SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN  

BACHELOR OF QUANTITY SURVEYING (HONS)  

PROFESSIONAL PRACTICE 1  (QSB 60604) 

 

DATE OF SUBMISSION: 28TH November 2017, TUESDAY Word Counts : 3215 words 

Lecturers: Mr. Wong Chong Wei & Sr. Ang Fuey Lin  

GROUP MEMBERS: 

No  Name  Student ID 

1  Gillian Chong Yeong Lin  0323941 

2  Goh Jia Jun  0323302 

3  Goh Song Kit  0322013 

4  Hong Li Vian  0327007 

5  Jacquelyn Vanessa  0320021 

6  Jason Wong Kok Yong  0327650 

7  Kam Pei Chi   0327295 

8  Loh Wen Jun  0323551 

9  Ng Chuan Kai  0323738 

10  Yeong Poh Ling  0323590 

11  Zachary Ooi Cheng En  0323120 

Table of Contents

CONTENTS PAGES

1. Introduction

2. Procurement Method 2

2.1 Advantages of Traditional Procurement Method 4

2.2 Justification on other method 4

3.0 Tendering Method 5

3.1 Tendering Process 6

3.2 Justification on other method 7

4.0 Contract Arrangement 8

4.1. Types of Contract 8

4.2. Form of Contract 9

4.2.1 Justification of other contracts 9

4.2.2 Client’s consideration 9 -12

5.0 Reference 13

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1.0 INTRODUCTION The main purpose of this project is to intentionally explain the most suitable procurement method, types of tendering method as well as the contractor arrangement which meets the project requirements for the client. Choosing the best and appropriate procurement method is essential because it can help to control risk, cost, quality and time of the particular project. Requirements

● Client wishes to have full control of the design and able to introduce changes from beginning till the completion.

● To ensure that all quality and Health & Safety requirements are captured in the Contract

and that there will be minimum variations to the Contract Price during construction.

● The project to complete on time and imposed Liquidated Damages of RM 250,000.00 a day.

● Client is not interested in the daily dealing with too many parties except the few key

members of the project.

● Being a public listed company and thus accountable to other shareholders and board of directors, he wants the selection process of the successful contractor to be reasonably transparent. However, the selection process should be able to eliminate potentially non-performing contractors.

The objectives of this report to be able to add value in relation to the project. The type of tendering method,type of contract used for the project, have a good contractual arrangement to protect the client.

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2.0 PROCUREMENT METHOD

Procurement is defined as acquiring goods, services and works either through competitive or non-competitive means. In this particular project the proposed procurement method is traditional method. It is one of the most preferred procurement method in the industry as it gives the best arrangement with better economy, efficiency, and transparency.

This method strictly involves the separation of construction from design. The client will first appoint a team of consultants to plan, specify and finalise the design before calling for tender. By accepting the tender, the contractor agrees to produce what has been specified in the documents. Thus, the contractor has no responsibility for the design. The client will have a contractual relationship with the contractor while the architect in the consultant team is responsible to coordinate them about all the construction works.

The appointment of a domestic sub-contractor is usually by the contractor while the client plays no part in selecting or entering into a contract. A stand out feature of traditional procurement is the nomination of sub-contractors by client. This ensures that the contractor employs sub-contractors of reasonable standing.

Figure above shows the contracted relationship between Client and the construction parties

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2.1 Advantages of Traditional Procurement Method

One of the advantages is the ability of the client to control the design of the project through his consultant team as there is close relationship between them. He can easily introduce change by telling his Architect or the superior officer (S.O.) subsequently the Architect will issue an Architect instruction (AI) to the contractor team.

The client only has to deal with few key members of the project with as the client is not interested to deal with too many parties. He only has to discuss with his own consultant team like Architect, Quantity surveyor and Engineer for the design, construction progress and others of the project although there is a contractual relationship between him and the contractor.

The contract sum is certain as it is calculated based on complete design especially under lump sum contract for traditional procurement method as long as there are no variation order which can be controlled by the Architect. Therefore, it is easier to do budgetary control and as a result minimum variations to the Contract Price. In the event that some sort of design error or defects happens, the contractor would need to chip in his own money for the amount that exceeded the contract price, which the risk to the client is reduced. 2.2 Justification on other method

Construction management The client will have to deal with more direct trade contractors because there is a contractual

relationship between the client and the works package contractors. The client is responsible to settle the disputes with the trade contractors when there is any issue arisen. Design and build

The client will only have a little involvement in the design of the project and the quality of material and workmanship are all depended on the contractor as the contractor of this procurement method handles both the design and construction of the project once their successfully get the tender award of the project. This method always have the problem of low quality of final product when the contractor get urged by the client. Management contracting

The chance of making variations with incomplete design is higher hence the amount of remeasurement is greater during construction period which mean the requirement of client to have minimum variation on the contract price cannot be achieved. As the project is split into works packages then only award to the sub-contractor, therefore the total cost is uncertain until the last works contracts have been signed and the overall construction cost will be higher.

