Quis Auctoramentum? (What is Contract?)

Quis Auctoramentum? (What is Contract? in Latin)

A Report of My Learning in Shun Hing Internship Programme 2015

Prepared for Shun Hing Group

Written By:

Jonathan Wan (Summer Intern)

24th July 2015

Quis Actoramentum? - Report of My Learning in SHIP Jonathan Wan

Executive Summary

This report presents my learning from the Shun Hing Internship Programme (SHIP) at Shun Hing Engineering Contracting Co., Ltd. (SHECON) between 8th June and 24th July 2015.

The report mainly records my growth in knowledge and maturity accompanied by my mentor, Lewis. It is separated into different sections: Introduction, Knowledge Exposed, Case Studies, Company Culture & Internship Programme, Personal Gains & Future Study Plans, Conclusion and last but not least, Appendix. I like to keep the report interesting and confined, thus most of the technical part I studied and mentioned will be prepared in the appendices like definition, explanation, backing diagrams & notes and some impressive photos, with a superscript marked next to the word.

Introduction gives a brief description of my company, department and my fellow workmates whist Knowledge Exposed is where the technical parts start kicking in and also where I spent the most time during the internship. All of the sections below should be entertaining to read but Case Studies in particular I believe as it is certainly not an experience that most people will come across. This internship programme not only widens my horizon on the engineering career front, it also has an extensive, broad-range of activities to participate in which my previous internships couldn’t provide. Only some exclusive activities which are more impactful to me will be mentioned and they would be explained in Company Culture & Internship Programme together with Personal Gains & Future Study Plans.

Finally, the conclusion consists of some contemplation and my overall sentiment towards the internship programme.

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Table of Contents

Executive Summary.........................................................................................................................21. Introduction..............................................................................................................................42. Knowledge Exposed.................................................................................................................4

2.1 Introduction to Contracts........................................................................................................42.2 First Encounter with the General Condition of Contracts (GCC)..........................................4

3. Case Studies..............................................................................................................................53.1 Technical Drawings................................................................................................................53.2 Site Visit Experience..............................................................................................................5

4. Company Culture & Internship Programme....................................................................64.1 Olympic Day Run...................................................................................................................64.2 Volunteering Event - AFANGERS.........................................................................................64.3 General Experience................................................................................................................7

5. Personal Gains & Further Study Plans..............................................................................75.1 Personal Gains........................................................................................................................75.2 Further Study Plans................................................................................................................7

6. Conclusion.................................................................................................................................8Appendicies.......................................................................................................................................9

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1. Introduction

I am currently undertaking Engineering and Management (BEng) at University of Exeter. I have just finished my first year and I am now working at Shun Hing Engineering Contracting Co., Ltd. (SHECON) as a summer intern.

SHECON provides a broad range of engineering services installations. This includes mechanical, electrical, HVAC, fire services, plumbing & drainage, sewage treatment, low & extra-low voltage, lighting, integrated ceiling, computer raised-flooring, and many more. All of which could be involved with my department.

My department - Commercial and Support Service Department (CSD) which is responsible for going through contracts and tenders, is the backbone of SHECON. Our solid, consistent performance enable our company to pursue its primary role light-heartedly: to plan and execute large-scale engineering projects, provide support and maintenance services.

My mentor Lewis Cheung is the head of section and also the contract manager of the company. He is a qualified quantity surveyor and an expert in his field. Our other member of the gatekeepers is Leung See Wing. She is the assistant of Lewis and current working towards the same qualification as my mentor.

2. Knowledge Exposed

2.1 Introduction to Contracts

There are two different types of Private Edition1 Contracts: With or Without Quantites2. Although there are improved versions of the Private Edition Contracts, i.e. the New Form3, the majority of the employers still use the Old Form4 due to the lack of clear definitions which grant them a greater advantage.2.2 First Encounter with the General Condition of Contracts (GCC)

I felt spoiled that my mentor willingly spent a lot of time teaching me and answering my questions patiently. One of the most memorable times during this internship was when we spent a day going through one of the standard form contracts from which I was given an in-depth breakown of its details. I made some charts5 and notes6 for later revision purpose and they had proven to help me by an immense amount while going through new, challenging contracts for the remaining time of my stay.

