Chongheapyihpa07304702ttt PDF

E-DISPUTE RESOLUTION MODEL ON CONTRACTUAL VARIATIONS
CHONG HEAP YIH
UNIVERSITI TEKNOLOGI MALAYSIA
PSZ 19:16 (Pind. 1/07)
UNIVERSITI TEKNOLOGI MALAYSIA

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Date of birth
CHONG HEAP YIH
17- APR-1983
: E-DISPUTE RESOLUTION MODEL ON
Title
CONTRACTUAL VARIATIONS
Academic Session
2010/2011
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830417-08-6317
ASSOC. PROF. IR. DR. ROSLI MOHAMAD ZIN
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Date
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BAHAGIAN B Untuk Kegunaan Pejabat Sekolah Pengajian Siswazah
Tesis ini telah diperiksa dan diakui oleh:
Nama dan Alamat Pemeriksa Luar :
Associate Professor Sr. Dr. Hamimah Adnan

Faculty of Architectural, Planning & Surveying,
Universiti Teknologi Mara (UiTM), 40450,
Shah Alam, Selangor, Malaysia.
Nama dan Alamat Pemeriksa Dalam :
Associate Professor Dr. Aminah Md. Yusof

Faculty of Civil Engineering,
Universiti Teknologi Malaysia, 81310,
Skudai, Johor, Malaysia.
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Disahkan oleh Timbalan Pendaftar di SPS:

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Tarikh :
E-DISPUTE RESOLUTION MODEL ON CONTRACTUAL VARIATIONS
CHONG HEAP YIH
A thesis submitted in fulfilment of the

requirements for the award of the degree of
Doctor of Philosophy (Civil Engineering)
Faculty of Civil Engineering

Universiti Teknologi Malaysia
DECEMBER 2010
ii
DECLARATION STATEMENT
I declare that this thesis entitled E-DISPUTE RESOLUTION MODEL ON

CONTRACTUAL VARIATIONS is the result of my own research except as cited
in the references. The thesis has not been accepted for any degree and is not
concurrently submitted in candidature of any other degree.
Signature
....................................................
Name
CHONG HEAP YIH
Date
iii
Dedicated to my beloved family, friends, Joelie and Lord Jesus
iv
ACKNOWLEDGEMENT
The author would like to express his utmost gratitude to his supervisor,
Associate Professor Ir. Dr. Rosli Mohamad Zin for his guidance and assistance
throughout the study. The author would like to extend sincere appreciation to the
experts involved in this research for their contributions and helps in the research. The
completion of this dissertation would not have been possible without their
conscientious guidance and patience. Last but not least, deepest appreciation to
authors parents and friends for their continuous supports and encouragements
throughout the progress of this research.
ABSTRACT
Construction contracts can be a complex subject if interpretation and

administration issues of the contract are not being handled properly. In this context,
variations are recognised as the most problematic issue in the construction contract.
Disputes may occur due to miscommunication, ignorance, and poor understanding
on the contractual obligations and expectations laid in the contracts. Dispute
resolution through the Alternative Dispute Resolution (ADR) methods have become
the mainstream option to litigation as the approach does not require full legal
process. Despite the many advantages of ADR, the actual experience of ADR is very
low in the local construction industry. This research aims to address the need to
review existing contract administration and dispute resolution practices, and
subsequently propose and develop eDR model on contractual variations as an
alternative means for resolving disputes in construction projects. And, the objectives
are: (a) to classify the attributes of dispute resolution methods in Malaysian
construction industry; (b) to identify the behaviour and practice of dispute resolution
methods in Malaysian construction industry; (c) to establish the systematic way of
contract administration through identification of its contractual issues and approach
on clarity; (d) to examine and evaluate the previous approaches in dispute resolution
and contract administration; (e) to develop an eDR model in a generic approach for
construction industry; and (f) to develop an application of eDR prototype/system
based on contractual variations. Literature review, questionnaire survey, semistructured interview and Delphi study were carried out to achieve the objectives. The
results revealed that the practice of dispute resolution needs to be improved and eDR
was proposed based on 75 agreed guidelines of contractual variations identified
through the Delphi study. Subsequently, a prototype of the eDR was developed for
the agreed guidelines. The prototype has applied the approach of contractual issues
breakdown and Plain English that derived from the systematic way of contract
administration. The eDR developed in this research is able to facilitate end-users to
take better decisions compared to the conventional approach which uses a bunch of
complicated contract documents and provisions.
vi
ABSTRAK
Kontrak pembinaan merupakan satu subjek yang rumit jika isu interpretasi
dan pentadbiran kontrak tidak ditangani dengan tepat. Dalam konteks ini, perubahan
dikenalpasti sebagai isu yang paling bermasalah dalam kontrak pembinaan.
Bantahan-bantahan boleh berlaku berpunca daripada komunikasi yang tidak
berkesan, pengabaian dan kurang pemahaman ke atas kewajipan-kewajipan dan
harapan-harapan yang tertera dalam kontrak. Penyelesaian bantahan melalui kaedah
penyelesaian pertikaian alternatif (ADR) telah menjadi pengganti utama kepada
perbicaraan mahkamah kerana ia tidak memerlukan proses perundangan yang
sepenuhnya. Meskipun ADR mempunyai banyak kelebihan, pengalaman sebenar
ADR adalah sangat rendah dalam industri pembinaan tempatan. Penyelidikan ini
bertujuan menangani keperluan untuk menilai semula pentadbiran kontrak yang
sedia ada serta pelaksanaan penyelesaian bantahan dan seterusnya mencadang dan
membangunkan model eDR ke atas isu-isu perubahan dalam kontrak sebagai satu
kaedah alternatif untuk menyelesaikan bantahan-bantahan dalam projek-projek
pembinaan. Dengan itu, objektif penyelidikan adalah untuk: (a) mengklasifikasi
sifat-sifat kaedah penyelesaian bantahan di sektor pembinaan Malaysia; (b)
mengenalpasti sifat dan perihal kaedah penyelesaian bantahan di sektor pembinaan
di Malaysia; (c) memantapkan pentadbiran kontrak yang sistematik melalui
pengenalpastian isu-isu kontrak dan pendekatan untuk kejelasan; (d) memeriksa dan
menilai kaedah-kaedah sedia ada dalam penyelesaian bantahan dan pentadbiran
kontrak; (e) membangunkan satu model eDR yang berpendekatan generik untuk
industri pembinaan; dan (f) membangunkan prototaip/system penggunaan eDR
aplikasi yang berdasarkan isu-isu perubahan dalam kontrak. Kajian literatur, soalselidik, temuduga semi-struktur dan kajian Delphi telah dilaksanakan untuk
mencapai objektif-objektif tersebut. Hasil kajian menunjukkan amalan penyelesaian
bantahan perlu diperbaiki dan eDR telah dicadangkan berdasarkan 75 garis panduan
untuk isu-isu perubahan yang telah disetujui dan dikenalpasti melalui kajian Delphi.
Seterusnya, satu prototaip eDR telah dibangunkan untuk garis panduan itu. Prototaip
tersebut telah menggunakan pendekatan isu-isu kontrak pemecahan dan Plain
English yang diperolehi melalui kaedah systematik pentadbiran kontrak. Penubuhan
eDR ini dapat membantu pengguna-pengguna mengambil keputusan yang lebih tepat
berbanding pendekatan tradisional yang merujuk kepada sekelompok dokumen dan
peruntukan kontrak yang kompleks.
vii
TABLE OF CONTENTS
CHAPTER
TITLE
PAGE
DECLARATION
ii
DEDICATION
iii
ACKNOWLEDGEMENTS
iv
ABSTRACT
ABSTRAK
vi
TABLE OF CONTENTS
vii
LIST OF TABLES
xv
LIST OF FIGURES
xvii
LIST OF SYMBOLS AND ABBREVIATIONS
xix
LIST OF APPENDICES
xxii
INTRODUCTION
1.1
Introduction
1.2
Problem Statements
1.3
Research Questions
1.4
Aim
1.5
Research Objectives
1.6
Scope of Research
1.7
Research Significance and Expectation
1.8
Research Methodology
1.9
Structure of the Thesis
12
1.10
Concluding Remarks
13
DISPUTE RESOLUTION
15
2.1
Introduction
15
2.2
Construction Conflicts and Disputes
16
viii
2.2.1
Relationship between Conflicts and
16
Disputes
2.3
Sources of Construction Conflicts and Disputes
17
2.4
Contractual Provisions for Dispute Resolution
19
2.4.1
20
Public Work Department Form 203A

(Rev. 2007)
2.4.2
Pertubuhan Arkitek Malaysia Contract
21
2006
2.4.3
Construction Industry Development
22
Board Form of Building Contract 2000

2.4.4
Summary of Contract Forms
23
2.5
Stages of Dispute Resolution
23
2.6
Prevention Stage
26
2.6.1
26
2.7
2.8
2.9
Prevention Methods in Practice
Negotiation
28
2.7.1 The Process of Negotiation
28
2.7.2
Advantages
29
2.7.3
Disadvantages
30
Nonbinding Dispute Resolution
31
2.8.1
Mediation/Conciliation
31
2.8.2
The Process of Mediation
32
2.8.3
Advantages
34
2.8.4
Disadvantages
35
Binding Dispute Resolution
36
2.9.1 Adjudication
36
2.9.1.1 The Process of Adjudication
37
2.9.1.2 Advantages
38
2.9.1.3 Disadvantages
39
2.9.2 Arbitration
39
2.9.2.1 The Process of Arbitration
40
2.9.2.2 Advantages
42
43
2.9.3 Litigation
43
ix
2.9.3.1 The Process of Litigation
45
2.9.3.2 Advantages
46
46
2.10
Summary of Dispute Resolution Methods
47
2.11
Concluding Remarks
48
CONSTRUCTION CONTRACT
49
ADMINISTRATION
3.1
Introduction
49
3.2
Previous Alternative Approaches
50
3.2.1
DISCON, 1988
51
3.2.2
Expert System For Construction Contract
53
Interpretation, 1991
3.2.3
Prediction of Construction Disputes,
53
2000
3.2.4
Construction
Negotiation
Online
54
Construction
55
(CoNegO), 2004
3.2.5
Conflict
Resolution
in
Disputes using Graph Model, 2006

3.2.6
Fuzzy Case-based Reasoning for Coping
57
with Construction Disputes, 2009

3.2.7
Summary of Critical Review of Expert
58
Systems/Models
3.3
3.4
Contractual Issues in Contract Administration
62
3.3.1 Pre-Construction Stage
64
3.3.2
Commencement and Construction Stage
64
3.3.3
Post-Commencement Stage
66
Understanding on Construction Contracts
67
3.4.1
68
The Need of Standard Form of Contract
3.4.2 Appreciation of Contractual Principles
69
and Obligations
3.5
Clarity of Constructions Contracts
70
3.5.1
73
Clarity Aspects
x
3.5.2 Measures on Enhancing Clarity
74
Concluding Remarks
76
77
4.1
Introduction
77
4.2
Background of Variations
78
4.3
Myths on Variations
81
4.4
Issuance of Variations
84
4.4.1
84
3.6
4.5
Authorized Person and Power
4.4.2 Period of Issuance
85
4.4.3
Provisional Sum
85
4.4.4
Summary of Issuance Variations
86
Validity of Variation
88
4.5.1
Written Instruction
89
4.5.2
Definition/Principle of Variation
90
4.5.2.1 Addition
92
4.5.2.2 Omission and Removal of the
93
Executed Works or Materials and

Goods
4.5.2.3 Substitution and Alteration of the
95
Kind or Standard of Materials or

Goods
4.5.2.4 Changes to the provisions in the
95
Contract
4.5.3
4.6
Summary of Validity of Variations
96
Valuation Rules
99
4.6.1
Rule 1 of Contracts Rates and Prices
100
4.6.2
Rule 2 of Fair Adjustment and Rule 3
100
of Fair Market Rates and Prices

4.6.3
Rule 4 of Daywork Rates
102
4.6.4
Rule 5 Omitted work
104
4.6.5
Rule 6 Re-measurement on Actual
104
Quantities (Provisional Quantity)
xi
4.6.6
4.7
Summary of Valuation Rules
104
Additional Expense and Subsequent
108
Circumstances Caused by Variations

4.7.1
Contract Sum
109
4.7.2
Summary of Additional Expenses and
109
Subsequent Circumstances
4.8
Concluding Remarks
111
RESEARCH METHODOLOGY
112
5.1
Introduction
112
5.2
Literature Review
112
5.3
Preliminary Semi-structured Interview and
113
Critical Review
5.3.1
Content Analysis
114
5.4
Documentary Analysis
115
5.5
Questionnaire
115
5.5.1
Questionnaire Design
116
5.5.2
Questionnaire Sample
117
5.5.3
Questionnaire Analysis
118
5.5.3.1 Mean Analysis
119
5.5.3.2 Factor Analysis
120
5.6
Development of eDR Model
121
5.6.1
Delphi Study
121
5.6.1.1 Fuzzy Delphi Method (FDM)
124
5.6.1.2 Delphi Study: Questionnaire
126
5.6.1.3 Delphi Sample
127
5.6.1.4 Delphi Calculation
128
5.6.1.5 Defuzzification and
129
Normalization
5.6.2
5.6.3
Process Flow Modelling of eDR

Prototype/Template of eDR
130
132
5.7
Research Framework
133
5.8
Concluding Remarks
134
xii
6
DISPUTE RESOLUTION METHODS IN
136
MALAYSIA
6.1
Introduction
136
6.2
Results and Analysis
137
6.2.1
Background of Respondents
137
6.2.2
Position
138
6.2.3
Education Qualification
139
6.2.4
Working Experience
140
6.2.5
Project Involvement of Organisation
141
6.2.6
Conflicts and Disputes Involved
143
6.2.7
Factors Affecting the Selection of
143
Dispute Resolution Methods
6.3
Factor Analysis
146
6.4
Discussion
151
6.5
Concluding Remarks
152
DEVELOPMENT OF E-DISPUTE RESOLUTION
154
MODEL
7.1
Introduction
154
7.2
Model Development
155
7.3
DFD on eDR
156
7.4
Context Diagram of eDR
157
7.5
Level-0 DFD of eDR
158
7.6
Level-1 DFD of eDR
162
7.6.1 Activity 1.0
162
7.6.2 Activity 2.0
165
7.6.3 Activity 3.0
166
7.6.4 Activity 4.0
169
7.6.5 Activity 5.0
171
Online Portal of eDR
172
7.7.1 Context Diagram
173
7.7.2 Level-0 DFD
173
Discussion
176
7.7
7.8
xiii
7.9
Concluding Remarks
APPLICATION OF EDR ON CONTRACTUAL
177
178
VARIATIONS AND PROTOTYPE

DEVELOPMENT
8.1
Introduction
178
8.2
Delphi with Fuzzy (DwF)
179
8.2.1 DwF Framework for eDR
181
8.3
Background of Experts
184
8.4
Round 1: Results and Feedback
186
8.4.1 Improvements and Corrections
186
8.4.2 Additional Information
189
Round 2: Statistical Analysis
191
8.5.1 Analysis on Issuance of Variations
194
8.5.2 Analysis on Validity of Variations
197
8.5.3 Analysis on Valuation Rules of
200
8.5
Variations
8.5.4 Analysis on Additional Expenses and
204
Subsequent Circumstances
8.6
Analysis on Expert Category
206
8.7
Discussion of Statistical Analysis
210
8.8
eDR Prototype Development
211
8.8.1 Database
212
8.8.2 Front Page
214
8.8.3 Main Menu
215
8.8.4 Issues Breakdown
216
8.8.5 Keyword Searching
220
8.9
Testing and Evaluation
221
8.10
Discussion of eDR Prototype
222
8.11
Concluding Remarks
223
CONCLUSIONS AND RECOMMENDATIONS
224
9.1
224
Introduction
xiv
9.2
Classification of Attributes of Dispute
225
Resolution Methods
9.3
Identification of the Behaviour and Practice of
227
Dispute Resolution Methods

9.4
Evaluation of Contractual Issues and Approach
227
on Clarity
9.5
Examination and Evaluation of Previous
229
Approaches in Dispute Resolution and Contract

Administration
9.6
229
9.7
Development of eDR Prototype
230
9.8
Recommendations for Future Research
231
REFERENCES
232
Appendices A F
247-267
xv
LIST OF TABLES
TABLE NO.
2.1
TITLE
PAGE
Literature on sources of construction conflicts or
18
disputes
2.2
Dispute resolution attributes
47
3.1
Categories and numbers of journals from 1990-2007
50
3.2
Characteristics of previous expert systems/models
60
3.3
RIBA plans of work
63
3.4
Contractual issues in pre-contract award stage
64
3.5
Contractual issues in commencement and construction
65
stage
3.6
Contractual issues in post-commencement stage
66
3.7
Summary of problems of clarity
73
3.8
Summary of legalese aspects
74
3.9
Plain English usage and guidelines
75
4.1
Contract clauses of variation under different contract
79
forms in Malaysia
4.2
Misperceptions on variation claims by contractors
82
4.3
Misperceptions on variation claims by employers
83
4.4
Preliminary guidelines on issuance of variations
86
4.5
Preliminary guidelines on validity of variations
96
4.6
Preliminary guidelines on valuation rules
105
4.7
Preliminary guidelines on additional expenses and
110
subsequent circumstances
5.1
Fundamental features on traditional Delphi method
121
5.2
Explanation of DFD elements and notations
131
6.1
Conflict cases in a project and dispute cases involved
143
annually
xvi
6.2
Factors of selecting dispute resolution methods ranked
144
by mean score
6.3
Extracted Components based on Eigenvalues
147
6.4
Rotated component matrix - VARIMAX with Kaiser
149
Normalisation
6.5
Ranking of Factor Scale Rating
151
7.1
Contractual issues in the three work stages
164
7.2
Breakdown of characteristics of contractual variations
167
8.1
Main elements of existing approaches and DwF
179
8.2
Comparison on different characteristics
180
8.3
Background of the experts
185
8.4
Improvements and corrections on Part A
187
8.5
Improvements and corrections on Part B
188
8.6
Additional information on Part B
189
8.7
Additional information on Part D
190
8.8
Results on the geometric mean
192
8.9
Reliability test on all variables
194
8.10
Reliability test on agreed variables
194
8.11
Agreed guidelines on issuance of variations
195
8.12
Agreed guidelines on validity of variations
198
8.13
Agreed guidelines on valuation rules of variations
201
8.14
Agreed guidelines on additional expenses and
205
subsequent circumstances
8.15
Kruskal Wallis test on the agreed guidelines
207
8.16
Mann Whitney U test on the discrepancy items
209
8.17
Analysis of eDR prototype evaluation
222
xvii
LIST OF FIGURES
FIGURE NO.
TITLE
PAGE
1.1
Research methodology flow
11
2.1
Stages of dispute resolution
25
3.1
Structure of DISCON expert system
52
3.2
Dispute prediction process model
54
3.3
Framework of Construction Negotiation Online,

CoNeO
55
3.4
Model of dispute development and resolution
56
3.5
Operating process of fuzzy case-based reasoning
58
5.1
Triangular fuzzy number
125
5.2
Research activities and outputs
134
6.1
Percentage of respondents from contractor and
138
developers
6.2
Position of respondents
139
6.3
Education qualification of respondents
140
6.4
Working experience of respondents
141
6.5
Project involvement of organizations
142
6.6
Sources of project funding
142
6.7
Scree plot
148
7.1
eDR model development on the contents and features
156
7.2
Splitting of DFD diagrams
157
7.3
158
7.4
Level-0 DFD of eDR
161
7.5
Level-1 DFD of eDR Activity 1.0
163
7.6
166
7.7
169
7.8
170
xviii
7.9
172
7.10
Context Diagram of online portal
173
7.11
Levl-0 DFD of eDR online portal
175
8.1
DwF framework for eDR
182
8.2
Relationship between tables in eDR database
212
8.3
Front page of eDR
215
8.4
Main menu interface
216
8.5
Issue breakdown interface
217
8.6
Content of issue
218
8.7
Forum interface
219
8.8
Forum page in issue breakdown
220
8.9
Keyword searching interface
221
xix
LIST OF SYMBOLS AND ABBREVIATIONS
SYMBOLS:
A(x)
Membership function
Triangular number
AL
Left triangular number
AR
Right triangular number
A(SR) ij
The mean scale rating of the j-th
ai
Value of score
am
The peak point
ain
Score rated by the nth expert
ai1
Score rated by the 1st expert
ai2
Score rated by the 2nd expert
a1
Left interval point (minimum)
a2
Right interval point (maximum)
Fi (SR)
The factor score based on scale rating
Total sum up of the interval within the Likert scale
MA
Geometric mean
Interval/range value for the category of disagreement and

agreement
Fuzzy value (mean)
xi
Respondent frequency
Interval/range value for the category of neutral.
xx
ABBREVIATIONS
Adj
Adjudication
ADR
Alternative dispute resolution
AI
Architects Instruction
Arb
Arbitration
BQ
Bill of Quantities
CDA
Conflict and dispute analysis
CIDB
Construction Industry Development Board
CMA
Contract management and administration
CoNegO
Construction Negotiation Online
CPC
Certificate of Practical Completion
DFD
Data Flow Diagram
DRT
Dispute resolution techniques
DwF
Delphi with Fuzzy
eDR
e-Dispute Resolution
FCBR
Fuzzy Case-based reasoning
FDM
Fuzzy Delphi Method
IEM
Institution of Engineers, Malaysia
IT
Application of information technology
JCT
Joints Contract Tribunal
KMO
Kaiser-Meyer-Olkin
Lit
Litigation
Med
Mediation
MO
Modeling
Neg
Negotiation
PAM
Pertubuhan Arkitek Malaysia
PC
Prime Cost
PCA
Principal component analysis
PWD
Public Work Department
Rank
RIBA
Royal Institute of British Architects
SD
Standard deviation
xxi
SMM
Standard Method of Measurement
SO
Superintending Officer
SPSS
Statistical Packages for Social Sciences
SR
Scale Rating
VO
Variations order
xxii
LIST OF APPENDICES
APPENDIX
TITLE
PAGE
Awards and publications as to the research
247
List of journals in the critical review
250
Questionnaire survey: dispute resolution
255
Complete Delphi questions on contractual variations
259
Prototype demonstration and evaluation form
264
List of respondents from questionnaire survey
265
CHAPTER 1
INTRODUCTION
1.1
Introduction
Construction industry is a fragmentation process and adversarial in nature

(Cheung et al., 2004). Every construction project is bound to have conflicts.
Conflicts would exist when incompatibility of interest happened (Fenn et al., 1998).
Construction contracts are drafted to regulate the risks as well as conflicts in a
project. Yet, construction contracts can be a complex subject if interpretation and
administration issues of the contract are not being handled properly. Disputes would
occur due to miscommunication, ignorance, and poor understanding on the
contractual obligations and expectations laid in the contracts. Contractual
disagreements are one of the main sources of disputes in construction industry. Then,
dispute resolution methods are designed to resolve disputes. Alternative dispute
resolution (ADR) techniques do not require a full legal process and become the
mainstream option to traditional dispute resolution, i.e., arbitration and litigation. Yet,
the actual experience of ADR is very low in the Malaysian construction industry
based on the studies by Zulhabri et al. (2008).
2
The results highlight an interesting dichotomy that the disputants are not
active in ADR even though they have great dissatisfaction on traditional dispute
resolution. Therefore, mitigation or prevention measure is necessary as it can be a
better approach to dispute resolution (Vallero and Vesilind, 2006). This research
addresses a proactive approach, namely e-Dispute Resolution (eDR) as a potential
area of improvement in contract administration and dispute resolution. Eventually,
the research renders an insight and assists in making inferences for a more clarified
and informative approach in the contract administration, and thereby contributes to
dispute prevention or mitigation.
1.2
Problem Statements
Dispute is a state of accelerated conflict, which the conflict goes into an

unresolved circumstance. Conflict requires the selection of a conflict resolution mode
such as confronting, compromising, smoothing, forcing, or avoiding (Kerzner, 2006),
while dispute resolution involves the next step, that of resolving the unsettled conflict
through the binding or nonbinding approach. Selection of an appropriate dispute
resolution method is vital as every construction project is bound to have
disagreements (Rosli and Zin, 2010). Besides, the low frequency of practicing ADR
in the local construction industry needs to be addressed (Zulhabri et al., 2008).
Consequently, a comprehensive study is necessary to understand and indentify the
behaviour of the dispute resolution methods. The philosophies and the selection
factors of the dispute resolution methods need to be re-examined.
Besides, contract administration is the process of administering a business

contract that governs contracting parties interests. Different interpretation could
denote a dispute regarding the contractual obligations and expectations between the
contracting parties. Interpretation error and misunderstanding of construction
contracts can be traced to the illegibility of contract clauses (Broome and Hayes,
3
1997; Cutts, 2004; Styllis, 2005) and legalese or technical legal terms/jargon
(Candlin et al., 2002; Cutts, 2004), which results in disagreements between the
contracting parties on their rights and responsibilities. This statement has been
justified by a recent local research (Mohamad and Zulkifli, 2006), in that contractors
reported having problems in understanding the contract documents based on the
results from the survey. The research concluded that the contractors should be well
versed in the interpretation of clauses stated in contracts. Hence this local research
has inspired the investigation on the detailed study of the lack of understanding,
especially on the technical aspect of the language structure within a contract form,
which also highlighted by a number of overseas literatures (Martin 1993; Thomas et
al., 1994; Broome and Hayes; 1997, Hill, 2001; Feinman, 2003; Cutts, 2004;
Shumway et al., 2004; Rameezdeen and Rajapakse, 2007). The form should be
written and presented in such a way as to be useful for easy reference by non-legal
site and consultancy personnel (Robinson and Lavers, 1988).
Subsequently, dispute resolution and contract administration are associated

with construction law after all, for instance, disputes on contractual variations. The
variations are recognised as the most litigious and problematic issue in the
construction industry (Charles and Bruce, 1990; Semple et al., 1994; Zaneldin, 2006).
In Malaysia, the variations or changes are inevitable, even though the project was
carefully planned many misperceptions on variation claims by the contracting parties
(Harbans Singh and Kandan, 2004). It could simply lead to unresolved circumstances
or disputes, particularly for the procedure, validity and valuations of variations
(Harbans Singh, 2003c). Therefore, the existing allocated contractual provisions on
variations need to be reviewed and addressed to a possible alternative means of
application or approach to reduce the disputes.
Apart from that, disputants behaviour is a hindrance in attaining dispute

avoidance. Jahren and Dammeier (1990) identified that people issues were main keys
to avoiding disputes, for instance, being fair, reasonable and respectful. The human
factor issues like unrealistic expectations, culture or work habits would have a great
impact on a project and lead to adversarial attitudes (Pena-Mora et al., 2003). Human
4
factor is agreed and recognised as an important aspect in dispute resolution and
contract administration. Part and parcel of the human factor is considered in the
research, although it is not fall into the scope of the research.
To Malaysian construction context, it is found that poor understanding and

lack of clarity are common problems in construction contracts. Interpretation of
clauses may vary among the construction users. It is contributed by personal and
human factors in contract administration, besides some hidden agendas exist in
contract documents and the poor understanding problems. Since the real practice of
alternative dispute resolutions is very low, a different approach in contract
administration needs to be considered. The conditions of contract can be served as a
basis or tool to prevent/mitigate the conflicts or disputes when the contract clauses
are always being referred during negotiation or dispute resolution. Therefore, the
different approach, namely, eDR is proposed to address the problem statements as
highlighted.
1.3
Research Questions
The literature review and semi-structured interview highlighted many issues

on contract administration and dispute resolution. It is vital to organise the issues into
research questions as to formulate and design the research aim and objectives
according to its sequence. The research questions that need to be addressed are:
1.
What are dispute resolution methods and their attributes in Malaysian

construction industry?
2.
How the practice and trend of dispute resolution methods in

Malaysian construction industry and lead to the need of alternative
means of contract administration?
5
3.
What and how the alternative means of contract administration apart

from dispute resolution?
4.
What are the previous alternative approaches toward the subsequent

critical review on dispute resolution and contract administration?
5.
What is the alternative means for the research gap found from the
previous approaches and how it works in general?
6.
How the real application of the alternative means toward the

contractual variations?
1.4
Aim
The research has highlighted the problem statements and research questions
on low practice of ADR and poor understanding of contract administration toward
the most litigious issue on contractual variations. Therefore, the aim of this research
is to addresses the need to review existing contract administration and dispute
resolution practices and subsequently propose and develop eDR model on
contractual variations as an alternative means for resolving disputes in construction
projects.
1.5
Research Objectives
This research concentrates on the contract administration and dispute

resolution toward contractual variations. Specifically, the following research
questions and objectives are suggested in order to achieve the aim of the research:
6
1.
To classify the attributes of dispute resolution methods in Malaysian

construction industry;
2.
To identify the behaviour and practice of dispute resolution methods

in Malaysian construction industry;
3.
To establish the systematic way of contract administration through

identification of its contractual issues and approach on clarity;
4.
To examine and evaluate the previous approaches in dispute

resolution and contract administration;
5.
To develop an eDR model in a generic approach for construction

industry; and
6.
To develop an application of eDR prototype/system based on

contractual variations.
1.6
Scope of Research
A different approach applies to the dispute resolution research areas after

reviewing the previous studies. The dispute resolution methods are grouped and
discussed together, which based on the similarity of their characteristics or attributes.
This research approach is different from the earlier studies, which mostly focused on
a single dispute resolution method, for instance, negotiation (Cheung et al., 2004;
Cheung et al., 2006), mediation (Yiu et al., 2006; Cheung and Yiu, 2007),
adjudication (Dancaster, 2008; Owens, 2008; Teo, 2008), and arbitration (Armstrong
and Hurley, 2002; Harmon, 2004). Some studies have discussed ADR, but it is still
limited to the method individually (Treacy, 1995; Keith, 1997; Rubin and Quintas,
2003) or the ADR itself (Cheung, 1999). The approach of grouping could render a
wider perspective and comprehensive view on the dispute resolution methods.
Construction law is a very broad research topic. This research focuses on

contractual variations in construction contracts. The contractual variations are served
7
as a research subject for the application of eDR. The selection of this area is because
none of the contractual variations studies are related to the Delphi method either
locally or internationally based on the literature review, where the Delphi in
construction related research were in selection of procurement systems (Chan et al.
2001) and team selection in public private partnership (Kumaraswamy, and Anvuur,
2008).
Besides, the contract forms need to be sorted as many forms are available in
Malaysian construction industry. Pertubuhan Arkitek Malaysia (PAM) contract form
is the most popular and familiar form in private sector. The public sector contract
form Public Work Department (PWD) forms is not selected as the scope of research
because the latest version of PWD 203 (2007) standard form is very new and just
launched . Therefore, this research focuses on the PAM 2006 standard form, which a
revised version of PAM contract for the eDR research. The court cases and literature
materials are referred to support and enhance the content of the contract provisions
on the contractual variations.
1.7
Research Significance and Expectation
The research significance highlights four important aspects that would be

achieved in this study, i.e., appreciation of fundamental contract principles, clarity
approach towards contract administration, the sophisticated model of eDR, and the
application of eDR.
The fundamental contract principles allow construction players to

substantiate contractual obligations and procedures as laid in the contract. It would
oblige contracting parties to follow and obey the rules and regulations once the
contractual principles are made clear. The systematic approach to present contractual
8
principles dealing with causes of conflicts/disputes enables the contracting parties to
understand and appreciate the spirit of contract conditions. This fundamental
knowledge of contract provision needs to be addressed in order to have a more
professionalism and healthier working behaviour in construction industry since the
industry have been plagued by rising of conflicts/disputes and unprofessional
practices.
Another aspect of this research is to render a better insight into the clarity of
construction contract. This clarity approach is the solution for legalese and
complicated language in construction contracts. Plain English could modify the
language to be a more understandable and it is important to construction players who
are not from legal background, particularly the construction naive users and partially
experts in a project. When construction people clearly understand the clauses
provided under the contract, the parties will perceive the importance of their
contractual obligations and rights in the contract as required. Meanwhile, it also
prevents the manifestation of construction conflicts/disputes.
Besides that, the eDR model is unique. The model could serve as a template
for future research, even though there are differences in the legal system and diverse
local scenario, it can provide a generic approach to dispute mitigation/prevention. It
describes how a clarified, organized and reliable source of reference would be
produced. It would cultivate self-learning and examination by the end-users. The
reference is important as the poor understanding of contracts and lack of
prevention/mitigation means of dispute resolution in the construction industry. This
functional modelling is value added to existing body of knowledge, particularly for
contract administration and dispute resolution.
Last but not least, the eDR renders a proactive approach in dispute resolution,
particularly in the contractual variations. The system is designed to provide a more
understandable and informative approach for preliminary references and alertness to
end-users. It could help to make better decision-making. The system also serves as a
9
platform of lifelong learning and self-examination for the end-users to improve their
understanding and knowledge. Once the users understood the operating clauses
provided under the contract and its consequences, they would appreciate the
importance of their contractual liabilities, duties, obligations and rights under the
contract.
1.8
Research Methodology
The research methodology is a guideline to the research to be completed in a

systematic way to achieve the research objectives. In this study, the research process
generally consisted of 4 stages, i.e. Stage A: initial study and confirmation of
research area, Stage B: research proposal, Stage C: data collection and analysis and
Stage D: write-up and conclusions as illustrated in Figure 1.1. The following was the
research process and the methods of approach used for this research, such as:
Stage A involves initial study and fixing of research area. Three

approaches were used in the initial study, i.e., literature review,
critical review and interview. These approaches tried to narrow down
research area. At the end of this stage, a rough idea of the research
topic was obtained.
After the initial study, Stage B of research methodology or a depth

literature review was conducted to strengthen and verify the research
area. The objective and scope of the research were decided. A
research outline was prepared in order to determine the type of data is
needed in this research. Also, data sources and gathering techniques
were identified as well. After that, research proposal was drafted and
confirmed.
Stage C involved data analysis, interpretation and data arrangement.

