E C M 5 78 - C ONTR A CT A DM INISTRATION

Construction
Contract
Types of
G R OU P 2 | 7 C 1
Presentation Outline
Building Construction Contracts Type

Today's Topics

E C M 5 78 - C ONTR A CT A D M INISTRATION
Common Contract Procurement Methods

Construction Project / Contract Participants

Standard Forms of Contract

Factors in Considering Type of Contract

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Lump Measurement Cost

Sum Contract Reinbursement
 Price is fixed,
payment made
No individual only once after
rates quoted for project
each item of executed No BQ is
work provided

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Suitable for
simple project
What is Higher risk to
owner ;
Example :
Bridge Painting
Lump Sum? contractor rate
items are not
specified

Lesser time Contractor will

needed to reduce his cost
prepare tender to increase his
document profit
No provision to
vary the
contract,
proceed even if
the actual work
executed differs
in quantity
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• Apply when the design / type of works can be
described in reasonable detail
• Allow an early start on site, before design is
completed and allow changes to be made
• Accurate
• Quantities of each item of work
• 'Contract Price' is the sum total of prices of each item of work mentioned in
BQ
• BQ assist in keeping tenders figures as low as possible
• Payments are generally made on the basis of the actual measured quantity
of work executed for each item in the BQ and the rate quoted
• Document with schedule of item, but need to enter price
• Document with schedule of item with price. Can choose to agree
or quote a percentage
• Both type above will include approximate quantities to be
executed for each item of work
• Suitable for maintenance, jobbing, urgent works

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BILL OF
QUANTITIES
MEASUREMENT SCHEDULE OF
R AT E

CONTRACT
Advantages and Disadvantages
Adantages and Disadvantages
• Variation in quantities are easily accommodated
• Can identify particular items on which to reduce the cost
• Experienced engineer able to forecast the type of work
• All the work schedule will be carried out
without drawing
• Lesser risk to owner and contractor, payment are exactly to the rate
• Lesser time spends to prepare BQ
quoted
• No implied guarantee given all work will be carried out
• Quantities stated is abstract from drawings, which have certain level of
• Quotation might be high since the volume of work is
accuracy of work executed
uncertain
• A lot of time spends to prepare BQ
• No guarantee as quantities indicates estimate amount
 Provide data for
cost analysis for
use in cost
planning for
Future
Price Data
future projects Project

Base prices on
Comparable
the same
information,
thus tenders are
Why BQ usually

E C M 5 78 - C ONTR A CT A DM INISTRATION
strictly Basis Payment

comparable
used in Provide a convenient
basis for valuation of
Malaysia?
During

certificated stage
payments during the
contract, before the
accurate figure Convenient

(actual) is available

Provide an
Provide a fair
Checklist Before actual

approximate
checklist for the basis for valuing
contractor to order variations and
materials and adjustments for
other resources the final account

Material Adjustment
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Example Bill of Quantities
 • Charges an agreed fee in
terms of % of the cost of
the actual work executed
• Use in emergency &
small project; kitchen
renovation

E C M 5 78 - C ONTR A CT A DM INISTRATION
• An agreed sum paid
to contractor will be • Fee paid to contractor
the actual cost in based on some of sliding
execution works plus scale
fixed fee and does
not fluctuate

• Actual fee paid to the

contractor is by
Suitable Project :
increasing/reducing the basic
Maintenance and
fee by an agreed percentage
Emergency work
• Suitable for project that both
parties will gain benefit
Eg; Bridge Collapsed
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Target + Cost
Cost + Fluctuating Fee
Cost + Percentage
Allow contractor to
involve in design stage
Contractor can confident
an equitable payment for
changes and unforeseen
event
Dishonest contractor
could increase the
contract price to increase
his profit
No incentive to complete
the work early or to try to
reduce the cost
Cost + Fixed Target + Cost
Encourage contractor to
Contractor not inclined to execute work as cheaply
push up the cost as possible
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If work accelerated, Fluctuation cost is shared
contractor will received and owner have flexibility
fixed fee early to involve in the project
Contractor may reduce
No incentive to complete
the cost of supervision,
the work as quick as
expedite the work,
possible
neglecting correct
construction process to Contractor try to reduce the
increase profit cost of supervision, expedite
with the work, neglecting
the correct construction
process
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Traditional / Design and Build Construction Others

Design-Bid-Build Method Management
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(by bidding)

documents
completed
Tender
 Advantages Disadvantages
Provide opportunities for the contractors to bid Time consuming

The design and cost are certainty Contractor not be able to improve the

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design

Ensure quality of material used Contractor has little flexibility to manage

the price

Owner is protected
 Government

E C M 5 78 - C ONTR A CT A DM INISTRATION
KLCC Holdings Sdn Bhd

Ranhill Bersekutu

1)Hazama Corporation

1)Samsung Engineering &

Construction
E C M 5 78 - C ONTR A CT A DM INISTRATION
 Advantages Disadvantages
Can reduce the time of overall Unexpected Cost
project delivery

Direct contact client to developer Less supervision from owner

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All risks (design) are on developer Financial risk on developer

Developer can save cost (economical design) Developer might charge extra fees on
consultant's fees

Good communication and collaboration in a

team
 Putrajaya
Corporation

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KLCC Project
Bhd

1)Putrajaya
Holdings
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(by bidding)
 Advantages Disadvantages
Can save time

Ability to closely manage cost during No cost certainty

E C M 5 78 - C ONTR A CT A DM INISTRATION
design

Can ensure the quality and performance of Reliance on management capability of

work construction manager

Minimize impact of change Risk on client

What is the
difference?

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Consultant
Design
Consultant

Client Client Construction

Client Developer
Manager

Contractor Construct
Trade
Contractors
 E C M 5 78 - C ONTR A CT A DM INISTRATION
Let's Recap!
 BUILD OPERATE TRANSFER
Private entity receives
Advantages Disadvantages
concession from public sector
Minimizes public cost Only works for large projects

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Suitable for large-scale
infrastructure projects Reduce public debt Place the public sector at a
disadvantage

Private party manage the finance, Allow public sector funds Requires strong corporate
design, construction and operate
the facility. the most needed governance
 BOT : Project Timeline
SELECTION
• Prequalification CONCESSION PERIOD
• Investors,
Proposals
• Preliminary work

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• Evaluation of
Proposals CONSTRUCTION TRANSFER
• Revised
• Execution • Transfer
Concession
• Delivery
Agreement

PRELIMINARY PROJECT OPERATION

STUDY IMPLEMENTATION
• Initiative • Maintenance
• Final work
• Feasibility Study and Operation
• Final
• Preliminary Concession
Concession Agreement
Agreement
 Advantages Disadvantages

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Less construction time Time taking

PFI is a type of Public Private Partnership

procurement method implemented in UK
construction industry in 1992. Delivery against budget Risk allocation

PFI requires private financers to put its own

capital at risk to deliver clearly defined public Innovation approach
projects for long-term period, ensuring the quality
of work delivered within time and budget.
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Government / Private International

Public Sector Sector Sector
A printed form and published by an
authoritative body on industry which

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recognized by both parties. The forms is set
of terms and conditions which need to be GOVERN/
PUBLIC

carried out by those parties

SECTORS

PRIVATE
INTERNATIONAL
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E C M 5 78 - C O NTR A CT A D M I NI STRATI O N
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 TIME EXTERNAL
CONSTRAINT FACTORS

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COST FACTORS CLIENT
ISSUES RESOURCES

PROJECT ABILITY TO
CHARACTERISTICS MAKE
CHANGES