3.

0 STANDARD FORMS OF
CONSTRUCTIONS CONTRACT
& TYPE OF CONSTRUCTION
CONTRACT
 THE RULE OF THUMB

All standard forms of contracts

[express] must be read and
construed together with
common law principles [implied]
and the statutory provisions.
FORMS OF CONTRACTS
 Standard forms
 Model forms
 Modified forms
 Ad hoc [because of situation / not planned in
advance]
 Bespoke [special made / according to needs of
individual project]

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 STANDARD FORM OF
CONTRACT
 A printed form of contract containing standards
conditions
 Example:
 PAM 98, PAM 2006
 PWD 203, 203A(Rev. 2007/2010), DB
 CIDB
 FIDIC
 It can be amended in any way the parties choose
 Comprises of :
 Articlesof Agreement
 Condition of Contract
 Appendix to the Contract
Why standard forms?
 Most construction professionals are familiar with
their operation, limitations and drawback.
 Such familiarity leads to administrative and
cost efficiency.
 As there is a body of judicial pronouncement
accumulated over the years on standard forms,
there is some certainty in meaning.
 Savings in time and costs when standard forms
are used compared to the costs of drawing up
fresh contracts.

5
Why standard terms of Contract?
(CICC, 2006)
 It becomes more economical as there is no
need to draft new terms of contract every time
a contract is let out.
 It provides more certainty when tendering
[equal bargaining power].
 Familiarity makes it easier and quicker to be
priced.

6
Why standard terms of Contract?
(CICC, 2006)
 It creates the possibility of a more
balanced allocation of risk between the
contracting parties.
 There is a higher chance of avoiding
unwarranted disputes in court or
arbitration.

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EVOLUTION OF STANDARD FORMS
 The first standard form of contract used in
the industry was the Royal Institute of
British Architects (RIBA) Form first
published in 1870

 This
evolved further leading to the
formation of the Joint Contracts Tribunal
(JCT).
EVOLUTION OF STANDARD
FORMS (CONT’D)
In Malaysia, the initial set of Standard
Forms were drafted by the various
government agencies for works in
the public sector i.e. earlier version
of PWD form modeled on the RIBA
Form of Contract 1931 and the
latest revisions coming in 1983.

9
EVOLUTION OF STANDARD FORMS (CONT’D)
Due to progress of development
projects, many other professional bodies
published their own version of standard
forms to suit the current development and
modernisation and variation of
procurement methods i.e. IEM was first
published in 1989 and PAM in 1969
(Lian, Im and Kheng, 2000).

10
3 MAIN PURPOSE - STANDARD
FORM OF CONTRACT
3 main purpose for using Standard Form of Contract:
1.To provide the basic legal framework evidencing the legal
relationship between the parties i.e. identifying the rights,
obligation and duties.
2.To put in place the administrative procedures necessary to
effect the legal and commercial relationship between the
parties for achieving the purposes of the contract.
3.The establish the ambit of the powers and duties of the
contract administrators under the contract between the
parties.
 STANDARD FORM OF
CONTRACT
 Advantages (Wright, 2004):
 Well known & widely used
 Save time & effort in negotiating, drafting new
conditions
 Can be tailored to match the project
 Mistakes maybe avoided
 Disadvantages (Wright, 2004):
 Designed for a standard situation
 Every contract is different
 We can make mistake over and over again
 CONTENTS STANDARD FORM OF CONTRACT
(ARTICLES OF AGREEMENT)
 This is the agreement form that must be fully
and properly completed.
 The agreement:
 The contractor agrees to execute and complete the
works including making good defects for a certain
amount of money
 And the employer agrees to pay the contractor for
the work done
 In conformity with the provisions of the contract
 CONTENTS STANDARD FORM OF CONTRACT
(ARTICLES OF AGREEMENT)
 Sets out:
 Names of the parties to the contract i.e employer and
contractor
 Location & scope work
 Express agreement by contractor & client
 Persons who carry out respective functions:
 Architect
 Engineer

 Quantity Surveyor (QS)

