10 Common Practice Issues in Contracts 21May11

25 Common Problems

for M&E Engineers

Armada Hotel , Petaling Jaya

26th May 2011

5 Common Contract

Management Problems

Ir. Looi Hip Peu

Hon Sec, ACEM (2010/11)

B.Eng (Hons) (Electrical)

P.Eng (5226), Jurutera Gas

[email protected]

26th May [email protected]

CONTENT2

Objectives of this Workshop

Mismatch in Main & Sub Contract

Confusion on BQ and Lump Sum

No Proper Work Acceptance Procedure

Acceptance of Products against System

PAM 1998 and PAM 2006 Contract Forms

What are the Objectives of this Workshop?

In the Malaysian context, M&E engineers are usually

responsible for managing the M&E portion of the

construction contract.

This responsibility frequently include:

1. Cost consulting

2. Contract drafting

3. Contract management

4. Works supervision and cost finalisation

The requires a basic understanding of (construction)

contracts and good understanding of cost

OBJECTIVESOF WORKSHOP3


This Workshop Module List 5 Common Problems !

1. Mismatch between Main Contract & Sub Contract

2. BQ contract and Lump Sum Contract

3. Failure in Contract Management

4. Shorting Comings in Work Acceptance

5. Interim Payment and Final Payment

OBJECTIVESOF WORKSHOP4


Contract draf t ing.


MAIN & SUB CONTRACTSMISMATCH6

1. The QS is responsible for drafting Main

Contract.

2. The M&E Engineer is responsible for

drafting M&E Sub Contracts.

Common procedure in Cont ract Draf t ing.



QS decide

Contract Form

M&E checks with

QS on

Contract Form

M&E Draft M&E

Sub Contract

based on Form

PAM 1998

PAM 2006

JKR 203

PAM 2006 NSC

JKR 203N

PAM 1998 NSC

Select ing the Cont ract Form.



Private

or

Public ?

JKR Contract Form

PAM Form

Sector

?

FIDIC, Other Forms

Government

Private

Building

Industry

Type?

PAM 1998

PAM 2006

Select ing the Cont ract Form.



Contract Based on BQ

Large / Complex

BQ or

Lump

Sum?

PAM/JKR Form

Selected.

Simple / Well Defined

Contract Based on Drawings



However the problem is not mismatch inContract Form but in draf t ing Main and SubContract wi th compat ib le terms!

QS decide

Contract Form

M&E checks with

QS on

Contract Form

M&E Draft M&E

Sub Contract

based on Form

M&E checks with

align in NSC



in Main Cont ract?

Nominated Sub Contract (PAM Form 2006):

Sub Contract is made pursuant to the agreement

for (hereinafter referred to

as Main made

between the of (or whose registered

office or business address is situate at) (hereinafter called the and the

Contractor.



in Main Cont ract?

Nominated Sub Contract (JKR 203N):

WHEREAS the Contractor has entered into a Contract

No: made the (hereinafter referred to as Main

between the Government of

(hereinafter called of the one part

and the Contractor of the other part for the .



Contract Management Issues:

1. Defects Liability Period

2. Date of Commencement

3. Liquidated & Ascertained Damages (LAD)

4. Completion & Sectional Completion (if applicable)

5. Period of Interim Certificate

6. Percentage of certified value retained

7. Limit of retention sum

8. Period of Final Measurements.

9. Insurances



Main specific responsibilities defined:

1. Ascertaining from NSC coordination information;

2. Providing coordination information; setting out ,

dimensions etc.

3. Making good and touching up damages due to NSC

works (this may sometimes be loaded under NSC).

4. Providing space ONLY for storage & accommodation.

5. Water supply, electricity supply (including charges).

6. Protection, covering, watching, security of NSC fittings

7. Removing rubbish off site.



Nom sub specific responsibilities:

1. Insurances (where his responsibility ends);

2. Providing coordination information; setting out

dimensions to main contractor etc.

3. Making good and touching of damages due to NSC

works (caveat; NSC is not qualified to rectify

works.

4. Consumption charges for water supply, electricity

supply.

5. Provision of water, energy, electricity for

commissioning.

6. Keeping site clean in coordination with MC.



Contract Management Issues:

1. Defects Liability Period cited is different in MC & NSC

2. LAD not cited in NSC

3. Responsibility for provision of water, electricity and

energy for construction and commissioning not

clearly cited or is different between MC & NSC.

4. Overlapping provision of insurance

5. Completion or Sectional completion not clearly stated.

6. Periods for interim & final certifications mismatch

standardised.



CONCLUSION

QS decide

Contract Form

M&E checks with

QS on

Contract Form

M&E Draft M&E

Sub Contract

based on Form

M&E checks with

in NSC

Modification to

Main Contract

terms must be

reflected in NSC



LASTRESORT

The tenderer is supposed to check at tender

JKR 203 & PAM:

the Nominated Sub Cont rac to r has hadreasonab le oppor tun i t y to examine and have fu l lknowledge o f a l l p rov is ions o f the Main Cont rac t(excep t the deta i l s o f t he p r i ces inc luded

The above does not det rac t f rom the respons ib i l i t yof the pro fess iona l M&E engineer to draf t aproper ly coo rd inated tender document.


BQ AND LUMP SUM CONTRACT20

M&E Consul tants are responsiblefor draf t ing descr ipt ion of i temsto be tendered.

Descr ipt ion of works or Bi l l of Quant i t iesare important documents which wi l ldetermined how cont ract are pr iced,var iat ion cost determined and f inalaccountsor measurementsf ixed.



Contract Based on BQ

Large / Complex

BQ or

Lump

Sum?

PAM/JKR Form

Selected.

Simple / Well Defined

Contract Based on Drawings

C o n t r a c t w i t h

Q u a n t i t i e s

C o n t r a c t w i t h o u t

Q u a n t i t i e s



M&E Consu l tan ts are respons ib le fo rdraf t ing descr ip t ion o f i tems to betendered.

Bill of Quantities (BQ) is a document detailing the qualitativeand quantitative aspects of every constituent parts of aproposedconstructionproject.

Qualitative: Description of material, labour andworkmanshipfor the work

Quantitative: Quantity of material, labour andworkshopHackett& Robinson(2003) andChan(2002)

It is compiled together with the form of tender, specification,preliminarybill and list of drawingsto form a tender document.



Contract based on quant i t ies

1. Price is based on quantit ies and is subject to finalre-measurementson completion.

2. Variations means difference due to designschematics, concepts or addition in scope (i.e.additional system not in drawings).

3. Variations valid only on instructions.

4. BQ form the basis of Contract Works.

5. Specif ications determines the qualitative aspectof works.



Lump Sum Contract

1. ContractPriceis firm andshallnot be subjectto revision.

2. Variationsonly on instructions.

3. Drawings form the basis of Contract Works (determiningthe contract drawings before contract binding is thereforeimportant).

4. Specificationsdeterminesthe qualitative aspectof works.

5. BQor pricescheduleaugmentdrawings.

6. Variations and final account is determined by comparisonwith ContractDrawingsand final As-Built (howeverchangesfrom ContractDrawingscan only claimed Variationsbasedon AI).



rates Total CostQuantity

10 Common Practice Issues in Contracts 21May11

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