This stage was to process and convert the data collected to
10
information that is useful for the research. Basically, questionnaire
and Delphi study were the main source of primary data collection.
Subsequently, the model and system are developed based on the data
collected. The validation was carried out with the experts in the
Delphi study.
Stage D was the last stage of the research process. It mainly involved
writing up and recommendations for future research.
These four stages are described the overall of the research methodology that
would be adopted in this research. The details of each research method are explained
in Chapter 5.
11
Stage A:
Initial Study and
Confirmation of
Research Area
Research area
identification
Literature review
Critical review
Articles review
Interview with experts

Views from local
scenario
Development of problem statements and research questions
Formation of objective and scope of research
Stage B:
Research Proposal
Decision of research methodology

Stage C:
Data Collection and Analysis
Data collection
Primary data
Questionnaire
Delphi study
Secondary data
Articles and books
Document analysis
Data analysis and discussion

Model and system development
Validation and evaluation
Conclusions &
recommendations
Stage D:
Write-up and Conclusions
Figure 1.1: Research methodology flow
12
1.9 Structure of the Thesis
This thesis consists of ten chapters. The chapters are arranged according to
the sequence of the objectives and rationale of the research. The ten chapters
comprises 1 chapter on research proposal, 3 chapters on literature review, 1 chapter
research methodology, 4 chapters on data analysis and discussion and 1 chapter on
conclusions and recommendations.
Chapter 1 formulates the research proposal while a review of the relevant

literature is given in Chapter 2, 3, and 4. Chapter 2 describes the philosophy of
dispute resolution techniques in construction industry. At the end, it classifies all the
attributes of the dispute resolution methods as to the first research objective. It forms
the basic of reference in the questionnaire survey to identifying the behaviour and
practice of dispute resolution methods in Malaysian construction industry. The
results of the survey are analysed and discussed in Chapter 6 to achieve the second
objective.
Chapter 3 presents the exiting alternative approaches in contract

administration and subsequently it explains a systematic approach in contract
administration by looking at sources or root causes of contractual issues and the need
on contract clarity. It is to achieve the third objective of the research.
Chapter 4 examines a source of the contractual disputes in contract

administration, i.e., variations. The detail of the investigation is supported by leading
court cases as well as journals, articles and books. The content of this chapter and the
systematic way of contract administration learned from Chapter 3 formulate the
questions for the subsequent Delphi study. The Delphi study is carried out with the
local experts.
13
Chapter 5 explains all the procedures and processes involved in this research.
Basically, the research consists of six main research activities, such as literature
review, document analysis, critical review, interview, questionnaire survey and the
Delphi study. All these method are equally important to achieve the research
objectives.
Chapter 6 presents the questionnaire data analysis. Mean and factor analysis
are applied to analyse the data collected from the survey. This enables the
establishment of the behavior of dispute resolution techniques in the construction
industry. Subsequently, Chapter 7 is about the development of eDR modeling. It
explains the generic approach on the contents and features of the eDR model.
Chapter 8 discusses the application of eDR on contractual variations. The

data were elicited from a mixture of experts. It shows how the clarified and reliable
references/guidelines are produced to the end-users. Finally the summary and
conclusions derived from this research are presented in Chapter 9. It also highlights
recommendations for future works.
1.10
Concluding Remarks
The research aims to address the need to review existing contract

administration and dispute resolution practices and to develop eDR as an alternative
means for construction industry. The eDR is an electronic-based of self-examination
approach in contract administration toward contractual variations. It demonstrates the
clarified, organized and more resourceful of references regarding contractual
variations. It could assist the contacting parties appreciate their contractual
obligations and expectations as described in the contract. In the end of the research,
the eDR would not jeopardise the roles of legal professions in dispute resolution
14
process, rather it is aimed to provide preliminary references and alertness to the endusers.
CHAPTER 2
DISPUTE RESOLUTION
2.1
Introduction
Conflicts and disputes are co-related. The philosophy of conflicts and

disputes need to be clarified before understanding and classifying the attributes of
dispute resolutions techniques. Dispute resolution techniques are numerous and
varied among countries due to its background and legal practice. This chapter
reviews the dispute resolution techniques in local construction industry such as
negotiation, mediation, adjudication (going to be implemented), arbitration and
litigation. It mainly discusses the techniques procedure, characteristic, advantages
and disadvantages. Apart from that, an examination on contract clauses is carried out
for the dispute resolution. The scope is focused on the building contract forms, i.e.
Public Work Department (PWD), Pertubuhan Arkitek Malaysia (PAM) and
Construction Industry Development Board (CIDB) forms of contract. At the end, the
attributes of the five dispute resolution methods are classified to have a better
understanding on its philosophies. It would render useful information in the
identification of the behaviour and practice of dispute resolution in the local scenario.
16
2.2
Construction Conflicts and Disputes
Construction industry is an adversarial in nature sector. Every participant

groups in a project has its individual objectives and concerns in terms of interest
conflicts and disputes (Cheng, et al., 2009). Conflict is a general English term. It
defines as a state of disharmony between incompatible or antithetical persons, ideas,
or interests; a clash, while dispute is defined as something argues about, debate,
quarrel and controversy (Oxford Advanced Learners Dictionary). The definition of
dispute is more understandable when looks into the legal definition on it. There are a
number of definitions for dispute according to Law Dictionary (Merriam-Webster's
Dictionary of Law 1996), for instance:
An assertion of opposing views or claims: a disagreement as to rights;
To oppose by argument or assertion; and
To engage in a dispute.
In brief, construction conflicts and disputes could be concluded as the

misunderstanding or disagreement between two parties or more either in contractual
or non-contractual matter, which always arise as assertions for extra money or time.
2.2.1
Relationship between Conflicts and Disputes
Certainly, Conflict and dispute are two different notions although some
authors do not differentiate them (Fenn et al., 1997). The conflicts and disputes are in
inter-correlated relationship. In other words, the disputes would turn up if the
conflicts go into unresolved circumstance because the conflicts usually happen at the
early stage of disagreement or misunderstanding.
17
In addition, Fenn et al. (1997) stated that conflict is manageable and possibly
to the extent of preventing a dispute resulting from the conflict. Meanwhile, dispute
is required to be resolved through dispute resolution techniques such as mediation,
arbitration and so on. It normally associated with official intervention by a third party.
Therefore, the conflicts always go for conflict management and prevention

means while disputes attach to dispute resolution for its binding or non-binding
decision. However, in some cases these two terms should group and categorise in one
entity, for example, to identify the causes or sources of the conflicts and disputes as
discussed in the following topics.
2.3
Sources of Construction Conflicts and Disputes
The purpose to review and identify the sources of conflicts and disputes for
the construction players is to avoid or forestall them or even to isolate and control the
root causes (Fenn et al., 1997; Kumarasamy, 1997). Kumarasamy (1997) also
reiterated that an appreciation of such causes or sources will be useful to revolve or
prevent any ongoing and unavoidable as well as avoidable disputes.
Recent empirical work about classification of sources of construction

conflicts and disputes has been summarized by many authors. Table 2.1 below has
been added some latest literatures as well as other relevant references to enhance the
understanding on sources of construction conflicts and disputes. It has been sorted
from year 1979 to 2009 and covered different areas concerning sources of
construction conflicts and disputes.
18
Table 2.1: Literature on sources of construction conflicts or disputes
Research
Williamson (1979)
Sources of Conflicts or Disputes

Three categories: behavioral problems, contractual
problems, and technical problems due to uncertainty
and low experience.
Hellard (1987)
Five key factors: contract conditions, design deficiency,

construction process, consumer reaction, and time.
Semple et al. (1994)
Four common causes: acceleration, restricted access,

weather and changes.
Conlin et al. (1996) (as Six areas: payment, performance, delay, negligence,
cited in Fenn et al., 1997)
quality and adminsitration
Sykes (1996) (as cited in Two areas: misunderstanding and unpredictability

Fenn et al., 1997)
Kumaraswamy (1997)
Two areas: proximate causes and root causes.
Fenn et al. (1997)
Contract conditions cause dispute some contracts

cause more disputes than others.
Bristow (1998) (as cited in Five areas: unrealistic expectation, contract documents,
Pena-Mora et al., 2003)
communication, lack of team spirit and changes.
Mitropoulos and Howell Five main sources: project uncertainty, contractual

(2001)
problem, opportunistic behavior, financial position, and
cost culture.
Pena-Mora et al. (2003)
Two areas: organizational issues (people, process and

people) and uncertainty (external and internal).
Cheung and Yiu (2007)
Three basic components: contract provisions, triggering

events and level of conflict.
Cheng et al. (2009)
Four dispute causes: caused by owners, caused by

general contractor, caused by both parties and caused
by acts of God.
Although a number of sources or causes of conflicts and disputes have been

identified in the literature, a common source of conflict found is that the majority of
projects are a one-time experience. Even the contract is performed under similar
19
nature for the same client, differing site condition, rules and regulations, market
conditions and project participants would change the development of the contract
(Pena-Mora et al., 2003). This is why the construction industry is so unique compare
to other industries and fields.
Nevertheless, it is still extremely important to identify and review all the

possible sources of conflicts and disputes for avoidance or controlling concerned. For
this reason, the following section discusses the detail sources of conflict and disputes
particularly in construction contract administration. All the previous researches on
sources of construction conflicts and disputes are related to contractual problems. An
addition to that, understanding and appreciation of construction contracts also one of
the main issues in contractual related problems (Pena-Mora et al., 2003; Zaghloul
and Hartman, 2003; Mohamad and Zulkifli, 2006; Chong et al., 2007; Chong and
Rosli, 2008a; Chong and Rosli, 2008b).
2.4
Contractual Provisions for Dispute Resolution
Unresolved conflicts or disputes need to be resolute using dispute resolution

methods. Contract provisions regarding the dispute resolution need to be reviewed.
The discussion is focused on the local contract forms that applied in building
construction contracts such as PWD 203A, PAM 2006 (With Quantities) and CIDB
Form of Building Contract 2000.
20
2.4.1
Public Work Department Form 203A (Rev. 2007)
PWD 203A is a most popular standard form of contract for public sector. The
contract form has been revised in the year of 2007. Clause 65.0, Arbitration is the
only part of the contract for dispute resolution. There are eleven sub-clauses under
Clause 65.0.
Overall, if dispute or difference occurs between the prime parties, the

contracting parties shall refer such matter to an officer named in the contract for a
decision. The officers decision is binding on the parties until completion of the
project. If the parties failed to receive a decision or dissatisfied with the decision by
the officer, they shall refer to arbitration. The award or decision by the arbitrator
shall be final and binding to the parties, where the arbitration is governed by the
Arbitration Act 2005 and the laws of Malaysia.
All the disputes or differences in the contract can be referred to the officer
and the arbitrator for resolution except termination of contractors employment on
national interest as stated in Clause 65.1 and Clause 65.4. The officer (s) is
empowered to take action on behalf of the government.
In summary, the PWD 203A provides a formal dispute resolution method

provision in the contract, i.e., arbitration. However, the empowering officer as stated
in the appendix also could play a significant role on the informal dispute resolution
method such as negotiation.
21
2.4.2
Pertubuhan Arkitek Malaysia Contract 2006
PAM standard form of contract is the most common type of contract used in
private sector. In year 2006, the contract form has been updated and revised. There
are two clauses found in the contract form for dispute resolution and discussed on
mediation, adjudication and arbitration. Clause 35.0, Mediation is allocated in the
contract form. The mediation requires both the disputants written agreement before
referring to this dispute resolution. This mediation is carried out in a voluntary basis.
There is no condition precedent in this dispute resolution for its reference to other
dispute resolutions like adjudication and arbitration. Appointment of mediator is
done by President of Pertubuhan Arkitek Malaysia when the parties failed to agree
on the mediator. Upon appointment, the mediation is governed by PAM Mediation
Rules or any modification to such rules.
Besides that, Adjudication and Arbitration are located at Clause 34.0.

Reference to adjudication is a condition precedent to arbitration when the dispute
deals with set-off done by employer. Besides, other matters also can be referred to
adjudication if the parties agree to do so by written agreement. The adjudications
decision shall be final and binding on the parties until practical completion if the
dispute on the decision not referred to arbitration within the stipulated time (6 weeks
from the date of making decision). Apart from that, if the set-off issue happens after
date of practical completion, the dispute must be referred to arbitration. In fact, any
matter arises in connection with the contract shall be referred to arbitration either
during the progress or after completion or abandonment of the project except for the
adjudication issue on set-off. As adjudication, the award or decision of such
arbitrator is final and binding on the parties. Appointment of adjudicator and
arbitrator is same as the rules of appointment for mediator. The only difference is the
adjudicator/arbitrator shall initiate the proceedings according to PAM Adjudication
Rules/PAM Arbitration Rules (Arbitration Act 2005) or any modification or revision
to such rules.
22
2.4.3
Construction Industry Development Board Form of Building Contract

2000
CIDB Form of Building Contract 2000 is published by Construction Industry

Development Board, Malaysia. Clause 47 Settlement of Disputes is the provision of
the contract form for dispute resolution. The resolution consists of three stages of
reference, i.e., Clause 47.1, Reference to the Superintending Officer (SO), Clause
47.2, Reference to Mediation and Clause 47.3, Reference to Arbitration.
Firstly, if a dispute or difference arises between the employer or the SO and

the contractor in connection with the contract, the party shall refer to SO for his
decision except matter regarding termination, repudiation or abandonment of
contract and final certificate. The decision made by SO shall within 30 days and it is
final and binding to the parties.
If the SO fails to give his decision by the expiry of 30 days or if either party
be dissatisfied with any decision by the SO (within 90 days after receiving the SOs
decision), then the disputant shall refer the dispute to mediation. The mediation must
obtain written consent by the disputants, if the parties fail to achieve any settlement
then upon the termination of the mediation pursuant to the CIDB Mediation Rules,
either party may refer the dispute to arbitration and it shall be a condition precedent
to commencement of arbitration proceedings.
An arbitrator will be appointed by the employer or the contractor within 14

days after termination of the mediation. If the parties fail to agree on the appointment
then either party may request the Appointer of Arbitrator named in Appendix to
appoint another arbitrator. The award of the arbitrator shall be final and binding on
the parties under the Arbitration Act 1952 or any amendment or re-enactment of the
said act.
23
2.4.4 Summary of Contract Forms
The local contract forms highlighted several dispute resolution methods such
as negotiation, mediation, adjudication, and arbitration. The negotiation is an indirect
of provisions in the contracts such as reference to the officer/SO regarding the
disputes. However, the mediation, adjudication and arbitration are the formal dispute
resolution techniques required in the contract. These formal and informal dispute
resolution methods together with litigation are the research subjects towards the
identification of the behaviour of dispute resolution in Malaysian construction
industry.
2.5
Stages of Dispute Resolution
Disputes may be resolved in a number of ways using various proceedings.

The stages of dispute resolution only start when the prevention means is over or
failed.
It would not be true to say that all disputes are resolved at court proceedings
or other formal settings of alternative dispute resolution methods. The stages of
dispute resolution should begin with a grievance. The grievance may be abandoned
where a person considers it to be trivial and not worth pursuing. The person may feel
unable to pursue the matter or may not realise that he/she may have legal recourse in
respect of it (Badman and Grimmett, 1996). This grievance is the least confrontation
and time consuming as the person would just follow or surrender due to his limited
knowledge or understanding about the dispute. In developing countries, the
grievance is very obvious and common although the parties may not realise it.
24
After that, the stage is negotiation, which is a very popular informal method
in dispute resolution. This stage is to communicate the grievance and negotiate for a
settlement. This negotiation technique is a preferred choice of the disputants, with
most disputes being resolved through this process (Cheung et al., 2000). It is the least
expensive, and it can preserve the working relationship of the parties involved. In
negotiation, the parties have absolute freedom with respect to the form, process and
type of agreement. In order to make it successful, the negotiation demands
cooperative effort from the disputants (Cheung, 1999; Edwin and Henry, 2005).
However, increased project complexity and shortening of the project life

cycle have made contact administrating difficult. Negotiation is not always workable
and bringing consensus in the end. It is because projects will be diverging from what
has been anticipated and triggered to other more formal method of dispute resolution.
At this moment, mediation or conciliation would take place to reach a settlement
after the negotiation (Essex, 1996). Ironically, mediator has no power to impose a
solution and his/her function is to help or guide disputants to focus on their actual
objectives and resolve their matter consensually (Harmon, 2006).
Therefore, the next stage is the methods that could render a legal binding
decision, i.e. adjudication, arbitration and litigation. The alternative to arbitration is
to the use of adjudication (Owens, 2008; Dancaster, 2008; Hill and Wall, 2008).
Adjudication deals with the payment problem between the contracting parties in
particular (Noushad Ali and Lim, 2008; Teo, 2008). Usually, it is under a contractual
provision in the contract and enforceable in law (Thomas, 2001).
Subsequently, the next stage is the use of arbitration. Here it is clear that the
disputants need an arbitrator, an independent expert to act as the decision maker. The
parties must agree to the appointment and are bound by the arbitrators decision.
Arbitration is conducted in private and confidentially (Teo and Aibinu, 2007). Yet,
over the years, with the increase in procedural complexity, arbitration is regarded as
25
a replicate of litigation (Cheung et al., 2000). Hence it is not considered one of the
ADR methods in this research.
Last but not least, litigation is the following stage of dispute resolution.
Litigation is costly, delaying and risky (Steen, 1994; Gebken and Gibson, 2006). It also
brings a number of variables and unable to satisfy the litigants (Harmon, 2004). On
the other hand, the court proceedings consist of several layers too, which is the
hierarchy of the courts. This is important and one kind of advantages for the
provision of an appeals structure (Badman and Grimmett, 1996).
In conclusion, the dispute should be resolved as early as possible in the stages

of dispute resolution. The contracting parties controversy and adversary would be
increased together with the consumption of cost and time once higher stage of
dispute resolution applied as illustrated in Figure 2.1. The figure is developed
Consumption of Cost and Time
according to the review on the stages of dispute resolution.
Litigation
Arbitration
Adjudication
Mediation
Negotiation
Grievance
Amount of Controversy and Adversary
Figure 2.1: Stages of dispute resolution
26
2.6
Prevention Stage
The prevention method is to prevent aggravation of the negative impacts on

project performance, and it attempts to manage the dispute proactively and aim for
early settlement (Cheung et al., 2004). Vallero and Vesilind (2006) described that
dispute prevention is much better than even the best dispute resolution techniques.
The prevention stage is the most effective means at which to resolve disputes. This
stage offers a vast array of techniques for promoting dispute avoidance as well as
encouraging conflict settlement during construction (Pena-Mora et al., 2003).
The prevention stage is the earliest stage before any formal or informal
dispute resolution methods. In UK, Construction Industry Institute, Dispute
Prevention and Resolution Task Force has proposed start right and stay right
approach for the contracting parties. Start right is about starting with suitable
contract language and with appropriate alternative dispute resolution while stay
right requires the parties solve emerging disputes quickly before they accelerated
into complex legal problems (Diekmann and Girard, 1995). Therefore, this approach
could help the contracting parties to identify the disputes at the outset of a project.
After that identification, the parties could avoid them or even to isolate and control
the root causes (Fenn et al., 1997; Kumarasamy, 1997). This is how the prevention
works, i.e. preventing conflict before it happens.
2.6.1 Prevention Methods in Practice
There are two scenarios for prevention means in construction industry. Firstly,
the prevention method applies before the construction is begun, which the decision
making solely falls on the owner/client/employer. Another scenario for prevention
27
method describes in the commencement of construction period, which includes the
contracting parties of the project.
For the first scenario, the prevention stage offers the greatest flexibility for
designing and creating ways to improve communication and job performance by
minimizing disagreement and helping the project team resolve those problems that
arise before they become disputes or claims. This approach applies to the
construction that has not begun yet. Therefore, the employer is the most crucial
participant in this stage. The techniques could be adopted are risk sharing, escrow bid
document, innovative project award and delivery systems, incentive programs,
constructability analysis and documentation, cost/schedule controls, and contract
implementation (Pena-Mora et al., 2003).
For commencement of construction, all the contracting parties are playing

important roles to prevent any conflicts or disputes happen. Predicting dispute
susceptibility on a construction project is a very complicated process. Therefore,
Diekmann and Girard (1995) identified three critical issues to avoid or reduce
likelihood of disputes, i.e., people issues, process issues and project issues. People
issues are considering the number of organizations, relationships, roles,
responsibilities and expectations of the people. Process issues are regarding to
contract and building process for planning of the project, financial and scope
definition, contractual obligation, contractual risk allocation and contract
administration. The technical nature of the work is the project issues, for example,
type and complexity of a project and the like.
In conclusion, the implementation of this prevention stage may need

additional investments, yet it is worthy by considering the negative consequences
that would be suffered from the project.
28
2.7
Negotiation
Even though there are a number of possible resolution methods, negotiation is

always used to negotiate the disputes before other dispute resolution methods are
considered (Cheung et al., 2006). It is the simplest form of ADR in the construction
industry (Mose and Kleiner, 1999).
Typically, negotiation is the preferred choice of the disputants to resolve a

construction dispute (Cheung et al., 2000). It is because it is a voluntary, informal,
and unstructured process, where the disputants are discussing and bargaining to reach
a mutually acceptable resolution and establish common grounds.
Cheong and Suen (2002) also pointed out that negotiation is the most
common form of dispute resolution. According to the research done by Jones (2006),
negotiation is best suited to preserving or enhancing existing job relationships and it
also effective in reducing costs and opening channels of communication.
Usually, the disputants expect there is give and take in the negotiation.
Therefore, cooperative effort from the disputants is required in order to have a
successful negotiation (Cheung, 1999; Edwin and Henry, 2005).
2.7.1
The Process of Negotiation
Negotiation is a voluntary pre-hearing process. Negotiation is the disputing

parties earlier negotiation before they seek for other resolution methods (Essex,
1996). In the negotiation process, the parties have absolute freedom in choosing the
29
form, process and type of agreement towards a successful negotiation demand
cooperative effort from the disputants (Cheung, 1999).
During the negotiation process, the disputants will exchange the information
and make up a solution which meets the objectives of all parities. The parties will
present its proposals with supporting facts and argument for an agreement. The
negotiator will attempt to understand and adjust their position. The way of
negotiation conducted will cause an impact to their relationship. Normally the
disputants will not want to continue compromise if the proposals suggested by one
party are kept banned by another party unless a compromise is reached among the
disputant parties (Cheung and Suen, 2002).
The successful of the negotiation depends on the attitudes and expertise of the
representatives. Any settlements or resolutions are achieved only by the agreement
from both disputing parties (Essex, 1996). Thus, the disputing parties involve must
be willing to bind their respective parties to a settlement and never ask for a
representative to participate in the proceedings. In this negotiation, the quarrelling
parties will try to reach a suitable negotiated solution for the dispute without
involving any third-party. The parties will only consider other dispute solution
methods like neutral advice or mediation if the parties cannot solve the dispute
through negotiation the resolution is not reached within a predetermined length of
time (Koolwik, 2006).
2.7.2
Advantages
The discussion below focuses on the main advantages of the negotiation, such
as:
30
Speedy - negotiation is the most cost efficient method to resolve

construction disputes because it is informal, speedy and non-complex
in nature resolution method (Cheung et al., 2006).
Preserve relationship - negotiation could preserve or enhance the

existing job relationships and as well as reduce other costs incurred in
proceedings (Jones, 2006). Negotiation helps the parties to improve
the communication and thereby the relationship is preserved and the
parties can continue to work together for mutual profits.
Third party - the disputing parties will try to reach a suitable

negotiated solution for the dispute without involving any third party
(Koolwik, 2006). The negotiator helps to clarify and narrow down the
issues of the disputes.
Risk free - negotiation is a communication without prejudice and the

parties can pursue other method if there is no agreement is reached. If
negotiation fails, they can seek for other alternative dispute resolution
methods (Mohammad, 2005).
2.7.3
Disadvantages
There are two main disadvantages of negotiation in this discussion, i.e., both
the disputing parities will face a relatively high risk in settling their disputes if the
negotiation fail; and if the negotiation fails due to the communication failures, bad
negotiation skill will lead to the delay (Mohammad, 2005).
31
2.8
Nonbinding Dispute Resolution
The nonbinding dispute resolution, such as mediation/conciliation is the last

phrase in which the parties still have control over the outcome of the dispute. In this
formal proceedings, it usually engages a third and neutral party for settlement. The
proceedings are voluntary, while procedures are flexible. The selection of third party
is done by mutual consent (Pena-Mora, 2003).
2.8.1
Mediation/Conciliation
Mediation is a nonbinding process of dispute resolution technique. Cheung

and Suen (2002) defined mediation as a deliberate, non-binding process in where a
mediator is a neutral party helps the disputants towards an equally beneficial
resolution. Furthermore, Chau (1992) also defined mediation is a non offensive,
voluntary, informal and nonbinding way to resolve the disputes. It attempts to
prompt the parties to appreciate and consider each others points of view and turn up
with an agreement.
Nowadays, mediation is a widely used technique by the parties who want to

continue their negotiation with the assistance of a mediator (Essex, 1996). Mediation
is appropriate when a substantial measure of goodwill exists on both sides and there
is a continuing business relationship (Jones, 2006). The relationship will be
preserved and will not be broken off through mediation.
The disputants require minimum cost for mediation. Generally, the costs of
the mediation are shared partially by each party and the mediator has no lien on the
view of his costs. The mediator plays an important role in assisting the parties to
32
agree on a settlement which can reflect the true intention of both parties (Singh,
1995). The cooperation of both parties is critical to determine the success of this
mediation.
Lastly, mediation helps the disputing parties to minimize the risk of losing
costly litigation fees and helps the parties in developing a creative solution. Although
the chances for the mediation to win is not so much but the risk of losing and the
view of pursuing costly litigation encourage the parties to choose mediation (Jones,
2006).
2.8.2
The Process of Mediation
Mediation is nonbinding and voluntary process. A neutral third person is

engaged to facilitate the negotiation. The role of the mediator is to scrutinize the facts
and clearly set out the parties weaknesses and strengths of their claims (Chan, 1997).
A mediator will investigate the issues of the disputes and develop the strength and
weakness of the parties towards their claims.
Mediator is given the responsibility to listen, generate and facilitate the

settlement that they cannot solve on their own. Jones (2006) mentioned the mediator
must acts neutrality while handling the dispute so that the parties have positive
approach towards mediation and believe that they can trust the mediator and reach a
settlement through mediation. Fisk (2003) opined that a mediator is needed when the
following circumstances exist:
(a)
Parties are unable to narrow the gap and differences arise in the
dispute and cause the inflexibility of other parties.
33
(b)
Parties do not manage proceed the movement since too many matters
are unsolved.
(c)
The parties wish the mediator to discover and give a solution to them.
(d)
The parties wish to solve a problem reciprocally and end a dispute

harmoniously.
(e)
It is desired to provide the parties with some suggestion of how their

positions look to an impartial person.
(f)
The parties wish mediator is used in private and confidential

confessions without endanger their original positions.
(g)
Mediator will avoid unenthusiastic significances like court case occur

during the mediation.
The process of mediation is to crate an environment where the parties can sit
down together to discuss and negotiate for a consensus agreement. The mediator also
helps both the parties to perceive a fair settlement and look for the alternative ways
to overcome obstacles through negotiation (Keith, 1997) or to simplify the issues
(Jones, 2006). Chan (1997) summarized the role of mediator as follow:
(a)
To postpone the proceeding of arbitration if both the parties agree go

settle their dispute by using mediation method.
(b)
To facilitate the communication between the parties.
(c)
To investigate and understand the primary problems and intentions.
(d)
The information obtained during the mediation process must not

salvaged by the mediator for other occasions.
(e)
To assist in drafting a settlement agreement and hand it down as

enforceable arbitration award if settlement is agreed by both parties.
(f)
If the parties do not want to carry on further, the mediator will finish
off the mediation stage and regress to arbitration.
During mediation, mediator facilitates and serves at the request of the

disputing parties but does not dictate the negotiation. The mediator undertakes to
34
clarify each partys concept of the facts, priorities and positions. The mediator will
never advocate for either side, loosens rigid stances and he always helps the parties
find a fair resolution for the parties (Essex, 1996).
Overall, mediator has no power to impose a solution. Mediators role is to

identify, highlight and narrow the issues, focus on each sides interest, explore an
agreement from both parties. Unlike a judge or arbitrator, mediator has no power to
oblige a solution to the disputing parties. His role is to identify and narrow down the
issues and focus on the disputing parties underlying interests, convey messages
between the parties and explore areas of agreement (Treacy, 1995). Hence, mediator
is only giving advice, making recommendations for the disputing parties (Chau,
1992).
2.8.3
Advantages
The main advantages of mediation are summarised as below:
Nonbinding - mediation is non-binding. The parties can ignore the

mediators recommendation for the settlement if either party think the
mediators rule is unfair or biased. Then, the parties will precede the
case to the other dispute resolution methods. There is no risk of an
unappeasable unfair resolution (Patterson, 1997).
Speedy - mediation can be as speedy as the parties wish to be (Chau,

1992). The mediation takes very short time to settle most of the cases.
Preservation of relationship - mediation enables the disputing parties

to preserve a continuing business relationship (Keith, 1997).
Mediation produces a win- win settlement where the parties felt
contentment on mediation as a tool of dispute. The parties can
35
maintain their business relationship if they are using mediation to
solve the settlement. According to Keith (1997), the successful of
using mediation to solve the dispute is more than 70% of the time in
the construction industry.
Flexible - the final jurisdiction in mediation vests in the parties

involved. If the parties are not satisfied with the decision made by
mediator, they can simply ignore the recommendation for settlement
and withdraw from continuing the mediation process (Chau, 1992).
The parties can reject the mediator anytime because it is based on the
willingness and cooperation of the parties.
2.8.4
Disadvantages
The disadvantages of the mediation are as following:
Mediation is lack of finality in its enforcement. It is because the

parties can simply ignore the solution made by mediator if they are
not satisfied with it (Chau, 1992).
If the mediation fails to present, the parties will have deserve for
losses in terms of time and money (Patterson, 1997).
The mediator has no authority to enforce a solution. He/she helps to

narrow the issues and focus on each partys interest (Treacy, 1995).
The parties may not be prepared to be directed by the mediator

towards productive negotiation when the parties do not have a good
faith on it (Chau, 2007).
36
2.9
Binding Dispute Resolution
Binding dispute resolution is referral of a dispute to one or more persons for

final and binding determination. Two methods are discussed in this resolution, i.e.,
adjudication and arbitration. The decisions rendered by the experts are impartial,
final and binding to the disputants (Pena-Mora, 2003).
2.9.1 Adjudication
Adjudication was first introduced into UK in the mid 1970s. The application
was restricted to disputes that occurred between main contractor and his
subcontractors. The process involved a third party as an adjudicator to help resolve a
dispute that had arisen (Ashworth, 2006). After some years, the standard forms of
contract have had provisions for adjudication. Formally, adjudication was introduced
to the construction industry in United Kingdom on 1st May 1998 when the Housing
Grants, Construction and Regeneration Act 1996 (HGCRA) came into force
providing mandatory requirements for construction contracts to include adjudication
as recommended by the Latham Report (Uff, 2002).
Ndekugri & Russell (2006) stated that under the HGCRA Act 1996, a party
has a right to refer a dispute to adjudication under construction contracts. Since the
fundamental objective of statutory adjudication is encourage dispute adjudication at
any time during the project, therefore the high percentage of adjudication
proceedings commenced after practical completion remains a genuine concern
(Cheung, 2006).
37
In Malaysian construction industry, only PAM 2006 contract form has a
provision for adjudication. One of possibility reasons may due to pending of
enactment of Malaysian Construction Industry Payment and Adjudication Act
(CIPAA). According to Noushad Ali and Lim (2008), the development of CIPAA is
going smoothly and many notable comments by the steering committee. It is
expected that the CIPAA would help to resolve payment issues in the industry once it
has been implemented.
2.9.1.1 The Process of Adjudication
Adjudication is an involuntary and adversarial process. However,

adjudication is quicker and more cost effective than the arbitration and litigation.
Muhammad (2005) stated that adjudication is a process where upon request by one of
the parties in a construction contract, an independent adjudicator steps in and makes
a binding decision on the disputes being referred to him within days or weeks. The
decision make by the adjudicator is binding but not final, the final decision is
determine by the ultimate tribunal, court or arbitration.
On the other hand, adjudication is binding through the legislation, where all
the parties are given a statutory right without the consent of the other. In the United
Kingdoms HGCRA Act 1996, a party is automatic given a right to settle the disputes
overpayment by giving a notice at anytime for a 28 days adjudication. The
adjudicator would make a prompt decision within 28 days of the appointment by his
or her own specialist knowledge toward the subject matter of the dispute. The
adjudication decision is binding until the dispute is finally determined by the legal
proceedings or arbitration if they are not satisfied with the adjudicators decision
(Chau, 2007).
38
2.9.1.2 Advantages
The adjudication has several core advantages as stated below:
Binding decision - the decision made by the adjudicator is binding and

enforceable. The parties are required to comply with the decision
make by the adjudicator until the dispute is finally determined by
other legal proceedings like litigation and arbitration (Muhammad,
2005; Chau, 2007).
Economical - the adjudication is much cheaper compare to litigation

and arbitration. The speedy process of adjudication reduces the money
spent on the fees and other resources (Chau, 2007).
Efficient - the number of using adjudication in the resolving the

dispute is increasing and the dissatisfaction over the adjudicator is
very low (Cheung, 2006). Siti Nora Haryati and Khairuddin (2006)
also described that only 2% of the adjudication cases being ended up
in court or arbitration based on their review from other practice.
Avoidance of complex dispute - adjudication helps to reduce and

avoid the complex disputes which may arise in the future. The
opportunity to seek the adjudicator at any time has helps to minimize
the aspect which might turn into complex disputes have been
examined and resolved as the work proceeds (Muhammad, 2005).
Speedy - adjudication helps to resolve the construction disputes in a

speedy manner during the early completion of the project and give a
early return to the employer (Muhammad, 2005).
Improvement of cash flow - dispute resolution methods like

arbitration and litigation are lengthy and expensive and in the mean
time the contractor may struggling with his cash flow. Thus,
adjudication introduced by the HGCRA Act 1996 provides a fast but
enforceable award allows the opportunity for improvements in cash
flow (Muhammad, 2005).
39
Underpinned by legislation - it is compulsory for adjudication to be

included in the construction contract when the statute is in force. It
means that the parties have to refer the dispute under a contract to
adjudication. The procedure, process and the period of adjudication is
stated in the legislation and need to be followed by the parties to
guarantee uniformity while preceding the adjudication (Siti Nora
Haryati and Khairuddin, 2006).
The following are the disadvantages of adjudication:
Faulty decision - due to the time constraint, sometimes adjudicator

makes a resolution based on the limited information and time. The
adjudicator may face the difficulties in establish the parties rights and
obligations and result in delayed and incorrect decision (Muhammad,
2005).
Temporary binding decision - the decision imposed by the adjudicator

is binding and enforceable. The parties have to comply with the
adjudicators decision until the final decision is determined by the
court or arbitration (Muhammad, 2005).
2.9.2
Arbitration
Arbitration is a formal dispute resolution method for the settlement of

disputes where the disputants agree to be bound by the decision make by arbitrator
whose decision is final and enforced by law (Cheung and Suen, 2002; Sundra, 2003).
40
Arbitration arose when two parties to a contract were incapable to be in agreement
and wanted an impartial party to decide on the issue (Treacy, 1995).
Arbitration is a well established dispute resolution method. To date,

arbitration has becomes the popular as the arbitration clauses are included in most of
the standard forms of contract (Patterson 1997; Harmon 2003). Meanwhile,
arbitration is an orderly proceeding and administered by the rules of procedure and
standards of conduct that are stipulated by law (Fisk, 2003).
In Malaysian construction industry, Sundra (2005) defined arbitration is the