 Space for attestation (for signatures of parties &

witnesses)
 CONTENTS STANDARD FORM OF CONTRACT
(CONDITIONS OF CONTRACT)
 Sets out:
 The normal performance required from each party
 Rules and procedures for conduction the contract
 Rules on dealing with problems or disputes arise
 Terms of payment to the contractor
 Important to ensure there are no conflicts with
others documents the contracts
 CONTENTS STANDARD FORM OF CONTRACT
(CONDITIONS OF CONTRACT)
 These conditions may be broadly classified as
follows:
 General – interpretations, definitions, etc.
 Quality of works during construction – statutory
obligations, levels and setting out, works, materials
and goods, access for S.), etc
 Cost of construction – variation, loss and expense,
certificates and payments
 Time factor of construction – date of possession,
practical completion, EOT, determination, etc
 Insurances.
 CONTENTS STANDARD FORM OF CONTRACT
(APPENDIX TO THE CONDITIONS)
 This section needs to be filled when executing the
contract.
 It is a summary of facts of the contract:
 Contract Period
 Completion Date
 Defect Liability Period
 Rates of The Liquidated Damages
 Period of delay
 PC Sums
 Period of interim certificates
 Period of honouring certificates
 Percentages of certified value retained
 Limit of retention sums
 Period of final measurements
 STANDARD FORMS OF CONTRACT

GOVERNMENT/PUBLIC PRIVATE SECTOR INTERNATIONAL

SECTOR CONTRACTS

FIDIC Conditions
ICE Conditions
JKR/PWD MISCELLANEOUS
IEEE Conditions
203 (Rev 10/83 CIDB Form for ImechE Conditions
without quantities building contracts
203A (Rev 10/83) 2000 Edn JCT Conditions
For NSC
203P (Rev 10/83) Modified JKR/PWD
For Nominated Suppliers Forms, e.g. LPK,
PWD form DB/T (2000 Edn) MHA etc.
for Design & Build Turnkey BUILDING WORKS CIVIL ENGINEERING M&E WORKS
Contract WORKS
PAM 98-Without IEM Conditions
Quantities IEM Conditions

-IEM.CE 1/89 -IEM.ME 1/94

PAM 98-With Quantities
-IEM.CES 1/90 TNB Conditions, etc
PAM NSC 98

Figure : Standard Form of Contract (Part II)

Source: Harban Singh KS, “ Engineering and Construction Contracts Management; Law and Principle”, 2002
STANDARD FORM OF CONTRACT
Government / Public Sector
Public Works Department (PWD/JKR)

 PWD Form 203 (Rev 1 /2010) without quantities.

 PWD Form 203A (Rev 1 /2010) with quantities.
 PWD Form 203N (Rev 1 /2010) for Nominated Sub-Contractors.
 PWD Form 203P (Rev 1 /2010) for Nominated Suppliers.
 PWD Form DB/T for Design and Build Turnkey Contracts

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Government / Public Sector [Previous Version]
Public Works Department (PWD/JKR)

 PWD Form 203 (Revised 2007)

 PWD Form 203A (Revised 2007)
 PWD Form 203N (Revised 2007)
 PWD Form 203P (Revised 2007) for Nominated Suppliers.
 PWD Form DB (Revised 2007) for Design and Build Contracts

 PWD Form 203 (Rev10/83) without quantities.

 PWD Form 203A (Rev10/83) with quantities.
 PWD Form 203N (Rev10/83) for Nominated Sub-Contractors.
 PWD Form 203P (Rev10/83) for Nominated Suppliers.
 PWD Form DB/T for Design and Build Turnkey Contracts

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Government / Public Sector (cont’d)
Construction Industry Development Board (CIDB)

 CIDB Form for Building Contracts 2000 Edition.

 Standard Proforma for Contract Administration (For
use in conjunction with The CIDB Standard Form of
Contract for Building Works).
 CIDB Standard Form of Sub-contract For Nominated
Sub-Contractor [Form CIDB.B (NSC) / 2002] (To
complement the Standard Form of Contract for Building
Works).
 Model Terms of Construction Contract for
Subcontract Work (2006) [CIDB / CICC].

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Model Terms of Construction Contract for Subcontract Work.

Intended to be used as part of a generally ‘stand

alone’ subcontract and not ‘back to back’ to
any one main contract.

The generic drafting style and flexibility mean it

can be used as subcontract terms with any
main contract whether a one-off contract
(bespoke & ad hoc) or published “standard
form” such as the PWD, PAM, IEM, CIDB,
FIDIC or JCT contracts.