2.2 First Encounter with the General Condition of Contracts (GCC) (Cont’d)

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There are in total 37 different topics6 covered in this Main Contract7 we discussed on and since there are too many of them, I am going to go over one of the contract review I did for a fire service installation instead. A normal contract review consists of: Definitions, Contract Documents (including ambiguities), Contract Sum & Building Quantities, Contractor’s Obligations, Insurance, Payment and finally Completion (deflects, delay & liability). While reading any contract, I find insurance8 the most interesting and trickiest topic of all. There are many different clauses and policies that can be confusing. Nonetheless, it is still extremely crucial to acknowledge and understand the grey areas about who is responsible for the situation and criteria for the victims’ righteous claim. (Brief explanation is given at Insurance8 & Notes5 :18)

3. Case Studies

I went to two different site visits in total and they were very memorable. Both projects had the same developer and were both Multi-Ventilation Air Conditioning (MVAC) installation: Developer: Henderson Real Estate Agency Ltd.1) 迎海 Double Cove (Phase 4 & 5) at Lok Wo Sha, Man On Shan, New Territories and 2) 浚峯 The Hudson at Davis Street No. 11 - 29, Kennedy Town, Hong Kong.

3.1 Technical Drawings

There is a massive amount of preparation needed before going down the site like familiarising with the technical drawings9 etc, on top of going through the project contract. Technical drawings are normally included in Schedule of Drawings inside the contract for reference, but actually identifying the details is like learning contract all over again.

The human sized technical drawing provides a vivid image for the palm thick contract I am used to, making it easier to swallow and digest. A General Legends10 always comes with it and acts as the definition page for technical drawings. From the drawings (typical floor plan), you can see the exact location of the outdoor, indoor air conditioner, model types and even installation method.

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http://www.google.com.hk/url?url=http://www.28hse.com/utf8/developer-214.html&rct=j&frm=1&q=&esrc=s&sa=U&ved=0CCEQFjAEahUKEwiRydKs9O3GAhVIk5QKHXS9DOA&usg=AFQjCNGPl5VkZAnSZeXyHD5Lo0WYaVq1Ww


3.2 Site Visit Experience

I thought it would be nice to have a change of environment, but I have never been this wrong before. The sites condition were terrible and filthy, and wearing a safety helmet11 around was absolutely boiling hot. We even needed to walk up 8 floors12 at The Hudson

3.2 Site Visit Experience (Cont’d)

because there weren’t any lift available The actual site visit experience just took contract application to a whole new dimension

because real life situation could be quite different from what was intended on the contract (hence Variation Order). I wished I had memorised more information from the floor plan back in the office as it was just so inconvenient to pull out a massive piece of paper and compare. The areas were crowded with other workers doing different kinds of work. Therefore taking a balance between comply the work schedule and co - operating among others is a challenge in itself as well as existing technical difficulties.

4. Company Culture & Internship Programme

4.1 Olympic Day Run

It was definitely quite an ambitious aim to finish a 6km run around the Hong Kong Disney Resort, even for an athletic person like myself. The sceneries we were running past were stunning but shame that the humidity and the heat were just ridiculous and distracting. Despite the harsh weather condition, it was a fantastic opportunity to strengthen team bonding13.

To me, the inhumane weather on the Olympic Day Run poses as a difficulty that our colleagues would normally face during daily work. However, a positive attitude makes overcoming the problem a much easier and enjoyable experience. People with the right attitude shares it around them, creating an atmosphere that loosen up the tensions among themselves. I am sure if they can apply this practice back at the office more often, this will enhance their work efficiency and harmony.4.2 Volunteering Event - AFANGERS

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I was in the operation team for this volunteering event and my job was to proposed operational plans14 (normal & contingency) and timetables15 for all other interns.

Improvements on communication skills are probably what I valued the most from this strenuous task. It is simply not possible to fulfil everyone’s preferences especially when doing the shift roster and this is where the communication skills play a big part. Try to understand their individual strength by listening to different opinions while being analytical at the same time, is what I believe the key to good leadership and outstanding achievements. 4.3 General Experience

I am surprised that the Group has taken on board a lot of social responsibility and I am privileged to be involved in some charitable & volunteering activities during this internship. I believe that the Group puts a great deal of focus into increasing employees’ sense of belonging. I personally love the monthly gathering at SHET because it shows caring do exist across the high and low ranks.