process where a dispute or difference between two or more parties as their mutual
legal rights and liabilities is referred to and determined judicially and with binding
effect by the application of law by one or more persons instead of a court of law.
Arbitration is governed by the Malaysian Arbitration Act 2005, which enacted by the
Parliament of Malaysia.
In the construction industry, arbitration is the norm. Arbitration plays an

important role in settling disputes. It has gained acceptance for settling construction
disputes. All the local construction contracts include an arbitration clause so that the
parties will go for the arbitration such as PAM, Institution of Engineers, Malaysia
(IEM), CIDB and PWD forms.
2.9.2.1 The Process of Arbitration
Arbitration is an orderly proceeding and administered by the rules of

procedure and standards of conduct that are stipulated by law (Fisk, 2003). In
contrast to litigation, arbitration does not apply the strict rules of evidence.
Arbitrators may accept all type of evidence submitted by the parties, believed and
justified to the evidence presented. Usually, the arbitrators are experienced in the
41
construction field and the need for the expert witnesses may be limited and
testimonies are submitted in the form of swear affidavits (Harmon, 2003).
The process of arbitration is conducted by a registered arbitrator who expert

in the field of argument. One of the positive attributes of arbitration process is it
gives both parties and the arbitrator the flexibility to decide on the particular
procedure (Harbans Singh, 2003c). Therefore, selection of an appropriate arbitrator is
important in the process of arbitration. The Malaysian Arbitration Act 2005 (come
into force on 15th March 2006) has stated some rules and procedures to comply in
order to select an arbitrator, such as:
Nobody shall be precluded by reason of nationality from acting as an

arbitrator unless otherwise agreed by the parties.
The parties are free to agree on a procedure for appointing the

arbitrator or the presiding arbitrator.
When the parties failed to agree on the procedure referred to (b), and
the arbitration consists of three arbitrators, each party shall appoint
one arbitrator and the two appointed arbitrators shall appoint the third
arbitrators as the presiding arbitrator.
When the two parties fail to agree on the third arbitrator within thirty
days of their appointment or such extended period as the parties agree,
either party may apply to the Director of the Kuala Lumpur Regional
Centre for Arbitration for such an appointment.
In summary, arbitration is referred to an independent arbitrator who is to act

in a judicial manner. Once the selection of arbitrator is completed for the hearing, the
decision by the arbitrator and which will be final and binding, subject to the
possibility of review by the courts.
42
2.9.2.2 Advantages
Arbitration has several advantages over other methods, such as:
Finality and binding - the arbitration proceeding is final. The

arbitrators decisions are not subject to judicial review excluding
under very narrow grounds like showing of fraud or corruption in
obtaining the award (Patterson, 1997).
Speed - through the survey done by Riggs and Schenk (1990),

arbitration is very much quicker process than litigation. Arbitration is
lack of time consuming compare to court system because the parties
may need to wait for years for a trial in litigation.
Economy - arbitration is more economical than litigation. This is

because the arbitration is based on the document only or restricted
form of hearing. The cost of the arbitration is low if the parties are not
represented by lawyers and discovery is limited (Cheung and Suen,
2002).
Privacy - the procedure of arbitration is private form of resolution and

confidential between the parties and their representatives. The public
are prohibited and have no rights to attend a hearing before an
arbitration tribunal (Sundra, 2003).
Confidentiality - the file of the dispute is handled merely by the

arbitrator. Thus, the privacy of the parties involved in the arbitration is
protected because the result is never published (Sundra 2003 and
Sundra 2005).
Convenience - by using arbitration, the most convenient location for

the hearing can be chosen (Jones, 2006). Besides that, they can
arrange the time best suited for the arbitrator and the parties. For
example, the parties can discuss and choose the most appropriate time
and location themselves with the arbitrator for the hearing.
43
Maintaining relationship - by comparing litigation, there is high

possibility for the parties for continuing business relationship because
arbitration is still quite flexible in the ruling (Harmon, 2003).
The following are the disadvantages for the arbitration:
The parties are frustrated of going to court for the enforcement of the
arbitration award. This is due to additional cost had to be bear by the
parties (Riggs and Schenk, 1990).
Arbitration may act like litigation, which is started too late and takes a
long time to reach a settlement (Essex, 1996).
Arbitration will dispel the good business relationship of the parties

before the process executed and this will corrode the relationship
between parties all the way through the rest of the project (Essex,
1996).
Arbitrator does not apply the strict rules of evidence as in the court.
However, it still subject to be reviewed if the matters related to law
points of view by the courts (Uff, 2002).
2.9.3
Litigation
Litigation is defined as a formal dispute resolution method in which the

issues are pleaded and argued before and adjudicated by a judge in the court, whose
decision is binding (Cheung and Suen, 2002). It is a traditional dispute resolution
44
method and provides an involuntary and binding solution. This method is a
compulsory form of dispute resolution because if the parties do not comply with the
specified procedures stated, they have an ultimate right of appeal to court (Jones,
2006). This appeal is referring to lawsuit, which consists of form of legal actions and
procedures in order to resolve the disputes.
Besides, complex cases involve an overabundance of issues of fact and law,

with very big sums at venture, are notoriously difficult to reconcile. Many of these
are still reaching the court. Furthermore, litigation is extremely costly and it takes a
long period of time to proceed. It is expected that litigation would decline in the
future as taking up of alternative dispute resolution methods (Gaitskell, 2005).
On the other hand, the parties give their control over the process and
conclusion imposed by the third party (Cheung, 1999). Occasionally, litigation is a
preferable dispute resolution method if the dispute involves legal issues or view
points of law by the litigants and requires a settlement by a judge (Harmon, 2003).
Moreover, Cheeks (2003) stated that litigation is more preferable compare to binding
arbitration if the following issues are considered:
(a)
The dispute must achieve an appropriate result through litigation.
(b)
The anticipated conciliation would be divergent to the custom and

practice relating to duty and responsibility.
(c)
The unavoidable compromise which cause the dangerous business

precedent to the industry.
(d)
The scope of claimed damages is extreme that conciliation can be a

financial disaster.
(e)
There are clear and dispositive legal defenses like statute of

limitations or contractual provisions.
45
2.9.3.1 The Process of Litigation
The litigation process is extremely long and consists of many rules and
procedures. Uff (2002) stated that litigation procedure is a general term which covers
the various steps necessary to turn a legal right into a satisfied judgment of the court.
In Malaysia, Harbans Singh (2003c) stated that engineering and construction related
disputes are usually referred to civil procedure in civil court and comprised statutory
rules like:
The Rules of High Court, 1980
The Rules of Supreme Court, 1980
The Subordinate Court Rules, 1980
The litigation procedure involves many steps to advance the litigants legal
right into an enforceable judgment. Overall, Harbans Singh (2003c) described that
the procedure consists of three main stages, namely:
The pre-trial or preliminary proceedings this stage comprises

Commencement of Action (Writ), Entry of Appearance, Exchange of
Pleadings, Close of Pleadings and then Pre-trial.
The trial itself the trial starts with the plaintiff commences the
opening address and calls his witnesses subject to examinations, next
defendant opens his case/defence, calls his witnesses subject to the
same examinations and makes closing speech once all the defendants
witnesses have been called. Lastly the plaintiff makes his closing
speech.
Post trial this stage is about the enforcement of the judgment,

however it subjects to appeal by the unsatisfied party.
46
2.9.3.2 Advantages
Although litigation is the last solution for the disputes, it has the following
advantages:
The disputing parties can appeal if they are not satisfied with the
decision imposed by the judge (Fisk, 2003).
Litigation is binding and the parties have to follow the decision make
by the judge (Fisk, 2003).
Litigation focuses public attention on important issues (Lee, 1990).
Litigation is a recognized public process and the court resolution is

lawful and binding to parties (Lee, 1990).
Litigation is ease with when other parties may want to join in an

action as compared to arbitration or other dispute resolution methods
(Uff, 2002).
The following are the disadvantages of the litigation:
The litigation is extremely rigid and conservative with complicated

legal procedures (Harbans Singh, 2003c).
The business relationship of both parties always fractures because one

party will emerge as winner and the other party as loser at the end
of the trial (Cheung and Suen, 2002).
In litigation, the time taken for the dispute to proceed is lengthy and
with each witness cross-examined several time (Gaitskell, 2005).
Thus, the time taken for litigation is unpredictable.
47
Litigation is expensive because it involved the cost for legal fee and
documentation for trial preparation (Mohammad, 2005).
Litigation is open to the public and media and it may affect the
reputation of the disputing parties (Mohammad, 2005).
The cost is high as to the attorneys fees and time (Gaitskell, 2005).
The disputing parties do not have the rights to select the individual to
solve the dispute but follow the assigned judge (Mohammad, 2005).
2.10
Summary of Dispute Resolution Methods
The summary distinguishes the characteristics and key features among the
dispute resolution methods, such as negotiation (Neg), mediation (Med), adjudication
(Adj), arbitration (Arb) and litigation (Lit) as shown in Table 2.2. The attributes have
been arranged according to the stages of dispute resolution, from negotiation until
litigation. This comparison is excluded grievance as mentioned in stages of dispute
resolution. It is because the grievance is not a method of dispute resolution.
Table 2.2: Dispute resolution attributes

Item
Dispute Resolution Attributes
Neg
Med
Adj
Non complex dispute
Controlling of the process by the parties
Helping the parties to understand each other

demands
Fair treatment of both parties during the
negotiation process prior to any official hearing
and ruling
The parties are free to look for other dispute
resolution methods (without legal liability) if they
are not satisfied with the result
Voluntary process
Speedy of the process
Economical
Preservation of relationship
Arb
Lit
48
Item
10
Dispute Resolution Attributes
Neg
Med
Adj
Arb
Item
11
Resolving the dispute without involving legal

profession
Meeting the budget and schedule of the process
12
Flexibility of the process
13
16
Providing the parties with the relevant

information background in the process for
consensus agreement
Third party helps to negotiate and narrow down
the issues
Providing a qualified, neutral expert to hear
complex matter
Improvement of cash flow
17
Confidentiality of the process
18
Saving in trial expenses
19
Finality of the settlement
20
Privacy of the process are protected
21`
22
Expert judgment in construction of those involved

in the process
Complex dispute
23
Enforceability of the decision
24
Bindingness of the decision
25
Ability to appeal if not satisfy with the result
26
Long period of the process
27
Formality of the process
2.11
Concluding Remarks
14
15
This chapter has presented a detailed literature study about the philosophy of
conflicts and disputes as well as dispute resolution in construction industry. The local
scenario has been discussed, although some of the references are derived from
overseas sources. The review on the local contract forms enhanced the knowledge on
the local practice of dispute resolution. The stages of dispute resolution were also
developed and more importantly the attributes of dispute resolution methods were
classified based on the literature review as to the first research objective. The
approach of grouping the attributes could render a wider perspective and
comprehensive view on the dispute resolution methods.
49
CHAPTER 3
CONSTRUCTION CONTRACT ADMINISTRATION
3.1
Introduction
This chapter reviews alternative approaches from related previous studies and
highlights a systematic way of contract administration through identification of
contractual issues and approach on clarity. Contract administration is the process of
administering a business contract that governs contracting parties interests. In the
construction
industry,
it
revolves
around
the
pre-construction,
construction/commencement, and post-construction stages. The contractual issues

would be identified according to the stages for the ease of references and
understanding. Subsequently, the need for contract clarity is highlighted. Plain
English guidelines are applied to clarify the language structure. The well-organized
contractual issues and clarified contents of standard form provide important findings
for futher development of the research on eDR as to its systematic approach.
50
3.2
Previous Alternative Approaches
The critical review on previous studies is to understand the trend and research
gap for the proposal of alternative means in contract administration, i.e., eDR. One
hundred and twelve (112) journals have been reviewed and shown in Appendix B.
The journals are mainly derived from the list of refereed journals as appended below:
Journal of Construction Management and Economics
Journal of Construction Engineering and Management
Journal of Management in Engineering,
Journal of Professional Issues in Engineering Education and Practice
International Journal of Project Management
After reviewing, the previous studies could be classified out into five
categories, i.e., dispute resolution techniques (DRT), application of information
technology (IT), contract management and administration (CMA), conflict and
dispute analysis (CDA) and modeling (MO). The classification is based on the
research area focused by researcher(s) as shown in Table 3.1.
Table 3.1: Categories and numbers of journals from 1990-2007

DRT
Resolution
methods (6)
ADR (13)
Negotiation (3)
Arbitration (5)
IT
Claim (3)
Decision
support
system risk
(5)
Decision
making
dispute
resolution (3)
Litigation
outcome (1)
CMA
Interpretation and
understanding (8)
Clarity (1)
CDA
Cost/time
overrun (2)
Delay
and
EOT (8)
MO
Conflict
behaviors (1)
Contract
bidding (2)
Claim
management (8)
Risk
management
(4)
Financing
conflict (1)
Expert witnessing Assessment

(1)
and
analysis(2)
Resolution
outcome (2)
51
DRT
Mediation (6)
IT
CMA
Procedures
steps (2)
CDA
and Dispute
prediction (1)
DRB (2)
Clause - notice (1)
Relationship
contracting (2)
Contract
specification (1)
Litigation (2)
Dispute avoidance
and prevention (4)
Contract form (3)
Informal
means/tactics (2)
Adjudication (3)
MO
Decision
making
on
dispute
resolution
method (2)
Consequences
(1)
Conflict
management
(1)
The results of the review show the exiting alternative approaches are focused
on expert systems or modelling in current development. Therefore, six (6) closerelated studies to this research from year 1988 to 2009 were selected and analysed
concisely. It is to identify the research gaps for the current trend on the alternative
approaches to contract administration, in particular their strengths and lessons to be
learnt.
3.2.1
DISCON, 1988
DISCON is a PhD research about developing an expert system for

construction contract disputes. It is the expert system designed to give legal advice to
construction players, who without the legal knowledge or background in concerning
differing site condition claims. The study is acknowledged that legal advice is not
always sought because of inconvenient or too expensive to consult it. Flow chart
serves as a decision tree modeling is applied in order to develop the system. In
analyzing a construction contract claim, uncertainties like inaccuracy of findings,
inconsistency in judgment, difficulty in proving facts and incompleteness of data will
52
be checked the system. At the end of an analysis, it will show the contractors chance
for recovery weighted by certainty factor that is estimated throughout the analysis.
The sources of knowledge in the system are mainly derived from two (2) lawyers
who dealing with construction claim regularly as well as a PhD holder, who as a
instructor from construction management and engineering. The system also referred
to contract clauses and justified the findings to court cases. Figure 3.1 shows the
structure of the DISCON.
DISCON.KB1
M1.EXE
First segment of
DISCONs
knowledge base.
DISCON.CFG
C program for
DISCONs external
calls
Configuration of
users interaction.
DISCON.EXP
Assistance and
instructions
Explanations
DISCON.CLR
DISCON.ASP
Assumptions
DISCON.IDP
Intermediate
conclusions
Clarifications
Second segment of
DISCONs
knowledge base
Intermediate
conclusions and
findings
Inference
engine.
C_DISCON.EXE
DISCON.GRL
DISCON.KB2
Cache
DISCON.KB3
Third segment of
DISCONs
knowledge base
DISCON.WFR
Explanations
DISCON.RNE
Reasons denying
the claim
DISCON.KB4
Forth segment of
DISCONs
knowledge base
Figure 3.1: Structure of DISCON Expert System

(Source: Kraiem, 1988)
DISCON.KB5
Fifth segment of
DISCONs
knowledge base
53
3.2.2
Expert System For Construction Contract Interpretation, 1991
This research is about an expert system to address the problem of contract

interpretation (Robinson et al., 1991). The contract interpretation expert system is
intended to provide the data and procedural guidance in any aspect of contractual
relationships in construction field. It designed to suit the needs of three distinct types
of user, such as the users seek advice in a particular contract interpretation problem,
those are required an explanation of contractual provisions, and also the ones to
compile a set of contractual terms. Prospective users include students and teachers,
contract administrators, arbitrators and the contracting parties. The system deals with
all the express provisions in the Singapore Institute of Architects 1987 standard form.
The local experts in the interpretation of building contract were invited to contribute
their knowledge and expertise to the knowledge base. Rule based technique is
adopted for expert system by using the Xiplus shell. Many lawyer questioned about
the system from only covering the express terms of the contract form, which the
implied term may be needed and also the rule based cant reflect some legal concept
like waiver, estoppel and so on. The researchers defended that the expert system in
law is an informed assistant, tool or data source to give specific advice on claim
situation, which based on interpretation of data given by the user. The limitations of
this system are non-involvement of arbitrators or lawyers in the panel of expert and
less modular of knowledge base to the system as well as the application of court case
for justification.
3.2.3
Prediction of Construction Disputes, 2000
The research is focused on prediction of contractual disputes. A model was

developed to proactively predict the disputes in a construction project. Citations from
court cases are the main source of the research. Content analysis was the selected to
extract lessons learned from the court cases. Court case citations consist of three
54
major parts: facts, dispute issues, and judgements. The there parts were used to
develop weights and correlations between the critical dispute characteristics, i.e.,
change, design/specification, contract condition, work, time/cost, and completion.
The statistical analysis process was to measure variables and build up the
correlations. The research targeted to the most severe disputes in the construction
projects. The proposed dispute prediction concept is as illustrated in Figure 3.2.
Completion of Project
Construction Project Process
Resolution
within
Project
Scope
Prevention
Resolved
Mediation
Dispute
Characteristics
Arbitration
Litigation
i.e
DRB
Process
Dispute
Prediction
Support
Dispute
Resolution
Process
Resolution
Support
Unresolved
Proposed Dispute
Prediction Concept:
Research Scope
Alternative Dispute
Resolution Process
Accumulated
Dispute
Figure 3.2: Dispute prediction process model

(Source: Sim and Molnenaar, 2000)
3.2.4
Construction Negotiation Online (CoNegO), 2004
CoNegO is an internet based computerized for construction negotiation.

Basically, it is using the client and contractor pessimistic value and optimistic value
55
towards a dispute to figure out a consensus solution. This is a common practice in
negotiation. The concept of Even Swaps evaluates possible options available on
the basis of their relative importance. There will be few proposals were exchanged
between the negotiators before reaching consensus agreement. The online system
enables the negotiation take place at a distance, and utilizing computing facilities.
However, this system merely handles the figure or number based construction
dispute in order to allow the statistical analysis works in the application. Figure 3.3
presented the conceptual framework for the development of CoNegO.
1. Communication
Network(via
WWW)Email
2. Dataaccessibility
Exchangingsharedissues
Exchangingpreferences
Exchangingproposal
CoNegO
(Online Negotiation)
3. CommonSystem
KnowledgebasedExpert
CaseReasoning
TradeOffAnalysis
Figure 3.3: Framework of Construction Negotiation Online, CoNeO

(Source: Cheung et al., 2004)
3.2.5
Conflict Resolution in Construction Disputes using Graph Model, 2006
The model develops a classification of problem situations, identifies the

problem-solving requirements and the potential for dispute in each situation. This
56
model doest not focus on the contractual terms for prevention of complex and high
cost disputes, rather more on the planning and problem solving ability of project
organization. Twenty four (24) construction disputes are analysed and referred in
order to develop the model. The model adopted the decision making/solution concept
in prisoners dilemma strategy to generate the possible states. It gives the general
guidelines to deal with the construction disputes from arising of problems to the
dispute resolution outcome. Figure 3.4 illustrates the Model of Dispute Development
and Resolution that described in the study. Confusion is likely to arise as some key
issues of construction dispute have not been clarified in detail in the model. The
dispute is hardly to be resolved when fails to address and locate the dispute sources
or problems.
Problem Solving
Effectiveness
- Behaviours, Relations
- Process
Who is
solution?
Uncertainty
- Complexity
- Performance
requirements
Problems
-Work
directives
- Environment
- Performance
Contractual
problems/Opp
ortunism
Problem
Situations
Four problems
types
Who is
responsible?
Dispute
Resolution
Effectiveness
- Integrative
- Distributive
Dispute
- Entitlement - Amount
Other factors
- Situational
- Costs of
conflict
- Culture
Figure 3.4: Model of dispute development and resolution

(Source: Kassab et al., 2006)
Dispute Resolution
Outcome
- Transaction costs
- Impact on relation
- Recurrence
57
3.2.6
Fuzzy Case-based Reasoning for Coping with Construction Disputes,

2009
The research Fuzzy Case-based reasoning (FCBR) is to develop a computeraided reasoning system that could be employed to help resolve construction
disputes.The objective are as follow:
Collecting data related to construction disputes and delineating

appropriate attributes in order to develop a construction dispute
database
Developing a new similarity measurement tool based on CBR and

incorporating fuzzy-set theory in order to identify similar cases; and
Identifying the most appropriate interface to assist mediators

responsible to handle construction disputes with accurate and
complete information.
Historical data were used as the main source for system development. It
derived from the Arbitration Association of the Republic of China, the Public
Construction Commission of Republic of China. There are 153 dispute cases. The
system incorporated with new similarity measurement, a new methodology to better
cope with construction disputes. Figure 3.5 illustrates how the system is operated.
58
Updating data
User
interface
Data base
Querying
Source
cases
FCBR
A target
case
Historical
data
Data of
similar cases
Information
Figure 3.5: Operating process of fuzzy case-based reasoning

(Source: Cheng et al., 2009)
3.2.7
Summary of Critical Review of Previous Expert Systems/Models
The previous studies were dealt with both general construction disputes and
also a single problem basis. The studies highlighted that application of information
technology facilities enhances the usability and flexibility of an expert system in the
recent development. It is important to enabling the expert system publishing online in
order to meet the challenges and competitiveness in construction dispute research. It
is also very practical since the high internets accessibility and user-friendly of
computing at the current situation.
Apart from that, all the expert systems discussed above were encouraging the
win-win situation and harmony atmosphere of resolving dispute. The systems are
assisting users to analyze decision through self-examine approach. It will encourage
59
self-learning and clarification to the certain construction deputes, so that the users
able to avoid or prevent it subsequently.
Table 3.2 shows the summary of the 6 studies and explains the differences in
term of their research characteristics. The comparison between the studies has
rendered important information for their research strengths and limitations, for
example, use of IT advancement, contract form, historical/court cases and panel of
experts as well as decision making methods on the targeted issues. This comparison
would help to improve the value and significance of the future research.
As a result, the findings from critical review and comparison of the expert
systems/models form the basis of discussion for the next preliminary study in the
local scenario.
60
Table 3.2: Characteristics of previous expert systems/models

Model/Name
Year
Method of
Historical
Panel of
Reference of
decision
data/ court
expert
Standard
making/process
case
Targeted Issue
Use of IT
advancement
Form
DISCON
1988
Flow chart
Yes
Yes
Yes
Differing site condition
Minimal
Expert System For Construction
1991
Rule based
Yes
Yes
Yes
Contract Interpretation
Minimal
2000
Case-based reasoning
Yes
No
No
Most severe contractual
Minimal
Contract Interpretation
Prediction
of
Construction
Disputes
issues
CoNegO
2004
Even Swaps
Graph Model
2006
Prisoners
dilemma
No
No
No
Figure based disputes
Yes
No
No
No
General
Minimal
strategy
FCBR
2009
Fuzzy
reasoning
Disputes
Problem
case-based
Yes
No
No
General
construction
Yes
disputes
62
63
The review and earlier preliminary semi-structured interview with the local
experts revealed the need for a more comprehensive expert system for contract
administration. From the studies above, the depth discussion of all construction
disputes will not be feasible by referring it to DISCON (Kraiem, 1988). It is
impossible to resolve or generate accurate and reliable results for all the issues due to
the characteristics and facts of the particular issues. It is also affected by the time and
resources constraint as well as uncertainties of external factors. However, an expert
system presents the principle of contractual obligations and expectations as a
guideline in decision making could fine-tune the argument above. The expert system
deals with the interpretation issues are relevant and practical towards the construction
industry as demonstrated by Robinson et al. (1991) in Singapore. Nevertheless, the
system by Robinson et al. (1991) has three areas that could be improved, i.e., use of
IT advancement, referring to the leading court cases and involvement of experts. It is
because an online application in the expert system is able to handle the shortcomings
of updating, storing, and exchanging information (Cheung et al., 2004). Furthermore,
the leading court cases and involvement of the experts are very crucial in an online
system because of the reliability and quality of the content.
Basically, there are numerous online applications for dispute resolution in

nations, for example, Online Dispute Resolution, e-Mediator, e-Arbitrator, e-Dispute
Resolution, Online Alternative Dispute Resolution so on and so forth. However,
these online applications are commercial driven to provide the consultation services.
Usually, the system will chair by a legal adviser/lawyer to give the legal services and
decision through internet.
In the meantime, the results generated by a system should not be too

subjected to case by case basis (Sim and Molnenaar, 2000; Cheng et al., 2009),
which applied the court cases as their main source of reference. A more coverage or
general approach to dispute resolution is needed to be taken into account. The
approach should have a practical sense and value to the construction industry.
However, the Graph Model (Kassab et al., 2006) may be too general in theory to be
applied in the industry.
62
Therefore, the self-examination and proactive approach in contract
administration towards dispute resolution or prevention is feasible. It could be served
by demonstrating a clarified, organized and reliable source of reference towards the
contractual obligations and expectations. It will cultivate self-learning and
examination by the end-users. The reference is important as the poor understanding
of contracts and lack of prevention/mitigation means of dispute resolution in the
local industry. In conclusion, the eDR was proposed by considering the shortcomings
from the previous studies.
3.3
Contractual Issues in Contract Administration
Contractual issues are related to legal principles and contractual obligations

in contract documents. The discussion on the contractual issues are confined to
traditional and general type of building contracts between the main contracting
parties, i.e. the employer and the main contractor. Besides, the contractual activities
by the contracting parties need to be identified during the pre-contract and postcontract period. Royal Institute of British Architects (RIBA) has published two
versions of Plan of Work Stages since year 2000.
The Plans of Work Stages divide the design and construction process. These
plans are important to be referred for identifying the job activities and the contractual
problems as shown in Table 3.3.
63
Table 3.3: RIBA plans of work
RIBA Plan of Work 2007
RIBA Work Description
Stage
RIBA Work Description
Inception
Appraisal
Feasibility
Design Brief
Outline Proposals
Concept
Scheme Design
Design Development
Detail Design
Technical Design
Product Information
Production Information
Bills of Quantities
Tender Documentation
Tender Action
Tender Action
Project Planning
Mobilisation
Operations on Site
Construction to Practical
CONSTRUCTION
PRE-CONSTRUCT
DESIGN
PREPARATION
Stage
Completion
L
Completion
Feedback
USE
USE
CONSTRUCT
DESIGN
PREPARATION
RIBA Plan of Work 2000
Post Practical Completion
Apart from that, many journals and books were studied and reviewed for
identification of contractual problems, in particular three books regarding
engineering and construction contract management in local construction industry,
which is absolutely suitable to be referred in this study (Harbans Singh, 2003a,
2003b and 2003c).
Subsequently, the contractual issues are organized and arranged according to

three main stages, i.e. pre-contract award stage, construction or commencement of
work stage, and post-commencement stage after reference to all the literature studies.
These stages describe about the principal contract parties on the contractual problems.
64
3.3.1
Pre-Construction Stage
Pre-contract award stage is the activities involved project inception,

feasibility, design and tendering. The contractual problems for the principle parties
are mainly focused on the design and tendering period. Table 3.4 shows seven
contractual issues in pre-contract award stage that derived from the literature
materials.
Table 3.4: Contractual issues in pre-contract award stage

No
Pre-Contract Award Stage
Estimating and pricing
Design information
Insurances
Performance bond submission
Site possession
Tender documentation and requirements
Work pragramme
(Source: RIBA Plans of Work, Harbans Singh, 2003a, 2003b and 2003c)
3.3.2
Commencement and Construction Stage
Construction or commencement of work stage is the period of contract date

starts and ends in a construction project. It would go until practical completion of the
project as referring to RIBA Plans of Work. For the ease of classification, the
practical completed work would complete before or same on the completion date
according to the contract. Twenty three areas of contractual issues are found in this
stage as shown in Table 3.5.
65
Table 3.5: Contractual issues in commencement and construction stage
No
Construction or Commencement of Work Stage
Accessing to site
Compensation/loss and expenses
Default on notice
Delay and extension of time
Discrepancy and inconsistency of information
Fluctuation of price
Interference/problem by subcontractors and suppliers
Interference/problem by professionals
Interim payment
10
Partial possession
11
Period of honouring certificates
12
Postponement or suspension of work
13
Practical completion
14
Quality of workmanship
15
Set off by employer
16
Site and nature of work
17
Standard and quality of material
18
Statutory obligations
19
Supply difficulties
20
Testing and inspection
21
Valuation and measurement
22
Variations
23
Weather
66
3.3.3
Post-Commencement Stage
Post-commencement stage is about the period after the practical completion

or post practical completion as referring to RIBA. In some circumstances, it also
could mean after determination of a contract. The determination does not mean to
bring the contract to an end, the contractual obligations are still binding to the parties.
It is simply because the determination is termination of an employment and not
necessarily repudiation. For example, the contractor still needs to resolve the
outstanding payments or any undertakings after the determination. Table 3.6 shows
nine contractual issues in this post-commencement stage.
Table 3.6: Contractual issues in post-commencement stage

No
Post-Commencement of Work Stage
Defect liability period
Defects
Determination
Dispute resolution
Final account and certificate
Liquated damages
Outstanding claim and set off
Retention monies or fund
Unresolved variations
67
3.4
Understanding on Construction Contracts
Every construction project involves risks. There is no possibility to eliminate

all the risks associated with a specific project. All that can be done is to regulate the
risk allocated to different parties and then to properly manage the risks. In context of
the construction project, it can be done through construction contracts (Zaghloul and
Hartman, 2003).
Construction contracts are written agreements signed by the contracting

parties to define their relationships and obligations in a particular project. The
construction contracts are the contract documents that comprise the documents like
Letter of Award, Articles of Agreement, Conditions of Contract, Contract Drawings,
Contract Bills and other documents incorporated in the contract documents (as
referring to PAM Contract 2006).
In addition to identifying responsibilities and allocating risk, construction

contracts should contain language for addressing disputes and claims at the earliest
possible stage in a project (Steen, 1994). Semple et al., (1994) stated that the
construction contracts are playing a critical role in term of contractual obligations
and expectations. It is formed and signed based on the fair basis where parties agree
amicably to discharge their obligations to satisfy each other needs and requirements
(Mohamad and Zulkifli, 2006). The construction contracts would abide the users to
follow and obey the rules and conditions if the contracting parties are able to
appreciate and understand the contents of the documents and the spirit of the
contractual relationships.
68
3.4.1
The Need of Standard Form of Contract
Standard form of contract is the conditions of contract in the contract

documents. Usually, the related construction professional bodies or boards publish
the contract form. Robinson and Lavers (1988) urged that the need of standard form
of contract in construction is to perform two major functions:
(i)
To serve as the evidence of the legal relationship between parties (in

contract); and
(ii)
To provide for the administrative procedures necessary to fulfilment

of legal relationship.
These functions are perhaps not clearly distinguishable but the most
successful standard forms are those that, apart from serving their legal function, are
regarded as regulating day-to-day relationship on site. The form should be written
and presented in such a way as to be useful for easy reference by non-legal site and
consultancy personnel (Robinson and Lavers, 1988). It is because the contract forms
are still lack of clarity and having legalese problems (Chong et al., 2007 and Chong
and Rosli, 2008b).
Besides, Robinson et al. (1996) also summarized that the objectives and
content of the standard form should cover the issues as follow:
To define the work to be executed by the contractor;
To define the sum to be paid as consideration, or the formula by

which that sum may determined;
In as much as the terms and conditions which would otherwise be

implied in the agreement by operation of law are considered
69
inadequately detailed or wrongly biased, to modify such terms and
conditions;
In as much as the contract might otherwise be construed as one of

strict entirely, to modify the consequences of its entirety;
In as much as contractual relationships are governed by statute, to

attempt to ameliorate the effect of such statutes;
To impose such further specific conditions and procedures as may be

deemed desirable including those relating to the settlement of disputes;
and
To identify the officers of the contract and their roles and

responsibilities.
3.4.2
Appreciation of Contractual Principles and Obligations
Shumway et al. (2004) highlighted that the biggest risks a contractor faces
today may not associate with timely or efficient performance, but with the terms and
clauses in the construction contracts. It is simply because the construction industry
has relied on construction contracts to define and enforce the obligations and rights
of contracting parties (Cheung et al., 2006).
The first criterion to avoiding construction conflicts and disputes is the

understanding of contractual terms as laid down in the contracts (Semple et al., 1994).
The word of understanding is not merely on knowing or recognizing the contractual
terms and meaning, but it should focus on appreciating the contractual obligations
and expectations in the contracts, i.e., the spirit of the documents.
Contractual obligations by any parties in any contracts will be of a

questionable state if the understanding of the terms and interpretation of the contents
70
of the contract documents are not fully appreciated or understood (Hartman et al.,
1997). Worst still, when the contract documents are complex as being too thick and
too many legal phrases (Mohamad and Zulkifli, 2006).
Nevertheless, construction contracts should not just be legal documents left in

the drawer and to be brought out only to provide protection when things go wrong.
They should be statements of how client and contractor are going to jointly and
cooperatively manage, monitor and control the project, so the result would enhance
both of their businesses in the future (Thompson et al., 2000).
3.5
Clarity of Constructions Contracts
The review on clarity is not only discussed about the significance of

understanding and appreciation of the construction contracts, but it is rather vitally
important to figure out the measures or approaches to enhance or achieve it.
Clarity is the key factor when to appreciate the construction contracts (Chong
and Rosli, 2010). Oxford Advanced Learners Dictionary defined that clarity is the
quality of being expressed clearly or ability to understand something clearly. In other
perspective, clarity is a starting point for the understanding, afterwards only goes
for appreciation of the construction contracts. Without clarity, it will be very difficult
to value and appreciate the contracts.
Clarity is very practical to deal with a complicated language structure. An

example of clarity approach, a pencil might describe as a communication utensil
used to relay a thought from one individual to another. Then again, it could be
71
identified as simply as a writing instrument. This is just one example of how
complex language can be made clearer (Corren, 2000).
In Malaysian construction industry, the clarity can be related to several issues

as highlighted below:
When the first language is not English, then it needs to clarify the
contract clauses in standard form (Styllis, 2005). It is applicable to
Malaysians as the mother tongues are basically in Malay language,
Chinese language and Tamil language.
Styllis (2005) also identified that the style of language is the barrier
for clarity of contract such as passive voice, repetition, too long in a
sentence (more than 50 words), incorrect or too much using shall,
too many cross references and so forth. It is absolutely related to
PWD Form of contract as Lim (2004) explained that the PWD Forms
can be traced to the English 1931 RIBA standard form of contract.
Then, it is also stated by Broome and Hayes (1997) that origin of
contract, which UK and Commonwealth largely derived from very old
precedents, and archaic language.
Besides that, there is a maxim to apply for interpretation a contract called

contra proferentem. A court will always try to discover the intentions of the
contracting parties using the plain, ordinary and popular meanings of the words used.
Reference to a common usage dictionary is perfectly in order. A court should not try
to re-write a contract using interpretation rules but, rather, to use these rules to
pinpoint the intentions of the parties at the moment of contract (Duhaime, 2007).
According to Wikipedia, contra proferentem is a rule of contract interpretation that a
contractual term found to be ambiguous should be construed against the party that
drafted the contract. That is, the preferred interpretation will be the one that works in
favor of the party who did not draft the contract. The reasoning behind this rule is to
encourage the drafter of a contract to be as clear and explicit as possible and to take
72
into account as many foreseeable situations as he can. The Latin definition of contra
proferentem is against the one bringing forth or against the proffering person.
An addition to this, a court case Scott v. Wawanesa Mutual Insurance Co. 1

brought out the clarity issue. The Judge held that if language of an insurance contract
is ambiguous, the contra proferentem doctrine applies. But "when the wording is
clear and unambiguous, courts should not give it a meaning different from that which
is expressed by its clear terms, unless the contract is unreasonable or has an effect
contrary to the intention of the parties" (Duhaime, 2007).
Furthermore, there is a local court case related to the issue of interpretation of

PWD Form 203A. The case Majlis Perbandaran Seremban v Maraputra Sdn Bhd2
was about the dispute on arbitrations right and power to order. The applicant
contended that the learned Arbitrator erroneously interpreted Clause 54 of the
conditions of contract by concluding that only the contractor may refer disputes to
arbitration, and not the employer. The Judge held that the wording of Clause 54 was
clear and unambiguous, the Arbitrator's reasoning in his decision on three issues was
sound, cogent and clear. Therefore, the virtue of this case is about the interpretation
or understanding of the contract should be right because the contract clause remained
clear and plain in the courts view during litigation. However, the question is the
understanding of construction contract by the contract parties maybe not right and
just.
Therefore, the clarity is vital and interconnected with the interpretation of

contract. Mohamad and Zulkifli (2006) stated that effective interpretation and
understanding of the contractual obligations will be much dependent on the clarity of
the documents in translating the needs and requirements implied as in the agreement.
It is because the presence of ambiguities cause confusing and language more than
one meaning (Henkin, 1988).
1
2
[1989] 1 S.C.R. 1445.

