SCHOOL OF ARCHITECTURE , BUILDING & DESIGN  

BACHELOR OF QUANTITY SURVEYING (Hons)   

PROFESSIONAL PRACTICE I (QSB60604)    

LECTURERS : MR. WONG CHONG WEI   SR. ANG FUEY LIN   

 GROUP ASSIGNMENT   

   SUBMISSION DATE: 28th November 2017 , 8am 

  PREPARED BY: 

NO.  NAME  STUDENT ID 

1  KENNETH TAN SIN KWANG  0322482 

2  CHAN YI FUNG  0323057 

3  LEE FONG YEN  0321976 

4  LEE LIN HUI  0322797 

5  LEONG LI JING  0323628 

6  LEONG MIN HUI  0327596 

7  ADELE LU KHAI SYN  0323151 

8  LEW QUO MING  0322884 

9  WONG JIA JING  0327221 

10  YEAP PHAY SHIAN  0322243 

11  YEE JYH LIN  0322408 

TABLE OF CONTENT

NO. CONTENT PAGE NO.

1.0 Introduction 2

2.0 Procurement

2.1 Recommendation - Traditional Procurement Method 3

2.2 Justification of Other Procurement Method

2.2.1 - Design & Build 6

2.2.2 - Management Contracting 6

2.2.3 - Construction Management 7

3.0 Tendering Methods

3.1 Recommendation - Two Stage Selective Tendering 8

3.2 Justification of Other Tendering Methods

3.2.1 - Single Stage Selective Tendering 10

3.2.2 - Open Tendering 10

3.2.3 - Negotiated Tendering 10

4.0 Contractual Arrangement 11

5.0 References 17

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1.0 Introduction

The main purpose of this project is to deliberately 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 appropriate method is very important due to ways it can

help to control risk, cost, quality and time of the particular project.

The objectives of these project are:

- Determine the most suitable procurement method that helps client add value in relation to

the project in term of cost, quality and time.

- Determine the type of tendering method to ensure that the client is able to appoint the

most competitive tender with the most reasonable prices or best reputable contractor.

- Determine the type of contract used for the project where it is a legal binding agreement

the client and contractor.

- Have a good contractual arrangement to protect the client from liquidated damages.

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2.0 Procurement

2.1 Recommendation : Traditional Procurement Method

The recommended procurement method that suitable for client’s requirement is traditional

procurement method. This is the most commonly used method in Malaysia especially in

procuring building work. The procedures are well known and familiar to the professionals in the

construction field. Firstly, client appoints consultant team which involves Architect, Engineer,

etc. to carry out design process during pre-tender stage. Client can involve in design process

with consultant team to ensure it is within client’s requirement. After design is completed, the

works will then be tendered out and the tenderer with the most competitive price will be selected

to carry out the work in accordance with consultant team’s design. The contractor is normally not

responsible for the design but only the construction works on site.

Based on the three basic criterias which are time, cost and quality, it is difficult to achieve all the

basic criterias in a single procurement method. The requirement of duration for this project is 5

years, which cause time is not a constraint because it is sufficient for this Mega project.

Therefore, the priority will fall into cost and quality instead of time, which traditional

procurement method is more suitable. However, this method provides medium time risk to client

because it requires longer time frame that the tendering process and contract award can only take

place after the design is completed. Besides, due to fixed contract date, contractor has the right to

claim for extension of time if it is caused by any relevant event in PAM Form of Contract 2006

Clause 23.8 such as employer delayed the site possession.

Since Kuala Lumpur Twin Tower is a tourist area and the landmark of Malaysia, quality must be

taken into account. Traditional procurement method able to provide client lower quality and

design risk, which allow client to have full control of design and quality as majority of the

work is designed by the consultant team which work directly with the client. Other than that,

client able to make decision and changes during design stage with the consultant team and also

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able to provide instructions to design team from the beginning until the completion, which will

lead to better quality of work.