From what I have observed throughout my time here, the Group has been very successful in terms of following their tenet: ‘We place emphasis on contributing towards the wellbeing of the communities in our marketplace by being an active corporate citizen’, follow by ‘go the extra mile’ in support of the worthy causes.

After each meal at Shun Hing Centre’s canteen, employees need to return their used cutleries categorically into different trays. This help developing a habit for the employees to recycle used items, and become more environmentally friendly inside and outside the Group. However, the most noticeable effort from the Group has to be the email. The format of the email is clean and simple, emphasising - “Love Life, Love Earth” along with the green highlight, presenting a firm positive corporal image.

5. Personal Gains & Further Study Plans

5.1 Personal Gains

Before I arrived here for the internship programme, I was hoping to understand how an Engineering company works and perhaps given a more in-depth and personal review on it. I am privileged to work at my department because I can get a very clear and comprehensive picture on the schedule of building works and everyone’s involvement.

Time management is not only a branch of knowledge, but a kind of art. In contract, a slight delay in schedules without any legitimate reason can be very costly; in real life, a lack of

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punctuality earns you a bad reputation which takes a long time to build it back. I can really feel the pressure towards the end of the programme when multiple deadlines are very close to each other.

Discipline is another area which I think I have improved a lot after I joined the programme. It is mainly about having a regular, healthy sleep cycle and failure to do so will results in poor working efficiency and bad temper.5.2 Further Study Plans

I am currently doing Engineering and Management (BEng) and I have just chosen next year’s modules to specify in Mechanical Engineering for the engineering part of the course. I am also wondering whether I should take a diversion into a more business management side in my current study.

Lewis and I have been chatting about my career path every now and then, where we thoroughly go through most possibilities. I am always keen to work back in Hong Kong but unfortunately, engineering as a whole is just not at the same level as finance. Furthermore, not all types of engineering survives in Hong Kong with guaranteed space for improvement.

Despite that I am considering to go down the business path as my future ambition, both Lewis and I are of the same mind on I should become a chartered engineer first no matter what. This is because a solid professional qualification is an important asset which guarantees job opportunities and wage. I immediately double-checked that my current course is credited by the Institution of Mechanical Engineers in UK (IMechE) and is recognized by Hong Kong Institution of Engineers (HKIE).

I have done some research on how to get a membership in HKIE as well: a few years of related work experience, along with two Corporate Member supporters and finishes with an interview. The passing rate has always been low and this is an annual assessment. However, I believe it is definitely worth getting it eventually if I decide to become an engineer in HK.

6. Conclusion

One of the fundamental elements we look for from an engineer is his problem solving skills. You can say that’s what differentiate a good engineer from a bad one, yet I regard this quality should apply to all real life situations. “Never work towards a set answer, and instead learn to fully understand it” is what I concluded from making risk reviews for multiple contracts. Tiny tweaks and modification can mean completely different and there can’t be a set answer for all possibilities.

This internship programme includes knowledge way beyond the scope of my enterprise. I believe I have done my best and made most of it, though there are still so much more to learn. I feel

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that I have gotten better on so many fronts (especially the person’s inner values) and I am pleased that I have made great friends with the other interns and colleagues within my company. This is without doubt a very unforgettable experience, and I would love to come back and work here, given the right timing and opportunity.

Appendicies

Private Edition1: Private Editions of Building Contracts are prepared for projects that do not associate with

the Hong Kong Government. There are different types of contracts designed for different parties and

purposes. Apart from the Private Editions, the Hong Kong Government has their own General Condition of

Contract (GCC) for Building Works (1999) (designed for Main Contractor) & Sub - Contract for Building

Works (2000) (designed for Nominated Sub - Contractor only)

With or Without Quantities2:

With Quantities suggest the content of the GCC contains risk factor mainly from the employer.

Building Quantities (BQ) carries risk of error in quantities meaning that if the employer need to make any

correction to the quantities later on will entitle the Main Contractor a variation order (VO) which might lead

to extension of time and claim loss and expenses.

