings are two types of site meetings that are used
in contract administration to monitor contract performance in a construction project.

Site possession meeting: A site possession meeting is typically held when the contractor
takes possession of the construction site. This meeting is used to establish the starting
point for the project and to agree on the initial conditions and requirements for the project.
The purpose of the site possession meeting is to ensure that both the contractor and the
client have a clear understanding of the scope of work and the responsibilities of each
party. This meeting is also used to identify any potential risks or challenges that may arise
during the project and to plan for their mitigation.

Site progress meeting: A site progress meeting is a regularly scheduled meeting that is
held throughout the course of the project. The purpose of the site progress meeting is to
review the status of the project and to monitor the performance of the contractor. This
meeting is used to identify any issues or problems that may be affecting the progress of
the project and to agree on a plan for resolution. Site progress meetings are also used to
review the budget and schedule for the project and to ensure that the project is on track to
meet its goals and objectives.

In conclusion, site possession and site progress meetings are two important methods of
contract administration used to monitor contract performance in a construction project.
Site possession meetings are used to establish the starting point for the project, while site
progress meetings are used to monitor the progress of the project and to identify and
resolve any issues that may arise. Both types of meetings are critical to ensuring that the
project is executed effectively, efficiently, and in accordance with the terms of the
contract.

(10 marks)

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b) In a scenario of an application testing:

"A technician set up his testing equipment (slump cone, concrete cylinder mould etc.).
He met with the concrete supplier, checked the load for product consistency. He
performed tests to measure the slump, air content, air and concrete temperature. He
recorded the date and the information".

With the scenario given, identify why it is important to implement quality assurance in a
construction project.

The scenario described above highlights several important aspects of quality assurance
in a construction project. In this scenario, the technician is performing tests to measure
the quality of the concrete being used in the project. This is an example of how quality
assurance helps to ensure that the construction materials and products used in the
project meet the specified standards and requirements.

Quality assurance is an essential part of a construction project, as it helps to ensure that

the project is being executed in accordance with the agreed-upon standards and
specifications. It helps to prevent problems and defects from occurring during the
construction process, and to identify and resolve any issues that may arise.

In this scenario, the technician is performing tests to measure the slump, air content, and
temperature of the concrete. This is an important step in ensuring that the concrete meets
the specified standards for these properties, as these characteristics can have a
significant impact on the strength and durability of the final product.

By recording the date and the information, the technician is creating a record of the
quality assurance tests that have been performed. This record can be used to
demonstrate that the project has been executed in accordance with the standards and
specifications, and can be used as evidence in the event of disputes or claims.

In conclusion, the scenario described highlights the importance of quality assurance in a

construction project. Quality assurance helps to ensure that the project is executed in
accordance with the agreed-upon standards and specifications, and helps to prevent
problems and defects from occurring during the construction process. By creating a
record of the quality assurance tests that have been performed, it is possible to
demonstrate that the project has been executed in accordance with the standards and
specifications.

(10 marks)

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QUESTION 3

a) Explain types of performance deficiencies notification in contract administration.

1. Verbal
- Minor discrepancies
- Task can be re-performed

2. Written
- Written document

3. Corrective Action Request (CAR)

- Failed result in corrective action
- Severe deficiencies exist
(5 marks)

b) Zamali has five years working experience as a Design Engineer, with a reputable
Malaysia consulting company. Reflecting on his good reputation as a Design Engineer, a
construction company offers him a position as a Project Manager. The newly appointed
Project Manager notices that his responsibility with the new company differs from the
previous.

If you are the Managing Director for Zamali, explain to him the types of claim he should
know and what the differences are between the types of claim.

Sub-con claim:
The subcontractor level of any project has the greatest potential for disputes because the
sub-contract paperwork and tender response are being handled by individuals without
formal training and legal matter.

Main-con claim:
Due to agreement of the proper value of variations and involve loss and expense.
Disruption of the normal progress of the works resulting in financial loss not otherwise
recovered under the contract.

Employer claim:
- Disruption of the normal progress of the works resulting in financial loss not otherwise
recovered under the contract.

- An action against contractor for defects usually discovered after practical completion.

- An action against the contractor for delayed completion, but only where there is no
provision for Liquidated and Ascertained Damages.

- An action against the Architect/ Contract Administrator or Employee’s Agent for

wrongful certification of time, money and quality.

- An action against the Quantity Surveyor for alleged negligence in allowing the project to
exceed budget

- An action against the Project Manager, if so appointed, for allowing the project to
overrun in cost or time.
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QUESTION 4

a) Write down FIVE (5) aspects on the "obligation on payments".

