Table of Content

Building construction Construction project/

3.1 contract type contract participant
3.3

Common contract Standard form of

3.2 procurement method contract 3.4

Factors considering
3.5 types of contract
3.1
 Definition When to use ?

• Involves a total fixed priced • Clear scope of work

• Lesser time needed to prepare tender • Straightforward to complete
document
• No bill of quantities is provided.
• No additional variation or omission

Lump Sum Example

Contract Deck building

Advantages
Disadvantages
• Low risk to the owner.
• 'Fixed' construction cost.
• Minimize change orders. • Higher risk to the contractor
• Owner supervision is reduced • Contractor free to use the lowest cost
• The contractor will maximize its production of materials. Equipment, methods
and performance. • Changes is difficult and costly.
 Bill of Quantity
• Most commonly used in CE work.
• Bill of quantities is provided.
• Contractor enter a unit rate against each item of
work.
• Total cost of the project is uncertainty.
• Consider additional variation or omission.
Advantages
• Provides clear statement of the work
Measurement
Contract
• Can be used to evaluate & compare
• Can identify particular items on which to
reduce the cost
Disadvantages
Pre-contract phase :
• Preparation of a BQ is time and cost
consuming.
Post-construction phase :
• Risk of disputation arising from
misinterpretation and error.
• Can allow an early start on site,
before design is complete, and
they can allow changes to be
made to the works relatively
easily.
Schedule of Rates
• Client cannot determine his requirements in
advance.
• Contractor may be requested to insert prices
against each item of work.
• Suitable for maintenance.
Advantages
• Detailed design is not essential at Tender
stage.
• Cost effective.
• Client can control and supervision over
the Contractor.
• Flexible framework permits changes to
quantities or scope requirements.
Disadvantages
• Final cost of the Contract is not known
• Often more expensive.
• Required post-Contract to handle
design/specification requirements.
Bill of Quantity Schedule of Rates
 Lump sum VS Measurement Contract
Lump Sum Contract Measurement Contract

• Complete Drawing • Incomplete drawing

• BQ is just a guide • BQ is important

• Contract sum is provisional

• Fixed contract sum (subject to change)

If total cost is fixed If total cost is uncertainty

 Cost
Reimbursement
Contract

The sum paid to the The contractor is paid The contractor is paid
contractor will be the the actual cost of the according to the The actual fee paid to
actual of the work plus work plus an agreed difference proportion the contractor by
a fixed sum which has percentage to cover between the increasing or reducing
been previously agreed. overhead, profit etc estimated cost and the the basic fee.
actual prime cost.
 Cost
Reimbursement
Contract

Advantages Disadvantages

• Result in better quality projects • Final cost is uncertainty

• Contractor’s risk is minimized • Unable to get advantage on favorable

market price
 Risk Allocation

Contractor’s Risk

Client’s Risk
 3.2
1. Traditional Contract

4. Built, Operate,
Transfer (BOT)

5. Private Finance
Initiative (PFI)
 Role of Parties

Client
• Founder / owner of project.
• Person who initiate the idea Contractor
of construction.
• Compete to win the tender.
• Offer reasonable price.
• Handle the project until handing
Designer over.

• Hired by client to do design

matters.
• Produce building design. Sub Contractor
(Architectural & Structural Design)
• Paid to do some internal work
on site.
• Play a role to complete the
project.
Designer’s Consultant
• Responsible for valuation.
• Control over design and quality.
 Traditional Contract

Client
Advantages Disadvantages

• Open competitive project • Time consuming

• Lower risk on owner • Contractor has no input in the design
• The procedures and contractual rules of Consultant Contractor stages.
conduct are well understood. • All parties work as an individual

Sub-consultant Sub-contractors

Design and construction are separated.

 Design & Build / Turnkey Contract

Client
Advantages Disadvantages

• Work progress ahead

• Less supervision from owner on design &
• Can reduce the time of overall project
construction
• Allows easier incorporation of changes
Developer • Contractor will charge more on
due to scope or unforeseen conditions
consultant’s fee
• Lack of checks and balances

Consultant Contractor

Design and construction are not separated.

 Construction Management Contracts

Client
Advantages Disadvantages

• Suit complex projects

• The client takes all risk
• Potential time savings in overall projects
• No commitment on price uncertainty
• Ensure the quality and performance of
Construction Management • Total cost of project is not usually known
work
until the project is well under way

Consultant Trade Contractors

 Build, Operate, Transfer (BOT)

Built Transfer
• Used to finance large projects, typically
infrastructure projects developed through
public-private partnerships.

• Private entity receives a concession from the

private or public sector to finance, design,
construct, own, and operate a facility stated
in the concession contract.