25
CIDB Forms
In year 2000, CIDB Standard Form of
Contract for Building Works was drafted
and issued by the Construction Industry
Development Board (CIDB)

There is presumption that CIDB will

replace PWD Standard Forms?

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Other Public Sector Forms
Some statutory bodies and public sector related
bodies utilise the PWD Standard Forms with slight
modifications and/or amendments.

 Drainage and Irrigation Department (DID/JPS)

 Lembaga Pelabuhan Kelang (Port Klang Authority)

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PAM FORM
Origin
Rather than developing and drafting a new standard
form on its own, PAM in collaboration with the
ISM in 1969 adopted 1963 JCT Standard Form
of Building Contract (Reprinted 1968) with
modifications to be used for private sector
building works through traditional general
contracting contract procurement method
comprised:

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Private Sector
PAM
 PAM 2006 with quantities.
 PAM 2006 without quantities.
 PAM NSC 2006

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PAM [Previous Version]
 PAM 1998 with quantities.
 PAM 1998 without quantities.
 PAM NSC 1998
 PAM/ISM 1969 Standard Form of Building Contract With
Quantities.
 PAM/ISM 1969 Standard Form of Building Contract
Without Quantities
 PAM NSC 1970 Standard Form of Contract for Nominated
Sub-Contractors to be used with PAM/ISM 1969.

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PAM 2006
Usage
Essentially for
1. Private sector projects
2. Building works
3. Contracts undertaken through Traditional
General Contracting Procurement

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Private Sector
Civil Engineering works
 IEM Condition IEM.CE 1/89. Mainly for Civil
Engineering Construction (Second Reprint
1994).
 IEM Condition IEM.CES 1/90. Sub-contract for
use in conjunction with the IEM Condition (First
Reprint 1994).

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Private Sector
M&E works
 IEM Condition IEM.ME. For mechanical
and electrical work (First Edition 1994).

33
IEM Forms
Origin

Due to rigours/harsh and pitfalls of the JKR/PWD

forms and unsuitability of the PAM forms for
engineering and infrastructure projects,
construction engineering professionals attempted
to employ UK engineering forms i.e. ICE,
IMECHE, IEE, JCT and FIDIC forms with
modifications.

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IEM Forms
Origin (cont’d)
The “modifications” were subject to job specific
and ad hoc basis. Thus, leading to uncertainty,
inconsistency and leading to construction
disputes.

Due to that, IEM attempted to fill in the lacuna by

drafting their own Standard Forms started from
1989 for the traditional general contracting.

35
IEM Forms
Usage
 Private sector projects.
 Civil engineering, Mechanical and Electrical works.
 Procured under the Traditional General
Contracting.

36
International Contracts
 FIDIC family
 JCT Family
 IEEE
 IMechE
 ECC
 PPC 2000
 NEC 1993

37
 Assignment 2: GROUPWORK
(4 person per group)

Prepare short report; and Write the review on

PWD203A & PAM 2006 Standard Form of Contract.

Submission date: 04.05.2016

38
TYPES OF
CONSTRUCTIONS
CONTRACT
Procurement
Contract Types based on Method of Contract Procurement (Harbans Singh,
2004):-

 Traditional General Contracts

 Management Contracts
 Construction Management Contracts
 Package Deal / Turnkey Contracts
 Build Operate and Transfer [BOT] Contracts;
and
 New Type of Contracts [i.e. private finance
initiative (PFI)]

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Procurement
As highlighted by Masterman (1992) building procurement
systems can be divided into several categories based on the
relationship and critical interaction between design and
construction responsibilities.
PROCUREMENT SYSTEMS

SEPARATED & CO- INTEGRATED MANAGEMENT-

OPERATIVE ORIENTATED

Design and Build Management

Traditional System Contracting
Variants of
Variants of Traditional Design and Build Construction
System
Management

Sequential Package Develop and Construct Design and

Method Deals Manage
Accelerated
Method Turnkey

Source: Masterman (1992)