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3.0 TENDERING METHOD To fulfill the client’s requirement of wanting to go through a selection process of successful contractors, we chose selective tendering as it is reasonably transparent and able to eliminate non-potential performing contractors. Selective Tendering This method is divide into 2 categories - single stage tendering and two stage selective tendering. In Single stage tendering, pre-selected list chosen by the consultants were asked to tender the project and the client will decide the final list of contractors whereas in two stage selective tendering, firstly, pre-qualification process will be held to select the list of contractors to tender and short-list of prequalified contractors will go through a selection based on the criteria such as price and quality. However, we chose two stage selective tendering. Why Two-stage Selective Tendering

1. Prequalification process A range of pre-qualification questionnaires and interviews will be held for selection which can reduce number of firms tendering and minimise the time wasted by unsuccessful applicants. Questionnaires includes the full company contact details, previous projects and topics such as financial capability, status and legitimacy, quality, and health and safety. Consultants will go through the questionnaires answered by the contractors and select the contractors that fulfil the requirements.

2. Quality assured

Due to this method only allow contractors from the pre-selected list chosen by the consultant, it ensures the quality of proposed building as the consultant choose the contractors based on their previous project, reputation, financial capabilities, company full details and so on.

3. Cost saving

Using this method will lower the overall cost. Firstly, the cost of printing tender documents will be lower as the number of tenderers will not exceed 6 tenderers. Secondly, in order to win the award, the tenderer will try to present an economical price to execute the works.

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3.1 Tendering Process 1. Invitation to tender A pre-selected list of tenderers chosen by the consultant will be asked if they are interested in the tender.

2. Pre-qualification process Questionnaires and interviews will be given out to tenderers to evaluate their capabilities in handling the tender and it able to eliminate non-potential performing contractors. 3. Documents collection Successful tenderers will collect the tender documents on a stipulated date by the consultants and employers. Documentation fee will be charged upon collection. 4. Tender closing Tenderers are required to submit their tender in a sealed envelope and to deposit into a “tender box” at the employer’s office. 5. Tender opening Tender box which contain all the tender submission from the tenderers will only be open in the presence of all consultants and employer’s representatives. Tender figures are recorded and jointly verified by all parties. 6. Tender evaluation All the tenders will be checked for major arithmetical errors and the lowest few tenders will be checked in detail for compliance with the tender condition and so on. Items to be check are arithmetical error, reasonableness of rates and elemental cost, comparison with Quantity Surveyor’s Pre-tender Estimate and other tenderer. Consultants will prepare tender report to the employer with their recommendations to call the lowest 3 tenderers for a tender interview. 7. Tender interview During the interview, the tenderers are to query on some issues regarding tender submission. 8. Tender award Consultant will then prepare letter of award to be issued to the successful tenderer and to be signed and return within a fixed period. If the contractor fails to return in the fixed period, the award will be considered as failure and there will no further legal effect on the tender.

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3.2 Justification on other method Open Tendering First of all, since all the contractors wants to win the award, underpriced tenders may include low quality materials, poor quality of works and other factors to cut corners. Secondly, open tender is a long tender process as it calls all possible contractors that to tender and upon submission of tender which requires the consultants to go through every single one of the tender which is time consuming. Lastly, the risks of possibly selecting a new and unknown contractor is higher with open tendering method. The contractor may also potentially not have the sufficient experience for the job. Negotiated Tendering The client wants selection process of the successful contractor to be reasonably transparent. Therefore, negotiated tendering is not suitable as only one contractor is approached by the client based on the contractor’s track-record experience and previous projects which the terms of the contract are then negotiated. Besides, negotiated tendering does not have a selection process and is normally only one or two contractors will be selected by the client based on their reputation and skills which may leads to higher cost as it lacks competitiveness.