Based on this scenario, the client is not interest to deal with too many parties except the few key

members of the project. Traditional procurement method is appropriate because the client only

have to communicate with the consultant team and only have contractual relationship with

the main contractor and consultants . Thus, this fulfilled the requirement because main

contractor will deal with the subcontractors. Besides, this method also suitable for both

experienced and inexperienced client because client can get advice from the consultant team

regarding to the project.

Moreover, having a completed design before tendering process can provide the client certainty of

cost and design quality. Minimum variation to the contract price during the construction is one of

client’s concern. The construction cost given is RM 1.2 billion. Thus, traditional procurement

method is more suitable as it provide lower cost risk to the client due to the use of lump sum

contract. The amount is agreed between the parties in the contract before the construction start.

This method also provide easier budgetary control for client with minimal variation and any

overcharging fees will be bear by the contractor.

In conclusion, traditional procurement method is the most suitable method to fulfill the

requirements and expectations of the client.

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Diagram 2.1: Traditional Procurement Method Route

Diagram 2.2: Traditional Procurement Method Route

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2.2 Justification of Other Procurement Method 2.2.1 - Design and Build

Design and Build does fulfill client’s requirement in a way that it saves time due to obtaining site

materials and start construction before the detail design complete. Aside from that, there is a

single point of responsibility by the contractor so the client has only one contractor to deal with.

However, our client is not well experienced in construction industry and would face difficulties

in dealing with items such as “Employer’s Requirement”. Besides that, our client would have

minimal control over the entire project as the D&B contractor is responsible for handling all

parties involved.

2.2.2 - Management Contracting

Management contracting offers client to have contractual links and deal with only the consultant

team and the management contractor. This fulfilled one of the requirement because management

contractor will deal with all the parties including works packages contractor. Client can also have

full control of design and introduce changes from throughout the design stage as the consultant

team appointed will complete the design under client’s requirement.

However, management contracting offer client medium cost risk as the actual cost of the project

is unknown until the last works packages contract has been signed. Other than that, there will be

more variations and re-measurement because this method provide greater opportunity to make

changes in the design during construction period as the design and construction process is

overlapped. Hence, this will increase the possibility of work delay and the total project duration

is uncertain until the last works packages contract has been signed.

Management contracting procurement method focuses more on quality instead of time and cost.

As time is not a constraint in this scenario, it is safer to choose traditional procurement method

where it focuses more on quality and cost instead of time.

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2.2.3 - Construction Management

Client appoints an external organisation to manage and co-ordinate the design and construction

phases of the project. They provide specified common user and service facilities but does not

normally execute any of the permanent works, which are undertaken by construction contractors.

Construction Management can accelerate project duration, improve overall buildability,

encompass flexibility and facilitate price competition. Construction Manager becomes an

employed agent of the client and not an independent business entity.

Under this procurement method, it offers clients the direct contractual relationship with the work

packages contractor, which means there will be more direct trades to deal with. However, in this

particular case, our client wish to deal with not too many parties, we excluded this procurement

method as the first choice.

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3.0 Tendering Method

3.1 Recommendation: Selective Tendering (Two Stage Selective Tendering)

As for tendering method, the recommended tender method for the client from Landowner WCW

& AFL Berhad’s case and requirements is Two Stage Selective Tendering. For two stage

selective tendering, certain contractors are invited to tender. The potential contractors are

selected based on their integrity and ability before they are invited to tender. The consultants

would have a list of prospective contractors which are selected by their track records and their

suitability for the nature and size of the project.

In the initial stage of two stage selective tendering, there is a selection process of tenderers which

is known as pre-qualification stage. For pre-qualification stage, an advertisement will be

published in newspapers to invite interested tenderers to submit their company profiles for

evaluation in the Pre-qualification Form. Some of the criteria for selection includes the

company’s standard of workmanship, financial capability, company size and grade class as well

as past experiences on similar works.