Without Quantities suggest the content of the GCC contains risk factor mainly from the Main

Contractor. The contract sum is derived by the Main Contractor with estimate amount of quantities. If any

more than the original set contract sum is needed, the Main Contractor will not get any compensation back.

(vise versa)

New Form3: It is referring to the Standard Form of Building Contract Private Edition – Without Quantities

(2006) & Standard Form of Building Contract Private Edition – With Quantities (2006)

Old Form4: It is referring to the Standard Form of Building Contract Private Edition – Without Quantities (1999) & Standard Form of Building Contract Private Edition – With Quantities (1999)

Main Contract7: It is referring to the Standard Form of Building Contract Private Edition – Without

Quantities (Old Form). This is a General Condition of Contract (GCC) designed for the Employers and Main

Contractors to use as reference. If they have any amendment they want to make, it will be written in the

special preliminaries in their tender and contract. Note that those amendments will be taken priority over the

GCC and if no amendments are stated, then all the clauses in the referred GCC (could be any) will remain in

full force.

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Insurance8:

Contractors’ All Risk Insurance (CAR) has two parts (modern forms of CAR policies cover both):

i) The first covers damage to property, such as damage to buildings and other structures being

constructed like caused by natural hazard: fire disaster, water flooding etc

ii) The second covers liability for third party claims for injury and death or damage to third party

property i.e. Third Party Insurance.

Employees’ Compensation Insurance (EC): This is the only compulsory insurance that all employers

must buy according to the Employees’ Compensation Ordinance. All of the Contractors are liable in

respect of “bodily injury to, disease contracted by or death of the employees of Contractor” for the

whole duration that the Contractor occupies the site (whether working or not).

Excess of CAR: The same functionality as normal CAR but if the party who is signing the contract not

feeling secure about it, then they can buy an extra CAR to make sure he is fully covered by the CAR

insurance (previous bought and his own one) if anything happens.

Open Policy: This is an internal policy that each company should have:

Let’s say there are 3 policies: One designed for any contract sum on or below £1 million, £3

million and £5 million. If there is a contract which now worth £3.5 million, then it fits in the £5 million

open policy and so the company can use this directly. If there is a contract which now worth £6 million,

and so none of the open policy falls into the category, hence the company would need to buy an extra

one (one-time usage) just for this specific contract which is large enough to cover the £6 million

contract sum.

Note that there is also a minimum amount, and if the amount the company wants to claim is below that

minimum amount then the request will be denied.

A Typical Technical Drawings9 (Floor Plan):

General Legend10 (Terminology

- left, diagram definition - right)

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Safety Helmet11 with Lewis:

Walk up 8 floors12 with Shun:

Air Conditioner Bulk Head (Both Sites):

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Incomplete Bulk Head (Left) & Finished and Covered Up (Right)

Olympic Day Run13 Brave Participants & Scenery (100% interns involvement from SHECON with Shun):

Operational Plan14 (Normal) & Work Allocation Timetable15 (Normal):

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Volunteering Event - AFANGERS, where we install, and distribute fans to old people for free:

Charts5 from Standard Form of Building Contract Private Edition – Without Quantities (Old Form):

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This chart is used to illustrate the relationship between the Employer, Consultants, Main Contractor and

different kinds of Sub - Contractor.

Further Explanation of the diagram:

- Employer normally approaches NSC before M.C. (Domestic Sub - Contractor won’t contact

employer at all, since the contract is formed between himself and M.C. not the employer)

- Within the contract between employer and NSC states that MC will replace employer’s role once it

is chosen by the employer and the NSC has to maintain the current relationship but now with M.C.

instead of the employer, hence the “transfer of power”

- Employer provides a tender directly to NSC, however M.C. can alternate or add clause to the

original one (NSC also have the right to reject the new amended one) after “transfer of power”.

- Employer still remains in play within the NSC and M.C. relationship by bond or collateral warranty

with the NSC. Advantages include when M.C. delays or refuse NSC’s payment, the employer has the

right to pay for the NSC first and deduct the amount from the contract sum between employer and

M.C., protecting NSC and his reputation.