[2004] 5 MLJ 469.
73
3.5.1
Clarity Aspects
Contract clarity is an undisputable necessity, whereby the quality of being

expressed clearly is a must for contractual agreements. Basically, the clarity issues
are the difficulties of understanding in construction contracts, particularly contract
clauses in standard form of contract. The issues can be divided into two categories,
i.e. clarity problems and legalese aspects.
Clarity as described earlier, it is about understanding and appreciation of

construction contracts as shown in Table 3.7. Eleven common problems of language
structure in terms of clarity have been summarised.
Table 3.7: Summary of problems of clarity

No
1
Problems of Clarity
Sentence is too long (Candlin et al., 2002; Cutts, 2004; Henkin, 1988; Styllis,
2005).
Too many passive voices (Cutts, 2004; Candlin et al., 2002).
Repetition of words (Candlin et al., 2002; Cutts, 2004; Styllis, 2005).
Too many cross references between clauses (Styllis, 2005).
Complexity of noun phrases (Styllis, 2005).
Too many shall (Styllis, 2005).
Negative style of language (Candlin et al., 2002; Cutts, 2004).
Poor explanation on procedure or process (Broome and Hayes, 1997; Corren,

2000).
Controversial as legal terms (Duhaime, 2007).
10
Ambiguous word or sentence, more than one meaning (Henkin, 1988).
11
Poor words formation, e.g. grammar in the contract (Cutts, 2004).
74
However, legalese is something too abstruse and difficult or failed to
understand. Occasionally, the reader will misinterpret the actual meaning. Candlin et
al. (2002) described that legalese is a term used, often derogatorily, to refer to the
unique characteristics of legal English. Moreover, Law Dictionary defined it as slang
for the sometimes arcane, convoluted and specialized jargon by the lawyers and legal
scholars. Henkin (1988) also stated that the meaning of such expression (legalese)
often differs from the meaning assumed by non-lawyers. In general, the legalese is
the use of formal and technical language in legal documents upsets interpretation
(Feinman, 2003). Table 3.8 shows the legalese aspects could be found in construction
contracts.
Table 3.8: Summary of legalese aspects

No
Legalese Aspects
Too many legal terms or phrases (Cutts, 2004; Mohamad and Zulkifli, 2006)
Specialised vocabulary or legal jargon (Cutts, 2004).
Unnecessary length and complexity (Hill, 2001).
Overly complicated, dense, repetitive, and outdated (Candlin et al., 2002).
3.5.2 Measures on Enhancing Clarity
Consequently, an antidote to this perceived lack of clarity and legalese

problems was found. The use of Plain English has established itself as a reform
movement that focused on making the language more accessible, particularly to nonlawyers (Candlin et al., 2002). Plain English is the main solution to the problem of
lack of clarity and understanding. Undoubtedly, somebody might argue that Plain
English is a woolly term. It is because there is no formula or standard procedure can
genuinely measure the plainness of a document. However, according to Cutts (2004),
Plain English can be described as the writing and setting out of essential information
75
in a way that gives a co-operative, motivated person a good chance of understanding
it at first reading, and in the same sense that the writer meant it to be understood.
The measures used to improve the understanding of contract clauses are

shown in Table 3.9. It derived from literature review on Plain English usage and
guidelines. All the guidelines are very helpful for clarifying the legal drafting.
Table 3.9: Plain English usage and guidelines

No
Plain English Usage and Guidelines
Shorten the sentence for ease of reading to average 15-20 words (Cutts, 2004).
Reduce the unnecessary words to keep it as short as possible if more than 20

words in a sentence (Candlin et al., 2002; Cutts, 2004; Styllis, 2005).
Use vertical list to break up complicated text (Cutts, 2004).
Avoid too many cross references between clauses (Styllis, 2005)
Use positive style rather than negative style (Candlin et al., 2002; Cutts, 2004).
Use everyday words and grammar and only include legal terms where it has to
(Styllis, 2005).
Use the active voice instead of passive voice (Candlin et al., 2002; Cutts,
2004).
Use verbs instead of noun phrases (Styllis, 2005).
Use language of obligation correctly: avoid using shall, but still using it to
express partys obligation (Styllis, 2005).
10
Eliminate the repetition or redundancy of words (Candlin et al., 2002; Cutts,

2004; Styllis, 2005).
11
Put accurate punctuation in a long sentence (Cutts, 2004).
12
Use illustrative examples or flow chart in treating procedures as processes

(Broome and Hayes, 1997; Corren, 2000).
13
Use engineering terminology common to all disciplines wherever possible

(Broome and Hayes 1997).
14
Maintain parallel sentence structures or identical phrases where possible

(Broome & Hayes, 1997 and Candlin et al., 2002).
76
In summary, the approach on clarity is vital. It is because the contracting
parties understand and agree to the contract provisions, the parties would perceive
the importance of their contractual obligations and rights as required in the contract.
Thus, an appreciation of what the construction contracts actually meant to the
stakeholders would help to avoid or prevent a dispute from festering, although
sometimes total elimination may not be achievable.
3.6
Concluding Remarks
This chapter reviewed the previous studies and current trend of alternative
means in contract administration toward the proposal of eDR, which to achieve the
fourth objective. Besides, Thirty nine contractual issues have been identified through
the three work stages. Meanwhile, the clarity aspects were discussed, i.e., the
language structure problems and clarity measures. It would help the users to
understand and appreciate the contractual expectations and obligations laid in the
contracts. In summary, the review highlighted a systematic means in contract
administration through identification of the sources of contractual issues and contract
clarity for better understanding and appreciation as to the third research objective.
The systematic means would be considered in the development of eDR in the
research.
3577
CHAPTER 4
4.1
Introduction
This chapter discusses contractual variations in the construction contracts. It

is based on the research aim and objectives on the eDR. Hence the PAM 2006
contract form is selected as the main reference in this discussion. The contract
provisions laid in the contract are investigated thoroughly. The provisions are also
supported by legal cases for the details and features of the contractual variations. The
landmark court cases from United Kingdom have been selected as legal sources
instead of Malaysian cases. It is because to render a generic approach to the
guidelines on contractual variations from the reliable and neutral sources. Moreover,
many local cases are still under the appeal process in the court of law. Thus, they are
not suitable to be referred in this study. Besides, the legal studies do not intent to
cater all the contractual issues, such as quantum meruit claim, detailed study of
common law, etc, rather to focus on clarifying the detail of the contract clauses for
better understanding and explanation. Clause 11.0 is the scope for the review, i.e.,
Variations, Provisional and Prime Cost Sums of PAM 2006
78
4.2
Background of Variations
Changes are inevitable, even though the project was carefully planned. It is
because the inherent characteristics of contraction contracts as the work progresses
along the period (Harban Singh and Kandan, 2004).
Variation is a common term to denote changes in construction industry.

Chappel et al. (2001) define variation as alterations, additions or omissions in work,
materials, working hours, work space, etc. The Malaysian practitioners are keen on
referring variations as variations order (VO). In reality, it should be described as
Architects Instruction (AI) on variation. Mostly, variations are caused by the
changes of employers requirements, revisions or modifications in the original design
and/or amendments or changes in the statutory requirements (The Entrusty Group,
2008). Variations can be issued by the Architect at any time before the practical
completion except for the changes in statutory requirements. More importantly, it can
not invalidate the original contract.
Variations are regarded as one of the most important provisions in a contract

form. It gives employer or the Architect to order variations as a right, where the
Architect is engaged by the employer or served as an employers representative in
the contract. In other words, the Architect is empowered by contractual provisions to
instruct variations. However, this power has its limit. Usually, it limits by the
common law principles. Hence the following contractual issues on variations are
discussed and supported by certain court cases.
Besides, although the discussion on variations is based on the PAM 2006, it

still important to understand the general provisions of the variations in other local
contract forms. Table 4.1 shows a comparison between the contract forms for its
principles in contractual variations. Six familiar local contract forms have been
discussed.
79
Table 4.1: Contract clauses of variation under different contract forms in Malaysia
Definition on Variation
PAM
PAM
2006
1998
CIDB
IEM
PWD
PWD
203A
DB/T
(83/07)
Alteration and
11.1
modification of quantity
11.1
1.1(a)
(i)
(addition or omission of -
23
24(b) /
(a)
24.2
27.1(a)
(i)
CIDB)
Change in quality
11.1
(including alteration and
11.1
1.1(c)
(i)
modification - Both PAM
23
24(b) /
(a)
24.2
27.1(a)
(iii)
forms)
Alteration or modification
11.1
of design
Exclude any changes for
11.1
the Contractor's default or
11.1
24(b) /
(i)
24.2
11.1
1.1
27.1(a)
27.2
(vi)
breach of contract.
Addition or omission
11.1
11.1
(a)
(ii)
1.1(b)
23
24(b) /
27.1(a)
(a)
24.2(a)
(i)
(ii)
&
(v)
Substitution
11.1
11.1
24(b) /
27.1(a)
(a)
(ii)
24.2(a)
(i)
Alteration of the kind or
11.1
11.1
24(b) /
27.1(a)
standard of any materials
(b)
(iii)
24.2(b)
(ii)
24(b) /
27.1(a)
24.2(c)
(iii)
or goods
Removal of any part of the 11.1
11.1
works, Equipment,
(iv)
materials/goods from site

(include demolition CIDB)
(c)
1.1(e)
80
PAM
PAM
2006
1998
CIDB
IEM
PWD
PWD
203A
DB/T
(83/07)
Addition, alteration or
11.1
11.1
omission of any expressed
(d)
(v)
27.1(b)
obligations or restrictions
imposed by the Employer
on any limitation of
working hours, working
space, or access to or
utilisation of any specific
part of the site or the
execution and completion
of the work in any specific
order. (exclude obligations
or restrictions - PAM06)
Any change in the original
1.1
contract intention, which

shall include but not
restricted to:
- Change in character
1.1(c)
and/or nature
- Change in levels,
1.1(d)
23
elevations, layout and
(a)
dimensions
(iv)
- Change in Contractor's
11.1
Temporary Works,
(vi)
working method and/or

construction Plant
(working method only PAM98)
1.1(f)
81
PAM
PAM
2006
1998
CIDB
IEM
PWD
PWD
203A
DB/T
(83/07)
- Postponement of any
1.1(g)
part of the works by

Employer
- Employer's requirement
1.1(h)
to complete the works or

any part/section earlier
than its completion time
- Include changes to alter
11.1
the use of the works.
(vi)
1.1
(Source: The Entrusty Group, 2008)
The comparison indicated that the definition or meaning on variations is more

or less similar. Overall, the contract forms explain various types of changes in the
contract works.
4.3
Myths on Variations
Occasionally, the changes in the contract would not the root problem in a
dispute. But, the consequent contractual obligations and expectations trigger the
dispute. Table 4.2 shows misapprehensions or myths by contractors pertaining to
variation claims:
82
Table 4.2: Misperceptions on variation claims by contractors
No
1
Myths on Variation Claims by Contractors

That the employer is bound to pay for any change or additional work
whatsoever undertaken by the contractor whether expressly directed or not.
Where the scope of work is unclear or should there be a discrepancy in the

contract documents, the contractor is automatically entitled to extras.
In the event work is omitted, the contractor is automatically entitled as of right

to loss of profit.
Prior to ordering extras, the employer must obtain the contractors agreement to
the rates for valuing the varied work.
The contractor has a right to refuse to undertake varied work if he so desires in

particular if there is disagreement as to the rates and time extension sought.
In the situation where varied work has been undertaken, measured and valued
by the contract administrator but payment is not effected, the contractor is
automatically entitled to interest on the amount due.
The employer has no right to order and the contractor is not obliged to carry out
varied work in the defect liability period.
The contractor has a right to call for a review of measured and valued work
involving variations even after the final account has been prepared and the final
certificate issued.
The contractor has, in addition to the monetary claim for the varied work, a
parallel right to claim for extension of time and direct loss and expense.
(Source: Harbans Singh and Kandan, 2004)
On the other hand, the employer has a different view towards these variation
claims. Most probably, it is caused by ignorance or lack of proper understanding or
appreciation as shown in Table 4.3.
83
Table 4.3: Misperceptions on variation claims by employers
No
1
Myths on Variation Claims by Employers

The employer has an unfettered right to vary work under the contract and the
contractor has a duty of compliance to the same.
The contractual requirements as to the procedures governing the ordering,

measurement, valuation and the payment of varied work are merely directory in
nature and do not mandatorily bind the employer in the same way as these do
the contractor.
There are no variations in contracts based on firm Bills of Quantities and for
extras the use of the corresponding BQ rates is mandatory irrespective of the
quantum of the extras.
For omissions, the contractor is not entitled to loss of profit or adjustment of

rates unless the contract expressly stipulates so.
The employer can omit any work as he likes and award it to a third party of his
choice during the currency of the original contract.
For package deal types of contracts based on a firm price lump sum, there is
no entitlement to the contractor for variations.
Unless there is an express formula for valuing varied work, the final decision as
to the rates to be employed is the prerogative of the employer, the contractors
only recourse in the event of disagreement is to arbitrate the matter
The employer has a right to restrict or limit the contractors entitlements

pursuant to a valid variation order.
10
Where the contractual provisions are not clear, the employer has an inherent
right to order varied work to be undertaken in the Defect Liability Period and
the contractor is obliged to effect the same.
11
Quantum meruit claims pertaining to varied work do not fall within the
contract administrators scope of responsibility and therefore the contractor
needs to pursue these either through arbitration or litigation
(Source: Harbans Singh and Kandan, 2004)
84
4.4
Issuance of variations encompasses three contractual areas such as authorised

person and power, period of issuance and provisional sum.
4.4.1
Authorised Person and Power
The issuance of variations is the first issue, instead of the definition or

principles about variations. This is important as to deliver a proper sequence of the
contractual obligations regarding the variations. If the issuance is carried out
wrongfully beforehand, then it would most likely treat as an invalid variation.
First of all, the right person with the right authority shall be determined. In
PAM 2006, the right person is the Professional Architect approved by Board of
Architect under the Architect Act 1967 as named in Article 3. Clause 11.2 permits
the Architect to issue instructions requiring variations or sanction in writing for any
variations made by the Contractor. Under these two conditions, the variations will
not vitiate the original contract. The vitiations statement is to clarify the Architects
power/his discretion to order any variations which is deemed necessary. The
common law has restricted the Architects power as held in case Commissioner for
Main Roads v Reed and Stewart Pty. Ltd. & Another3, where the power to direct the
contractor to not perform certain works under the contract and then allow another
person to perform the work. Besides, the Architect may be liable to the employer if
he overruled, which the issued variation was outside the scope of contract without
special authority from the employer (Sundra, 1999). This statement can be referred to
Mitsui Construction Co v Attorney General of Hong Kong 4.
3
4
[1974] 131 CLR 378.

[1987] HKLR 1079.
85
4.4.2
Period of Issuance
Although the Architect is authorised in the contract to order variations, he

obliges to know the valid period for the instruction. The Architect may issue the
variation at any time before the issuance of the Certificate of Practical Completion
(CPC). After this period, the variation only be issued and necessitated by obligations
or compliance with the local authorities requirements over the Work. These two
statements are located in Clause 11.3 of PAM 2006.
In addition to this, Clause 4.3 explains the Contractor must proceed with the
work to conform to the local authorities requirements, even though the Contractor
does not receive any response of Architect Instruction (AI) within 7 days. It is
provided that the Contractor already sent a written notice to the Architect regarding
the inconsistencies between the Contract documents and the local authorities
requirements. Any changes of this issue are regarded as a variation required by the
Architect in the Contract.
In other words, the valid period of variations is before the CPC. The Architect
cannot issue any AI on variations after this CPC. There is an exception to variations
if the project needs to comply with the local authorities requirements.
4.4.3
Provisional Sum
The provisional sum can be divided into two aspects as regards to variations,
i.e., provisional quantities and expenditure of provisional works. The first one does
not necessary require an AI for carrying out the work, example piling works stated in
the Bill of Quantities (BQ) (The Entrusty Group, 2007). It is inappropriate to get an
86
AI at the moment of driving the piles for its varied quantities. However, it is
advisable to obtain an AI before the work is carried out for acknowledgement.
Apart from that, AI is mandatory for the expenditure of Prime Cost (PC)
Sums and Provisional Sums as described in Clause 11.4 of PAM 2006. Usually,
these provisional works relate to the PC or provisional works, which are hard to
determine its actual quantity/quality based on the existing contract documents.
Furthermore, the instruction on the expenditure PC Sums work is regarded as
expenditure of Provisional Sums.
4.4.4
Summary of Issuance of Variations
Table 4.4 summarises seventeen contractual references on the issuance of

variations. All the references or generic guidelines of the contractual variations
would be verified and commented by the local experts in the subsequent study.
Table 4.4: Preliminary guidelines on issuance of variations

Item
A1
> The right Person is the Professional Architect or other form of practice
registered under Architect Act 1967 and named in the contract.
A2
> The right person also includes the Employer of the contract.
A3
> Architect issues variations or sanctions contractors variations provided that

the variation will not vitiate the original contract.
A4
> Architects power is restricted, which he cant omit a work and give it to
another contractor.
87
Item
Issuance Variations
Period of Issuance
A5
> If Architect issues variations that outside the scope of Contract and without
expressed authority from the Employer, he may be liable to the Employer.
A6
A7
> Architect can issue variations at any time before issuance of the CPC.
But, after CPC period, the variations must be necessitated by

obligations or compliance with the local authorities and service
providers requirements towards the Work,
A8
During DLP if the contractor fails to rectify the defects and with the
consent of Employer, Architect can issue omission for leaving the
defects from the set-off. The omission constitutes a valid issuance of
variation.
A9
> Contractor must conform to the local authorities and service providers
requirements and proceed the work if no AI in response for the
inconsistencies with statutory requirements within 7 Days of the given written
notice.
A10
> AI to rectify Contractors default is not considered as a variation either

before or after the CPC.
Provisional Sums
A11
> There are two parts of provisional items for variations, i.e., Provisional
Quantity and expenditure of Provisional Sums.
A12
> Provisional Quantity means the estimated quantities of work, materials or

goods in the BQ which cannot be determined or detailed at the time.
A13
Provisional Quantity describes as the tasks are with rates and prices
for the pre-estimate quantity and it subject to re-measurement for the
actual value.
A14
> Provisional Sums means Sums provided in the Contract and/or for
Nominated Sub-Contract for work, materials or goods in the BQ which
cannot be determined or detailed at the time.
A15
Expenditure of Provisional Sums describes as the tasks but without

detailed information for its quantity, and rates.
88
Item
Issuance Variations
Provisional Sums
A16
> Provisional Quantity does not necessary require an AI for carrying out the
work, like piling length in the BQ.
A17
> AI is mandatory for expenditure of Provisional Sums, which from the

expenditure of Prime Cost Sums or Provisional Sums.
(Source: PAM 2006, Commissioner for Main Roads v Reed and Stewart Pty. Ltd. &
Another, Mitsui Construction Co v Attorney General of Hong Kong and
researchers inputs)
Items A1, A3, A6, A7, A8, A9, A11, A12, A14 and A17 are derived from
Clause 11 of PAM 2006. Items A4 and A5 are from Commissioner for Main Roads v
Reed and Stewart Pty. Ltd. & Another3 and Mitsui Construction Co v Attorney
General of Hong Kong4, respectively. The remaining items A2, A10, A13, A15 and
A16 are the personal inputs from the researchers observations or elaborations. These
preliminary guidelines would be confirmed and verified by the experts in a
questionnaire form (Appendix D) during the subsequent Delphi study.
4.5
Validity of Variations
The validity of variations is very crucial in contract administration. This is the

core of variations after the proper contractual issuance of variations. It examines the
issues of written instruction and definition of variations as stated in Clause 11.1 of
PAM 2006.
89
4.5.1
Written Instruction
PAM 2006 highlights a mandatory provision on AI (Clause 2.2) in a written

notice. This is a revamped provision compare with the last version of PAM contract
form.
In the meantime, the mode of written notice is important to be duly served

and proved. Under the Clause 36.1, 36.2 and 36.3 of PAM 2006, there are three
modes available as to the written notice, such as:
1.
by hand, at the time of delivery and a signed of acknowledgement of

receipt;
2.
by ordinary mail or registered post, after 3 days of posting and a

receipt of posting from Post Office; or
3.
by facsimile transmission, at time of transmission and a transmission

report generated by the transmitting equipment.
A well known case, Central Provident Fund Board v Ho Bock Kee 5 has
discussed in detailed about the validity of notice. The case highlighted the
determination issues from a building construction. Giving a notice with a particular
form, mode and manner is vital and required in most of contract forms. If notice was
delivered not according to the requirements in the contract, it would construe as an
invalid notice and bear no liability of legal effect to the concerned party as
highlighted in the case, where a registered post is required instead of hand delivery.
Lord Denning also took his view about this by pointing out a registered post would
show a clear proof of postage and of the time of posting.
[1981] 17 BLR 21.
90
Apart from that, there is a legal principle governed about waive of written
instruction, called habitual acceptance or by conduct of work completed. If this is
practiced by the concerned parties through oral agreement, it is able to waive the
requirement of written variation as subsequent actions or conducts could serve as
evidence for this circumstance. Hence the contractor recovers for extra work without
written instruction on variation. The court cases, Flooring System, Inc v Staat
Construction Co.
and Missouri Department of Transportation, ex rel. PR
Developers, Inc v. Safeco Insurance Co. Inc7 could be referred as to a waiver of the
requirement of written instruction on variation. The Flooring System case further
emphasised without express and defined items on extras, it would not recoverable.
4.5.2
Principle of Variations
In general, any errors or inaccuracies in the bills of quantities are at the risk
of the employer in that it may constitute a variation. This statement is based on the
court case, Patman and Fortheingham Ltd v Pilditch8. However, this case should be
read along with the contract provisions under PAM 2006, which clarify the
concerned parties obligations regarding discrepancy or divergence between
documents (Clause 1.4) and correction of errors could be carried out by the Architect
or Consultant (Clause 12.2).
On the other hand, if the bills of quantities are not prepared in accordance
with the applicable Standard Method of Measurement (SMM), it may be a
contractual basis for a variation as referring to the Bryant and Sons Ltd v
Birmingham Hospital Saturday Fund9. Clause 12.1 supports this by stating that the
[2003] ED 80814 and ED 80867.

[2002] ED 79860.
8
[1904] HBC 368.
9
[1938] 1 All ER 503.
7
91
bill of quantities must be prepared in accordance with the principles of the SMM,
which sanctioned by the Institution of Surveyors Malaysia and currently in force.
From the above statements, it is important to understand and follow the

express contract provisions. Moreover, Thomas et al. (1994) explain that the court
will always examine the entire agreement to determine the contract meaning and
interpret it as a whole in two principles, i.e., conflicting language will be reconciled
by reading them as complimentary and not contradictory and every clause will be
given meaning and purpose.
Nevertheless, claiming for variation without a formal instruction is very

topical in the local practice. The Entrusty Group (2007) highlights that the following
need to be considered for the work can be construed as an extra work, such as:
work carried out by the contractor with the instruction from SO

including the owner, which is not explicitly included in the contract is
considered extra work;
work carried out by the contractor which is outside the contract is

considered extra work;
work carried out by the contractor under statutory requirement which

is not provided in the contract is considered extra work;
work carried out by the contractor under emergency circumstances

when it is impossible to obtain instructions from the SO for the sake
of preserving the owners property is considered extra work;
items specifically provided for in the contract is not considered extra

work;
materials supplied by the contractor is more superior than that

specified without any instruction is not considered extra work;
works carried out by the contractor not required under the contract
and without any instruction is not considered extra work;
92
work which are deemed to be indispensably necessary to the contract

under lump sum contract is not considered extra work;
extra work arising from redesign due to difficult conditions under

lump sum contract is not considered extra work;
any instructions to remedy contractors default are not considered

extra work.
On top of that, all variation works must exclude any changes intended to
rectify any negligence, omission, default and/or breach of contract by the Contractor
and such changes executed by the Contractor entirely at his own cost. This statement
is found at last paragraph of Definition of Variation under Clause 11.1 of PAM 2006.
4.5.2.1 Addition
According to Clause 11.1 (a) of PAM 2006, the variation means the
alteration or modification of the design, quality or quantity of the Works including
the addition of the Work. Under this express provision, the clause briefly states about
addition work could be formed a variation in a contract. However, it does not discuss
in detail to which extend of the addition could be a variation. Few scenarios from the
court cases could reduce this gap.
If an additional work which is deemed to be indispensably necessary to a

project under lump sum contract is not considered extra work (The Entrusty Group,
2007). The case Williams v Fitzmaurice10 provides a great example of this scenario,
which the flooring is necessary for the completion of work in the project. Hence it
can not be construed as a variation work in the contract. Meanwhile, an old case from
10
[1858] 157 ER 709.
93
Russel v Sa Da Bandeira11 also discusses the indispensably necessary works are not
considered as variations in a contract.
Furthermore, the leading cases Thorn v Mayor and Commonalty of London12

and Blue Circle Industries v Holland Dredging Co.13 are discussed about the invalid
additional work of variation. If the work is so peculiar, so unexpected and different
from the contract, then it would constitute a separate contract. It cannot treat as a
valid variation as it would jeopardize the original contract. Moreover, Clause 11.2 of
PAM 2006 also states that no variation shall vitiate the contract.
Apart from that, invalid additional work also could discuss in Cardinal
Changes. Harbans Singh (2003c) explains that if the variation ordered be
substantially different, either materially in excess of the agreed sum or
fundamentally changes the nature of the works, such a variation work would be
contractually invalid as referring to Sir Lindsay Parkinson and co Ltd v
Commissioners of His Majestys Works and Public Buildings 14 . For example,
increased of 60% in excavation, 40% in sewer length and 90% in concrete as
highlighted in Wegan Construction Pty Ltd v Wodonga Sewerage Authority15.
4.5.2.2 Omission and Removal of the Executed Works or Materials and Goods
Clause 11.1 (a) and Clause 11.1 (c) of PAM 2006 discuss about omission and
removal of works. Even though the clause numbers are different, they are sharing
some same principles for the variation works. The former deals with omission works,
while the latter is about removal from site any executed works, materials and goods
which are in accordance with the contract. The discussion focuses on the omission
11
[1862] 13 CBNS 149.

[1876] 1 App Cas 120.
13
[1987] 37 BLR 40.
14
[1949] 2 K.B. 632.
15
[1978] VR 67.
12
94
works. It is because the omission of works requires more clarification and detailed
investigation, whereas the removal provision is clearly stated.
There are two different types of omission of work could be found in a project,
i.e., the work is omitted by a way of variation as certain part of work is no longer
needed in the project and secondly is about the omitted work has been given to
another contractor to carry out.
At the first scenario, the omission works are valid in the contract and quite
common in a construction project. It also includes reduction of the quantities of a
particular work in the contract. The omission works may cause by clients finance
problem and change of design requirements. Meanwhile, the second circumstance is
an invalid omission, where the omission of work has been given to a third party
(Harbans Singh, 2003c). It is an invalid exercise of the power given to the designated
person and could be construed as a breach of contract entitling the contractor to
rescission and/or damages as referring to Carr v JA Berriman Pty Ltd 16 and
Commissioner for Main Roads v Reed and Stewart Pty Ltd and Another17.
Besides, cardinal changes also can be referred in omission work in a

variation. The physical work changes like deletion of 98% of the specified wall
finish in the case of Chadmax Plastics v Hanson and Yuncken18. If the omitted work
alters the fundamental basis of the contract, it can be construed as invalid variation,
which there is no duty of compliance on the contractor or even constituting a breach
of contract on the employers part (Harbans Singh, 2003c).
16
[1953] 89 CLR 327.

[1974] 12 BLR 55.
18
[1984] 1 BCL 52.
17
95
4.5.2.3 Substitution and Alteration of the Kind or Standard of Materials or
Goods
Clause 11.1 (a) states that the alteration or modification including substitution
of the design, quality or quantity of works. According to Oxford Dictionary,
substitution is defined as a person or thing acting or serving in place of another or
replacing another. In other words, the substitution is about replacing the work of
another for its design, quality or quantity.
In the meantime, it is appropriate to discuss above-mentioned clause with

Clause 11.1 (b). It is because the clauses are close-related. The alteration in the
Clause 11.1 (b) is about changing or modification. It concentrates on the kind or
standard of materials and goods to be used in the works.
There are two court cases that can be referred for above two scenarios, i.e.,
Thorn v Mayor and Commonalty of London12 and Blue Circle Industries v Holland
Dredging Co.13. The cases highlighted that if the varied work is so different from the
contract, it will be an invalid variation. It would constitute a separate contract.
4.5.2.4 Changes to the provisions in the Contract
There are four conditions that allowed to be changed in the contract

provisions under Clause 11.1 (d) of PAM 2006. The conditions have been discussed
and elaborated for better understanding, for instance:
i.
Any limitation of working hours restriction on the working time, for

instance, working at night-time only.
96
ii.
Working space changing of working space from original space to a

smaller or restricted one, either inside the building or external area of
the project.
iii.
Access to or utilisation of any specific part of the Site it is difficulty

on accessibility towards the land or part of the site.
iv.
The execution and completion of the work in specific order it could

be referred to method of statement, construction method, etc issued
under a variation.
Theses changes are based on the contracts requirement and on a case basis. It
is subjected to the project characteristics and nature of the works to be carried out.
4.5.3
Summary of Validity of Variations
Table 4.5 shows the summary of validity of variation that discussed earlier. It
consists of eight main contractual areas and twenty-nine guidelines concerning
validity of variations.
Table 4.5: Preliminary guidelines on validity of variations

Item
Written Instruction
B1
> AI must be in writing.