A list of pre-qualified contractors will then be included in the final tender list and invited to

collect the tender documents. The aim of pre-qualification stage is to eliminate potentially

non-performing contractors , thereby reducing the risk of selecting inexperienced and unknown

contractors. Building an extension of the Kuala Lumpur Twin Tower by developing a RM1.2

billion hotel and shopping complex in the heart of Kuala Lumpur is considered as a significant

project. The selection of a well performing and experienced contractor is crucial to ensure that

the extension can take place successfully and it meets all of the client’s requirements.

Furthermore, since the tender procedure of Two Stage Selective Tendering involves the

placement of advertisement for tender, the client’s requirement to have a reasonably

transparent selection process of the successful contractor is met. Being a public-listed

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company and accountable to other shareholders and board of directors, it is important that the

tender selection process of the successful contractor is reasonably transparent.

The list of pre-qualified contractors will proceed on to the tendering process. After the evaluation

process of tender submissions from the list of pre-qualified contractors, the most competent and

suitable contractor will be selected to carry out the works for the project.

The selected contractor will proceed on to the negotiation process. The contractor has to prepare

a detailed document that describe the proposed work and the bill of quantities which is priced

based on the first stage tender. The price negotiation would take place until an agreement is

reached and both parties are satisfied, leading them to enter into contract for construction works

to commence.

In addition, since the client is unfamiliar with the construction industry, it is better to choose two

stage selective tendering based on the consultant’s recommendation list. High quality

workmanship can be assured as the contractor’s past records have been checked through to

evaluate their capabilities and qualifications.

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3.2 Justification of Other Tendering Methods

3.2.1 - Single Stage Selective Tendering

Single stage tendering does not have pre-qualification stage and two stages of screening. As

such, the likelihood of selecting a non-performing contractor would be higher. In addition,

favouritism may occur as the consultant may favour a particular contractor more. As such, it

does not align with the client’s objective of having a transparent selection process.

3.2.2 - Open Tendering

Open tendering provides opportunity to all interested bidders and normally contractor with the

lowest bid would win the tender. As such, there may be risk of selecting unknown and

inexperienced contractors which may produce poor workmanship as the client and consultant are

not familiar with the contractor.

3.2.3 - Negotiated Tender

Negotiated tender acquire the advantages of being more flexible comparing to other method but

the project costs may be driven up by the lack of competitive bidding and became less attractive

for the client. Not only that, this method lack of transparency as only one or two contractors are

approached.

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4.0 Contract Arrangement

4.1 Type of Contract

Lump Sum Contract

Lump Sum contract is a single “lump sum” price for all the work agreed before the work begin

whereby contractor is required to submit a total and global price instead of bidding on individual

trades or items. Since our client is unfamiliar with the construction industry, lump sum contract

which is a widely accepted and understood as a method of contracting would be suitable and at

the same time lower risk apportioned to the client since a fixed rate is agreed upon. This proposal

is based on a the project of the extension of Kuala Lumpur Twin Tower which is expected to

have a well-defined scope of construction projects, which enable the contractor to accurately

price the work they are being asked to carry out. With this, contractor is responsible for

executing the complete contract work for a stated total sum of money. However, there is actually

more risk to the contractor compared to other types of contract such as measurement contract and

cost-plus contract due to the lack of mechanisms to enable contractor to vary their price. Since

our client wish to have minimum variation to contract price during construction, with lump sum

contract, the better defined the works are when the contract is agreed, the less likely the contract

sum will change. Unlike measurement contract where work design are not given sufficient detail

for bill of quantity to be produced.

Although lump sum contract is said to provide a fixed price to be let out for tender, price of lump

sum contract can change during construction stage due to changes introduced. Having said that,

some clear mechanism are put in place to serve varying conditions during the course of

construction by adding necessary provisions such as:

A.Variation

In a complex mega project like this, some degree of change is inevitable. Therefore, in lump sum

contract, agreement which include terms for contractor to go with such design, material or

quantity variation is signed and agreed to cover such variation without initiating any dispute.

