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Abstract

All standard forms of construction contract contain clauses for determination of contracts. For example, PWD 203A forms, PWD Design and Built, PAM 2006 form and etc. It is the same with the PWD 203A form where the PWD 203A (Rev. 10/83) has been replaced by the PWD 203A (Rev. 2007). These are the traditional forms of contract based on drawings and specification (203) or bills of quantities (203A) produced for use in public sector or government projects in both building and civil engineering contracts. Generally it can be said that a majority of the risks have been transferred to the contractor under these standard forms of contract and this remains true with the 2007 version. The standard form is generally used in conjunction with the accompanying standard administrative forms which have been produced specifically for use with the contract forms and in many instances enhance the obligations contained within the conditions of contract. However, based on a preliminary study that had been conducted for the research, it has been found out that both of the employers and contractors may not actually realize their rights, procedures and effects in determining the contractors employment under the new forms. Hence, this study will focus on comparison between PWD 203a and PWD Design and Built, procedures and effects as a result of determination of the contractors employment under the forms.

1.1 Introduction

A contract is a legally binding agreement between the parties identified in the agreement to fulfill all the terms and conditions outlined in the agreement. A prerequisite requirement for the execution of a contract, amongst other things, is the condition that all the parties to the contract accept the terms of the claimed contract. Construction contracts are basically different from major service contracts. There are various types of construction contract. The choice of contract depends on the basis of pricing and the contract strategy that best meets the project objectives. The various types offer different ways of handling pricing, risk transfer, responsibility for performance, cost certainty, and complexity. The purpose of standard forms of contract is to facilitate the contractual arrangements between actors in a project. Standard forms of contract are readymade terms and conditions when making a contract (Kwakye 1997). The standards vary from country to country and from one type of project to another. These standards are generally used and accepted by different contracting parties. It would be practically impossible to devise a standard form of contract that would take account of all eventualities that might occur in a construction project (Andersson and Gunnarsson, 2002). Standard forms of contracts are often criticized as being a compromise containing some defective aspects. However, the advantage of their adoptions is that with the passage of time, persons using them become familiar withtheir overall content as well as their particular strengths and weaknesses (Kwakye 1997).

1.2 Comparison between PWD (203a) and PWD (D & B)

There are different specialists or parties during the process of building procurement. It leads to the fragmentation process in construction industry (Murdoch and Hughes, 2000). Each project participant has particular aims and objectives and it is rare to find contract structures that encourage harmony among these aims. According to the scale and requirement of the project the parties may differ in types of contract. Figure 2 provides parties organization in PWD DB form of contract and figure 3 shows parties relation in PWD 203A form of contract.

Client

Project Director

Turnkey Contractor (project management consultant) Joint Venture Contractor

Architect

Architect

Design and Implementation Project Manager

M&E Engineer

C&S eer

Project Engineer

C&S Builders

Validation Team

Accreditation Team

Figure 1: Organization chart of PWD DB form of contract

Client

Superintending Officer

Contractor (director)

Architect

C&S Engineer

Executive

Nominated Sub-Contractor M & E Services

Director

Quantity Surveyor

Safety Officer

Site Supervisor

M&E Engineer

Assistant of Quantity Surveyor

Assistant of Site Supervisor

Figure 2: Organization chart of PWD 203A form of contract

MAIN PARTY Client

ROLES Representative Advisor Stakeholder

PWD D & B Project director Advisory group, feasibility consultant End-user, general public, tenant -

PWD 203A Superintending Officer Advisory group, feasibility consultant End-user, general public, tenant Architect(management function) Consultant team manager Architect(design function) Architect, contract administrator, supervising officer, project administration Clerk of work Builder, main contractor, principal contractor, executive director Project manager, site supervisor, builders

Consultant

Design Leadership Management Design Administration

Contractor

Site inspector Overall responsibility

Constructors staff

Partial responsibility

Consultant(architect), main contractor, joint venture contractor, design and build project manager Contract manager, project engineer, supervision team, builders Architect, C & S sub-contractor, M & E sub-contractor, supplier

C&S sub-contractor, M&E sub-contractor, quantity surveyor, supplier

Table 1: Comparison of PWD DB and PWD 203A form of contract parties

According to table 1; PWD DB. form, there is no consultant party which directly would be employed by the client. In fact, the client employs the contractor to design and build which means the consultant is included in the package of the contractor. Therefore the design leadership, design management, administration team and site inspector roles are under contractors responsibilities. The contract management is the method in use in PWD DB. The contract manager controls, monitors and maintains the project since the earliest stage of a project.

One of the benefits for the client is that the client does not have to be so active during the project, because most of the responsibility of the project is allocated to the contractor (Sderberg 1993). Architect (management function), consultant team manager, design manager, architect (design function), engineer, consultant, contract administrator, supervising officer, planning supervisor, project administration, clerk of work are the roles involved in consultant which are the subordinates of contract manager. In PWD DB the contractor is compensated for all costs incurred. Also failing such deductions will be recovered from the performance bond or as a debt from contractor. Identifying and controlling (by avoiding or minimizing) the risks to a project is a vital part of managing it. This includes those risks that have been transferred to the contractor under PWD DB contract. The reason of popularity for using this type of contract is that the client does not take the risk as much as the contractor has.