 EMPLOYER’S INVOLVEMENT
IN CONSTRUCTIONS
 Some employer do get involved / some prefer
to stay away
 If minimal involvement – Traditional Contracting
 If greater involvement – Construction
Management
 DESIGN & MANAGEMENT /
CONSTRUCTION SEPARATION
 Designing & Managing/Construction a project is
two different activities
 Employers may have various preferences:
 Different
Parties designing & managing/construction
 Same parties designing & managing/construction
 Different Parties – Traditional Contractual
 Same Parties – Construction Management /
Package Deal
 FLEXIBILITY OF CHANGE
 Reasons of changing:
 Change in user requirements, rethinks
 Revision / refinement of design due to incomplete
information,discripencies, unclarities
 Changes due to external factors
 Flexible in change – Construction Management
 Inflexible in change – Package Deal
 CLARITY OF EMPLOYER
CONTRACTUAL REMEDIES
 Nature and extent of the remedies available to
employer if breach happens
 “who to blame?!”
 Package Deal / Construction Management -
Single point responsibility
 Traditional Contractual – Varies point of
responsibilities
DURATION OF CONTRACT
 Being primary criteria influencing the
procurement decision
 Fast = Construction Management
 Slow = Traditional Contractual
 CERTAINTY OF PRICE
 As a confirmation of total financial
outlay/commitment required
 Why it is important to client:
 His
financial exposure
 Whether is budget met or exceeded:
 Need to:
 secure additional fund
 Cost cutting arises
 The planning of financial disbursement (cashflow)
 Late Confirmation = Construction Management
Contractual
 Fast Confirmation = Traditional Contractual
TRADITIONAL
GENERAL
CONTRACT
 TRADITIONAL GENERAL
CONTRACTS
 The most oldest, familiar types of contract in
industry
 The origin is from UK where:
 the fast growth of professional consultant at that
time
 A lots of bulk government project
ORGANIZATION
STRUCTURE
NATURE &
CHARACTERISTICS
 The separation of design from building:
 Employers have his own design team
 The contractor only builds/manufacture what
the designers specified
 Design = Employer/Professional Team
responsibilities
 Construction = Contractor responsibilities
 APPLICATION
 Where the design is totally complete before
selecting contractor
 Where an independent project team will be
used
 Where employer required certainty of price
‘PACKAGE DEAL’
CONTRACT
 ‘PACKAGE DEAL’ CONTRACT
 The fastest growing method in the country
 Usually in lump sum basis
 Design & Build type:
 Most Famous
 Contractor undertakes:
 Design
 Construction
 Client:
 Financing
 Approvals
 Turnkey type:
 Contractor undertakes everything:
 Financing
 Approvals
 Design
 Construction
 Employer is getting the key at the end of the project
 APPLICATION
 Where client wants a ‘single responsibility‘ party
 Where project is novel and complex.
 Where client want the price certainty (Lump
Sum)
MANAGEMENT
CONTRACTING
 MANAGEMENT CONTRACTING
 Originated in the west as the 1920s
 Enter Malaysia around 80s
 “a form of contractual arrangement whereby a contractor
is paid a fee to manage the project on behalf of client”
 “a contract to manage…rather than a contract to build”
 The management contractor undertakes:
 Planning / programming all stages / activities of project
 Contribute his expertise / experience on ‘buildability’ to
design process
 Coordination, time, costs and quality over ‘works contractor’
 The works is packaged by the management contractor
and sub it out to ‘work contractor’ who actually
undertake the actual works (construction)
 APPLICATION
 In complex project involve high tech and need
greater flexibility in design
 Where the project is too large
 Where employers to capitalize involvement of
large number of sub con
RIGHT & OBLIGATIONS OF
PARTIES IN THE
CONSTRUCTION CONTRACT
RIGHTS & OBLIGATIONS PARTIES IN
CONSTRUCTIONS CONTRACT
 Employer
 Contractor
 Professional Consultant:
 QS
 Architect
 Engineer
 EMPLOYER RIGHT & OBLIGATIONS
 Refer to building owner, the person or body which
trigger/start a project
 Will enter contract with the contractor /
professional consultant
 Main obligations to make the payment.
 Usually a standard form of payment will be used:
 It
will have all the detail provision of the payment’
 Approval by professional consultant