> The AI must be in a valid mode, duly served and proved as:
B2
1. by hand, at the time of delivery and a signed of acknowledgement of

receipt;
B3
2. by ordinary mail or registered post, after 3 Days of posting and a

97
Item
Written Instruction
B4
3. by facsimile transmission, at time of transmission and a transmission

B5
> If the delivered notice was not according to the requirements in the contract,
it would construe as an invalid notice and bear no liability of legal effect.
B6
> Generally, if BQ is not prepared in accordance with applicable Standard

Method of Measurement, it could be a contractual basis for a variation.
B7
> Any errors or inaccuracies in the BQ are at the risk of employer as it

constitutes a variation.
B8
> However, if Contractor finds any discrepancy or divergence between

documents; he must send a written notice to Architect before commencement
of the affected work.
B9
> Contactor must execute variation entirely at his own cost if to rectify his
negligence, omission, default and/or breach of contract.
Addition
B10
> Variations define as addition of design, quality or quantity of the Works.
B11
> An additional work is required by statutory requirement but not provided in

the contract, it construed as a valid variation.
B12
> If an additional work is so peculiar, so unexpected and different from the

contract, then it would constitute a separate contract or an invalid variation.
B13
> An additional work has caused the cardinal changes of agreed sum or nature
of the Works, it construed as an invalid variation.
B14
For example, increased of 60% in excavation, 40% in sewer length and

90% in concrete, it construed as an invalid variation.
Omission
B15
> Variations define as omission of design, quality or quantity of the Works.
B16
> An omitted work is the part of the Work that no longer needed in the
project, it construed as a valid omission.
B17
> If the part of the Work is omitted and given it to other contractor, it
construed as an invalid omission.
98
Item
Omission
B18
> An omitted work changes the fundamental basis of the contract, it construed
as an invalid omission.
B19
E.g., deletion of 98% made on the specified wall finish.
Substitution
B20
> Variations define as changing the work of another for its design, quality or
quantity of the Work.
B21
> If the changed work has caused the cardinal changes of agreed sum or
nature of the Works, it construed as an invalid substitution.
Alteration of the Kind or Standard of Materials or Goods
B22
> Variations define as alteration or changing and modification of the kind or

standard of materials or goods to be used in the Work.
B23
> If the changed materials/goods are so different from the contract, it would
constitute an invalid variation.
B24
> Materials supplied by the Contractor are more superior than that specified
without any instruction is not considered as a variation.
Removal of the Executed Works, Materials and Goods

B25
> Variations define as removal from site any executed works, materials and
goods which are in accordance with the contract.
Changes to the provisions in the Contract
Variations also define as:
B26
> Any limitation of working hours e.g., working at night-time only.
B27
> Working space e.g., changing of original space to a smaller or restricted

one, either inside the building or external area of the project.
B28
> Access to or utilisation of any specific part of the Site e.g., difficulty to
access or use on the land or part of the site.
B29
> The execution and completion of the work in specific order e.g., changing
of method of statement, construction method, etc.
(Source: PAM 2006, Central Provident Fund Board v Ho Bock Kee, Flooring System,
Inc v Staat Construction Co, Missouri Department of Transportation, ex rel. PR
Developers, Inc v. Safeco Insurance Co. Inc, Patman and Fortheingham Ltd v
99
Pilditch, Bryant and Sons Ltd v Birmingham Hospital Saturday Fund, Wegan
Construction Pty Ltd v Wodonga Sewerage Authority, Carr v JA Berriman Pty Ltd,
Commissioner for Main Roads v Reed and Stewart Pty Ltd and Another,Blue Circle
Industries v Holland Dredging Co., Thorn v Mayor and Commonalty of London,
Chadmax Plastics v Hanson and Yuncken and researchers inputs)
Items B1, B2, B3, B4, B6, B8, B9, B10, B11, B13, B15, B20, B22, B25, B26,
B27, B28 and B29 are derived from Clause 1.4, 2.2, 4.3, 11 and 12 of PAM 2006.
Items B5, B7, B12, B13, B14, B17, B19, B21 and B23 are extracted from court cases.
The remaining items B16, B18 and B24 are the personal inputs from the researchers
observations or elaborations. These preliminary guidelines would be confirmed and
verified by the experts in a questionnaire form (Appendix D) during the subsequent
Delphi study.
4.6
Valuation Rules
Under PAM 2006, Quantity Surveyor shall measure and value the variation
works. The Contractor shall provide assistance to the Quantity Surveyor for any
recording of site information and/or site measurements are carried out at the site.
Then, the Quantity Surveyor is able to valuate the variations and provisional sums
works as described in Clause 11.5.
Six rules of valuation of variations are discussed in Clause 11.6 of PAM 2006.
It is for the variation works that executed by the Contractor. The works are the
provisional quantity that included in the bill of quantities and the expenditure of
provisional sums works.
100
4.6.1
The first rule uses the rates and prices laid in the contract documents to
determine the valuation under Clause 11.6 (a). This rule is only applicable to the
variation work is of a similar character and executed under similar conditions. It does
not significantly change the quantity of work as set out in the contract documents.
In other words, the clause could be explained that the variation causes a little
change in the quantity of the works. Most probably, the amount of changed quantity
is anticipated before the variation work is executed. Therefore, the original works
rate and price will be used for its valuation.
4.6.2
Rule 2 of Fair Adjustment and Rule 3 of Fair Market Rates and

Prices
Clause 11.6 (b) states this valuation would take into consideration on a fair
adjustment into the rates and prices for determining the valuation. The rule is
targeted to the variation work of a similar character, and either is executed or not
executed under similar conditions but there is a significant change in the quantity of
work carried out.
Meanwhile, if the variation work is not of a similar character to the original

work, the valuation shall be determined by the Quantity Surveyor at a fair market
rates and prices under the Clause 11.6 (c). The word similar cannot be taken as
identical but the conditions and background information and facts of the variation
work such as type of procurement systems, nature of works, location and the like.
101
Furthermore, these two contract provisions are quite similar in term of the fair
adjustment and fair market rates and prices. The term fair need to be clarified and
explained. Chappel et al. (2001) defined that what is fair will depend on the whole
of the contractors pricing strategy, either keenly priced or with a handsome profit
margin. Although a fair valuation is solely the responsibility of the quantity surveyor
under the contract provisions, he/she must still refer to the general tenor of pricing as
revealed in the contract documents.
Besides, these fair adjustment or rates are very common in litigation cases.
Many court cases discussed about the evaluation of price for the varied work, such as:
Laserbore Ltd v Morrison Biggs Wall Ltd19 The judge defined the
meaning of "fair and reasonable payments for all works executed". He
considered that the costs plus basis was wrong in principle even
though in some instances it may produce the right result. The
appropriate approach was to adopt general market rates.
Banque Paribas v Venaglass Ltd20 An argument on the fair and

reasonable value for a partial completed project. The judge decided
that the fair and reasonable value should be calculated on a cost or
measure and value basis and not on open market value of the project.
Semco Salvage and Marine Pte Ltd v Lancer Navigation Co Ltd21 The fair rates and prices in this case explained that the equipment
and personnel used in the salvage operation means a fair rate of
expenditure and does not include any element of profit.
Henry Boot Construction v Alstom Combined Cycles Ltd 22 The

learned judge Humphrey Lloyd made this clear when he said: a fair
valuation must in the absence of special circumstances include an
element on account of profit.
19
[1993] CILL 896.

[1994] 1 Feb.
21
[1997] 1 Lloyd's Reports 323.
22
[2000] CA BLR247.
20
102
Weldon Plant Ltd v The Commissioner for The New Towns23 - The
contractors entitlement was to be paid a fair valuation. The judge
took the view that in evaluating a fair valuation, the calculation should
be based upon the reasonable costs of carrying out the works if
reasonably and properly incurred. The judge held that a fair valuation
should include elements for the cost of labour, the cost of plant, cost
of materials, the costs of overheads and profit.
With the aforesaid case law decisions, some of the cases are holding different
principles as to the fair valuation. However, it is relatively clear that the latest
development of the fair valuation should include the costs of labour, plant, material,
overheads and profit according to the Henry Boot Construction v Alstom Combined
Cycles Ltd22 and Weldon Plant Ltd v The Commissioner for The New Towns23.
4.6.3
According to Building Contract Dictionary, Chappel et al. (2001) defined

dayworks as the works are carried out by the contractor and the works cannot
properly be valued by measurement, they may be valued on a prime cost basis.
Further, the amount of work done and materials used are recorded and a percentage
is added.
Clause 11.6 (d) states that if the works cannot be properly measured and
valued under the Rule 1, Rule 2 or Rule 3, the Contractor shall be allowed to use
Rule 4, either:
23
[2000] BLR 496.
103
the daywork rates in the contract document; or
without the daywork rates, at the actual cost to the Contractor of his
materials, additional construction plant and scaffolding, transport and
labour for the work concerned, plus fifteen (15) percent, which
percentage must include for the use of all tools, standing plant,
standing scaffolding, supervision, overheads and profit.
In either case, vouchers are required for the valuation and signed by the Site
Agent as well verified by the Site Staff, by specifying:
time spent daily upon the work
workers names
materials
additional construction plant
scaffolding
transport
The vouchers must be delivered to the Architect and Quantity Surveyor at weekly
intervals with the final records delivered not later than 14 days after the work has
been completed.
Besides, a signed daywork sheet is only for evidence or record purposes and
does not signify an entitlement to additional payment as held in the Clusky v
Chamberlain24. The particulars of vouchers are vital for contractor to be entitled for
the payment.
24
[1995] BLM 6.
104
4.6.4
Rule 5 Omitted work
The valuation of omitted work is based on the rates and prices in the contract
documents. If the omissions substantially vary the conditions for the remaining
works are carried out, the prices of such remaining works must be valued under Rule
1, Rule 2 or Rule 3.
4.6.5
Rule 6 Re-measurement on Actual Quantities (Provisional Quantity)
Rule 6 relates to provisional quantity in a variation. This is about the

quantities stated in the contract documents shall be re-measured by the Quantity
Surveyor based on the actual quantities executed. The actual quantities must be based
on the agreed as built drawings and/or site records. Therefore, the rates and prices in
the contract documents will determine the valuation.
4.6.6
Summary of Valuation Rules
Table 4.6 summarises the valuation rules on the contractual variations. It

provides the generic guidelines for the contracting parties in term of the variations
claims.
105
Table 4.6: Preliminary guidelines on valuation rules
Item
Valuation Rules
C1
> The Quantity Surveyor shall measure and value all variations.
C2
> The Contractor shall provide assistance to the Quantity Surveyor for any
recording of site information and/or site measurements are carried out at the
site.
C3
> The word similar used in valuation rules cannot be taken as identical, it
should consider the background information and facts of the variation.
C4
> The following 6 Rules apply to expenditure of Provisional Sums and

Provisional Quantity.
Rule 1 of Contract Rates and Prices
C5
> It uses the original rates and prices of BQ to determine the valuation.
C6
> This rule applies to the variation of a similar character and executed under
similar conditions. It does not significantly change the quantity of work as set
out in the BQ.
C7
C8
> The amount of changed quantity is minor and anticipated.
E.g., a variation caused a little change in quantity for a concrete

structure, but conditions (grade, dimension or method) of the concrete
structure remains.
Rule 2 of Fair Adjustment

C9
> It includes a fair adjustment into the original rates and prices of BQ to
determine the valuation.
C10
> This rule applies to the variation of a similar character and either is
executed or not executed under similar conditions but there is a significant
change in the quantity of work carried out.
C11
> The fair will depend on the whole of the contractors pricing strategy,
either properly priced or with a handsome profit margin.
C12
> If properly priced, a fair adjustment must include an element of profit

except for special circumstances.
C13
> The calculation should be based upon the reasonable costs that properly
incurred from the works and included elements for the cost of labour, plant,
materials, overheads and profit.
C14
> The amount of changed quantity is significant and unanticipated.
106
Item
Valuation Rules
C15
E.g., a variation caused a significant change in quantity for a concrete

structure, whether under similar or different conditions (grade,
dimension or method), but the concrete structure remains.
Rule 3 of Fair Market Rates and Prices

C16
> It includes a fair market rates and prices for the variation of different
character.
C17
> A fair valuation must include an element of profit except for special
circumstances.
C18
>The calculation should be based upon the reasonable costs that properly
materials, overheads and profit.
C19
> This fair valuation is based on the variations character, instead of the
amount of changed quantities.
C20
E.g., a variation made to change a concrete structure to steel/timber

structure.

C21
> If the works cannot be properly measured and valued under the Rule 1,
Rule 2 or Rule 3, the contractor shall use Rule 4.
C22
> The valuation is either from Daywork Rates in the Contract documents; or
where there are no such Daywork Rates, at the actual cost to the Contractor of
his materials, additional construction plant and scaffolding, transport and
labour for the work concerned, plus fifteen (15) percent, which the percentage
must include the use of all tools, standing plant, standing scaffolding,
supervision, overheads & profit.
C23
> In either case, vouchers are required for the valuation, signed by the Site
Agent and verified by the Site Staff, by specifying:
time spent daily upon the work, workers names, materials, additional
construction plant, scaffolding and transport
The vouchers must deliver to the Architect and Quantity Surveyor at weekly
intervals and the final records must deliver within 14 Days after completing
the work.
107
Item
Valuation Rules
C24
> Quantity Surveyor shall not change the figure or hours in the agreed and
signed Daywork rates or vouchers.
C25
> A signed Daywork sheet is only for evidence or record purposes and does
not signify an entitlement to the variation.
Rule 5 Omitted work
C26
> It uses the original rates and prices to determine the valuation of omitted
work. If the omissions substantially vary the conditions for the remaining
works are carried out, the prices of such remaining works must be valued
under Rule 1, Rule 2 or Rule 3.
C27
> The Quantity Surveyor shall re-measure the original BQ provisional

quantities based on the actual quantities executed. The original rates and
prices determine the valuation.
C28
> The actual quantities must be based on the agreed as built drawings and/or
site records.
(Source: PAM 2006, Building Contract Dictionary, 2001, Weldon Plant Ltd v The
Commissioner for The New Towns, Henry Boot Construction v Alstom Combined
Cycles Ltd , Clusky v Chamberlain and researchers inputs)
Items C1, C2, C4, C5, C6, C9, C10, C16, C21, C22, C23, C26, and C27 are
derived from Clause 11 of PAM 2006. Items C11 is from Building Contract
Dictionary. Items C12, C13, C17, C18 and C25 are from the court cases. The
remaining items C3, C7, C8, C14, C15, C19, C20, C24 and C28 are the personal
inputs from the researchers observations or elaborations. These preliminary
guidelines would be confirmed and verified by the experts in a questionnaire form
(Appendix D) during the subsequent Delphi study.
108
4.7
Additional
Expense
and
Subsequent
Circumstances
Caused
by
Variations
Clause 11.7 explains that where a variation has caused or likely to cause the
Contractor to incur additional expenses for which he would not be paid under any
provisions in Clause 11.6. The Contractor may make a claim regarding this provided
that the Contractor shall give written notice to the Architect of his intention to the
claim together with an initial estimate duly supported with all necessary calculation
within 28 days from the date of the AI or Confirmation of Architects Instruction.
The notice is a condition precedent to the entitlement of the claim. Subsequently, the
Contractor shall send to the Architect and Quantity Surveyor complete particulars
and calculations within 28 days of completing such variation. If the Contractor fails
to submit the required particulars within the stated time or long period agreed by the
Architect in writing, then the Contractor has waived his rights to the claim.
However, it seems that Clause 11.7 under PAM 2006 would not allow for
loss of profit for the Contractor. It is because this is a new provision, which different
from clause 11.6 PAM 1998 direct loss and/or damage that possible to include the
gross profit. The direct loss and/or damage was held by the court that this wording
included loss of gross profit on the uncompleted work in Wraight Ltd v PH and T
Holdings25 (1968). Therefore, it is relatively clear that the contractor may claim his
expense only under the Clause 11.7.
Nevertheless, a claim for loss of profit will always be successful where the
varied work is by an invalid variation, for instance, omission of work. If the work is
omitted from the contract and given to others to execute it then the contracting
contractor/injured party will have an entitlement to loss of profit as referring to
McAlpine Humberoak Ltd v McDermott International Inc 26 and even for oral
agreement regarding invalid variation as held in the case of Kin Wah J F
25
26
[1968] 13 BLR 29.

[1992] 58 BLR 1
109
Construction & Engineering Co Ltd v L&M Foundation Specialist Ltd27. Besides that,
the decision from Carr v JA Berriman Pty Ltd16 also clearly revealed that if a work is
omitted from the contract and given to others then the contractor will be entitled to
claim loss of profit.
There is an exception case for above scenarios as to a valid variation. If an

omitted work affected a supplier, the supplier can claim for loss of profit from the
contractor, the contractor can reimburse it from the employer as a third party in this
action as referring to Tinghamgrange Ltd v Dew Group and North West Water28.
4.7.1
Contract Sum
The amount caused by variations need to be added into the contract sum. As
soon as the Architect has ascertained the amount of variations as stated in Clause
11.9, the amount must be added to contract sum. In other words, the ascertained
amount must be included in the coming Interim Certificate. Basically, there is no
timeframe provided for the ascertainment.
4.7.2
Summary of Additional Expenses and Subsequent Circumstances
Table 4.7 summarises the additional expenses and subsequent circumstances

caused by variations. The subsequent circumstances discuss the ascertainment of
claims as to additional expenses incurred as well as their consequences.
27
28
[2004] HCA 226.

[1995] 47. Con. L.R. 105.
110
Table 4.7: Preliminary guidelines on additional expenses and subsequent
circumstances
Item
Additional Expenses and Subsequent Circumstances Caused by

Variations
D1
> If a variation has caused or likely to cause the Contractor to incur additional
expenses, where he would not be paid under the 6 Rules. He may claim it
provided that given a written notice of his intention to the Architect together
with an initial estimate duly supported with all necessary calculations within
28 Days from the date of the AI or CAI. The notice is a condition precedent
to the claim entitlement.
D2
> Subsequently, the contractor shall send to the Architect and QS complete
particulars, calculations and contemporaneous records within 28 Days of
completing such variation. If the contractor fails to submit the required
particulars within the stated time or longer period agreed by Architect in
writing, then the contractor has waived his rights to the claim of additional
expenses.
D3
> Loss of profit is not claimable in this provision as it was covered under the
Rule 2, 3 or 4.
D4
> However, a claim for loss of profit will always be successful for the invalid
omission.
D5
> The Architect and QS shall have access all contractors documents or
records in the possession, custody or control and with free of charge each to
them if requested until all variation claims resolved. Same for the subcontractors and/or suppliers documents in possession, custody or control by
the Contractor.
D6
> As soon as the Architect has ascertained the amount of variations and/or
additional expense, it will add into Contract Sum and include into the next
Interim Certificate.
D7
> The Architect could ascertain the amount anytime before Final Account as
no timeframe is provided.
(Source: PAM 2006, McAlpine Humberoak Ltd v McDermott International Inc, Kin
Wah J F Construction & Engineering Co Ltd v L&M Foundation Specialist Ltd, and
researchers inputs)
111
Items D1, D2, D5, D6 and D7 are derived from Clause 11 of PAM 2006. Item
D4 is extracted from McAlpine Humberoak Ltd v McDermott International Inc26 and
Kin Wah J F Construction & Engineering Co Ltd v L&M Foundation Specialist Ltd27.
The remaining D3 is the researchers observations or elaborations. These preliminary
guidelines would be confirmed and verified by the experts in a questionnaire form
(Appendix D) during the subsequent Delphi study.
4.8
Concluding Remarks
This chapter discusses the issuance and validity of variations. Architect is the
designated person to instruct a variation in written form, while validity is about the
principles or definitions of variations in the contract provisions. The concerned
parties should mutually agreed beforehand about the variation work as detail as
possible for its timing of execution, prices and rates, methodology, as well as
contractual provisions. Then, it would reduce or prevent any conflicts or disputes
occurred after the work was carried out. The preliminary guidelines were developed
through a detail investigation. It would be tested in the subsequent Delphi study
before the incorporation into the eDR.
112112
CHAPTER 5
RESEARCH METHODOLOGY
5.1
Introduction
Research methodology refers to the procedures and processes that applied to

a scientific investigation. Overall, this chapter describes the details of each research
methods involved in the research. i.e., literature study, critical review, interview,
document analysis, questionnaire, Delphi study, and Data Flow Diagram (DFD)
model. All the methods are described in a sequence based on the research
methodology flow highlighted in Chapter 1 (Figure 1.1).
5.2
Literature Review
A literature review report is a synthesis of information on a topic presented in

an organized narrative. It is to make sure the theory is developed from a thorough
literature review. There are two ways of the review, i.e., review in a broad sweep and
113
review only the main works which more attention to the concepts, linkages and
measures (Tan, 2008). For the results of the first way of review, keywords and
important terminologies in the research were defined such as construction contract
administration, construction conflicts and disputes as well as dispute resolution.
These areas would be reviewed to understand and determine their backgrounds or
philosophies. The second way was a detailed literature study and included law case
studies. The findings of the review were presented in Chapter 1 to 5.
5.3
Preliminary Semi-structured Interview and Critical Review
A semi-structured interview was carried out to understand the local scenario

as most of the literature materials or issues were derived from overseas. The semistructured interview was chosen as it can be thought of as a half-way house between
the rigid formality of a structured interview, where the researcher attempts to fix and
control the circumstances of the interview so that the data are collected in as
consistent a fashion as possible, and the flexibility and responsiveness of a depth
interview (Moore, 2000). The research method by interviewing has been adopted to
strengthen and verify the research area in local industry.
The experts for the interview consisted of an academician expert who is a

veteran and registered quantity surveyor and holding a professorship in quantity
surveying and construction management; a registered architect who serves as
Superintendent Officer up to 15 projects and has been practicing as a Professional
Architect more than 20 years; a registered arbitrator who specialises in contract
administration and more than 25 years working experience in the industry; and a
licensed and practice lawyer who has more than 10 years of working experience in
court proceedings regarding construction dispute. They were asked about five (5)
areas, such as, aspect of understanding on construction contracts, issues related to
contract administration, practice of dispute resolution, issues related to dispute
114
resolution and comments and recommendations. It was served as preliminary study
in this research. Content analysis was adopted to compare and analyse the data
recorded from the interview. The findings were merely used to justify and strengthen
the need of this eDR research as highlighted in problem statements.
Subsequently, the literature review was carried out concurrently. It kept open
and ensured its comprehensiveness towards the latest research findings. However, it
may lead to the review never being finished, so a critical review is carried out and
established a period (1990-2007), which the body of relevant literature from
previous research was reviewed critically (Fellows and Liu, 2003). As a result
of the critical review, a detailed literature study was conducted on the expert
systems/model as the latest development in the recent years. This subsequent review
is to identify the research gaps for the current trend on the application as shown in
Chapter 3. These two research methods were carried out at the early stage of research,
yet they have the significant findings towards the proposal of eDR.
5.3.1
Content Analysis
Content analysis is defined as an empirically grounded method, exploratory

in process, and predictive or inferential in intent (Krippendorff, 2004). The original
text is reduced to categories consisting of a word, set of words or phrases, on which
to have specifics words or patterns that are indicative of the research question
(Jonker and Pennink, 2010). Generally, it used the application of standards for the
analysis of the interview (Krippendorff, 2004). Two steps were followed, which
comparing a variable, a representation of texts, with a given or assumed standard and
then judging what this entails from the results of the interview. By applying the short
notes from the interview into content analysis, the data can be analyzed according to
their presence, meaning, and relationships easily.
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5.4
Documentary Analysis
Documentary analysis is also known as the documentary frequency studies

where, it is also the type of normative-survey research, like historical research, deals
with records which already exist. Fellows and Liu (2003) emphasise that the
document analysis is always vital to consider the whole of document and its context
and especially important to appreciate the extent of applicability.
Document analysis deals with the systematic examination of current records

or documents as sources of data (Yogesh, 2006). The document analysis is focused
on the standard form of contracts for its proviso and contractual obligations. The
clauses on the dispute resolutions and variations were examined and studied
repeatedly and thoroughly. This method provided important inputs to the provisions
for dispute resolution in local contract forms in Chapter 2, which focused on building
contracts like PAM 2006, CIDB 200 and PWD 203 forms. Meanwhile, it was also to
generate the preliminary guidelines on contractual variations from PAM 2006 in
Chapter 4.
5.5
Questionnaire
Questionnaire method is the first chosen instrument to collect one of primary

data in this research. The Survey is the most familiar and ubiquitous form of research
in the social sciences. Moore (2000) stated that the self-completion/administered
questionnaires are flexible in that they can be used to collect a wide range of data in a
variety of different circumstances, and relatively cheap.
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Likert scale selected for the questionnaire design, in which a set of items was
proposed with respect to a particular attitudinal object for the scaling respondents
method (Panneerselvam, 2006). Likert scale is a widely used instrument in
measuring opinions, beliefs and attitudes (Devellis, 1991). Therefore, the
questionnaire were incorporated the likert scale for the degree of agreement. Besides,
the self-administered questionnaire was selected and used in this research, particular
in achieving the second objective, i.e., to identify the behaviour and practice of
dispute resolution methods in Malaysian construction industry.
5.5.1 Questionnaire Design
In this section, the details of the questionnaire design and administration are
explained. This method adopted to analyse the data collected from the survey
exercise is also described. Basically, there are two main sections for the
questionnaire such as:
Section A: Personal Particulars
Section B: Dispute Resolution
Section A is to understand the background of the respondents. Several

questions were designed to achieve this such as position, education level, working
experience and others. Meanwhile, Section B consisted of two parts. Part 1 is to
understand the philosophy of conflicts and disputes in term of cases of occurrence
and Part 2 is to identify the behavior and practice of dispute resolution methods in
the industry by looking at the degree of agreement on their attributes. The sample of
questionnaire was attached in Appendix C.
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Apart from that, since the questionnaire was determined to be selfadministered, it was realised that it should be self-explanatory without sharing any
clarifications regarding the questions. To ensure this, a covering letter and a separate
page of introduction describing the aim and objectives of the research were attached
to the questionnaire.
Therefore, in preparing the self-administered questionnaire the following

guidelines were followed to ensure the smooth and effective data collection as
highlighted by Fowler (1993) and Fellows and Liu (2003), such as
5.5.2
Making the respondents task as easy and simple as possible; and
Keeping the respondents interest level and attention at a maximum;
Questionnaire Sample
Population is a large group of individual, object or incidence that the

researcher wishes to investigate while sampling is a researched group from the
population (Malhotra, 1993). According to Sekaran (2003), the population is known
as the total number of elements that exist at the time of the study and the posses the
characteristic of interest.
In the questionnaire research, the main or prime contracting parties in a

project are selected as the respondents. The populations are from the Grade 7 with
ISO contractors who registered under Construction Industry Development Board and
developers who registered under Real Estate and Housing Developers Association.
The targeted respondents were selected from Klang Valley, i.e., Selangor State and
Kuala Lumpur due to the strategic location in Malaysia. The selection of the Grade 7
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and ISO contractors because the are more competent contractors with systematic and
better management approaches in terms of ISO and their projects are exceeding RM
10 millions.
5.5.3
Questionnaire Analysis
The collected data by questionnaires can be analyzed by using Statistical

Packages for Social Sciences (SPSS) for Windows Version 16.0. According to
Norusis (1998), SPSS is a user friendly statistical tool and time saving. The data
collected from the questionnaire were the first input to the SPSS system and
subsequently coded and edited for further analysis. The Likert scale was used to
answer the quantitative questions in the section B (Part 2). It was the main part of the
questionnaire. There are fives level of agreement to the each of the factors. The
levels are as below:
Point 1: Strongly Disagree
Point 2: Disagree
Point 3: Neutral
Point 4: Agree
Point 5: Strongly Agree
According to Abdul Ghafar (2003), Likert Scale is a scale measurement of

respondents perspectives to determine the degree to which the state is true or
contrast. Based on the scale above, the higher of lever meant the higher of the
significant level of each factors. On the other hand, the lower of level meant the
lower of the significant of each factors. The questionnaire is presented in a form with
comprehensive instructions to make the exercise as stress-free as possible.
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5.5.3.1 Mean Analysis
Descriptive analysis was applied to the questionnaire. Frequency was adopted

to analyse the questions in Section A and Part 1 in Section B, while mean was
applied to analyse the data in Part 2 of Section B. Levine et al. (2001) explain that
mean is the most commonly used measure of central tendency. It is calculated by
summing the observed numerical values of a variable in a set of data and then
dividing the total by the number of observation involved. The mean is also called or
referred to average index. The formula is the same for mean or average index as
shown below:
Average Index
a x
x
i
Where ai = value of score (i = 1, 2, 3, 4, 5)

xi = respondent frequency (i = 1,2,3,4,5)
Subsequently, data obtained from the survey exercises were also tested in a
series of statistical tests. The following statistical methods have been used for data
analysis, with the aid of SPSS software, for instance:
Analysis of Variance: Kruskall Wallis Test
Reliability test: Cronbach Alpha
The Kruskal-Wallis test indicated that the means of three groups are equal on
the problems of language structure because all the variables P-value larger than
critical value of significance 0.05 (Morgan et al., 2007). Meanwhile, Cronbachs
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Alpha method was applied in this case to understand whether the data provide a good
support for internal consistency reliability. If the tested item has reliability
coefficient of more than 0.7 implies that it is statistically reliable and should not be
dropped for further analysis (Julie, 2005).
5.5.3.2 Factor Analysis
Factor Analysis was adopted to find the latent factors to be considered in this
research. The Factor Analysis is important as to further clarify the data analysis from
the mean score. Meanwhile, it helped to reduce and extract the essential factors
affecting the selection of dispute resolution methods. SPSS program was used to
perform the data analysis of the research. According to Petty (1995), factor analysis
is a technique to achieve parsimony through the identification of the smallest number
of descriptive terms to explain the maximum amount of common variance in a
component matrix
Besides, the chosen extraction method is principal component analysis (PCA).

Varimax with Kaiser Normalisation was applied prior to factor rotation, thus keeping
factors with an eigen value of one or greater. This procedure was chosen to eliminate
error variance (Rasli, 2006). Two statistical tests are required to perform prior to this
PCA such as Kaiser-Meyer-Olkin (KMO) and Bartletts test of sphericity. The KMO
test is to indicate whether the sample size used for analysis is sufficient, while the
Barletts test is to assess whether factor analysis could be performed.
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5.6
5.6.1
Delphi Study
The Delphi method is the main primary data collection method for the
development of the eDR. The Delphi method was developed by Norman Dalkey of
the RAND Corporation in the 1950s for a US-sponsored military project (Buckley,
1995; Meyrick, 2003; Skulmoski et al., 2007; Steinert, 2009). A commonly agreed
definition of the Delphi method was proposed by Linstone and Turoff (1975) as
follow: Delphi may be characterised as a method for structuring a group
communication process so that the process is effective in allowing a group of
individuals, as a whole, to deal with a complex problem. The Delphi method is a
popular method in research in the field of the social sciences especially at the masters
and doctoral levels (Skulmoski et al., 2007). This method has well accepted by the
academicians. A big number of publications regarding the Delphi can be found in the
well-known referred journals. However, many feedback reports and comments have
discussed about the implementation and effectiveness of the method. Thus, a detailed
investigation has been carried out on the Delphi method as shown in Table 5.1.
Table 5.1: Fundamental features on traditional Delphi method

Features
Panel
Issues and Remarks

Issues: How to define an expert? Poor selection of experts may occur. The
Recruitment term of expert may misuse in Delphi study (Mullen, 2003; Meyrick, 2003;
Hung et al., 2008).
Remarks: Choosing qualified experts is critical for success of Delphi
study. Hence the expert recruitment is based on the relevant knowledge,
experience of a particular topic and some soft issues like willingness and
effective communication skills (Mullen, 2003; Skulmoski et al., 2007).
122
Features
Issues and Remarks
Number of
Issues: There is a wide range in the sample size, it can be from a few of
Participants
experts (3) to a few hundreds (345) (Skulmoski et al., 2007).

Furthermore, the more the participation of experts, the lower would be the
response rate. It would lead to high dropouts and cause a bias in the data
(Mullen, 2003; Nevo and Chan, 2007; Hung et al., 2008; Kumaraswamy
and Anvuur, 2008).
Remarks: The sample size is different from the usual statistical or
questionnaire survey. It should concentrate on the background and
relevancy of the study, rather give a definite or arbitrary figure on it. For
the response rate and dropout, the Delphi study requires a certain patience
to follow up with non-respondents (Buckley, 1995; Hung et al., 2008).
They should be handled properly, instead of simply grouping them as
outliers.
Number of
Issues: There is a possibility that outliers may withdraw from the study
Rounds
simply because the Delphi has no more rounds or they have been
excluded as they had failed to modify their opinion (Kuo and Chen,
2008).
Remarks: As the Delphi allows the respondents to give their feedback
and revise their earlier responses, two rounds of Delphi are a must
(Mullen, 2003). The number of rounds should depend on the research aim
and objectives and not be pre-determined at the outset of the research.
Anonymity
Issues: Responses from the individual may have an accountability pitfall

due to anonymity (Mullen, 2003).
Remarks: The strength of it should be preserved as to allow the
participants to freely express their view, without any pressures
(Skulmoski et al., 2007).
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Features
Issues and Remarks
Mode of
Issues: There are different modes of Delphi study interaction, a
Interaction
questionnaire is the common one (Buckley, 1995). It can be article-based

(direct interview), ordinary mail, or email. Some feel that the trend of
Delphi is toward the real time process or is computer based (Steinert,
2009).
Remarks: Although the internet allows new ways of group interaction
for the Delphi process, this is still an option for researchers (Skulmoski et
al., 2007). Time and cost are the main concern for mode selection.
Moreover, the question should be semi-structured so the experts could
provide new inputs into the study wherever necessary.
Consensus
Issues: Delphi may become a tool for forcing consensus by having more
Results
rounds or by withdrawing the outliers or ignoring the disagreement

(Buckley, 1995, Mullen, 2003; Kuo and Chen, 2008).
Remarks: There are many methods to determine the consensus or
dissensus of Delphi such as content analysis (Hung et al., 2008),
statistical analysis like Kendalls coefficient (Kumaraswamy and Anvuur,
2008), and so on. The method of analysis should be adopted appropriately
and the differences that may occur from the Delphi process should be
considered.
As a result, the purpose of selecting the Delphi method in this research is

based on the reasons below:
The view on construction conflicts and disputes are different between

the professionals, where bias may occur to a single side of the prime
party, either contractor or employer.
The construction experts are from different background in the

construction industry and this Delphi method gives access to them to
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render their view on a particular issue who cannot come together
physically.
The Delphi method is an effective and efficient method for PhD level
research due to its flexibility research technique to collect and distil
the anonymous judgment of experts.
5.6.1.1 Fuzzy Delphi Method (FDM)
Over the years, researchers has modified and improved the traditional Delphi
Method for their researches aim and need. It is because the traditional Delphi
method has always suffered from low convergence expert opinions, declined of
response rate, costly, time consuming and the possibility of filtering out particular
expert opinions by the researcher (Ishikawa et al., 1993; Kuo and Chen 2008).
Furthermore, in many real situations, experts judgments can not be properly
reflected in quantitative terms by having more rounds of Delphi. It will create
ambiguity due to the differences in the meanings and interpretations of the experts
opinions (Wang and Lin, 2008). Thus, Ishikawa et al. (1993) utilized fuzzy sets
theory in the Delphi method to eliminate these shortcomings by using the max-min
fuzzy type of Delphi method. Subsequently, this method has been adopted by many
researchers and described it as FDM.
A fuzzy number is a value that imprecise. A triangular fuzzy number is the

type of fuzzy set applied into the Delphi method. Bojadziev and Bojadziev (2007)
explained the triangular fuzzy number, for example, A is with membership function
A(x) the formula as follow:
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x a1
for a 1 x a m , A L
a m a1
A A (x)
x a2
for a 2 x a m , A R
am a2
0
otherwise
AL and AR are the triangular number for left and right. The (a1, a2) is the supporting
interval and the point (aM, 1) is the peak as illustrated in Figure 5.1 below.
(am, 1)
1
AL
a1
AR
am
a2
Figure 5.1: Triangular Fuzzy Number