- Direct Contractor has the same right as NSC (negotiate with either the employer or his consultants)

except that direct Contractor is directly taking orders from the employer without any involvement of

M.C. (This not only has a better quality control, it also reduces the contract sum because there won’t

be M.C. taking some of the money as profit)

- Since the MC is not part of the relationship between the employer and direct Contractor, it will cost

more on the management front for the employer in exchange with a greater efficiency of work.

6Notes from Standard Form of Building Contract Private Edition – Without Quantities (Old Form):

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Summary of Standard From of Building Contract Private Edition – without quantities (Old Form) – highly

recommend having the contract with you while reading this. (same as the written notes shown)

- Articles of Agreement (中標後)

Acts as assigning authorities (授權書/授議書)- Index

1) Main Contractor’s Obligation

2) Architect’s Instructions:

Any instructions from the Architect must be in written form = A.I. (工程界聖旨) (verbal instructions must be confirmed by a written notice to be valid), and if the Architect didn’t reply within 7 days, then the

verbal instruction is completely useless.

2a. Variation Order (V.O. - 工程變更 ) Architect’s instructions can normally be delivered in any form

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like letter etc, but A.I. should be stated.

3) Contract Documents:

Normally specification and drawings are not included in this section.

4) Statutory Obligations, Notices, Fees and Charges

5) Levels and Setting out of the Works

6) Materials, Good and Workmanship to conform to Description, Testing and Inspection

7) Royalties and Patent Rights:

This doesn’t just bound at Hong Kong Special Administrative Region, the patent right could be

involved internationally. (Note that it could be very costly to apply and also to maintain)

8) Foreman - in - Charge

9) Access for Architect to the Works:

Architect has the right to visit site or workshop any time to inspect and M.C. has no right to refuse.

Normally after M.C. completed the work, M.C. needs to notify the Architect within a period of time

(stated in contract). Within the period of time, the Architect will not compensate either time or money to

M.C. to open up work for inspection or closing it back. However, if the Architect visits after the stated period

of time, then M.C. could potentially claim EoT or money.

10) Clerk of Work (CoW):

The person who looks after materials and the workmanship (Architect 之下 but everyone else 之上 at site)

(工程監督).His role is like a Quality Assessor (Q.A.), but he is a technical man who can negotiate with the Architect and Q.A. can’t.

11) Variations, Provisional and Prime Cost Sums:

11.3 Prime cost is designed for NSC only

11.3 Provisional Sum (for the whole contract) 到時實價實報 . 11.4 Variation Principle (it’s all about V.O.)

11.4a Building Quantities (B.Q.) rates if same or similar character in the same or similar situation.

For example: If Room A has 2 Socket A, V.O. said 3 more Socket A is needed in Room A (hence

same or similar character in the same or similar situation). 1 Socket A cost: (£80 labour & £20 material =

£100 in total). Therefore total sum will now be £500 from £200.

11.4b Try B.Q. rates (if reasonable)

For example: If Socket A labour cost £80, material £20, Socket B material cost £30. Reasonable

total cost from 1 Socket A to 1 Socket B is £100 to £110.

11.4c.i Labour Scenario

11.4c.ii No Rates Scenario

11.4c.iii Cost Plus (C.P.)

It means the capital cost (includes overhead 雜費 , profit etc ) + 15% and the C.P. could refer to either labour or material.

12) Quality and Quantity of the Work

13) Contract Sum

14) Materials and Goods, Unfixed and Off-site:

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If the materials arrived to the site and the M.C. has signed off and collected money, then the materials

will belong to the Employer, but if the payment process is incomplete then those remain as M.C.’s property.

However, if any damages or loss of the material while in the site, no matter whose properties (defined from

the above statement), it is still M.C. to indemnify the lost.

15) Practical Completion and Deflects Liability (by the Employer):

After Practical Completion Certificate starts Deflect Liability Period (DLP)

After DLP, sometimes you will get 14 days of Schedule of Defects. Within this 14 days period, it

basically acts as last order ( 最後通牒 ) , and M.C. needs to start working. The Certificate of Making Good Defects will be issued if M.C. finishes all the work within the DLP or Schedule of Defects. If M.C. showed

no sign of starting the work (even putting one worker at the site counts as starting work) even after schedule

of defects, Employer has the right to hire someone else to finish the job and M.C. will need to cover all the

expense that cost the Employer extra (most likely deduct from the contract sum).