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B. Relevant Event

Relevant event are event listed under clauses in the contract which entitle the contractor to claim

for losses from the employer in the event if the listed event occur and affect the construction

regular work progress.

C.Provisional Sum

Provisional sum are included in the contract for works that the client has intention to build

character of work but cannot be determined precisely at the time the Bills of Quantity is

prepared. By adding provisional sum into contract document, it helps to prevent the employer in

cases where the employer may not prefer to pay for undefined work done.

D. Fluctuations in Inflation

Chances of inflation for this project is high since the duration of this project is long (construction

period 5 years). Provision are added to the lump sum contract in order to suitably compensate

contractors in case of inflation whereby tender is based on current price and contract should be

paid in case of price change that occur during the entire project commencement period.

Another reason why lump sum contract is chosen over other types of contract is because our

client wish to deal with only few key parties of the work, lump sum construction contract

promote better interaction and association between the owner, contractor and designer only.

Based on all the client requirement stated, lump sum contract will therefore be the most suitable

type of contract for this mega project.

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4.2 Form of Contract

PAM Contract 2006 (With Quantities)

For this extension of Kuala Lumpur Twin Tower, we proposed to our client to use PAM Form

of Contract 2006 with quantities because it is a private sector project. By using PAM 2006, there

is no need to draft and no need to worry about uncertain terms in the form of contract. PAM

2006 form of contract also equally spread risks between employer and contractor. Since the

traditional procurement method is chosen for this project, the superintendent officer is usually

the architect which supports why PAM form of contract is suitable.

4.3 Employers Consideration and Requirement

Since the extension of Kuala Lumpur is considered as a mega project, our client has emphasis on

a few key consideration and requirement toward this project such as project to be completed on

time, quality of building work and health and safety requirement. Therefore, by reviewing the

client’s requirement, PAM Contract 2006 and a few other acts are chosen to support and fulfill

the client’s requirement. Besides that, preliminaries in the contract document must include the

few key requirements which are, workmanship, health and safety.

4.3.1 Time

Our client wishes to build an extension of the Kuala Lumpur Twin Tower with a construction

period of five years. According to clause 21.1, the contractor is given the possession of the site

for execution of the works on the Date of Commencement.

However in the event where the contractor fails to complete the works by the agreed Completion

Date stated in Article 7, the architect will issue a Certificate of Non-Completion by referring the

clause 22.1. With clause 22.2, the contractor have to pay for the agreed Liquidated Damages of

RM 250,000.00 a day imposed by the client for the period from the Completion Date to the date

of practical completion. The amount of Liquidated Damages imposed not only covers the

employer’s reputation but must also be able to bare compensation to involved authority and

publication expenses.

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PAM Contract 2006 requires the Contractor to give written notice to the Architect, when the

Works are practically completed. Upon receipt of this notice, the Architect has to evaluate this

notice within 14 days according to clause 15.2. The Architect can either reject or accept the

notice, or accept with defect that do not affect Employer’s enjoyment of the building.

Based on the clauses mentioned above, the client can ensure that project to be completed on

time.

4.3.2 Quality

For this mega project, extension of Kuala Lumpur Twin Tower, our client is very much

concerned with the quality of building works. Based on PAM 2006 Clauses 6.0 Material, Goods

and Workmanship To Conform to Description, Testing And Inspection supports the requirement

of good workmanship. Contractor shall commence the work based on client requirement method

of construction and also material used as requested in the contract. Contractor is required to

provide samples to be tested and inspected for the assurance of high quality materials. In order to

fulfill good quality building works and prevent contractor from cutting corners, an AI may be

issued by the Architect for inspection to make sure works are executed in accordance to

contract’s requirement. Instructions to demolish or reconstruct the works will be issued by the

Architect if works, materials used and workmanship are not in accordance to the contract.