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4.0 CONTRACTUAL ARRANGEMENT 4.1 Type of Contract The type of contract we proposed for this project is Lump Sum Contract with Quantities. Lump sum contract with quantities is also known as Bill of Quantities Contract. In this form of contractual arrangement, the Bills of Quantities are normally comprising of general conditions and preliminary of the contract, trade preamble and specification, measured items of materials and labour. The contract conditions and preliminaries cover both practical and contractual conditions of the contract, while the trade preamble and specification indicate the quality of materials and standard of workmanship required and finally the measured items give the quantities of material and labour necessary to complete the works. The advantages of using BQs are as follow: 1. Reduces cost and time spend on tendering process 2. Reduce the risks of the tenderers 3. Ensures fairness in competitive tendering process 4. Provides improved cost feedback 5. Provides a basis of valuing variations. In this form of contract, it can be further divided into two types; Bills of Firm Quantities and Bills of Approximate Quantities. For this project, we proposed the bills to be Bills of Approximate Quantities. In this form of bills, the quantities given in the bills are approximate and are subjected to late adjustment. The essential characteristic is that only unit rates form part of the contract. This form of bills allows the client to have room for adjustment since he have the intention to control the design of the project which may happen in between the construction period. This method is suitable to be used in cases where time and speed is of demand and general design has been selected such as this project, where the project need to be done in five years. In addition to that the design of the project deem to be change and therefore it does not permit accurate bills to be prepared.

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4.2 Form of Contract

Form of contract is the employ standardized of agreement which set by one of the parties. Form of contract acts a vital efficiency role in mass distribution of services or goods as it decreases the transaction cost and time for both parties to negotiate all the details required and create a new contract.

After considering different aspects, we consider the use of Pertubuhan Akitek Malaysia (PAM) contract 2006 (with quantities) as the type of form of contract. First of all, most of the Malaysia industries familiar with the PAM contract 2006. In addition, PAM 2006 also emphasizes on adhering to time provisions by the three parties which are contractor, employer and consultants together with the inherent loss of rights and incurring of liabilities. 4.2.1 Justification of other contracts PWD contract

Public Works Department (P.W.D) Form 203 is a standard form of contract which suitable for government or public sector project only. In our situation, our client is a public listed company.

Besides, Superintending Officer (S.O) is appointed to monitor and supervise the whole project which has a similar role and responsibility as Architect stated in PAM 2006. However, nowadays in Malaysia S.O are mostly not appointed based on their experiences or expertise, in other words, they are based on a public post according to Umi Kalsum.

FIDIC

As employer is not familiar with the construction industry, he can appoint a staff to be ‘Engineer Representative’ defined in clause 1.1 to represent him whenever the contract requires orders from the employer. However the term of “Employer’s personnel” has a large scale of defining who is the person represent the employer or in charge, which means engineer or anyone without experience and expertise can be appointed by the employer and might cause a lot of failures appointing tasks, damages, and delay in the end.

According to sub-clause 13.8, if the table of adjustment data is not used, employer will pay the actual amount of the material, labour, plant cost instead of the estimated cost to the contractors. The cost might rises or falls throughout the construction period due to the inflation.

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4.2.2 Client’s consideration Cost

Employer request the liquidated damage as RM 250,000.00 per day, which both parties agree before they enter into the contract and used to cover the employer’s loss or damage caused by the delay of contractor who is unable to finish the construction on time. Liquidated damages collected from the employer by directly on demand or deduct from payment payable or recover from performance bond. If the contractor does not intend to pay the total liquidated damages, is considered as a debt to the employer, contractor can discuss with the employer or write an appeal letter to the court otherwise employer can charge the interest under Clause 30.17.

According to Clause 11.1, it protects the employer when the variation is due to the negligence of the contractor, architect can reject the written notice of claim from the contract and using the clause 6.5 to order the contractor to remove, demolish or reconstruct the work which is not according to the contract.

Clause 30.1 stated that the contract shall submit the payment application within the interim interval and if the contractor fails to submit the payment application will be considered he has waived his right to claim from the employer.

The amount of final account of the works is defined in clause 30.11 (a), (b), (c), and (d) only which means liquidated damages, set-off imposed by the employer and interest payable by either of the parties are unable included in the final account and employer not responsible to pay any cost which is not in the final account.

Time

According to the client requirement, he wants the project to be completed on or before the completion date. However, for a large project, it is unable to ensure that there is no variation, no delay of construction or unforeseen issues. So as provisions Extension of Time (EOT) under PAM clause 23 is to preserve the interest of the employer. ‘Relevant Event’ stated in clause 23.8 are the only circumstances or incident for a contract to claim EOT other than that the architect will take consideration and reject the request for EOT from the contractor.

According to clause 23.6, the contractor must use his best endeavor constantly to show that the contractor is willing to finish his job as soon as possible.Architect must take part to justify the contractor’s progress throughout the project in order to make sure the project able to complete before the completion date.