Hence the contractor consists of a contract manager to control over the cost and time. However in PWD 203A the client employs consultant separately which is directly linked. In this type of contract there is a separation of construction and design. There is a designing team, which is contracted by the client, and they shall provide the contractor with a complete design (Ashworth 1991). The contractor subordinates include executive director who is the person in charge at site for complementation. Any problem happens during project development or any difference between designed and built documents in details, the executive director informs the superior and handles all.

The executive director includes site supervisor, quantity surveyor and safety officer who occupy positions at the site of construction. The quantity surveyor monitors all required materials quantities, proper cost and suggests to the client. The site supervisor manages all works, workers, daily reports (site dairy) and the quality of work. Arranging the masonries, material maintenance and all machines installation are the site supervisors responsibilities. In occurrence of a problem, they refer to the project manager for handling. The different method of organizing and maintaining the project is used in PWD 203A which is project management. The project manager controls and monitors the work through schedule of planning during constructing. The important aspect in PWD 203A is bills of quantities. Therefore the contractor has the responsibility to complete the work according to the requested quantities referred to the contract documents. In PWD 203A the government is entitled to deduct such costs, expenses and on-cost charges or any part from any monies due to the contractor or to recover it from performance bond as debt due from the contractor. That is the reason of being popular for this type of contract for government sector in Malaysia.

1.3 Categories of Comparison

In this report, the comparison will be carried out based on these categories: 1. Parties who involves in payment 2. Type of payment 3. Interim payment stages statement 4. Advance payment 5. Procedure of Interim Payment 6. Schedule of issuing interim certificates 7. Requirement upon issuing interim certificates 8. Contractors obligation in applying payment 9. Procedure of payment upon completion 10. Wages of workmen affects the final payment 11. Retention fund/performance bond 12. Payment for liquidated damages 13. Payments upon termination 14. Performance bond 15. Direct payment to the third party 16. Late payment by government/employer

1.4 Comparison between PWD Form 203A and PWD Form Design and Built
No 1 Item Parties who involves in payment obligation: PWD 203A parties involves 1. Contractor 2. Superintending Officer(SO), or SOs representatives 3. Employer 2 3 Type of payments Interim payment stages statement 4 Advance payment No advance payment 25% of the value of the contract sum 5 Procedure of interim payment Procedure: 1. Contractor shall complete the work as in Appendix 2. Regarding to the complete work, SO shall make valuation of the complete work in 14 days Procedure: 1. Contractor shall submit interim payment application 2. PD consider and ascertain the amount in 28 days 3. PD issuing the interim payment certificates Stages Stated in appendix Advance payment and stages Stated in appendix PWD DB parties involves: 1. Contractor 2. Project Director (PD) 3. Employer

3. SO issuing interim certificates 4. Government pays the 4. Government pays the contractor base on interim certificates contractor base on interim certificates

Schedule of issuing interim certificates

14 days

28 days

Schedule of interim certificates payment

Stated in appendix, if it not stated = 30 days

Stated in appendix, if it not stated = 30 days

Contractors

To make a works is done and SP

1. The value of works done and properly executed 2. The amount on any valuation of variations or the instructions by the PD (clause 24 3. The amount in regard to the expenditure of provisional sums executed or expended (clause 25) 4. The value of any goods or unfixed materials delivered to or adjacent to the site intended for use or to be incorporated into the works 5. The upervision reports as required by the PD under clause 13.1

obligation in applying can make a valuation payment

Procedure of payment 1. Within 3 month after the upon completion issuance of the certificate of practical completion, the contractor shall submit application to enable the final account prepared by the SO. If contractor failed, SO shall forthwith make the assessment based on available document for the final account

1. Within 3 month after issuance of the certificate of completion of making good defects or the certificate of completion of maintenance (if any), Contractor shall submit to PD a statement of the final account showing in detail the value

2. Within 3 months after the expiry of the defects liability period for the whole of the works or 3 month after the issue of the certificate of completion of making good defects under clause 48 hereof, SO shall issue the final certificate that consists of supported documents, full particulars complete with receipt, vouchers, final valuation, any amount determined in clause 31.1 3. Final payment is paid by the government to the contractor. Final payment will not be paid unless the contractor satisfied the SO in his obligation due to the workmen

2. PD proceed to verify the final account based on the document which is given by contractor 3. If final account is verified, PD shall issues Final certificate which consists of balance sum 4. Final payment is paid by the government to the contractor. Final payment will not be paid unless the contractor satisfied the SO in his obligation due to the workmen

10

Wages of workmen affects the final payment

Wages of all the workmen has to be paid and all contributions under the Employment Act 1955, The Employee;s Social Security act 1969, The Employees provident Fund Act 1991 and any other laws relevant to the employment of workmen have been paid.