 Types of payment:
 As an actual work progress
 In stages where both parties agree …
 EMPLOYER RIGHT & OBLIGATIONS
(PERFORMANCE BOND/RETENTION FUND)
 A sum of money that being detain by client
 Client only detain the money .
 As a fund if there is a defect after the project, which
contractor is liable but refuse to rectify
 It is 5 – 10 % of contract sum/value and are
taken out with an insurance company/bank.
 Will be paid after the Certificate of Completion
issued
 EMPLOYER RIGHT & OBLIGATIONS
 Will:
 Takes proactive measures to ensure contractor do his works
with diligent & properly
 Handover site to the contractor
 Issue plans, drawings & other information necessary for the
execution of work at the proper time.
 Appointed professional consultant/subcontractor

 Will not:
 Prevent contractor to proceed his works with diligent &
properly
 Deduct any scope of works and gave it to others
 CONTRACTOR RIGHT & OBLIGATIONS
 “One who is contract to carry out and complete
construction works in return for financial
consideration” **
 Can be:
 Person
 Partnership
 Company/body/organization
 CONTRACTOR RIGHT & OBLIGATIONS
(EXPRESS TERMS) - JKR/PWD Clause 10.1
 Carry out & complete the works in accordance to contract
documents** (Clayton v Woodman, 1962)
 Comply all valid instructions from clients
 Ensure all materials quality & works accordance to contract &
drawings
 Give all supporting documents/information to clients
 Inform clients if there's any discrepancy in the document
 Take all related insurances
 Give way to client to the site
 Allocated representative at site
 Provide sufficient basic facilities for client at site
 Keep all information/details in the contract as confidential
CONTRACTOR RIGHT &
OBLIGATIONS (IMPLIED TERMS)
Unless parties have agreed to the contrary.
Workmanship - that the will do his work in a
workmanlike manner.
Material (Young & Marten v MacManus Child Ltd,
1968)**
 he will supply goods and proper materials
Completed Works & Design Liability
 that the building will be fit for the purpose it was built.
CONSULTANT RIGHT & OBLIGATIONS
1. DURING THE DESIGN STAGE
During the schematic design stage, the
consultant determines the feasibility of the
project.
Design Development the actual design of
project.
In construction document, the consultant is
responsible for the specifications, plans and
drawings related to a project.
CONSULTANT RIGHT & OBLIGATIONS
2. DURING BIDDING AND NEGOTIATIONS
The consultant represents the owner and acts
as the owner’s agent in the preparation,
issuance and supervision of tender documents.
The consultant also prepares, or co-ordinates
and issues the agenda to the tender
documents
CONSULTANT RIGHT & OBLIGATIONS
3. CONSTRUCTION CONTRACT
ADMINISTRATION
During the construction contract
administration, the consultant owes a duty to
the owner
to ensure that the contractor abides with the
terms of its construction contract
follows the plans and specifications in
constructing the project.
CONSULTANT RIGHT & OBLIGATIONS

4. POST-COMPLETION INSPECTION

The consultant is responsible for inspecting

the project once it has been completed.
CONTRACT FORMATION

OFFER
OFFER

COUNTER OFFER

ACCPTANCE
NO. 2
NO. 1 ACCEPTANCE

CONTRACT CONTRACT

INVITATION TO TREAT

OFFER

NO. 3 ACCEPTANCE

CONTRACT
 LETTER OF INTENT
 “a device to indicate that each party has agreed
that a formal agreement can be archived soon”
 Usually used where clients intends a tenderer
to start work before a formal contract is
conclude
WRITES INTENDS SOONER OR LATER TO
ENTER CONTRACT (BUT NOT READY TO BE
BOUND)
MR. A

MR. B
 LETTER OF INTENT
 Client may want to start early to reduce cost of
resources
 Usually if disputes arise, Quantum Meruit
method will be used for the remedies.
 There are risks involved:
 Contractor likely to incur expenses upfront without
having any proper formal contractual agreement
 Client will not be able to enforce anything if the
Contractor fails to deliver
 LETTER OF INTENT
 Effects of Letter of Intent:
 Ithas no binding effect
 Always fails
 May constitute an interim contract, but present:
 Both parties demonstrated their intention to contract
 Both parties must have agreed all the essential
terms (description of works, price, time & quality)
 Acceptance must be clear by both parties (by action
or conduct)
 Turiff Construction v Regalia Knitting Mills
(1971)
THANK YOU…..