Example Scenario : Contractor build the floor finishes of the lobby with marble but stated in

contract is granite. Clauses 6.8, if the contractor requires any warranty or guarantee in respect to

the goods or material, contractor shall procure it and it will not relieve or release the contractor

from any liabilities under the contract. Since this project is considered as a mega project whereby

good reputation is a concern, Clauses 6.0 in PAM 2006 help client assure building work quality

to be met.

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4.3.3 Health and Safety requirement

Firstly, in the BQ, under preliminaries, there are some general items that shall be taken note of in

relation to safety and health issues. Some of these items include scaffolding, mosquito

prevention, first-aid kit, health and safety training for workers. Besides that, there are also

insurances included under the preliminaries section, which are the Employee’s Social Security

and Workmen’s Compensation. During the execution of works, Contractor is required to register

all local workmen employed for that specific construction work, under the Employee’s Social

Security Scheme in accordance to Employee’s Social Security Act,1969. This act aims to carry

out accident prevention activities by increasing safety awareness and occupational health

programmes amongst employers and employees.

As for Workmen’s Compensation Act,1952, it is a compensation for injury to a foreign employee

or worker arising out of and in the course of employment that is paid to the worker or

dependents, as per the Workmen’s Compensation Act 1952.

Next, according to PAM Contract 2006 (With Quantities), the clause that specifies contractors’

indemnity against injury or death to person or loss and/or damage of property and indemnity to

employer against claims by workmen is clause 18 of the PAM Contract 2006. The clause

demands the Contractor to be liable for and shall indemnify the Employer against any damage,

expense, liability, loss, claim or proceedings, from conditions arising from common law,

negligence in carrying out works, claims and payment from workmen and etc. Besides that, as

this project involves an extension to the existing building, our client should also take into

account Clause 20.C.1, whereby, the Employer, Contractor, sub-contractor and all interested

parties are to participate in a CAR insurance policy. CAR Policy, also known as Contractor All

Risk’s Insurance aims to provide coverage during the construction period for contract works

against loss or damage to property caused by unforeseen circumstances and also third party

liability for accidental bodily injury or property damage in connection with the performance of

the contract during the construction of works.

Lastly, Occupational Safety and Health Act 1994 (OSHA) is an Act that provides legislative

guidelines to secure the health, safety and welfare among all Malaysian workforces and to

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protect against risks to safety or health in relation with activities at work. According to Section

29 of OSHA, as this mega project exceeds twenty million of total contract sum, hence,

appointment of a safety and health officer shall be needed . This assures safe and healthy working

conditions for working men and women by setting and enforcing standards and by providing

training, outreach, education and assistance.

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5.0 References

1. Ab Rahman, R. (2017). Managing Safety at Work Issues in Construction Works in Malaysia: A Proposal for Legislative Reform. Retrieved 16 November 2017, from http://ccsenet.org/journal/index.php/mas/article/view/51010 2. Announcement Details | KLRCA. (2017). Klrca.org. Retrieved 16 November 2017, from https://www.klrca.org/announcements-announcements-details.php?id=82 3. Botak. (2017). DIFFERENCE BETWEEN CONTRACT FORM JKR 203A & PAM. Slideshare.net. Retrieved 16 November 2017, from https://www.slideshare.net/AnepBotak/difference-between-contract-form-jkr-203a-pam 4. Buhler, P., Schechter, H., & Management, S. (2017). Similarities of Standard Forms of Contract in Malaysia | Insurance | Indemnity. Scribd. Retrieved 16 November 2017, from https://www.scribd.com/doc/241553620/Similarities-of-Standard-Forms-of-Contract-in-Malaysia 5. Chapter 2 osha legislation. (2017). Slideshare.net. Retrieved 16 November 2017, from https://www.slideshare.net/fawisam/chapter-2-osha-legislation 6. Chubb. (2017). Occupational Safety and Health Act (OSHA). Slideshare.net. Retrieved 16 November 2017, from https://www.slideshare.net/waklou/occupational-safety-and-health-act-osha?next_slideshow=1 7. Designing Buildings Wiki (2017) Two-stage Tender. Retrieved November 07, 2017, from https://www.designingbuildings.co.uk/wiki/Two-stage_tender 8. Employees' Social Security Act 1969. Attorney General’s Chambers of Malaysia. Retrieved 16 November 2017, from http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%204.pdf 9. Guidelines on OSH Act 1994 (2006). Retrieved 16 November 2017, from http://www.utar.edu.my/osh/file/Guidelines%20on%20OSH%20Act%201994%20-%202006.pdf 10. HMRC?, S., story?, S., & consider, D. (2017). Do's and Don'ts: Common mistakes in...lump sum contracts | Expert Insights | Berwin Leighton Paisner. Blplaw.com. Retrieved 16 November 2017, from http://www.blplaw.com/expert-legal-insights/articles/construction-and-engineering-common-mistakes-in-lump-sum-contracts 11. Learn About Lump Sum Construction Contracts and Where Scope is Defined. (2017). The Balance. Retrieved 16 November 2017, from https://www.thebalance.com/lump-sum-construction-contract-844915