Advantages Disadvantages

• Reduce development and infrastructure

Operate • Not suitable for smaller project
budget
• No incentive for the operator
• Transfer the risk to the concession
company
Private Finance Initiative (PFI)

• A form of Public-Private Partnership (PPP),

established to encourage private participation
in the local development projects

• To reduce government's expenditure in

providing public infrastructure and services.
Project • Suitable for long term and complex project
under PFI

Disadvantages
Advantages

• Approach to Innovation • High costs

• Better management skills • Lack of expertise
3.3
 Construction Project /
Contract Participants
Who are the ..
 Client
• Public sector
• Private sector
Consultant
Authorities
• Federal • Architects
• State • Civil/M&E/Structural
• Local • QS

Financier
• Bank
• Credit corporation Contractor
• Leasing company
• Main contractor
Supplier
• Nominated supplier • Sub contractor
• Manufacturer

Manpower
• Technician
• Skilled worker
• Unskilled worker
3.4
 Standard
form of
Rusmi !! Do you know
what is standard
form of contract?

contract

Hi I’m Shariff from 7C2 Hi I’m Rusmi from 7C2

 Bodies and Institutions

PERTUBUHAN ARKITEK MALAYSIA

Produced Form of contract Produced two standard The standard form

standard form for use for building form contract : contract use for
building works work in Malaysia • Building Work civil engineering
and civil private sector (2000 edition) work and M&E
engineering work • Nominated work in Malaysia
in public sector Subcontractor in private sector
public sector
 STANDARD FORMS OF CONTRACT

GOVERNMENT PRIVATE SECTOR

JKR/PWD MISCELLANEOUS BUILDING WORKS CIVIL ENGINEERING M&E WORKS

WORKS

203 (2007) – CIDB FORM FOR

BUILDING PAM 2006 –
WITHOUT QUANTITIES IEM CONDITIONS – IEM CONDITIONS –
CONTRACTS WITH
QUANTITIES IEM. CE 1/89 IEM. ME 1/94
2000

203A (2007) – MODIFIED

JKR/PWD FORMS PAM 2006 -
WITH QUANTITIES IEM CONDITIONS – TNB CONDITIONS.
E.G. LPK, MHA, WITHOUT
QUANTITIES IEM. CES 1/90 ETC
ETC.
203N (2007) –FOR
NOMINATED
SUPPLIERS PAM NSC
2006
JKR FORM FOR DB
(2007 EDN.)
CONTRACTS
 203 (2007) – Drawing and specifications
Without Quantities form part of the contract

203A (2007) – Bills of quantitties form part of

With Quantities the contract
GOVERNMENT-
JKR & P.W.D
Mainly for government
projects or use by government
203N (2007) – The main contract is based on
linked agencies (building and
Nominated Sub-Contractor form 203 or 203A
engineering work)

JKR Form For DB Design and Build contract

(2007 EDN.)
 Contractual relationship in PWD 203A

I’m A Consultant
I’m A Employer
(Government)

I’m A Superintending
Officer (S.O)
I’m A Contractor
Communication relationship in PWD 203A

I’m A Employer I’m A Superintending

(Government) Officer (S.O)

I’m A Consultant

I’m A Contractor
 Government - Miscellaneous

Building work (2000 Edition) and

1 sub-contract for nominated sub-
contractor

Enhancement of the tender

2 procedure in both public and
private sectors
CIDB Standard Form and Term of Contract
Distribute the risks equally and
3 appropriately to all parties
 Standard Form Guide

Building
Work

NSC
 Private Sector- IEM

Condition of contract for works

CE 1/89 mainly of civil engineering
construction.

Condition of sub-contract for

Forms of Contract use in conjunction with the IEM
is produced in three CES 1/90 conditions of contract for civil
standard forms engineering works.

Condition of contract for

ME 1/94 mechanical and electrical
work.
IEM Standard Form Of Contract
 • 90% of the building
PERTUBUHAN ARKITEK MALAYSIA
contracts in private sector
Private Sector •
are based on a PAM form.
Consists of with quantities
PAM 2018 and without quantities.

Development Of PAM Contract

PAM PAM PAM PAM

1969 1998 2006 2018

• 3 articles • 3 articles • 7 articles

• 34 clauses • 35 clauses • 38 clauses
PAM 2016 VS PAM 2018
 2018

PAM 2018 With Quantities PAM 2018 Without Quantities

Clause 11 • Architect / Quantity surveyor • Quantity surveyor evaluate is

Variation evaluate claims absent

Clause 12
Quality and Quantity • Risk of error by employer • Risk of error by contractor
of Works
 International Contract
FIDIC Contract or Agreement

Construction Contract, 2nd Edition FIDIC Conditions of Contract for Plant and Design-Build Contract,
(2017 Red Book) EPC/Turnkey Projects, Second Second edition (2017 Yellow Book)
edition (Silver Book)
3.5
 Type and complexity Allocation Risk
of project

Finance available Time Constrain

Likelihood of changes in the Amount of information available

employer’s requirement at contract formation
 Bill of Quantity Contract

Type and Complexity of

Project Allocation Risk
Building work The cost of project may
Moderate be higher
Pembinaan Bangunan
Sekolah Pekan Pahang
Duration : June 2020 – March 2022
Location : Kampung Acheh, Pekan Pahang
Time Constrain
Likelihood of changes
Not emergency work
thus it has sufficient Allow additional
time to prepare a variation or omission
detailed document Available information in Finance available
tender or drawing before contract
work begin Project by government
Drawing ,quality of with stable financial
material and The cost of this project is
workmanship described uncertainty
in a specification
 Recap
Lump Sum
Factors considering
Building construction Bill of Quantity
Measurement types of contract
contract type Schedule of Rates
Type and complexity
Cost + Fixed Fee of project

Reimbursement Cost + Percentage

Finance available
Cost + Fluctuating
Target + Cost Time Constrain

Traditional Contract Likelihood of changes

Common contract
Design & Built Contract
procurement method Information available
Construction Management
Allocation Risk

Standard form of Government

contract Private Sector