(Source: Bojadziev and Bojadziev, 2007)
Grade or membership degree is used to establish the membership function of

each expert. The group membership functions will be used to compute the expected
values of fuzzy numbers, and then a forecasting value could be obtained. The
geometric mean is taken rather than average/arithmetic mean as the membership
degree of triangular fuzzy numbers to denote the consensus value of the experts and
avoid the impact of extreme values (Kuo and Chen, 2008).
In conclusion, the FDM has improved and overcome certain shortcomings

compare with traditional Delphi, especially the use of triangular fuzzy number and
geometric mean in the research approach. However, the FDM has been modified in
126
this study because one round of Delphi cannot incorporate feedback and revision of
answers by the experts. It is vital to consider the defining features of traditional
Delphi because new data and/or view-refinement along the Delphi process would
contribute very important information toward this research. Therefore, a modified
Delphi method is proposed herein to overcome the methodological weaknesses of the
traditional Delphi method and FDM. The modified Delphi method was discussed in
Chapter 8 as Delphi with Fuzzy (DwF).
5.6.1.2 Delphi Study: Questionnaire
The eDR could not cater all the contractual issues in this research. Therefore,
the guidelines from the contractual variations in Chapter 4 was referred and set in to
the questionnaire. There are four main aspects on contractual variations such as:
1.
Issuance of variations
2.
Validity of variations
3.
Valuation rules of variations
4.
Additional expenses and subsequent circumstances caused by

variations
The experts were asked for their degree of agreement based on 11-points
likert scale (0-10). This likert scale is chosen as it could enhance and streamline the
levels of agreement. The score and definition for the agreements are referred and
modified from the studies of Liang et al. (2006) and Hsu et al. (2010) as follow:
Point 0 = Absolutely disagree
Point 1 = Strongly disagree
127
Point 2 = Highly disagree
Point 3 = Quite disagree
Point 4 = Slightly disagree
Point 5 = Neutral
Point 6 = Slightly agree
Point 7 = Quite agree
Point 8 = Highly agree
Point 9 = Strongly agree
Point 10 = Absolutely agree
The score from zero to ten was applied for the experts during the interview
with the experts. It is purely for the ease of rating and understanding by the experts.
Subsequently, the score was modified from the point 0-10 to the point 1-11 in
analysis part as to the geometric mean analysis. The conversion is important to avoid
calculation error that would be occurred when calculating zero score.
5.6.1.3 Delphi Sample
The selection of experts must be properly accomplished. It has a direct impact

on the accuracy and reliability of the results. Therefore, all experts in this research
were selected based on the criteria mentioned below:
A mixture of experts with various backgrounds, such as legal experts,

engineers, architects, and quantity surveyors, is required to obtain an
overall view on the issue.
128
The number of experts to be appointed must be equal to avoid any

bias results or findings specific to certain groups of experts.
The experts must be reputed or well-known persons based on their

contributions, expertise, or publications in the construction industry.
The willingness of the experts to participate and be interviewed for up

to 2 rounds of the Delphi process must be acquired.
5.6.1.4 Delphi Calculation
One of the key features of this Delphi study is the application of the
geometric mean to calculate the value of the guidelines in the questionnaire. The
maximum and minimum values of the expert opinions are calculated based on
triangular fuzzy numbers. The geometric mean is taken as the membership degree of
triangular fuzzy numbers to derive the statistically unbiased effect and avoid the
impact of extreme values (Kuo and Chen, 2008). In this Delphi calculation, the
geometric mean is the point of peak (aM) where supported interval points a1 and a2 as
illustrated Figure 5.1.
In general, geometric mean is a type of mean or average, which indicates the

central tendency or typical value of a set of numbers, except that instead of adding
the set of numbers and then dividing the sum by the count of numbers in the set, n
the numbers are multiplied and then the nth root of the score from the experts. This is
why the conversion from point 0-10 to point 1-11 is required. It is because any
numbers/scores multiply with zero, it will become zero and created unsound analysis.
Hence the conversion is to avoid calculation error on the value. Therefore, the
geometric mean is different compare to average index or mean as discussed earlier.
The geometric mean (MA) formula is:
129
MA
a i 1a i 2 ...a i n
Where ai is the score rated by the (1 = 1st, 2 = 2nd n = nth) expert.
Usually, the value of geometric mean is lower or equal than the arithmetic
mean (average index/mean). In this research, the geometric mean was used to denote
the consensus of the expert group. Microsoft Excel is applied to calculate the
geometric mean.
Besides, the Kruskal Wallis test on the discrepancy between the experts in
term of mean ranks. For the variables were under the discrepancy, the Mann-Whiney
U test was applied to examine which group was different in their overall response by
comparing individual pairs (Morgan et al., 2007).
5.6.1.5 Defuzzification and Normalization
Since the geometric mean was applied in the analysis, the defuzzification and
normalization procedures were also modified. The threshold value was used to
perform the function as described by Kuo and Chen (2008). However, the threshold
value set by the authors is not appropriate in this 11-scale Likert study. Therefore, for
the threshold value or selection of the guidelines, the common 5-point Likert scale is
referred. It modifies from the 5-point Likert scale (1-5) and its three categories of
agreement (Chong and Zin, 2010).
The formula to determine the interval/range for the agreement is as follow:
130
I 2X Y
Where,
I = Total sum up of the interval within the Likert scale;
X = Interval/range value for the category of disagreement and agreement; and
Y = Interval/range value for the category of neutral.
As a result, the classification of the three categories for the 11-point Likert
scale is as follow:
Disagree = 1 geometric mean < 4.75
Undecided/Neutral = 4.75 geometric mean < 7.25
Agree = 7.25 geometric mean 11.00
The agree category is the references or guidelines used in the eDR

prototype/template development.
5.6.2
Process Flow Modelling of eDR
A model is a valuable tool to communicate a process requirement between

entities. Thus, a conceptual process flow model was produced based on triangulation
research method (Fellow and Liu, 2003) which applied semi-structured interviews,
questionnaires and Delphi to develop the eDR. Data Flow Diagram (DFD) method
was selected for the model development as it focused on object perspective (Luo and
Tung, 1999), where the model aims to produce clarified references or guidelines
131
from the experts to end-users. Besides, the DFD is like the plot of a story where
reading the diagram is very much like reading a story (Rinzler, 2009). It could
deliver a complicated process or model in a simplified and organised hierarchy
structure. By combining diagrams hierarchically, the DFD combines the best of the
flowchart and the function diagram, which able to demonstrate followings strength as
described by Oppel (2004). The strengths of the DFD are:
Its good for top-down design work.
Its quick and easy to develop, even for complex systems.
It shows overall structure without sacrificing detail.
It shows complex logic easily.
Its great for presentation to management.
Principally, DFD is a graphical representation of the flow of data through

the processes. DFD uses four basic symbols to show entity, process, data flow and
data store to trace and depict the movement of information (Luo and Tung, 1999). As
illustrated in Table 5.2, the explanation of the DFD elements is based on the eDR.
Table 5.2: Explanation of DFD elements and notations

No
1
DFD Element
Entity
DFD Notations
DISPUTES
Process
0
Mitigate/ prevent
the issue
systematically
and proactively
Explanation
Entity is a data source or data sink about
construction conflicts and disputes. The
data flow (contractual issue) will start and
end at the entities.
Process is an activity of mitigating or
preventing the contractual issue that
involved in the model. It shows in bubble
shape. The process is stated the numbering
to show the sequence and level for the
transformation of data. It shall start with
verbs in the process.
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No
3
DFD Element
DFD Notations
Data Flow
Contractual issues
The arrow represents an information flow or

movement either from the process, entity or
data store to another state. With a rule that
the flow must involve a process.
New cases (if any)
This arrow describes a new information

flow into a process, entity or data store. The
information must come from a process.
Data Store
D1
Explanation
Project database
Data store is the developed data storage. It

is to be retrieved for database references.
The eDR model was developed to render a generic approach on the

contractual issues. It shows how the processes involve in the development of the
eDR. The model could serve as a template for future research, even though there are
differences in the legal system and diverse local scenario.
5.6.3
Prototype/Template of eDR
The eDR template/prototype was developed after the model development.

The template was followed the process as discussed in the eDR model. Two
softwares were applied to the development of eDR template, such as Microsoft
Access 2003 was used to develop the databases; and Access 2007 Developer
Extensions and Runtime are to package the database and create database template in
a format of exe. The Access 2007 Developer Extensions and Runtime are the free
softwares provided by Microsoft. It would lock the database and the users were not
able to edit the database. They were used to create the template for testing and
evaluation during the prototype demonstration for the end-users. The users are
required to rate the satisfaction score (0-100%, i.e., 0 = extremely dissatisfied, 30% =
dissatisfied, 50% = neither satisfied nor dissatisfied, 70% = satisfied, 100% =
extremely satisfied) on five closed questions regarding usefulness of clarity,
133
practicality, functionality, coverage and overview of it. Subsequently, an open
question for comment and feedback is designed.
5.7
Research Framework
The research stages have described a clear methodology for this research. As
such, a research framework should be provided to highlight the proper steps to be
established in order to achieve the research aim and objectives. The research
activities and outputs are the main components in the research framework as
illustrated in Figure 5.2.
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Literature review
To study and understand the potential

area of the research
Critical review
To appreciate the detailed area of

contract administration and dispute
resolution
Interview
To understand and discover the local

scenario of the research area
Questionnaires
To identify the behavior of dispute

resolution as well as to evaluate the
subsequent eDR template/prototype
Model developmentDFD
To develop eDR model of a generic

approach on contractual issues.
To develop a template of the expert

system based on a contractual issue,
i.e., contractual variations
Delphi study
Figure 5.2: Research activities and outputs
5.8
Concluding Remarks
The research methodology described in this chapter enables data to be

collected and analysis of the data to be made. All the research methods were
interconnected and equally important to achieve the research aim and objectives. The
135
detail of literature review (including documentary analysis and critical review),
questionnaire surveys, Delphi study, modelling and eDR template development have
been described. The outcomes of the analysis and results of the data collected are
presented in Chapter 6 until Chapter 8.
CHAPTER 6
DISPUTE RESOLUTION METHODS IN MALAYSIA
6.1
Introduction
The conflict would turn into the dispute when the contracting parties failed to
manage the conflict. At this moment, dispute resolution would be applied either
through binding or nonbinding approach. Selection of an appropriate dispute
resolution method is vital as every project is bound to have disagreement. ADR
techniques do not require a full legal process and become the mainstream option to
traditional dispute resolution, i.e., arbitration and litigation. Besides, the low
frequency of practicing ADR in the local construction industry needs to be addressed.
Therefore, to explore this topic, the questionnaires were distributed to gather the
information required. The questionnaires were specially designed to obtain the
objectives of this research. Dispute resolution methods are grouped and discussed
together, based on the similarity of their characteristics (refer to Table 2.1), and used
for the questionnaire survey.
This research approach is different from the previous studies, which mostly
focused on a single dispute resolution method, for instance, negotiation (Cheung, et
al., 2004; Cheung, et al., 2006), mediation (Yiu, et al., 2006; Cheung and Yiu, 2007),
137
adjudication (Dancaster, 2008; Owens, 2008; Teo, 2008), and arbitration (Armstrong
and Hurley, 2002; Harmon, 2004). Some studies have discussed ADR, but it is still
limited to the method individually (Treacy, 1995; Keith, 1997; Rubin and Quintas,
2003) or the ADR itself (Cheung, 1999). This approach of grouping could render a
wider perspective and comprehensive view on the dispute resolution methods. It
would be very beneficial for future research and development on bridging the gap
between the academia and industry.
6.2
Results and Analysis
The questionnaire survey was conducted. It is to identify the behaviour and

practice of dispute resolution methods in Malaysian construction industry.
6.2.1
Background of Respondents
Survey samples were concentrated in Klang Valley (Kuala Lumpur and

Selangor), Malaysia, due to its strategic location. 281 developers were identified
from Real Estate and Housing Developers Association (REDHA), while 273 Grade 7
ISO certified contractors were selected out of 2332 Grade 7 contractors registered
with the Construction Industry Development Board (CIDB). The questionnaires were
distributed and 60 questionnaires were returned for analysis. A total of 44 contractors
and 14 developers had participated in this survey as illustrated in Figure 6.1. It is
acceptable for the larger portion of contractors as it reflects the population ratio of
the construction industry. The list of the respondents was attached in Appendix E.
138
16, 27%
Developer
Contractor
44, 73%
Figure 6.1: Percentage of respondents from contractors and developers
6.2.2
Position
The Figure 6.2 illustrated the position of the respondents involved in the
construction industry. The survey was responded by 60 respondents, which was
consisted of 24 contract executives, 6 project managers, 5 contract managers, 5
directors, and another 20 construction professionals. They were in the right position
to answer the questionnaire and provide useful information regarding the dispute
resolution practice within their organisations.
139
6, 10%
20, 33%
Project Manager
Contract Executive
Director
24, 41%
Contract Manager
Others
5, 8%
5, 8%
Figure 6.2: Position of Respondents
6.2.3
Education Qualification
A majority of respondents (48 or 80%) held bachelors degrees or higher as

illustrated in Figure 6.3. It showed the respondents were well educated and more than
qualified to respond to the questionnaire. It is because the questionnaire required the
respondents to have certain knowledge toward the dispute resolution methods.
140
2, 3%
2, 3%
10, 17%
SPM/STPM or
equivalent
Diploma
Degree
Master or PhD
46, 77%
Figure 6.3: Education qualification of respondents
6.2.4
Working Experience
A majority of respondents (65%) possessed more than 5 years of working

experience. Meanwhile, 21 respondents or equivalent to 35% have had less than 5
years of working experience as illustrated in Figure 6.4. It showed high reliability of
the responses based on their working experience, which most of the respondents
were considered experienced practitioners.
Working Experience
141
21
less than 5 years
5-10 years
16
Over 10 years
23
10
15
20
25
Number of respondents
Figure 6.4: Working Experience of Respondents
6.2.5
Project Involvement of Organisation
Figure 6.5 illustrated types of the project mostly completed by the contractors
and developers. Residential projects were the most common project undertaken by
the contractors and developers. It consisted of 61% or 37 from the total 60
respondents. Besides, the rest were commercial projects (15%), transportation
projects (7%), industrial projects (6%) and others (2%). A question on the project
involvement was needed to know the background of the projects toward the dispute
resolution practice. It justified that the most respondents were working with
organizations that normally involved in building projects.
142
6, 10%
1, 2%
7, 12%
Residential Project
Commercial Project
Industrial Project
Transportation Project
9, 15%
37, 61%
Others
Figure 6.5: Project involvement of organizations
Subsequently, most of the projects were funded by the private sector. It

comprised 67% of the total. Meanwhile, 25% of the projects were governmentfunded project and another 8% were joint venture basis between the government and
private sector as illustrated in Figure 6.6. It showed that the result of questionnaire
was consistent or compatible with the Malaysian scenario, which most of the projects
were funded by private sector.
5, 8%
15, 25%
Private sector
Government
Joint venture
40, 67%
Figure 6.6: Sources of project funding
143
6.2.6
Conflicts and Disputes Involved
Conflict and dispute were studied in the survey to understand the frequency
of the cases involved in the industry as shown in Table 6.1. A majority of the
respondents (63%) expressed an average of 1-5 cases of conflict in a project, while
only 5 respondents (8%) indicated zero such cases. Besides, about 53% of the 60
respondents did not involve in any dispute cases. However, there are 35% of the
respondents indicated an average of 1-5 cases of dispute involved in the organization
annually. The result indicated that conflicts are very common in a project, while
disputes are infrequent. This can be justified that the disputes only occurred when the
conflicts failed to be managed based on literature.
Table 6.1: Conflict cases in a project and dispute cases involved annually
Number of Cases
Frequency
Percentage
Conflict
Dispute
Conflict
Dispute
Nil
32
8.33%
53.33%
1-5
6-10
> 10
TOTAL
38
8
9
60
21
6
1
60
63.33%
13.33%
15.00%
100%
35.00%
10.00%
1.66%
100%
6.2.7
Factors Affecting the Selection of Dispute Resolution Methods
In this section, the central limit theorem was applied to model the sample
mean (Mann, 2005). According to this theorem, the mean of the sample size is equal
to the mean of the population, where x . The samples approach to normal
distribution. Table 6.2 examined the extent to which factors to be considered by the
respondents in selecting the dispute resolution methods, sorted according to the mean
rank (R). Standard deviation (SD) of the data set shows the results are close to mean.
144
The highest rank was the factor related to negotiation and mediation, i.e., fair
treatment of both parties during the negotiation process prior to any official hearing
and ruling. The second highest mean was 3.88, which was contributed by expert
judgment in construction of those involved in the process (Adj & Arb) and the
parties are free to look for other dispute resolution methods (without legal liability) if
they are not satisfied with the result (Neg & Med). However, the lowest rank (3.30)
was improvement of cash flow, as referring to adjudication. This is probably due to
the pending implementation of adjudication in the industry.
Table 6.2: Factors of selecting dispute resolution methods ranked by mean score
Item
4
21
5
12
7
15
25
3
23
9
8
20
24
17
10
1
13
Factors to be considered while choosing the

dispute resolution methods
Fair treatment of both parties during the
negotiation process prior to any official
hearing and ruling (Neg & Med)
Expert judgment in construction of those
involved in the process (Adj & Arb)
The parties are free to look for other dispute
resolution methods (without legal liability) if
they are not satisfied with the result(Neg &
Med)
Flexibility of the process (Neg & Med)
Speedy of the process (Neg, Med & Adj)
Providing a qualified, neutral expert to hear
complex matter (Med, Adj & Arb)
Ability to appeal if not satisfy with the result
(Adj, Arb & Lit)
Helping the parties to understand each other
demands (Neg & Med)
Enforceability of the decision (Adj, Arb & Lit)
Preservation of relationship (Neg, Med & Adj)
Economical (Neg, Med & Adj)
Privacy of the process are protected (Adj &
Arb)
Bindingness of the decision (Adj, Arb & Lit)
Confidentiality of the process (Adj & Arb)
Resolving the dispute without involving legal
profession (Neg, Med & Adj)
Non complex dispute (Neg &, Med)
Providing the parties with the relevant
information background in the process for
consensus agreement (Med)
SD
Pvalue
3.98
0.70
0.16
3.88
0.61
0.48
Mean
R
1
2
3
3.88
0.69
0.08
3.83
3.83
0.76
0.78
0.10
0.19
3.82
0.79
0.21
3.77
0.81
0.25
3.75
0.73
0.35
3.70
3.68
3.68
0.81
0.77
0.85
0.09
0.22
0.35
3.68
0.87
0.74
3.67
3.67
0.75
0.91
0.33
0.59
3.67
0.75
0.45
3.63
1.04
0.18
3.60
0.76
0.18
4
5
6
7
8
9
10
11
12
13
14
15
16
17
145
Item
11
19
2
26
27
6
14
18
22
16
Factors to be considered while choosing the

dispute resolution methods
Meeting the budget and schedule of the
process (Neg, Med & Adj)
Finality of the settlement (Adj & Arb)
Controlling of the process by the parties (Neg
& Med)
Long period of the process (Arb & Lit)
Formality of the process (Arb & Lit)
Voluntary process (Neg & Med)
Third party helps to negotiate and narrow
down the issues (Med & Adj)
Saving in trial expenses (Adj & Arb)
Complex dispute (Adj, Arb &Lit)
Improvement of cash flow (Adj)
SD
Pvalue
3.58
0.77
0.53
3.57
0.83
0.23
3.57
1.01
0.24
3.53
3.53
3.53
0.77
0.79
0.81
0.54
0.99
0.27
3.48
0.77
0.26
3.47
3.45
3.30
0.93
0.79
0.98
0.62
0.11
0.55
Mean
R
18
19
20
21
22
23
24
25
26
27
P-value of Kruskal-Wallis was included in the analysis to test the null

hypothesis that the means of the contractors and developers are equal versus the
alternative hypothesis that their means are not equal. The nonparametric KruskalWallis test was selected because the result was a rank from the mean score and the
uneven sample size of developers and contractors. The test compared the mean ranks
to identify any statistically significant differences between the two groups. Thus, the
Kruskal-Wallis test indicated that the means of the two groups are equal regarding
the factors as all the variables P (sig) value larger than the critical value of
significance 0.05. In other words, they have same viewpoint of agreement for the
factors, according to statistical analysis.
Besides, a reliability test was performed to assess the consistency of results

across the factors. Hence Cronbachs Alpha method was applied in this case to
understand whether the data provide a good support for internal consistency
reliability. The Reliability Statistic showed the Cronbachs Alpha value 0.833 from
the correlation among the 27 factors. This value is larger than 0.70, which presents a
great support for the consistency of the results (Morgan et al., 2007).
146
6.3
Factor Analysis
The mean score and Factor Analysis were adopted to identify the factors. The
mean rank was to understand the arithmetic average of the distribution while the
Factor Analysis was to find the latent factors to be considered in this research. The
Factor Analysis is important as to further clarify the data analysis from the mean
score. Meanwhile, it helped to reduce and extract the essential factors affecting the
selection of dispute resolution methods. SPSS program was used to perform the data
analysis of the research.
PCA was chosen as a method of data reduction towards the 27 factors using
the SPSS program. All the means, which were more than 3.00 and close to each other,
were skewed toward agree category; therefore, the extracted factors are significant
in this study. It can be used to represent the latent factors within the various variables
based on their similar characteristics (Hsia et al., 2009). Two statistical tests are
required to perform prior to this PCA such as Kaiser-Meyer-Olkin (KMO) and
Bartletts test of sphericity. The KMO test is to indicate whether the sample size used
for analysis is sufficient, while the Barletts test is to assess whether factor analysis
could be performed.
The KMO value was 0.620, substantially exceeding the recommended value
of 0.6 (Kaiser, 1974 as cited in Bradbury et al., 2009), while the Bartletts test was
657.030 with significance 0.000, which is less than 0.05. Hence, the data set is valid
and supported the suitability of PCA.
In this study, finding the latent factors or the number of factors to be retained
is a critical issue. Yet, there is no 100% foolproof statistical test or unique way to
determine the number of factors to be retained (Cudeck and MacCallum, 2007).
Therefore, a few sources of reference are considered such as Kaiser Criterion, ScreePlot and theoretical consideration of the PCA. The Kaiser Criterion was used to drop
147
all the factors with eigenvalues below 1. Therefore, there are 10 Components found
in the Factor Analysis as shown in Table 6.3.
Table 6.3: Extracted Components based on Eigenvalues

Initial Eigenvalues
Component
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Total
5.639
3.226
2.106
1.733
1.518
1.372
1.319
1.186
1.118
1.023
.875
.762
.738
.584
.567
.486
.419
.413
.331
.310
.267
.238
.206
.173
.162
.141
.087
% of Variance
20.886
11.949
7.801
6.417
5.623
5.080
4.885
4.392
4.142
3.789
3.243
2.824
2.733
2.163
2.100
1.800
1.553
1.528
1.225
1.148
.988
.882
.761
.641
.600
.522
.324
Cumulative %
20.886
32.834
40.636
47.053
52.676
57.756
62.642
67.033
71.176
74.965
78.207
81.031
83.764
85.927
88.027
89.827
91.381
92.908
94.133
95.281
96.269
97.151
97.912
98.554
99.154
99.676
100.000
Next, the Scree-Plot test was done along with theoretical consideration of
factors with eigenvalues more than 1 and with at least 1 pair variables. Subsequently,
the Scree-Plot made a cut-off point after Component 7 using the rule of thumb that
plotted the eigenvalues in the decreasing order to obtain the scree as illustrated in
Figure 6.7.
148
Eigenvalue
Omitting Point
2
0
1
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Component Number
Figure 6.7: Scree Plot
Meanwhile, the theoretical consideration excluded the Components that

accounted for little variance, i.e., the Components 8, 9 and 10, which consisted of
one item as to this research consideration of extracting the latent factors that
affecting the selection of dispute resolution methods.
As a result, 21 of the original 27 items are loaded into 7 Factors after

VARIMAX rotation as shown in Table 6.4.
149
Table 6.4: Rotated component matrix - VARIMAX with Kaiser Normalisation
Item
4
11
20
7
10
18
16
9
3
13
6
27
19
17
24
25
23
14
15
21
26
1
0.75
0.71
0.58
0.54
0.54
0.03
0.11
0.09
0.31
0.09
0.11
-0.08
-0.02
0.32
0.00
0.07
0.00
0.04
0.41
0.06
0.15
2
-0.06
0.23
0.15
0.22
-0.02
0.87
0.86
0.55
0.06
0.10
0.17
-0.08
0.11
0.12
-0.02
0.03
-0.16
-0.01
0.07
0.07
-0.10
3
0.20
0.20
-0.02
0.43
0.00
0.07
0.04
0.45
0.77
0.70
0.68
0.19
-0.08
-0.23
0.00
0.00
0.24
0.16
0.09
0.15
0.02
Factor
4
0.00
-0.19
0.45
-0.03
0.04
0.01
0.03
-0.04
0.04
0.03
0.08
0.85
0.71
0.52
0.01
0.18
0.49
0.01
0.21
0.15
0.13
5
0.10
-0.12
0.20
-0.02
0.06
-0.07
0.04
0.07
-0.01
0.32
-0.16
0.07
0.11
0.09
0.82
0.77
0.52
0.19
-0.05
0.07
0.03
6
0.22
-0.21
0.19
0.17
0.17
-0.02
0.12
-0.26
0.00
0.16
0.29
0.15
0.01
-0.25
0.16
-0.08
0.21
0.79
0.68
0.05
0.31
7
-0.01
0.15
-0.01
0.07
0.29
0.12
-0.01
-0.14
0.21
0.38
-0.24
0.01
0.38
0.01
0.16
-0.01
-0.14
0.20
0.02
0.86
0.61
The extracted factors accounted for 77.8% of the variance. The seven Factors
can be classified based on their similar characteristics as below:
Factor 1: Process of proceedings (Item 4, 7, 10, 11, & 20)
Factor 2: Outcome of ADR (Item 9, 16, & 18)
Factor 3: Informal method of proceedings (Item 3, 6, & 13)
Factor 4: Traditional approach of proceedings (Item 17, 19, & 27)
Factor 5: Effect of proceedings (Item 23, 24, & 25)
Factor 6: Expert ruling (Item 14 & 15)
Factor 7: Reliable decision (Item 21 & 26)
After the classification, the Factors were ranked by using the factor Scale
Rating (SR) (Cheung, 1999). It is to understand the viewpoint of the respondents
150
based on mean scale rating and the formula is as follow:
Fi (SR)
A(SR)
j1
ij
Where,
Fi (SR) is the factor score based on scale rating and A (SR) ij is the mean scale rating
of the j-th. For instance,
Factor 1 = (Mean of the items) / number of items
= (3.98+3.58+3.68+3.83+3.67) / 5
= 3.748
The Factor Scale Rating of the seven Factors is listed at Table 6.5. The factor
ranking scores indicated that the users were greatly concerned about the process of
proceedings, which graded at the first ranking. The process covered all the dispute
resolution methods except litigation. These proceedings, without interference by the
legal profession, highlight the attributes for meeting out fair treatment, meeting the
budget and schedule, and privacy. The second highest Factor was the effect of
proceedings. It related to binding, enforceability as well as the ability to appeal
against the proceedings. The factors lying in the middle range of importance were
reliable decision, expert ruling, and informal method of proceedings. The last two
Factors perceived as of lesser importance were the traditional approach of
proceedings and outcome of ADR. The Factor Analysis showed another perspective
of the results compare to mean score after the rotation. The rotation does not change
the raw data, but makes the interpretation of the analysis easier. It can be concluded
that the seven Factors are the aspects to be considered in selecting the methods.
151
Table 6.5: Ranking of Factor Scale Rating
Factor
1
2
3
4
5
6
7
6.4
Description
Factor
Scale
Rating
Process of proceedings 3.748
Outcome of ADR
3.483
Informal method of
3.627
proceedings
Traditional approach
3.590
of proceedings
Effect of proceedings
3.713
Expert ruling
3.650
Reliable decision
3.705
Ranking
1
7
5
6
2
4
3
Discussion
The respondents evinced keen interest in the ADR methods based on the
mean score analysis. Four of the top 5 factors were associated with negotiation and
mediation. The factors discussed were fair treatment, voluntary, flexibility and speed
of the proceedings. The respondents ranked it as top priority in the selection of a
dispute resolution method. On the contrary, Factor Analysis has further clarified that
the ADR methods are regarded as important in the process of proceedings (Factor 1),
rather than the outcome of ADR (Factor 2). This is an obvious contradiction result
generated by the Factor Analysis on the ADR methods, which the Factor 1 is mostly
consisted of the ADR methods. It could be explained by looking at the factors that
derived from the outcome of ADR. The factors are towards the attributes of
adjudication, which the method is yet launched officially in the local industry. It
would cause the low appreciation on the true benefits of ADR and probably
contribute to the lack practice of the ADR in local industry. Most likely, this scenario
is caused by the uncertainties result and bindingness of the ADR in nature.
152
This apart, the factors associated with arbitration and litigation were ranked
lower than the ADR. However, the methods were accepted by the respondents one
way or another; for instance, the lowest mean score among them was 3.45, which
was still classified in the agree category according to the likert scale. In all
likelihood, the respondents had understood and appreciated the features of these
methods. Factor Analysis also supports this likely situation, as most of the factors
related to the characteristics of arbitration and litigation are ranked higher after the
Factor Scale Rating, for instance, the Factors 5, 6 and 7. Further, the lowest mean
score for the improvement of cash flow as well as the Factor 7: outcome of ADR
were most probably caused by the pending implementation of adjudication in the
construction industry.
As noted, the features of dispute resolution methods are shared among each
other in a factor. It might have several dispute resolution methods in a single factor in
selection of dispute resolution method. Hence it is vital to have a clarification of the
results as well for the future reference concerned. It could be clarified by taking into
consideration of the two main aspects of the research such as, stages of dispute
resolution and Factor Analysis. The Factor Analysis has extracted the latent factors
and loaded into 7 Factors, which able to render a better interpretation and more
understandable results. While, the stages of dispute resolution could assist decision
makers to select the least confrontation method in term of time, cost, controversy and
adversary.
6.5
Concluding Remarks
All dispute resolution methods have pros and cons. The features of dispute
resolution methods grouped and discussed together into a factor have achieved the
second objective. The results have addressed the behaviour of the dispute resolution
methods, where the negotiation and mediation are the preferred option by the
153
respondents. Adjudication is rated unpopular by the respondents compared to other
ADR methods. While, the arbitration and litigation are somewhat accepted by the
respondents as the methods are well established and familiar in the industry. The
findings of the Factor Analysis also revealed that the process of proceedings is the
first criteria in selection of dispute resolution methods, while the outcome of ADR is
not a major concern of the selection. It indicated that the appreciation of the true
benefits of the ADR is very low. Hence the selection of ADR or non-ADR itself is
not the major issue; rather, the increased efficiency and appreciation of the methods
in the construction industry are more demanding. Ultimately, the second research
objective was achieved and highlighted the need to have an alternative means of
contract administration, namely eDR to facilitate the conflicts or disputes since the
low appreciation toward the true outcomes of the dispute resolution.
154
CHAPTER 7
DEVELOPMENT OF E-DISPUTE RESOLUTION MODEL
7.1
Introduction
Model is a valuable tool in communicating a process requirement between the

entities. DFD is selected for the eDR model development. The eDR model is
developed by two sub-models, i.e., content of the eDR and online portal of the eDR.
The model for the content of eDR describes how the clarified references/guidelines
are produced to end-users, while the subsequent model explains how the clarified
references/guidelines to be referred and retrieved by the end-users from the online
portal of eDR. These models were explained and reviewed by the experts before the
Delphi process. The experts have agreed and commented on the models that showed
below. Ultimately, this eDR renders a generic approach on how to prevent/mitigate
contractual issues and applies the IT advancement, which ready to be served in the
155
7.2
Model Development
A good system supplies useful information and data for users to make
decisions or references. The model on eDR consists of two sub-models to deliver the
contents and features. Figure 7.1 illustrates the eDR model development.
The first model demonstrates how to produce a clarified, organised and

reliable source of references regarding the contractual obligations and expectations.
It discusses the processes involved in the content development. Leading court cases
and involvement of the local experts are important input in the eDR. Besides, the
project characteristics, breakdown of contractual issues, and contract provisions need
to be clarified in order to deliver indented messages. The focus of the model is on
explaining the sequence and process required.
On the other hand, the second model describes the features required in the
eDR. The online portal is the final and complete system that would be achieved in
this eDR model. The online portal consists of three main features such as keywords
searching, dispute sub-categories (breakdown of issue), and forum for comments or
discussion. It is designed in a simple way to ease searching and feedback by users.
Eventually, the system is aimed to render a self-examination and proactive approach
in contract administration towards dispute resolution or prevention, whereby the
clarified references/guidelines are referred and retrieved by end-users.
156
eDR Model
Development
Model on the content
- Project characteristics
- Breakdown of
contractual issues
- Contract provisions
- Leading court cases
- Involvement of local
experts
Model on the features
- Project characteristics
- Keywords searching
- Breakdown of subcategories
- Updating or storing (if
any)
- Exchange of information
(forum for comments)
Figure 7.1: eDR model development on the contents and features
7.3
DFD on eDR
The context diagram is the highest level of diagram in the set of DFD which
reveals an external picture and overall function of an information system (Tam et al.,
2001). The next level is Level-0 DFD, which it is made up of a number of processes
from the main activity in the Context Diagram. The following is Level-1 DFD, which
decomposes from a parent process in the Level-0 DFD. The splitting of DFD
diagrams presents better visualisation of the model as illustrated Figure 7.2.
157
Context Diagram
0
Level-0 DFD
1.0
2.0
3.0
Level-1 DFD
3.1
3.2
3.3
Figure 7.2: Splitting of DFD diagrams
7.4
The Context Diagram of the eDR model is illustrated in Figure 7.3. This level
is an overall picture of the process flow model and briefly illustrates how the
clarified references/guidelines are produced. The activity numbering 0 is the only
process involved in the Context Diagram, i.e., mitigating/preventing the contractual
issue systematically and proactively.
158
DISPUTES
Contractual issue
Mitigate/
prevent the
issue
systematically
and
proactively
Clarified
references/guidelines
END-USERS
Figure 7.3: Context Diagram of eDR
7.5
Level-0 DFD of eDR
The Level-0 DFD is a child diagram from the Context Diagram. It is the most
comprehensive data that presented in this model. This Level-0 DFD of the model
indicates detailed information on how the processes involved as illustrated in Figure
7.4.
The first activity is to classify the project characteristics and contractual issue.
There are two information flows into the project database. The first stores the new or
additional data from a new case, while the second is a database that contains previous
project particulars. This project database is vital as different project characteristics
would have different effects and implications on the contractual issue. The project
particulars could be classified as project type, contract procurement system,
procurement method, project scale and standard form of contract.
Meanwhile, the contractual issues can be categorized into three main stages.
They are pre-contract award stage (seven areas), construction or commencement of
work stage (twenty three areas), and post-commencement stage (nine areas). These
159
work stages are organized in such a way to make clear the contractual activities that
involved by the principal contracting parties.
The second activity is to identify the relevant contract clauses related to the
targeted issue. The relevant contract provisions will be identified from the contract
form (D2). The targeted issue is classified according to the project particulars under
the first activity of selecting the contract form. The issue will be referred to the main
clause and its sub-clauses. In the meantime, other related clauses will be studied to
have a wider view of the expressed contractual obligations and expectations. All the
related clauses will be combined and cross-referred. The principle of read and
interpret as a whole is applied to produce contract provisions regarding the targeted
issue.
The third activity is related to the enhanced information on contract

provisions under the contract. It is important to consider some background data and
legal principles in order to achieve a comprehensive reference and details related to
the contract provisions. The latest leading court cases and literatures (D3) are the
main sources for this exercise. For example, court cases provide the common law
principles and legal positions for a particular issue, while literature sources help in
organising and recognising the characteristics of the issue from different perspectives.
If necessary, the content of each clause may be reverted to the second process if there
is extra information generated after investigating literature and court cases.
Activity number four involved the comprehensive details that must be

clarified due to the weak understanding and poor interpretation of the issues in the
industry. The use of Plain English is to be adopted to provide a clear meaning of its
content so that they are simple and easy to understand (Chong and Zin, 2010). After
the clarifying process, the draft references/guidelines will be produced.
160
The activity numbering 5.0 is the last process of the conceptual model of eDR.
It is the most important process because it is the centre of the quality system which
provides useful information and references to end-users. Therefore, the Delphi
approach has been incorporated under this process to denote a consensus result from
a mixture of experts. Construction industry is unique and adversarial in nature and
this consensus is vital especially when dealing with conflicts or disputes. After the
verification and commentary, the clarified references/guidelines will serve as a
preliminary reference or to alert the end-users. The verification process by the
experts is not only confined to language structure but also to the meaning and certain
legal intents of the contents.
161
DISPUTES
Contractual issue
New cases (if any)
1.0
D1
Project database
Previous cases
Classify the
project
characteristics
and
contractual
issue
Feedback/data refinement (if any)
Targeted issue
2.0
D2
Standard Form
Contract clauses
Identify the
relevant
contract
clauses
Extra info (if any)
Contract provisions
3.0
D3
Literature & court cases

Background data and
legal principles
Investigate
and organise
the provisions
in detail
Comprehensive details
4.0
D4
Clarity references
Clarity aspects
Clarify the
content for
the ease of
understanding
Drafted references/guidelines
5.0
Verify and
comment the
references by
mixture of
experts for
the consensus
Clarified references/guidelines
END-USERS
Figure 7.4: Level-0 DFD of eDR
162
7.6
Level-1 DFD of eDR
The Level-1 DFD is a child diagram from a process in the Level-0 DFD. It
has further discussed on the development of eDR.
7.6.1
Activity 1.0
Figure7.5 illustrates how the process activity 1.0 has been split up to be
functioned in the model. It is about classifying the project characteristics and
contractual issue. Firstly, the contractual issue will be classified and organised.
Project database (D1) is referred to locate any similar cases or issues for the same
type of project. New case will be stored into the database if no previous case is
located. After that, the project characteristics will be categorised and organised as:
Type of project (building construction, road construction, etc)
Contract or procurement system (lump sum contracts, cost

reimbursement, etc)
Procurement method (traditional, design and build, etc)
Standard form of contract (international or local contract form, e.g.