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12. Lump Sum Construction Contract - Advantages and Disadvantages. (2017). The Constructor. Retrieved 16 November 2017, from https://theconstructor.org/construction/lump-sum-construction-contract-advantages-disadvantages/14956/ 13. Lump sum contract - Designing Buildings Wiki. (2017). Retrieved 16 November 2017, from https://www.designingbuildings.co.uk/wiki/Lump_sum_contract 14. Lynch, J. (2011, November 06). Open Tendering. Retrieved November 16, 2017, from https://procurementclassroom.com/open-tendering/ 15. Mishra, G. (2016, July 27). TYPES OF TENDERING METHODS IN CONSTRUCTION. Retrieved November 07, 2017, from https://theconstructor.org/construction/types-of-tendering-methods-in-construction/6372/ 16. Obligations in Construction Projects. (2017). Hansen's Kammer. Retrieved 16 November 2017, from https://hansenkammer.wordpress.com/2011/10/27/obligations-in-construction-projects/ 17. Pertubuhan Akitek Malaysia (2017). Pam.org.my. Retrieved 16 November 2017, from http://www.pam.org.my/index.php/component/content/article?id=430 18. Proceedings of the 2013 International Conference on Education and Educational Technologies. (2013). Aminah binti Md Yusof. Retrieved 16 November 2017, from http://www.inase.org/library/2013/rhodes/bypaper/EET/EET-02.pdf 19. Risks in the PAM 2006 standard form of contracts - Universiti Teknologi Malaysia Institutional Repository. (2017). Eprints.utm.my. Retrieved 16 November 2017, from http://eprints.utm.my/48852/ 20. Safety in Malaysian Construction: The Challenges and Initiatives. JURUTERA (2008), Retrieved 16 November 2017, from http://dspace.unimap.edu.my/dspace/bitstream/123456789/13853/1/feature-Safety%20in%20Construction%203pp.pdf 21. STANDARD CONSTRUCTION CONTRACTS IN MALAYSIA Issues and Challenges (2002). OON CHEE KHENG. Retrieved 16 November 2017, from http://www.ckoon-law.com/Paper/STANDARD%20CONSTRUCTION%20CONTRACTS.pdf 22. THE PAM 2006 FORM OF BUILDING CONTRACT: AN OVERVIEW. (2017). Sundra Rajoo. Retrieved 16 November 2017, from http://sundrarajoo.com/2009/10/07/the-pam-2006-form-of-building-contract-an-overview/ 23. UNIMAS E-Journal of Civil Engineering, Vol 1: issue (2009) Feng.unimas.my. Retrieved 16 November 2017, from http://www.feng.unimas.my/JCEST/images/article/vol1issue1/3874-0809-02.pdf

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