1. Timing of payments
2. The amount of payment
3. The procedure and conditions precedent
4. Right of set-off and abatement
5. Enforecement
(5 marks)

b) Contract termination is the cancellation of an outsourcing agreement. Usually, the terms

for cancellation are spelled out in the contract as part of a termination clause. Discuss
the conditions in the following:-

i) The employer shall be entitled to terminate the contract.

The condition "The employer shall be entitled to terminate the contract" means that the
employer has the right to cancel the outsourcing agreement, either through mutual
agreement with the contractor or due to specific circumstances spelled out in the
contract's termination clause.

This could include situations such as:

• Breach of contract by the contractor
• Failure by the contractor to meet the agreed-upon milestones
• Insolvency of the contractor
• A change in the employer's business needs that makes the outsourcing agreement no
longer necessary.

The contract may state that the employer can terminate the contract if the contractor
breaches any of the terms, fails to meet performance standards, or if the employer
experiences a change in its business needs. The contract should also specify the notice
period required for termination and any compensation that may be payable to the
contractor in the event of termination.

The exact conditions and consequences of termination by the employer should be spelled
out in detail in the termination clause of the contract.

ii) The contractor shall be entitled to terminate the contract.

The condition "The contractor shall be entitled to terminate the contract" means that the
contractor has the right to cancel the outsourcing agreement, either through mutual
agreement with the employer or due to specific circumstances spelled out in the contract's
termination clause.

This could include situations such as:

• Breach of contract by the employer
• Insufficient payment or late payment by the employer
• A change in the contractor's business needs that makes the outsourcing agreement no
longer feasible

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The contract may allow the contractor to terminate the contract if the employer breaches
any of its obligations, if the contractor experiences a change in its business needs, or if the
employer fails to pay the agreed amount within a specified period. Like the employer, the
contractor may also be required to provide notice before terminating the contract, and any
compensation payable to the employer in the event of termination should also be
specified.

As with termination by the employer, the exact conditions and consequences of

termination by the contractor should be spelled out in detail in the termination clause of the
contract.

*In conclusion, both the employer and the contractor should have clear understandings of
the conditions for termination outlined in the contract, including the notice period,
compensation, and circumstances under which the contract can be terminated.

(15 marks)

QUESTION 5

a) Explain what is unilateral contract modification. Give an example and evaluate a situation
when unilateral contact modification is used.

Unilateral Modification is a contract modification that is signed by only the contracting

officer. It is used for example when making administrative changes, issue change orders,
issue termination notices and make changes authorized by clauses in the contract.

A unilateral contract modification in construction is a change made to a construction

contract that only binds one party. This type of modification is often made when one
party, such as the owner or contractor, wants to modify the terms of the agreement but
the other party is either unwilling or unavailable to agree to the changes.

For example, in a construction contract, the owner may unilaterally modify the contract to
add additional scope of work to the project. The contractor is then obligated to perform
the additional work even though they have not agreed to the change in the contract.

(5 marks)

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b) NQZ Sdn Bhd has recently won a RM 120 million contract from a local company. The
Contract includes three separate construction projects, which begin at the same time.
Two of the projects are eighteen months in duration and the third one is thirty months.
Each project has its own project manager. As a Contract Administrator for the projects
you gave the suggestion that the projects need to have site progress meeting 2 times in
a month. Justify to NQZ Sdn Bhd contractor why they need to have site progress
meeting 2 times in a month.

As a Contract Administrator for NQZ Sdn Bhd, I would like to justify why it is important to
have site progress meetings 2 times a month for the RM 120 million construction
contract.

First and foremost, regular site progress meetings ensure that the projects are on track
and that any potential problems are addressed in a timely manner. By holding site
progress meetings twice a month, NQZ Sdn Bhd can monitor the progress of each
project and identify any issues that may impact the schedule or budget. This helps to
avoid any costly delays and ensures that the projects are completed on time and within
budget.

In addition, regular site progress meetings provide an opportunity for all parties involved
in the construction projects to communicate and collaborate effectively. The project
managers, subcontractors, and any other stakeholders can discuss any challenges or
opportunities and work together to find solutions. This can improve the overall efficiency
of the project and enhance the quality of the final product.

Furthermore, site progress meetings also help to ensure that the projects are in
compliance with the contract terms and conditions. By reviewing the progress of each
project, NQZ Sdn Bhd can ensure that the work is being performed in accordance with
the contract and can identify any areas where additional attention is needed. This helps
to reduce the risk of disputes and claims, and protects NQZ Sdn Bhd's interests.

In conclusion, having site progress meetings 2 times a month is essential for the
successful completion of the RM 120 million construction contract. These meetings help
to ensure that the projects are on track, that all parties are communicating effectively,
and that the projects are in compliance with the contract terms and conditions.

(15 marks)

END OF QUESTION PAPER

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