Wages of all the workmen has to be paid and all contributions under the Employment Act 1955, The Employee;s Social Security act 1969, The Employees provident Fund Act 1991 and any other laws relevant to the employment of workmen have been paid.

11

Retention fund

No retention fund is applied in government standard form.

No retention fund is applied in government standard form. If the contractor fails to complete the works by the date for completion or within any

12

Payment for liquidated damages

If the contractor fails to complete the works by the date for completion or within any

extended time granted pursuant to extended time granted pursuant clause 43, the SO shall issues a certificate of non completion to the contractor and notice the intention of the Government to to clause 49, the PD shall issues a certificate of non completion to the contractor and notice the intention of the Government to

impose liquidated and ascertained impose liquidated and damages that stated in appendix. ascertained damages that stated in appendix. 13 Payment upon termination Base on reasonable valuation. If contract is terminated under clause 50 and 52, the amount to Base on reasonable valuation. If contract is terminated under clause 50 and 52, the amount to

be paid (in so far as such amounts be paid (in so far as such or items have not already been covered by payments on account made to the contractor) shall be the following: a. The value of all work carried out up to the date of termination amounts or items have not already been covered by payments on account made to the contractor) shall be the following: a. The value of all work carried out up to the date of termination

b. The amounts payable in respect of any preliminary items so far as the work of service comprised therein has been carried out or performed and a proper proportion of any such items which have been partially carried out or performed c. The cost of materials or goods reasonably ordered for the works which have been delivered to the contractor or of which the contractor is legally liable to accept delivery d. A sum being the amount of any expenditure reasonably incurred by the contractor in the expectation of completing the whole of the works in so far such expenditure has not been recovered by any other payments e. The reasonable cost of any protection works and removal of equipment and site facilities pursuant to termination as provided under the contract.

b. The amounts payable in respect of any preliminary items so far as the work of service comprised therein has been carried out or performed and a proper proportion of any such items which have been partially carried out or performed c. The cost of materials or goods reasonably ordered for the works which have been delivered to the contractor or of which the contractor is legally liable to accept delivery d. A sum being the amount of any expenditure reasonably incurred by the contractor in the expectation of completing the whole of the works in so far such expenditure has not been recovered by any other payments e. The reasonable cost of any protection works and removal of equipment and site facilities pursuant to termination as provided under the contract.

14

Performance bond

If the contractor fails to performs any of his obligations under the contract and such failure is non remedied in accordance with this contract, the government shall be entitled to call upon the performance bond, wholly or partially. The performance bond may be released or refunded to the

If the contractor fails to performs any of his obligations under the contract and such failure is non remedied in accordance with this contract, the government shall be entitled to call upon the performance bond, wholly or partially. The performance bond may be released or refunded to the

contractor upon the completion of contractor upon the completion works. 15 Direct Payment to the third party Government shall paid the nominated sub contractor/suppliers according to interim certificates/final certificates of works. Applied in direct payment to the contractors consultants. For the purpose of payment to the consultant, the contractor and the consultant shall enter an irrevocable Deed of Assignment for the assignment of any money due to the consultant to be paid directly by the government. 16 Late payment by employer/government No provision No provision

Conclusion

In conclusion, the main differences in construction contract are the extent to which the client is responsible for the management of the project, risk allocation and the internal responsibilities of the project members. According to the comparison which is given above, the roles link are depended on the type of contract and it would lead the liabilities and risk to the parties. In PWD DB, contractors responsibilities vary from PWD 203A. The contractors responsibilities in PWD DB are the design leadership, design management, administration team and site inspection roles. The traditional contractual arrangement sets out the legal relationship the parties wish to establish and the rights, obligations and procedures for resolving contractual disputes .There are several factors that affect what type of contract is suitable for a certain project such as the amount of involvement from the client, the location of the project, technical complexity. The project manager controls and monitors the work through schedule of planning during constructing.

The trend of the faster development of the construction industry in Malaysia make Design & Build contract more familiar and efficient because it may avoid the delay in completing the project. The increasingly of complex projects, and the search for quicker and cheaper solutions and achievement of value for money will influence the need for new organisational and management methods. This will have a positive influence in terms of the integration of main project stakeholders and phases, as well as the ultimate success of the entire construction project.

In an initial stage of the design phase, the client has to adopt a suitable contractual arrangement for the project and a corresponding standard form of contract in order to attain the proper management and organization in project.

References
Malaysian Construction and Contract Law, Retrieved from
http://simplymalaysia.wordpress.com/standard-forms-of-contract/domestic-standard-contractforms/p-w-d-form-of-contract-203-2007/

Determination Of Contractors Employment Under PWD 203a (Rev. 2007) And PAM2006 Standard Forms Of Contract Retrieved from http://fab.utm.my/files/2012/07/ThesisUGBQS2010ChenKianMun.pdf