Joints Contract Tribunal (JCT), PAM 2006, CIDB 2000, etc)
As a result, the project particulars are classified as to the contractual issue.

The classification is important as the project particulars are linked with all the
subsequent main activities that would be carried out in the model.
163
Contractual issue
New cases (if any)
1.1
D1
Project database
Previous cases
Classify and
organise the
issue based
on project
characteristics
Project particulars
1.3
Check for the
pre-contract
award stage
1.4
Check the
construction/
commenceme
nt of work
stage
1.5
Check the
postcommenceme
nt stage
Related issues
1.6
Identify the
main
contractual
issue from the
related issues
Targeted issue
Figure 7.5: Level-1 DFD of eDR Activity 1.0
Subsequently, the next activities numbering 1.3, 1.4 and 1.5 are in a parallel
process. The classified project principles will be checked by these three activities to
identify all related issues for this dispute. The project particulars would help in
sorting out the issues, especially the standard form of contract and procurement
method in the project. Cross reference is needed between the three work stages in
order to search all the related issues, i.e., pre-contract stage, construction or
commencement of work stage and post commencement stage. All the possible
contractual issues are allocated in these three work stages as shown in Table 7.1.
164
Table 7.1: Contractual issues in the three work stages
Pre-contract
award stage
SEVEN areas:
1. Estimating and
pricing
2. Design
information
3. Insurances
4. Performance
bond
submission
5. Site possession
6. Tender
documentation
and
requirements
7. Work
pragramme
Construction or commencement of
work stage
TWENTY THREE areas:
1. Accessing to site
2. Compensation/loss and expenses
3. Default on notice
4. Delay and extension of time
5. Discrepancy and inconsistency of
information
6. Fluctuation of price
7. Interference/problem by
subcontractors and suppliers
8. Interference/problem by professionals
9. Interim payment
10. Partial possession
11. Period of honouring certificates
12. Postponement or suspension of work
13. Practical completion
14. Quality of workmanship
15. Set off by employer
16. Site and nature of work
17. Standard and quality of material
18. Statutory obligations
19. Supply difficulties
20. Testing and inspection
21. Valuation and measurement (work
done)
22. Contractual Variations
23. Weather
Post-commencement
stage
NINE areas:
1. Defect liability
period
2. Defects
3. Determination
4. Dispute
resolution
5. Final
account
and certificate
6. Liquidated
damages
7. Outstanding
claim and set off
8. Retention monies
or fund
9. Unresolved
variations
The last sub-activity 1.0 is to identify the main contractual issues from all the
related issues. A detailed examination is required to prioritise the weightage of the
related issues. As a result, a targeted issue will be identified for the subsequent
activity 2.0.
165
7.6.2
Activity 2.0
The targeted issue will be referred to contract provisions in this process as

illustrated in Figure 7.6. The first activity numbering 2.1 is to select an appropriate
contract form to the project, which involved three movements of info such as
targeted issue from precedent activity, contract clause from the standard form, and
extra information from the activity 3.0. The information is inter-connected in order to
generate the contract provisions at the end of the activity 2.0.
After selecting the contract form, the issue will be referred to the main clause
and its sub-clauses. In the meantime, other related clauses will be studied to have a
wider view on the expressed contractual obligations and expectations. Subsequently,
all the related clauses will be combined and cross referred. The principle of read and
interpret as whole is applied to produce the contract provisions regarding the targeted
issue.
166
Targeted issue
2.1
D2
Standard Form
Select the
contract form
that used in
the project
Contract clauses
Extra info (if any)
Contract form
2.2
2.3
Refer the
main clause
and subclauses for
the issue
Refer other
related
clauses that
related to the
issue
Related clauses
2.4
Combine and
cross
reference for
the contract
provisions
Contract provisions
7.6.3
Activity 3.0
Three activities are discussed in the activity 3.0 as illustrated in Figure 7.7.
The first activity is to investigate the contract provisions with literature materials.
Background information will be sought to understand the characteristics of the issue.
For example, one of the contractual issues mentioned in activity 1.4, i.e., variations
and changes under PAM 2006 (with quantities) contract form. After a detailed
literature study from database D3 (journals, articles and books), the issue can
167
breakdown into few categories and sub-categories. The breakdown of the
characteristics of the issue is as shown in Table 7.2. The four main issues are
issuance of variations, validity of variations, valuation of variations and additional
expenses
and
subsequent
circumstances
caused
by
variations.
List
of
references/guidelines will be produced for the breakdown elements after going

through the activity 3.2 and 3.3.
Table 7.2: Breakdown of characteristics of contractual variations

Item.
1
Characteristics
1
Issuance of variations
1.1 Authorised person and power

1.2 Period of issuance
1.3 Provisional items
2
2 Validity of variations
2.1 Written instruction
2.2 Definition/principle of variations
2.3 Addition
2.4 Omission
2.5 Substitution
2.6 Alteration of kind or standard of materials or goods
2.7 Removal of executed works, materials and goods
2.8 Changes to the provisions in the contract
3 Valuation rules of variations

3.1 General principles
3.2 Rule 1 of contracts rates and prices
3.3 Rule 2 of fair adjustment
3.4 Rule 3 of fair market rates and prices
3.5 Rule 4 of daywork rates
3.6 Rule 5 of omitted work
3.7 Rule 6 of Re-measurement on actual quantities (provisional quantities)
Additional expenses and subsequent circumstance caused by

variations
168
Activity 3.2 is a complicated process. It is because this activity alone could be
a main source of reference especially for law related research. Therefore, the scope
of study is limited in this applied social science research, which is constrained to the
found contract provisions in the earlier process. The court cases or statutes merely
support or enhance the content of the contract provisions. The investigation of the
court cases could be derived from database D3 either from local cases (Malayan law
journal) or international cases from United Kingdom, Singapore, Australia, etc.
Meanwhile, the applicable statues or other laws consist of Contract Act 1950,
Arbitration Act 2005, Law of Tort, Land Law and other relevant law. The common
law and legal principles will be produced from the court cases and statues.
Subsequently, the common law and legal principles will be organised to

supplement the detail of the contract provisions. The comprehensive references and
details for the particular contractual issue will be produced.
169
Contract provisions
3.1
D3
Literature & court cases

Background data
Investigate
the provisions
with literature
materials
Characteristics of the issue

3.2
Investigate
with leading
court cases or
relevant law
or statutes (if
any)
Construction law
Common law and legal principles

3.3
Organise the
data gathered
from both
sources to
supplement
the detail
Comprehensive references
7.6.4
Activity 4.0
In activity 4.1, the comprehensive references are checked by the aspects of

clarity and legalese in the language structure (refer to Table 3.7 and 3.8). If the
references consist of several sentences, it will be checked in a sentence by sentence
basis. The process is to identify any clarity aspects and legalese problems that need
to be considered in the references. Consequently, the language structure problems
will be indicated.
170
The next activity is to improve and clarify the language structure problems
using Plain English. Database D4 (refer to Table 3.9) is referred, which a list of
clarity aspects. It is to determine which type of measure would be applied on it. More
importantly, the clarifying process must
obligations/legal
intent
laid
in
the
not jeopardize any contractual
contract.
Eventually,
references/guidelines will be produced as illustrated in Figure 7.8.
Comprehensive references
4.1
Check the
problems of
clarity and
legalese
Language structure problems

4.2
D4
Clarity references
Clarity aspects
Improve and
clarify the
language
structure
using Plain
English
the
drafted
171
7.6.5
Activity 5.0
Figure 7.9 illustrates the last procedure in developing the content of eDR. The
procedure links with the Delphi method, which is to elicit experts knowledge for a
consensus result. In activity 5.1, the drafted references/guidelines will be verified by
the experts for two aspects. The first aspect is to verify the clarified sentences for its
intended meanings, while the second is to make sure the legal intents or obligations
still exist in the references. After the process, the experts will comment and respond
to the verified contents. Feedbacks or refinements may be raised by the experts and it
will be reverted back to the earlier process. Nevertheless, there will be at least two
rounds of interaction with the experts to allow the experts to modify or revise their
opinions after the verification and feedback.
The last process is to determine the consensus value using appropriate

research approach. The consensus value can be calculated using the statistically
analysis. Eventually, the clarified references/guidelines will be produced to the endusers.
172
5.1
Verify the
meanings and
legal intents
by mixture of
experts
Verified contents
5.2
Comment and
respond to the
verified
contents by
the experts
Feedback/data refinement (if any)
Results
5.3
Determine the
consensus
using an
appropriate
research
approach
END-USERS
7.7
Online Portal of eDR
The clarified references or guidelines are the sources for the online portal of
the eDR. It discusses how the online system associated with the outcome of the eDR.
The online portal consists of three main features such as keywords searching, dispute
sub-categories (breakdown of issue), and forum for comments or discussion.
173
7.7.1
Context Diagram
DFD method is adopted to elaborate the process involved in the system,

which it is ready to be developed by the IT programmer. Figure 7.10 illustrates the
main process in development of the online portal. It is to search and refer to the
clarified and organised references/guidelines by the end-users.
0
DISPUTES
Contractual issue
Search and
refer to the
clarified and
organised
references/
guidelines
Sorted
references/guidelines
END-USERS
Comments/discussion
Figure 7.10: Context Diagram of online portal
7.7.2
Level-0 DFD
Level-0 DFD is a child diagram from the Context Diagram as illustrated in

Figure 7.11. A contractual issue is extracted from disputes. The issue will be
classified according to the project particulars. Project database (D1) is referred to
provide a list of choices for the selection. The choices are listed from the five main
elements of the project, i.e., project type, contract procurement system, procurement
method and standard form of contract. Then, the specified particulars of the project
will be produced.
174
The next process is to target a main issue from contractual issues database
(D2). All the contractual issues are store in the three work stages of the database. The
issue can be retrieved via searching the keywords or by selecting the concerned issue
from issues breakdown. A targeted issue will be obtained.
Subsequently, the targeted issue will be further examined based on the

characteristics of the issue. It is to investigate and find out the root cause of the main
issue. For instance, a sub-topic that could be selected from any of the four elements
of contractual variations that discussed in Table 7.3.
The
last
process
is
to
select
the
dispute
root
cause
for
the
references/guidelines. The eDR database is set up to store all the clarified

references/guidelines elicited from the experts. The database performs two functions.
Primarily, it is to provide the consensus data by the experts based on the issues root
causes. Meanwhile, the next function is to keep all the comments/discussion by the
end-users regarding to the particular issue or its sub-topics. It will serve as a forum of
discussion to the end-users for exchanging and sharing of information.
175
DISPUTES
Contractual issue
1.0
D1
Project database
Choices of project particulars
Select the
project
particulars
Specified particulars
2.0
D2
Contractual issues
Three work stages - issues
Search the
contractual
issue via
keywords or
issues
breakdown
Targeted issue
3.0
Sort and
examine for
the subtopics/root
cause from
the issue
Breakdown of the issue
4.0
D3
eDR database
Consensus data by the experts
Select the
dispute cause
for reference/
guidelines
Comments/discussion
END-USERS
Figure 7.11: Level-0 DFD of eDR online portal
176
7.8
Discussion
Two models were successfully developed using DFD. The first model
describes how to build up the contents of the eDR, while the second explains how the
clarified references/guidelines to be referred by end-users through the online portal.
These model are discussed separately instead of having a single one because to
provide a better understanding on the eDR. The models need to be referred together
when setting up a complete eDR system.
Certain limitations need to be considered in the eDR models. The models are
designed based on Malaysian scenario for the culture, working environment and
legal system. For overseas practice, it needs to be considered the cultural differences
and legal system of their countries. Nevertheless, the eDR models can be used as a
point of reference by other countries as it provides a generic approach on how to
mitigate/prevent contractual issues.
Besides, the issue on the need of an administrator to monitor the online

system is not a major concern if the eDR system has properly designed and
developed. It is because the eDR is not a decision making tool, rather it is to render a
reference/guideline to contractual issues encountered by the end-users.
In summary, the models highlight another perspective of applied social

science research which accommodates the Delphi and law in construction. It could
also serve as a template for other related construction law research.
177
7.9
Concluding Remarks
The chapter highlights the potential improvement on dispute resolution and

contract administration. The eDR model renders a generic approach on the
contractual issues, even though certain parts of model (Level-1 DFD) focus on
contractual variations as a research subject. The fifth objective was achieved from
the developed eDR model. The ideas of model development are derived from the
previous studies, semi-structured interview, and results of questionnaire survey. It
was also further verified and commented by the local experts during the Delphi study.
The models provide a useful reference or proactive approach to the prevention or
mitigation in contract administration and dispute resolution towards end-users in the
CHAPTER 8
APPLICATION OF EDR ON CONTRACTUAL VARIATIONS AND

PROTOTYPE DEVELOPMENT
8.1
Introduction
This chapter discusses application of the eDR on the contractual variations

from the innovated DwF method. The details of the DwF method are discussed in the
chapter. Besides, the variation issues are selected because the topic has not been
tested or studied using the Delphi method based on the literature review as
highlighted in the Scope of Research. The topic concentrates on the PAM 2006
contract form. It is the main reference of the contract provisions regarding the
contractual variations. Twelve experts has participated and contributed their
knowledge on the contractual variations based on PAM 2006. The results were
analysed using geometric mean. As a result, the analysed data are served as the raw
data in the eDR prototype development.
179
8.2
Delphi with Fuzzy (DwF)
The traditional Delphi method and the FDM have different features of
implementation as highlighted from Chapter 5. The difference mainly caused by the
one round of investigation using the geometric mean. This issue needs to be
addressed, as two of the defining features are absent in the Delphi process, i.e.,
feedback and answer revision by the experts. Although the FDM highlights its
features to overcome some of the weaknesses in the traditional Delphi, it is vital to
reconsider the defining features of the traditional Delphi so that the true values of the
Delphi would not go in vain. It is because the new information and / or view
refinement along the Delphi process would probably be ignored in the FDM.
The eDR requires important input by the local experts. Therefore, an

innovative approach is proposed after the detailed investigation on Traditional Delphi
and FDM. The proposed research approach is designed to suit the researchs need
and named as Delphi with Fuzzy (DwF). It is a cross mutation of the Traditional
Delphi and works together with Fuzzy Delphi method. Table 8.1 shows the
comparison of the three methods.
Table 8.1: Main elements of existing approaches and DwF

Elements
Traditional Delphi
FDM
DwF
General
Consensus results
Consensus results from
Consensus results from
Principles from experts with
experts with anonymity
experts with anonymity
anonymity are
are derived from fuzzy
are derived from fuzzy
achieved after few
triangle approach
triangle approach (max-
rounds of Delphi or
(max-min fuzzy type)
min fuzzy type) with a
refinement of
with a single round of
maximum two round of
results
Delphi and analysed by
Delphi and analysed by
geometric mean
geometric mean.
180
Elements
Traditional Delphi
FDM
DwF
Strengths
New information
It could improve the
Possibility of new
may be added by
shortcomings of
information raised by
experts
vagueness and
experts is considered in
ambiguousness of
this DwF, and it would
Traditional Delphi due
reduce the ambiguity due
to the differences in the
to differences of experts
interpretations by
by referring to FDM.
having the geometric

mean analysis.
Weakness The process is time
New information may
Extra one more round
es
and cost
be ignored as single
may be needed and
consuming, may
round of Delphi.
possibly the round may
decline the
not significant in the
response rate after
research.
few rounds and low

convergence expert
opinions due to
outlier.
Besides, Table 8.2 shows their different characteristics or features under the
Delphi principles.
Table 8.2: Comparison on different characteristics

Different Characteristics
Traditional
FDM
DwF
Delphi
Number of Rounds
Usually more
1 round
than 2 rounds
Maximum of 2
rounds
Mode of Interaction type of
Could be semi-
Must be
Could be semi-
question
structured
structured
structured
questionnaire
questionnaire
questionnaire
181
Different Characteristics
Traditional
FDM
DwF
Delphi
Opportunity for feedback and
Yes
No
Yes
High
Not at all
Slight
answer modification
Time and cost consuming
possibilities
Declined of response rate
High
possibilities
Not at all
possibilities
Low convergence expert
High
opinions
possibilities
Achievable of Consensus
Easy
Slight
possibilities
Not at all
Slight
possibilities
Easiest
Easier
Results
8.2.1
DwF Framework for eDR
The DwF method was selected in the research after discussion on the pros
and cons of the traditional Delphi method and FDM. The following sections discuss
how the DwF being incorporated into the research to achieve the last objective of this
research, i.e., to develop an application of eDR prototype/system based on
The content of eDR is representing the core of the research. The research
approach towards its content must be well defined and justified in order to have the
quality system. The DwF framework was developed towards the eDR. It is based on
the mutual benefits from traditional Delphi and FDM as illustrated in Figure 8.1.
182
START
Is the selection of the

experts appropriately?
No
Yes
Is anonymity response
from the experts?
No
Yes
Any open-ended
questions (semistructured)?
No
Yes
First round of eliciting of

experts knowledge
Analysing of results using the

geometric mean
Yes
Second and the last

round of eliciting of
experts knowledge
Any feedbacks or
additional information
provided?
No
Yes
No
Verification and possibility

modification of answer by the
experts
Results will be used in the

research after defuzzification
and normalization
Figure 8.1: DwF framework for eDR
END
183
The flowchart diagram above represents a sequence of operations. The DwF
framework would consider the original values of the traditional Delphi and also
address the problems raised from the FDM such as the possibility of new information
and answer modification by the experts. Therefore, the DwF framework is
accommodated with a semi-structured type of question in the Delphi study, which
allows for additional information to be contributed by the experts. It may bring an
extra round in the Delphi process due to the additional information. At the end of the
process, the experts are also given a chance to verify and revise the data.
Meanwhile, the DwF would not tolerate the issues caused by the traditional
Delphi, wherein the time and cost consuming in the process had resulted in a low
convergence of expert opinions. Hence, the fuzzy triangular number with the
geometric mean is applied into the data analysis. It could also make sure that there
are only a maximum of two rounds of investigations in the Delphi study. Using the
geometric mean reduces the ambiguity caused by the differences between experts
opinions and helps to encompass all their opinions in one investigation.
Subsequently, this DwF framework serves as a basis of reference in carrying

out the eDR research, especially on the data collection. Then, the quality of the
content is controlled. The content of the eDR not only provides the neutral and
clarified references or guidelines to the practitioners, but also a reliable source as it
has verified and extracted from the experts views.
In summary, the content of the eDR is elicited and analysed from experts
knowledge. It could be the best practice or idea generated towards the contractual
issues.
184
8.3
Background of Experts
A mixture of experts was interviewed. Three professionals out of each group

of the experts were selected based on their contribution, expertise and reputation in
the construction industry. The group consists of legal professionals, architects,
engineers, and quantity surveyors. All the experts have had more than 20 years of
working experience. They are either directors or partners in their respective
companies and hold a significant position in the concerned professional bodies. In
addition, they have a wide range of expertises in their chosen professions, as shown
in Table 8.3.
In this DwF research, all the experts are freely express their view without any
pressures. It is because they are responded in the anonymous mode.
185
Table 8.3: Background of the experts

Group
Legal
L1
L2
L3
Architect
A1
A2
A3
Engineer
E1
E2
E3
Quantity
Surveyor
Q1
Q2
Q3
Expertise
Registered
arbitrator or legal
profesional
Registered and
professional
architect
Registered and
professional
engineer
Registered and
professional QS
Project
management and
contract
administration
Construction
contract drafting
185
186
8.4
Round 1: Results and Feedback
The DwF consists of two rounds. A total of eighty-one guidelines were asked
in the form of a questionnaire during the first round of interview. The questionnaire
includes the open-ended questions that allow feedback and comments from the
experts. Any changes or modifications of the guidelines during the interview would
be confirmed by the experts in the second round.
The first-round analysis discusses the experts feedback. There are two parts
of the feedback, namely, improvement and corrections to the guidelines; and new
information or guidelines provided by the experts. The statistical results of the
questionnaire are presented in the second round of the Delphi after the results
confirmation of the results by the experts.
8.4.1
Improvements and Corrections
Although the questionnaire was well prepared and designed based on

literature review, it still bounded to have disagreements or mistakes. Therefore, the
experts feedback would improve the wordings and terms usage and correct the error
or wrong meaning of the guidelines.
Table 8.4 shows the improvements and corrections made to Part A (Issuance
of Variations). The changes are based on the need of legal intent and meaning of the
contract for example, person should be written as Person, local authorities
should be described along with service providers, and a clearer meaning provided for
sub-contract works. These terms and language structure were edited to present the
intended meaning of the contract.
187
Table 8.4: Improvements and corrections on Part A
No
1
Original version
The right person is the Professional
Improved version
The right Person is the Professional
Architect or other form of registered Architect or other form of practice
under Architect Act 1967 and
registered under Architect Act 1967 and
named in the contract.
named in the contract.
If Architect issues variations that
If Architect issues variations that outside
outside the scope of Work and
the scope of Contract and without
without special authority from the
expressed authority from the Employer,
Employer, he may be liable to the
he may be liable to the Employer.
Employer.
3
But, after CPC period, the variations But, after CPC period, the variations
must be necessitated by obligations
must be necessitated by obligations or
or compliance with the local
compliance with the local authorities and
authorities requirements towards
service providers requirements towards
the Work.
the Work.
During DLP and with the consent of
During DLP if the contractor fails to
Employer, omission issued by the
rectify the defects and with the consent
Architect for leaving the defects
of Employer, Architect can issue
from the set-off is considered as a
omission for leaving the defects from the
valid issuance of variation.
set-off. The omission constitutes a valid

issuance of variation.
Contractor shall conform to the
Contractor shall conform to the local
local authorities requirements and
authorities and service providers
proceed the work if no AI in
requirements and proceed the work if no
response for the inconsistencies
AI in response for the inconsistencies
with statutory requirements within 7
with statutory requirements within 7
days of the given written notice.
days of the given written notice.
188
No
6
Original version
Improved version
Provisional Sums means Sums
Provisional Sums means Sums provided
provided for Nominated Sub-
in the Contract and/or for Nominated
contractor or Nominated Supplier of
Sub-Contract for work, materials or
work, materials or goods in the BQ
goods in the BQ which cannot be
which cannot be determined or
determined or detailed at the time.
detailed at the time.

7
AI is mandatory for expenditure of
AI is mandatory for expenditure of
Provisional Sums, which from the
Prime Cost Sums or Provisional Sums.
expenditure of Prime Cost Sums or

Provisional Sums.
In Part B (Validity of Variations), the structure of the sentences was modified

to deliver clearer message, especially for the second item that needed to emphasise
the possibilities of if in the statement as shown in Table 8.5. It is more appropriate
to explain the substitution as changing instead of replacing.
Table 8.5: Improvements and corrections on Part B

No
Original version
Improved version
Written notice in AI is mandatory.
AI must be in writing
However, Contractor shall send a
However, if Contractor finds any
written notice to Architect before
discrepancy or divergence between
commencement of the work
documents; he must send a written notice
regarding the discrepancy or
to Architect before commencement of
divergence between documents.
the affected work
Variations define as replacing the
Variations define as changing the work
work of another for its design,
of another for its design, quality or
quality or quantity of the Work
quantity of the Work
189
Apart from that, the experts agreed with all the guidelines provided in Part C
(Valuation Rules of Variations) and Part D (Additional Expenses and Subsequent
Circumstances Caused by Variations) in terms of their language structure and
meanings.
8.4.2
Additional Information
There are two additional guidelines have been suggested by the experts. The
guidelines are aimed at enhancing the value and coverage of the contractual
variations. The first guideline explains the principle and definition of omission. The
BX is a new guideline to be referred by end-users for omission. Table 8.6 shows the
location of item BX after the 16th guideline of Part B. It would be rated for
agreement by experts in the second round of DwF.
Table 8.6: Additional information on Part B

Item
Omission
B15
> Variations define as omission of design, quality or quantity of the

Works.
B16
BX
> An omitted work is also referred to a reduction of the quantities of the

Works.
B17
> If the part of the Work is omitted because to give it to other contractor,
it construed as an invalid omission.
B18
> An omitted work changes the fundamental basis of the contract, it

construed as an invalid omission.
B19
E.g., deletion of 98% made on the specified wall finish
190
Besides, the subsequent additional guideline is located in Part D. It discusses
the claim of work done on the completed variation in the contract. This is a different
procedure as highlighted in Clause 11.7, which is discussed in the claim of additional
expenses. Table 8.7 shows the location of the new info of the claim (DX) under Part
D.
Table 8.7: Additional information on Part D

Item
Additional Expenses & Subsequent Circumstances Caused by

Variations
D1
> If a variation has caused or likely to cause the Contractor to incur

additional expenses, where he would not be paid under the 6 Rules. He
may claim it provided that given a written notice of his intention to the
Architect together with an initial estimate duly supported with all
necessary calculations within 28 Days from the date of the AI or CAI. The
notice is a condition precedent to the claim entitlement.
D2
> Subsequently, the Contractor shall send to the Architect and QS

complete particulars, calculations and contemporaneous records within 28
Days of completing such variation. If the contractor fails to submit the
required particulars within the stated time or longer period agreed by
Architect in writing, then the Contractor has waived his rights to the claim
of additional expenses.
D3
> Loss of profit is not claimable in this provision as it was covered under
the Rule 2, 3 or 4.
D4
> However, a claim for loss of profit will always be successful for the
invalid omission.
D5
records in the possession, custody or control and with free of charge each
to them if requested until all variation claims resolved. Same for the subcontractors and/or suppliers documents in possession, custody or control
by the Contractor.
191
Item
Additional Expenses & Subsequent Circumstances Caused by

Variations
D6
Interim Certificate.
D7
> The Architect could ascertain the amount anytime before Final Account
as no timeframe is provided.
DX
> However, if the contractor has applied for the properly executed
variations into Interim Claim, together with complete details and
particulars, the Architect shall issue an Interim Certificate within 21 Days
from the date of receipt of the payment application.
8.5
Round 2: Statistical Analysis
The second round of DwF comprises two main activities. The first activity is
to confirm the given results of the previous round by comparing the experts score
with the average score. Next, the experts are required to rate their degree of
agreement with reference to the additional guidelines (BX and DX) regarding
Table 8.8 shows the results of the geometric mean for all the variables. The
variables are the guidelines or references on the contractual variations. This statistical
analysis is carried out after the score confirmation of the scores and the experts
response on the new information.
192
Table 8.8: Results on the geometric mean
Part A
MA
Part B
MA
Part C
MA
Part D
MA
A1
10.02
B1
9.87
C1
8.93
D1
8.88
A2
3.31
B2
9.53
C2
10.03
D2
7.89
A3
8.58
B3
9.69
C3
10.03
D3
8.73
A4
8.57
B4
8.55
C4
9.68
D4
5.57
A5
9.48
B5
5.86
C5
10.19
D5
9.34
A6
10.29
B6
6.43
C6
10.12
D6
9.90
A7
9.37
B7
8.18
C7
9.39
D7
9.23
A8
5.19
B8
8.52
C8
9.77
DX
9.21
A9
9.58
B9
9.71
C9
9.77
A10
9.94
B10
9.40
C10
8.51
A11
8.26
B11
9.65
C11
8.22
A12
8.66
B12
9.31
C12
9.27
A13
9.91
B13
8.93
C13
9.44
A14
7.87
B14
7.22
C14
8.94
A15
9.83
B15
9.73
C15
8.52
A16
9.58
B16
8.06
C16
8.75
A17
10.43
BX
8.68
C17
9.68
B17
10.37
C18
9.52
B18
9.69
C19
9.57
B19
6.10
C20
9.02
B20
9.48
C21
9.77
B21
9.34
C22
9.68
B22
9.48
C23
10.10
B23
4.36
C24
8.70
B24
9.30
C25
8.14
B25
8.70
C26
9.68
B26
9.25
C27
9.46
B27
9.25
C28
9.20
B28
9.24
B29
8.30
193
The geometric mean is applied in the analysis to calculate the consensus
value. Most of the variables were agreed with by the experts. Eight out of eightythree variables have been rejected as the guidelines for users because they are out of
the range of the agree category, i.e., 7.25 geometric mean 11.00. It is an
approximately 9.64% rejection rate for the variables.
The rejected variables are:
The right person also includes the Employer of the contract (A2).
During DLP if the contractor fails to rectify the defects and with the
consent of Employer, Architect can issue omission for leaving the
defects from the set-off. The omission constitutes a valid issuance of
variation (A8).
If the delivered notice was not according to the requirements in the

contract, it would construe as an invalid notice and bear no liability of
legal effect (B5).
Generally, if BQ is not prepared in accordance with applicable

Standard Method of Measurement, it could be a contractual basis for a
variation (B6).
E.g., increased of 60% in excavation, 40% in sewer length and 90% in

concrete, it construed as an invalid variation (B14).
E.g., deletion of 98% made on the specified wall finish (B19).
If the changed materials/goods are so different from the contract, it

would constitute an invalid variation (B23).
However, a claim for loss of profit will always be successful for the
invalid omission (D4).
Furthermore, the Cronbachs Alpha method is applied in this statistical

analysis to understand whether the data provide a good support for internal
consistency reliability. The Reliability Statistic indicated the Cronbachs Alpha value
194
of 0.976 from the correlation among the eighty-three variables as shown in Table 8.9.
This value is larger than 0.70, and it is interpreted as a great support for the
consistency of the results (Morgan et al., 2007).
Subsequently, the agreed variables were tested again for the internal
consistency reliability after the rejection. The test showed a very positive result in
terms of the correlation among the agreed variables. The Cronbachs Alpha value
now increased from 0.976 to 0.982 as shown in Table 8.10. In other words, the
rejected variables using the geometric mean are appropriate, where the variables are
weak correlated in the data. As a result, the agreed variables are valid in term of the
consistency reliability.
Table 8.9: Reliability test on all variables

Reliability Statistics
Cronbach's Alpha Based on Standardized
Cronbach's Alpha
Items
N of Items
0.976
0.983
83
Table 8.10: Reliability test on agreed variables

Reliability Statistics
Cronbach's Alpha Based on Standardized
Cronbach's Alpha
Items
N of Items
0.982
0.985
75
8.5.1
Analysis on Issuance of Variations
This section discusses the details of the variables associated with issuance of
variations. Two variables were rejected in Part A as described earlier. The item A2
(MA, = 3.31) was rejected because the experts opined that the Employer should not
195
intervene in the issuance of variations by the Architect, even though, most often the
variations are instructed by the employer. In this case, the Employer should listen and
seek the Architects advice regarding the issuance of variations. Furthermore, there
are no such contract provisions or legal cases regarding the authorised person also
should be included the Employer of the contract. This idea of the guideline was
derived indirectly from the literature review.
Besides, the experts were neutral or undecided regarding item A8 (MA, 5.19)
because the defects were not counted as variations in the contract, although the
leaving the defects from the set-off seemed like an omission work. Therefore, some
of the experts expressed some reservations on their view regarding the defects as
omission works.
Table 8.11 shows the agreed guidelines serve in the eDR prototype.
Table 8.11: Agreed guidelines on issuance of variations

Item
A1
> The right Person is the Professional Architect or other form of practice
registered under Architect Act 1967 and named in the contract.29
A3
> Architect issues variations or sanctions contractors variations provided that

the variation will not vitiate the original contract.30
A4
> Architects power is restricted, which he cant omit a work and give it to
another contractor. 31
A5
> If Architect issues variations that outside the scope of Contract and without
expressed authority from the Employer, he may be liable to the Employer.32
29
Article 7 (c) and Article 3

Clause 11.2
31
Commissioner for Main Roads v Reed and Stewart Pty. Ltd. & Another (1974)
32
Mitsui Construction Co v Attorney General of Hong Kong (1987)
30
196
Item
Period of Issuance
A6
> Architect can issue variations at any time before issuance of the Certificate
of Practical Completion (CPC).
A7
But, after CPC period, the variations must be necessitated by

obligations or compliance with the local authorities and service
providers requirements towards the Work,33 or
A9
> Contractor shall conform to the local authorities and service providers
requirements and proceed the work if no AI in response for the
inconsistencies with statutory requirements within 7 Days of the given written
notice.34
A10
> AI to rectify Contractors default is not considered as a variation either

before or after the CPC.
Provisional Sums
A11
> There are two parts of provisional items for variations, i.e., Provisional
Quantity and expenditure of Provisional Sums.35
A12
> Provisional Quantity means the estimated quantities of work, materials or

goods in the BQ which cannot be determined or detailed at the time.36
A13
Provisional Quantity describes as the tasks are with rates and prices
for the pre-estimate quantity and it subject to re-measurement for the
actual value.
A14
> Provisional Sums means Sums provided in the Contract and/or for
Nominated Sub-Contract for work, materials or goods in the BQ which
cannot be determined or detailed at the time.37
A15
Expenditure of Provisional Sums describes as the tasks but without

detailed information for its quantity, and rates.
A16
> Provisional Quantity does not necessary require an AI for carrying out the
work, like piling length in the Bill of Quantities (BQ).
A17
33
> AI is mandatory for expenditure of Prime Cost Sums or Provisional Sums.38
Clause 11.3
Clause 4.3
35
Clause 11.6
36
Article 7 (at)
37
Article 7 (au)
38
Clause 11.4
34
197
8.5.2
Analysis on Validity of Variations
Most of the variables rejected were from this part. Four out of thirty variables
fall into the category of neutral or undecided, whereas another variable was placed in
the category of disagree. These five variables were referred from the court cases.
The experts opined that the court cases concerning the five variables were
based on case-by-case basic. The facts of the cases need to be looked into; for
example, the item B5 was referred to the notice of determination instead of the
validity of variations. This constraint is also applicable to the items B14 and B19,
where the basis should be the facts of the case rather an arbitrary figure to determine
the validity of variations. Moreover, the experts had doubts concerning the item B6
because sometimes there are conditions or terms in the preamble of the contract that
prevent the issuance of variations due to the non-compliance of the SMM principles.
In addition, the item B23 was disapproved by the experts because changed
materials or goods are very common in a construction project. It would not have the
effect like cardinal change as highlighted in the case of Carr v JA Berriman Pty Ltd
39
and Commissioner for Main Roads v Reed and Stewart Pty Ltd and another40.
Table 8.12 shows the agreed guidelines on the validity of variations for the
eDR prototype. Besides, the additional guideline (BX) was well accepted by the
experts.
39
40
[1953] 89 CLR 327.