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Quality For a RM1.2 billion project which consists of hotel and shopping mall, quality is one of

the well-regarded consideration to ensure the robustness of the building. Contractor can request the information or detail from the engineer or architect if not

stated in contract document. So, if architect finds that any works, material or workmanship doesn’t meet the requirement stated in the contract document, architect might instruct the contractor to remove from the site, demolish or reconstruct the works according to clause 6.5 (a), (b) & (c). The reconstructed or removed works unable to claim from the employer in term of time and cost. If the contractor fails or refuses to do what the architect issued, employer can employ other parties to do the work which the contractor rejected or failed according to clause 15.3(b) and 6.7. Insurances and safety

Safety and insurance is part of the important things that need to be considerate during the construction period. Incidents such as damage to properties, injury and death are bound to happen during the construction. Therefore, insurance is to cover the loss for the workers, contractors, employer and other parties who are involved.The most common types of insurances are all risk insurance, professional indemnity insurance, public liability insurance and worker’s compensation insurance.

First of all, there are two building that need to consent about insurance are the existing building and the new construction building that will extend beside the existing building.The new constructing building will cover in clause 18, it stated that injury to person or loss and/or damage of property and indemnity to employer means that any injury or death (clause 18.1), Damages to property (clause 18.2) and claim on workmen’s compensation and SOCSO (clause 18.3) are all responsibility of the contractor. The contractor’s indemnities cannot be cancelled or reduced due to employer's or agents' neglection or failure to find contractor mistakes which cause accident is state in clause 18.4.

Moreover, clause 19 stated for insurance for injury to person loss and/or damage of property. The Contractor shall take out insurance from insurance company with automatic extension or renewal before commencement of works, with endorsement of clause 19.1(a) to 19.1(d). In clause 19.1(a) means that it cover accidents for all parties. In clause 19.1(b) explain insurer to waive his rights to subrogation .In clause 19.1(c) means the party has rights of subrogation or recoveries against the insured. In clause 19.1d means for automatic extension or renewal of the insurance.

For the case proposed, it will have the insurance fall under clause 20.C. Even though clause 18 provides for contractors’ indemnity to employer in event of accident, payout may be insufficient which results in contractor slow down works. Hence ,employer can take insurance himself and pays premium .If insufficient, contractor to bear shortfall. Under clause 20.C.1, the contractor take out Contractor All Risk (CAR) Insurance,in the joint names of all interested

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parties and also to cover professional fees. CAR be extended for extension be effected 1 months before expiry.This policy covers perils as listed in Contract plus a sum to cover professional fees for reinstatement usually at 10% of Contract Sum. Insurances can be extended accordingly when EOT has been granted. If contractors can not assess properly the risks, they will conveniently try to price the items excessively for assuming such risks to cover themselves financially.                                  5.0 Reference  

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 Construction Insurances Explained – Existing Building Insurance. (2012, February 07). Retrieved November 22, 2017, from https://simplymalaysia.wordpress.com/articles/insurance/construction-insurances-explained-existing-building-insurance/  Construction Insurances Explained – Professional Indemnity Insurance. (2012, February 07). Retrieved November 22, 2017, from https://simplymalaysia.wordpress.com/articles/insurance/construction-insurances-explained-professional-indemnity-insurance/  Employer's Personnel. (n.d.). Retrieved November 20, 2017, from https://www.fidicterms.org/wiki/index.php/Contracts:Employer%E2%80%99s_Personnel  Finch, R., Finch, R., McPartland, R., Sharman, J. and Finch, R. (2017). Tendering for construction projects . Retrived November 19th, 2017, from https://www.thenbs.com/knowledge/tendering-for-construction-projects  Rajoo, S., Davidson, W. S., & S., H. S. (2010). The PAM 2006 standard form of building contract. Petaling Jaya, Selangor Darul Ehsan, Malaysia: LexisNexis.  Tender processes for construction contracts - Designing Buildings Wiki. Retrived November 20th, 2017, from https://www.designingbuildings.co.uk/wiki/Tender_processes_for_construction_contracts  The role of the Engineer in accordance with FIDIC [PDF]. (n.d.). From http://staff.fit.ac.cy/eng.ls/Skevi/ACEC438/The%20role%20of%20the%20Engineer-FIDIC.pdf  The role of the Engineer in accordance with FIDIC [PDF]. (n.d.). From  http://staff.fit.ac.cy/eng.ls/Skevi/ACEC438/The%20role%20of%20the%20Employer&Contractor-FIDIC.pdf      

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