(Note that there is also a Certificate of Compliance which is issued on or after the Certificate of Making

Good Defects. Certificate of Compliance is issued by 地政處 instead of the Employer)16) Section Completion:

Either the Employer or the Architect can decide sectional completion.

For example: There are 4 phases in total. The Architect decided he wants to finish phase 1 & 2

first and get it done with, and so for M.C to co-operate with that, he might focus all the work ( including

labour and material) on phase 1 & 2 first. When phase 1 & 2 is completed, Certificate of Practical

Completion is then awarded and they will enter the DLP. M.C. can now focus on the rest of the remaining

phase 3 & 4. It is possible as the case stated above that building in the same project to have different start

time on DLP and receiving Certificate of Practical Completion.

17) Assignment or Sub - letting:

Assignment (轉讓) - has legal right (responsibility): The person who is assigned to have full liability and the person who originally assigned it is now realised from any responsibility.

Sub - letting (分判) - shares the legal right (responsibility): Both the person who is sub - letting and the one who received the sub - letting share the liability.

(Note that this is not depended on the amount or difficulty of the work i.e. the whole proportion of the

work can be sub - letted and still works under the definition of sub - letting)

18) Injury to Persons and Property and Employer’s Indemnity:

All scenarios below must happen within Main Contractor’s working area for this clause to be in effect

If third party person is injured or killed, M.C. will have full responsibility (unless otherwise proved that

it was the Employer’s fault)

If third party property is damaged, the Employer will have full responsibility (unless otherwise proved

that it was M.C.’s fault)

19) Insurance against injury to Persons and Property:

As defined above in Insurance 7 :

Employees’ Compensation (E.C.) (勞保)Contractor’s All Risk (CAR 1 & 2)

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20) Insurance of the Works against Fire, etc

21) Possession, Completion and Postponement

22) Damages for Non - Completion:

Liquidated and Ascertained Damages (L.D.) (業主實際損失)(Note that L.D. is not correlated to the contract sum i.e. the contract sum could worth £10 million but

L.D. could cost up to 1 million per day)

23) Extension of Time (EoT):

23.d Civil Commotion (遊行), Strike (罷工) etc Doesn’t matter people involved are workers or not.23.e A.I. states extension. (V.O. doesn’t automatically grants EoT but gives you the right to apply for it)

23.h Delay caused by people who are authorised by the Employer (Artists, Tradesman etc)

Employer can delete clauses like extreme weather to protect himself (prevent all possibilities for non-

human error or non-controllable) and so only usually left with clauses which are predicable human errors

like (23.h) However sometimes the Employer might even delete clauses like (23.h). M.C. couldn’t finish in

time and is penalised. M.C. can argue through common law about the unfair and injustice which he wouldn’t

be able to do though contract law.

24) Loss and Expense Caused by Disturbance of Regular Progress of the Work:

Most of the V.O. claim cases, EoT is successful but claiming money back is more likely to fail.

25) Determination by Employer

26) Determination by Main Contractor

27) Nominated Sub - Contractors (refer to chart1 for some brief introduction on NSC)

There is a separate General Condition of Contract and it states:

1) If any ambiguity in the Sub - Contract, but mentioned in the Main Contract and it’s related to

NSC, then the NSC must follow.

3a) Observe, Perform and Comply..

28) Nominated Supplier

29) Artists and Tradesmen

30) Certificates and Payments

31) Surety Bond

Acts as (擔保金) Normally M.C. needs to provide around 10% of the contract sum as Surety Bond.Employer has the right under reasonable judgement (like M.C. is bankrupt) to call bond and the bank

must give the money. After receiving Practical Completion or Certificate of Making Good Deflects (depends

on the contract), M.C. is then allowed to take back the money minus 手續費 from the bank.32) Outbreaks of Hostilities

33) War Damages

34) Antiquities:

It is a sufficient and legitimate reason to claim EoT or even Loss Expenses.

However if any were found, it belongs to Employer’s property.

35) Arbitration (仲裁):Acts as the legal court and deals with the disputes between the Employer and M.C.

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36) Fluctuation in Wage Rates:

Only deem to be part of the contract only if specified in the specification.

37) Appendix

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