[1974] 131 CLR 378.
198
Table 8.12: Agreed guidelines on validity of variations
Item
Written Instruction
B1
> AI must be in writing.41

> The AI must be in a valid mode, duly served and proved as:42
B2
1. by hand, at the time of delivery and a signed of acknowledgement of

receipt;
B3
2. by ordinary mail or registered post, after 3 Days of posting and a

B4
3. by facsimile transmission, at time of transmission and a transmission

B7
> Any errors or inaccuracies in the BQ are at the risk of employer as it

constitutes a variation. 43
B8
> However, if the Contractor finds any discrepancy or divergence between

documents; he must send a written notice to Architect before commencement
of the affected work.44
B9
> The Contactor must execute variation entirely at his own cost if to rectify
his negligence, omission, default and/or breach of contract.45
Addition
B10
> Variations define as addition of design, quality or quantity of the Works.46
B11
> An additional work is required by statutory requirement but not provided in

the contract, it construed as a valid variation.47
B12
> If an additional work is so peculiar, so unexpected and different from the

contract, then it would constitute a separate contract or an invalid variation.48
B13
> An additional work has caused the cardinal changes of agreed sum or nature
of the Works, it construed as an invalid variation.49
41
Clause 2.2
Clause 36.1, Clause 36.2 and Clause 36.3
43
Patman and Fortheingham Ltd v Pilditch (1904)
44
Clause 1.4
45
Clause 11.1(last sentence)
46
Clause 11.1(a)
47
Clause 4.3
48
Blue Circle Industries v Holland Dredging Co (1987)
49
Lindsay Parkinson and co Ltd v Commissioners of His Majestys Works and Public Buildings
(1949)
42
199
Item
Omission
B15
> Variations define as omission of design, quality or quantity of the Works.50
B16
BX
> An omitted work is also referred to a reduction of the quantities of the

Works.
B17
> If the part of the Work is omitted and given it to another contractor, it
construed as an invalid omission.51
B18
> An omitted work changes the fundamental basis of the contract, it construed
as an invalid omission.
Substitution
B20
> Variations define as changing the work of another for its design, quality or
quantity of the Work.52
B21
> If the changed work has caused the cardinal changes of agreed sum or
nature of the Works, it construed as an invalid substitution.53
B22
> Variations define as alteration or changing and modification of the kind or

standard of materials or goods to be used in the Work.54
B24
> Materials supplied by the Contractor are more superior than that specified
without any instruction is not considered as a variation.
B25
> Variations define as removal from site any executed works, materials and
goods which are in accordance with the contract.55
50
Clause 11.1(a)
Carr v JA Berriman Pty Ltd (1953) and Commissioner for Main Roads v Reed and Stewart Pty Ltd
and another (1974)
52
Clause 11.1(a)
53
Thorn v Mayor and Commonalty of London (1876) and Blue Circle Industries v Holland Dredging
Co (1987)
54
Clause 11.1(b)
55
Clause 11.1 (c)
51
200
Item
B26
> Any limitation of working hours e.g., working at night-time only.56
B27
> Working space e.g., changing of original space to a smaller or restricted

one, either inside the building or external area of the project.57
B28
> Access to or utilisation of any specific part of the Site e.g., difficulty to
access or use on the land or part of the site.58
B29
> The execution and completion of the work in specific order e.g., changing
of method of statement, construction method, etc. 59
8.5.3
Analysis on Valuation Rules of Variations
All the variables in this part were fall into the agree category, i.e., 7.25
geometric mean 11.00. This also includes the examples given of different types of
the valuation rules such as C8, C15 and C20, where the examples were derived
indirectly from the literature review. This acceptance is probably because most of the
variables are derived from the contract provisions.
There are six valuation rules on the contractual variations such as:
56
Rule 1: Use of contract rates and prices
Rule 2: Use of fair adjustment on the contract rates and prices
Rule 3: Use of fair market rates and prices
Rule 4: Use of daywork rates
Clause 11.1(d)(i)
Clause 11.1(d)(ii)
58
Clause 11.1(d)(iii)
59
Clause 11.1(d)(iv)
57
201
Rule 5: Use of Rules 1, 2 or 3 on omitted work
Rule 6: Use of original rates and prices on re-measurement
Table 8.13 shows the guidelines on the valuation rules of variations for the
eDR prototype.
Table 8.13: Agreed guidelines on valuation rules of variations

Item
Valuation Rules of Variations
C1
> The Quantity Surveyor (QS) shall measure and value all variations.60
C2
> The Contractor shall provide assistance to the QS for any recording of site
information and/or site measurements are carried out at the site.60
C3
> The word similar used in valuation rules cannot be taken as identical, it
should consider the background information and facts of the variation.
C4
> The following 6 Rules apply to expenditure of Provisional Sums and

Provisional Quantity.61
Rule 1 of Contract Rates and Prices
C5
> It uses the original rates and prices of BQ to determine the valuation.62
C6
> This rule applies to the variation of a similar character and executed under
similar conditions. It does not significantly change the quantity of work as set
out in the BQ.62
C7
C8
E.g., a variation caused a little change in quantity for a concrete

structure, but conditions (grade, dimension or method) of the concrete
structure remains.
60
Clause 11.5
Clause 11.6
62
Clause 11.6(a)
61
202
Item

C9
> It includes a fair adjustment into the original rates and prices of BQ to
determine the valuation.63
C10
> This rule applies to the variation of a similar character and either is
executed or not executed under similar conditions but there is a significant
change in the quantity of work carried out.63
C11
> The fair will depend on the whole of the contractors pricing strategy,
either properly priced or with a handsome profit margin.64
C12
> If properly priced, a fair adjustment must include an element of profit

except for special circumstances.65
C13
materials, overheads and profit.66
C14
C15


dimension or method), but the concrete structure remains.
C16
> It includes a fair market rates and prices for the variation of different
character.67
C17
> A fair valuation must include an element of profit except for special
circumstances.65
C18
materials, overheads and profit.66
C19
> This fair valuation is based on the variations character, instead of the
amount of changed quantities.
C20
E.g., a variation made to change a concrete structure to steel/timber

structure.
63
Clause 11.6(b)
Building Contract Dictionary by Chappel et al.(2001)
65
Henry Boot Construction v Alstom Combined Cycles Ltd (2000)
66
Weldon Plant Ltd v The Commissioner for The New Towns (2000)
67
Clause 11.6(c)
64
203
Item

C21
> If the works cannot be properly measured and valued under the Rule 1,
Rule 2 or Rule 3, the contractor shall use Rule 4.68
C22
> The valuation is either from Daywork Rates in the Contract documents;69 or
where there are no such Daywork Rates, at the actual cost to the contractor of
his materials, additional construction plant and scaffolding, transport and
labour for the work concerned, plus fifteen (15) percent, which the percentage
must include the use of all tools, standing plant, standing scaffolding,
supervision, overheads & profit.70
C23
> In either case, vouchers are required for the valuation, signed by the Site
Agent and verified by the Site Staff, by specifying:
time spent daily upon the work, workers names, materials, additional
construction plant, scaffolding and transport
The vouchers must deliver to the Architect and QS at weekly intervals and the
final records must deliver within 14 Days after completing the work.68
C24
> QS shall not change the figure or hours in the agreed and signed Daywork
rates or vouchers.
C25
> A signed Daywork sheet is only for evidence or record purposes and does
not signify an entitlement to the variation.71
Rule 5 Omitted work
C26
> It uses the original rates and prices to determine the valuation of omitted
work. If the omissions substantially vary the conditions for the remaining
works are carried out, the prices of such remaining works must be valued
under Rule 1, Rule 2 or Rule 3.72
68
Clause 11.6(d)
Clause 11.6(d)(i)
70
Clause 11.6(d)(ii)
71
Clusky v Chamberlain (1995)
72
Clause 11.6(e)
69
204
Item

C27
> The QS shall re-measure the original BQ provisional quantities based on the
actual quantities executed. The original rates and prices determine the
valuation.73
C28
> The actual quantities must be based on the agreed as built drawings and/or
site records.
8.5.4
Analysis on Additional Expenses and Subsequent Circumstances
One variable was rejected in Part D, which the item D4 fell in the category of
neutral or undecided. This guideline is about the invalid omission that will have an
entitlement to loss of profit as referring to the cases McAlpine Humberoak Ltd v
McDermott International Inc74 and Kin Wah J F Construction & Engineering Co Ltd
v L&M Foundation Specialist Ltd75. The experts expressed reservations regarding
this guideline because it could not provide a generic approach regarding contractual
variations to the end-users. It is subject to case-by-case consideration.
Furthermore, the additional guideline about the properly executed variations

should be paid in the Interim Certificate was fully agreed to by the experts. This
guideline (DX) is extremely important as the previous item D7 describes that the
Architect could ascertain the amount of the variations anytime before Final Account
as no timeframe is provided. It could have a fairer risk allocation as to the claim of
variations by the contractor. Table 8.14 shows the agreed guidelines on the additional
expense and subsequent circumstances caused by variations.
73
Clause 11.6(f)
[1992] 58 BLR 1
75
[2004] HCA 226.
74
205
Table 8.14: Agreed guidelines on additional expenses and subsequent circumstances
Item
D1
Additional Expenses and Subsequent Circumstances

> If a variation has caused or likely to cause the Contractor to incur additional
expenses, where he would not be paid under the 6 Rules. He may claim it
provided that given a written notice of his intention to the Architect together
with an initial estimate duly supported with all necessary calculations within
28 Days from the date of the AI or CAI. The notice is a condition precedent
to the claim entitlement.76
D2
> Subsequently, the Contractor shall send to the Architect and QS complete
particulars, calculations and contemporaneous records within 28 Days of
completing such variation. If the contractor fails to submit the required
particulars within the stated time or longer period agreed by Architect in
writing, then the contractor has waived his rights to the claim of additional
expenses.77
D3
> Loss of profit is not claimable in this provision as it was covered under the
Rule 2, 3 or 4.
D5
records in the possession, custody or control and with free of charge each to
them if requested until all variation claims resolved. Same for the subcontractors and/or suppliers documents in possession, custody or control by
the Contractor. 78
D6
Interim Certificate.79
D7
> The Architect could ascertain the amount anytime before Final Account as
no timeframe is provided.79
DX
> However, if the Contractor has applied for the properly executed variations
into Interim Claim, together with complete details and particulars, the
Architect shall issue an Interim Certificate within 21 Days from the date of
receipt of the payment application.80
76
Clause 11.7 and 11.7(a)

Clause 11.7(b) and 11.8
78
Clause11.8
79
Clause 11.9
80
Clause 30.1 and 30.2
77
206
8.6
Analysis on Expert Category
Since the respondents were appointed from four different backgrounds, it is

important to understand whether they have the same opinion on the agreed guidelines
of contractual variations. The nonparametric Kruskal-Wallis test was carried out
using the SPSS software to understand the situation.
The test was compared the mean ranks to find out any statistically significant
differences among the four groups of experts as shown in Table 8.15. P-value of
Kruskal-Wallis was included in the analysis to test the null hypothesis that the means
of the four groups are equal versus the alternative hypothesis that their means are not
equal.
Totally, seventy-five variables were tested. The Kruskal-Wallis test indicated

that most of the guidelines had the same view of the experts, with the variables Pvalue larger than the critical value of significance 0.05 (Morgan et al., 2007). Only
seven guidelines were indicated different views from the experts in term of the mean
ranks.
The differences between guidelines needed to be further examined using the

Mann-Whitney U test. This nonparametric significant test is conducted to assess
whether two independent samples (groups) come from the same distribution. In other
words, it is aimed at identifying which group of experts is different in its overall
response compared with another. It is a nonparametric test to determine if a
difference exists between the two groups. The critical value of significance is 0.05.
207
Table 8.15: Kruskal Wallis test on the agreed guidelines
Part A
P-Value
Part B
P-Value
Part C
P-Value
Part D
P-Value
A1
0.153
B1
0.150
C1
0.558
D1
0.038
A3
0.323
B2
0.036
C2
0.955
D2
0.068
A4
0.254
B3
0.153
C3
0.344
D3
0.105
A5
0.300
B4
0.124
C4
0.277
D5
0.337
A6
0.300
B7
0.621
C5
0.300
D6
0.324
A7
0.378
B8
0.436
C6
0.709
D7
0.621
A9
0.324
B9
0.415
C7
0.378
DX
0.525
A10
0.048
B10
0.480
C8
0.324
A11
0.868
B11
0.243
C9
0.324
A12
0.364
B12
0.293
C10
0.276
A13
0.153
B13
0.925
C11
0.043
A14
0.041
B15
0.138
C12
0.246
A15
0.427
B16
0.912
C13
0.077
A16
0.469
BX
0.181
C14
0.258
A17
0.196
B17
0.046
C15
0.026
B18
0.713
C16
0.248
B20
0.277
C17
0.277
B21
0.133
C18
0.078
B22
0.277
C19
0.263
B24
0.781
C20
0.105
B25
0.364
C21
0.324
B26
0.499
C22
0.277
B27
0.499
C23
0.364
B28
0.254
C24
0.750
B29
0.728
C25
0.263
C26
0.277
C27
0.277
C28
0.364
208
The seven guidelines of different view indicated in the Kruskal Wallis test are
as follow:
AI to rectify Contractors default is not considered as a variation

either before or after the CPC (A10).
Provisional Sums means Sums provided in the Contract and/or for

Nominated Sub-Contract for work, materials or goods in the BQ
which cannot be determined or detailed at the time (A14).
By hand, at the time of delivery and a signed of acknowledgement of

receipt (B2)
If the part of the Work is omitted and given it to another contractor, it

construed as an invalid omission (B17)
The fair will depend on the whole of the contractors pricing

strategy, either properly priced or with a handsome profit margin
(C11).

dimension or method), but the concrete structure remains (C15).
If a variation has caused or likely to cause the contractor to incur

additional expenses, where he would not be paid under the 6 Rules.
He may claim it provided that given a written notice of his intention
to the Architect together with an initial estimate duly supported with
all necessary calculations within 28 days from the date of the AI or
CAI. The notice is a condition precedent to the claim entitlement
(D1).
Table 8.16 shows the results of the Mann Whitney U test for the seven
guidelines. It is notable that the engineers, the main group of experts, gave different
views on the items compared to the legal professionals, architects and quantity
surveyors. Fourteen out of twenty-one variables had statistically different values
compared to the other groups, where the engineers P-value of asymptotic
209
significance (2-tailed) was less than the critical value of significance 0.05.
Meanwhile, the architects were placed at the second, with nine variables different
from the other groups. The legal professionals and quantity surveyors had the least
discrepancy among the groups, with eight variables different from the other groups.
Furthermore, the architects and engineers were the most different pair in terms of
their agreement. However, the legal professionals and quantity surveyors shared
more in terms of their views based on the statistical analysis. Overall, the tests on the
agreed guidelines indicated that the experts were generally had the same degree of
agreement for the variables, with more than 90% consensus based on the Kruskal
Wallis test.
Table 8.16: Mann Whitney U test on the discrepancy items

P Value (asymptotic significance, 2-tailed)
Pair (Group)
A10
A14
B2
B17
C11
C15
D1
Legal
professional
and Architect
0.034
0.121
0.121
0.037
0.121
0.121
0.121
0.487
0.046
0.178
0.376
0.037
0.037
0.037
0.034
1.000
0.121
0.037
0.827
0.487
0.487
0.121
0.034
0.034
0.121
0.025
0.025
0.025
1.000
0.121
1.000
1.000
0.037
0.034
0.317
0.121
0.046
0.034
0.121
0.121
0.034
0.034
Legal
professional
and Engineer
Legal
professional
and Quantity
Surveyor
Architect and
Engineer
Architect and
Quantity
Surveyor
Engineer and
Quantity
Surveyor
210
8.7 Discussion of Statistical Analysis
Most of the clarified guidelines were agreed to by the experts for thier content
and language structure in the DwF study. The guidelines provide a generic approach
to contractual variations, although some of the guidelines are referred from court
cases and literature review. This is a value added to the guidelines because it could
enhance the content and detail of the contract provisions from the PAM 2006.
Furthermore, all the guidelines were incorporated with clarity aspects for
better understanding, which included the contract provisions from the contract form.
The guidelines with referring to the contract provisions were all agreed to by the
experts. It shows that the clarified contract provisions are valid with reference to the
meaning and intention of the contract. The clarifying of the language structure is both
practical and important to the construction practitioners because most of them do not
have a well-trained legal background.
In addition, the mixture of experts played a significant role in the analysis.

Although they came from different backgrounds, they had a consensus view
regarding the guidelines based on the statistical analysis. The geometric means
considered all the experts views and provided a more accurate and strict result
compared to the conventional arithmetic means of analysis. For example, some of the
rejected variables such as items B6 and B14 would have become the agreed
guidelines if the arithmetic means had been applied to the variables.
Moreover, the Kruskal Wallis and Mann Whitney U tests were applied to the
arithmetic means to compare whether any discrepancy existed between the four
groups of experts. Although the arithmetic means were applied to the test for the
examination, the procedure did not have any conflicts with the earlier geometric
means because the tests were focused on examining the discrepancy in terms of the
mean ranks from the four groups.
211
The DwF research approach achieved the desired objectives from the
contributions of the experts. Totally, seventy-five out of eighty-three guidelines were
accepted after the classification of the threshold value. The viability of Plain English
adopted in the research has proven useful and important for clarifying the language
structure as all the clarified contract provisions were accepted by the experts.
Moreover, the guidelines have been incorporated with additional information apart
from the clarified contract provisions from PAM 2006. These information have
enhanced the coverage and contents of the contract provisions for better explanations
and references. Eventually, all the accepted guidelines are used as the raw data in the
eDR database.
8.8
eDR Prototype Development
An eDR system on contractual variations was developed using Microsoft

Access softwares. The content and features are based on the models as described in
Chapter 8. However, the template is yet to handle all contractual issues. It only
focuses on one of the contractual issues in the construction or commencement of
work stage, i.e., contractual variations. Nevertheless, all the relevant tables of the
database were developed, even though some of them are for future research and
development such as ProjectParticulars, PreIssues, ConIssues and PostIssues. The
tables with linked relationship are illustrated in Figure 8.2. The One-to-One and Oneto-Many relationships were set for the tables to ensure the functionality of the
database.
212
Figure 8.2: Relationship between tables in eDR database
8.8.1
Database
In this system, the dimension tables are MainVariaitons, SubVariations,

Content and Forum, while others are the fact tables. There are totally eight tables in
the system. The details and explanations of each table are as follow:
ProjectParticulars describe the classification on the type of project,

contract system, procurement method and standard form.
PreIssues list all the contractual issues related to pre-contract work stage
as discussed in Chapter 3 (Table 3.3).
ConIssues list all the contractual issues related to commencement or

construction work stage as discussed in Chapter 3 (Table 3.4).
213
PostIssues list all the contractual issues related to post-commencement

work stage as discussed in Chapter 3 (Table 3.5).
MainVariations list the four main aspects for contractual variations such
as issuance of variations, validity of variations, valuation rules of
variations and additional expense and subsequent circumstances caused
by variations.
SubVariations list the sub-issues from the four main aspects for
contractual variations such as authorised persons and power, period of
issuance, provisional sums, written instruction, definition/principle of
variation, addition, omission, substitution, alteration of the kind or
standard of materials or goods, removal of executed works, materials and
goods, changes to the provisions in the contract, valuation rules of
variations, Rule 1 of contracts rates and prices, Rule 2 of fair adjustment,
Rule 3 of fair market rates and prices, Rule 4 of daywork rates, Rule 5 of
omitted work, Rule 6 of re-measurement on actual quantities (provisional
quantity) and additional expense & subsequent circumstances caused by
variations.
Content is the complete list of the generic guidelines/references on the

Forum is the platform for end-users to comment or give feedback on the

issue.
Subsequently, the database queries and forms were developed from the tables.
The forms are the important features in the eDR database. The eDR interface was
developed from the forms. The final eDR database file was converted to exe file as a
template setting using the Access Developer Extensions and Runtime. Therefore, it
serves as a read-only analytical database that is used as the foundation for decisionmaking. The portion of the forum for comments or feedbacks is excluded from this,
which is purposely set in an unlocked mode.
214
8.8.2
Front Page
The front page of the eDR explains a brief introduction of the template. Basically,
it discusses the following two main elements before entering into the eDR:
General Info: This eDR template is developed for the academic

purposes. The contents are derived from literature review, contract
provisions of PAM 2006, legal cases and consensus view of the local
experts. The template renders clarified references and guidelines on
contractual variations based on a generic approach.
Disclaimer: The contents of the system solely provide the preliminary

references and guidelines to the users. The universities, researchers
and experts involved directly or indirectly of this research do not bear
any liabilities incurred or caused by the eDR template. This is
explained the exclusion of liability.
These two elements are important as the database has its limitations and
scopes. The eDR is focused on the contractual variations and contract provisions
from PAM 2006 contract form. Since the database involves many legal principles and
obligations with regard to variations, the exclusion of liability is also explained in the
front page to avoid any conflicts or disputes that might arise.
Figure 8.3 illustrates the front page of the eDR, which was designed using the
Access 2007 Developer Extensions and Runtime software.
215
Figure 8.3: Front page of eDR
8.8.3
Main Menu
The next interface of the eDR template is the main menu. It provides two
choices of selection. The first choice is issue breakdown, while the second is
keyword searching. The issue breakdown describes how breakdown of the sub-issues
is derived. The keyword searching uses a search tool to locate the references required
by users. Figure 8.4 illustrates the main menu interface of the eDR.
216
Figure 8.4: Main menu interface
8.8.4
Issues Breakdown
Issues breakdown consists of several forms of the database. It is designed in

such a way that the users can easily locate the specific sub-issue to be referred. Users
can refer to the guidelines based on the sub-issue after clicking on the details button
as illustrated in Figure 8.5.
217
Figure 8.5: Issue breakdown interface
After clicking the Click here for DETAILS, there will be a pop-up screen
from the database. It shows all the guidelines as to the sub-issue. For example, the
guidelines on the sub-issue of Authorised Person and Power are as follow:
The right Person is the Professional Architect or other form of practice

registered under Architect Act 1967 and named in the contract.81
Architect issues variations or sanctions contractors variations

provided that the variation will not vitiate the original contract.82
Architects power is restricted, which he cant omit a work and give it

to another contractor. 83
If Architect issues variations that outside the scope of Contract and

without expressed authority from the Employer, he may be liable to
81

Clause 11.2
83
82
218
the Employer.84
Figure 8.6 illustrate the interface for the content of issue on Authorised
Person and Power.
Figure 8.6: Content of issue
Subsequently, the users are able to comment or give their feedback after
referring to the guidelines. It can be done by clicking the button GO to
Forum/Comments. This forum has been set unlocked on purpose and with the
command of Auto Number so that users can comment or discuss in the forum; all
the comments will be stored automatically. Figure 8.7 illustrates the blank column of
comments to be filled up by the users.
84
219
Figure 8.7: Forum interface
As a result, if there are any comments given into the forum, it will be stored
and displayed at the issue breakdown as well by clicking the page of
FORUM/COMMENTS as illustrated in Figure 8.8.
220
Figure 8.8: Forum page in issue breakdown
8.8.5
Keyword Searching
Another important feature of eDR is the keyword searching. A total of

seventy-five agreed guidelines allocated in the database. Therefore, keyword
searching would help users to locate the issue or guideline easily. The command
button Find and Replace was used to perform the searching as illustrated in Figure
8.9. Besides, the users are also able to comment in the interface by clicking the
button GO to Forum/Comments.
221
Figure 8.9: Keyword searching interface
8.9
Testing and Evaluation
The eDR prototype is demonstrated to end-users. Sixteen professional

quantity surveyors from an established consultant firm have participated in the
testing and evaluation. They are required to rate your satisfaction score and comment
on an open question.
Table 8.17 shows the results on prototype evaluation. Overall, the

respondents were satisfied with the prototype. All the variables are above the neutral
level (50%). The usefulness of clarity, practicality and functionality of the prototype
received a very positive feedback from the respondents. Apart from that, the
respondents had little reservations (66.9% satisfaction score) regarding the coverage
222
of the guidelines on contractual variations. . This was evident from the comments
from respondents, such as, the respondents would like to have more discussions and
elaborations on the contractual variations. Moreover, a checklist regarding the
contractual variations was suggested by the respondents as well. In summary, the
evaluation process received good responses and revealed that this prototype has
managed to achieve its objectives to deliver a more user-friendly, reliable and
organised means in contract administration. It helps to make better decision-making.
Table 8.17: Analysis of eDR prototype evaluation

No
Testing variables
Mean (%)
Interpretation
The usefulness of clarity aspects in contract
75.6
Satisfying
74.4
Satisfying
70
Satisfying
66.9
Slightly satisfying
74.1
Satisfying
administration for the references

2
The practicality of the eDR to provide

references and alertness to the users
The functionality of the e-Dispute Resolutions

structure in terms of its features and interfaces
The coverage of the generic references

concerning contractual variations
Overall
8.10
Discussion of eDR Prototype
The eDR template/prototype highlights how the information technology

could be incorporated into the contract administration. The template was developed
using Microsoft programmes because they are the most common and user-friendly
softwares. It enables exchanged, storing, and updating of information. This electronic
method could improve the existing approach on contract administration in term of
retrieving and updating the information. It also encourages a proactive approach of
examining the contractual issue since the template is user-friendly with the more
223
organised and clarified contents. However, certain limitations need to be considered.
The template need to be further developed because the construction industry is not
only plagued by the disputes on variations, but also affected and contributed by many
others contractual issues, such as delay and extension of time, interim payment, etc.
Hence a complete data warehouse is a must before it publish online and supported by
the relevant professional bodies. The internet is considered as a macro level in the
future research as to absorb and manage huge amounts of data from the industry.
Once the web data put into the system is able to be integrated that very useful
information will be created and beneficial to all the construction users.
8.11
Concluding Remarks
The last or sixth objective was achieved in this chapter. The application of
eDR revealed two important findings from the research. Firstly, the results from the
DwF indicated that the existing contract provisions on contractual variations could be
improved in terms of clarity of the language structure and its contents. The total
seventy-five agreed guidelines render the comprehensive references on the
contractual variations, where it could enhance the existing contract provisions on
variations. Secondly, the use of information technology has improved the practice of
contract administration in the construction industry, where the electronic approach
has highlighted a more user-friendly and organised means in the contract
administration.
CHAPTER 9
CONCLUSIONS AND RECOMMENDATIONS
9.1
Introduction
Chapter 9 is the last chapter of the thesis. It describes how the six research
objectives have been achieved based on the results and analysis from the previous
chapters. The research has addressed the low practice of ADR and the problems of
understanding in contract administration in construction industry by identifying the
behaviour of dispute resolution and establishing the systematic approach of contract
administration as well as developing the clarified and informative approach on
contractual variations in the application of eDR prototype/system to achieve the
research aim. An innovative research method, DwF method was applied to the eDR
development. The outcome of the eDR is novel in terms of the easily understandable
and better coverage of the existing contract provisions on variations as well as the
more user-friendly and organised way of retrieving the information from the database.
225
9.2
Classification of Attributes of Dispute Resolution Methods
The first objective is to classify the attributes of dispute resolution methods in

Malaysian construction industry. Chapter 2 has discussed a detailed literature study
about dispute resolution in construction industry. Local contract forms were studied
to enhance the knowledge of dispute resolution since most of the literature materials
were derived from overseas.
Besides, different approach was applied to classify the attributes of dispute

resolution techniques compare to the previous studies. Most of the attributes were
grouped and discussed together into a factor. It renders render a wider perspective
and comprehensive view on the dispute resolution methods. The classification of the
attributes is as follow:
Non complex dispute (e.g. Negotiation, Mediation, Adjudication)
Complex dispute (e.g. Arbitration, Litigation)
Confidentiality of the process (e.g. Arbitration, Adjudication)
Flexibility of the process (e.g. Negotiation, Mediation, Arbitration)
Speedy of the process (e.g. Negotiation, Mediation, Adjudication)
Voluntary process (e.g. Negotiation, Mediation)
Economical (e.g. Negotiation, Mediation, Adjudication)
Controlling of the process by the parties (e.g. Negotiation, Mediation)
Long period of the process (e.g. Arbitration, Litigation)
Bindingness of the decision (e.g. Adjudication, Arbitration, Litigation)
Ability to appeal if not satisfy with the result (e.g. Adjudication,

Arbitration, Litigation)
Preservation
of
relationship
(e.g.
Negotiation,
Adjudication)
Saving in trial expenses (e.g. Arbitration)
Improvement of cash flow (e.g. Adjudication)
Mediation,
226
Finality of the settlement (e.g. Adjudication, Arbitration)
Formality of the process (e.g. Arbitration, Litigation)
Enforceability of the decision (e.g. Adjudication, Arbitration,

Litigation)
Third party helps to negotiate and narrow down the issues (e.g.
Mediation, Adjudication)
Providing a qualified, neutral experts to hear complex matter (e.g.

Mediation, Adjudication, Arbitration)
Privacy of the process are protected (e.g. Mediation, Adjudication,

Arbitration)
Help the parties to understand each other demands (e.g. Negotiation,

Mediation)
Provide the parties with the relevant information background in the

process for consensus agreement (e.g. Mediation)
Expertise judgment in construction of those involve in process (e.g.

Adjudication, Arbitration)
Meet the budget and schedule of the process (e.g. Negotiation,

Mediation, Adjudication)
Both parties are fairly treated during negotiation process before any
official hearing and ruling (e.g. Mediation)
Resolving the dispute without involving legal profession (e.g.

Negotiation, Mediation, Adjudication)
The parties are free to look for other dispute resolution methods
(without legal liability) if they are not satisfied with the result (e.g.
Negotiation, Mediation)
227
9.3
Identification of the Behaviour and Practice of Dispute Resolution

Methods
The second objective is to identify the behaviour and practice of dispute

resolution methods in Malaysian construction industry. Questionnaire survey was
designed to achieve this objective. The descriptive analysis and Factor Analysis
applied to the data collected. The results revealed that the negotiation and mediation
are the preferred option by the contractors and developers. Adjudication is rated
unpopular compared to other ADR methods. While, the arbitration and litigation are
somewhat accepted by the respondents as the methods are well established and
familiar in the industry.
Besides, the findings of Factor Analysis also analysed that the respondents
evinced keen interest in the ADR methods. However, Factor Analysis has further
clarified that the ADR methods are regarded as important in the process of
proceedings, instead of the outcome of ADR based on the seven latent factors. In
other words, the outcome of ADR is not a major concern of the selection. It then
indicated that the appreciation of the benefits of the ADR is very low. Hence the
selection of ADR or non-ADR itself is not the major issue; rather, the increased
efficiency and appreciation of the methods in the construction industry are more
demanding. The continuing search for and the use of the ADR should be emphasized
and more widely employed in the construction industry in order to improve the actual
practice and obtain the desired benefits at the end of the proceedings.
9.4
Evaluation of Contractual Issues and Approach on Clarity
The third objective is to explain a systematic way of contract administration

through identification of its contractual issues and an approach on clarity. The
228
literature review is applied to achieve the objective by identifying all the contractual
issues associated with contract administration and applying the clarified contract
provisions to prevent or control the issues. Total thirty nine contractual issues were
identified in three work stages such as:
Pre-contract award stage consists of seven issues
Construction or commencement of work stage consists of twenty three

issues
Post-commencement work stage consists of nine issues
Subsequently, the literature review on the contract provisions found out that
the language structure is the main problem of understanding in the construction
contracts. Clarity approach is promoted using the Plain English as an antidote to the
language. Fifteen problems of clarity and legalese aspects were identified and
fourteen measures were proposed from the literature to improve the language
structure. The approach on clarity in contract administration is vital as to understand
and appreciate the contractual obligations and expectations in order to prevent and
control the construction conflicts and disputes.
Overall, the explanation on a systematic way of contract administration is

associated with risk management concept, i.e, identifying the root causes and
preventing or controlling of it using the appropriate means. In contract administration,
the root causes are the contractual problems or issues in the three work stages as
described, while the appropriate means is the contractual obligations and
expectations of the construction contracts.
229
9.5
Examination and Evaluation of Previous Approaches in Dispute

Resolution and Contract Administration
The fourth objective is to examine and evaluate the previous approaches in

dispute resolution and contract administration. The examination was carried out by
the critical review on the previous studies, while the evaluation was the proposal on
the eDR suggested after the review and preliminary semi-structured interview. One
hundred and twelve (112) international refereed journals have been reviewed and
classified into five categories, i.e., dispute resolution techniques, application of
information technology, contract management and administration, conflict and
dispute analysis and modeling. The review found out that the current trend of studies
is focused on the ADR, understanding of contracts, claim management and IT
applications based on the years and numbers of publication. Therefore, a detailed
literature study was carried out related to the areas of research. Six related studies
were studied and analysed before conducting the interview with the local experts.
The semi-structured interviewed supported and verified the critical review and
proposed eDR as the alternative means in dispute resolution and contract
administration. Hence the eDR was proposed based on the analysis and findings from
the critical review and interview.
9.6
The fifth objective is to develop an eDR model of contract administration in

dispute mitigation/prevention. The model development is the subsequent activity
from the results of the previous objective. DFD method was applied in the eDR
model development. The quality of a system is determined by the quality and
appropriateness of collected data as well as the interpretation of the analysed data.
Therefore, the eDR model comprises of two sub-models to explain the contents and
features that highlighted from the proposal of eDR. The first model describes how to
230
build up the content of the eDR, while the second explains how the clarified
references/guidelines to be referred by end-users through the online portal. The eDR
model also highlights an applied social science research accommodates the Delphi
and law in construction. This model renders a generic approach on the contractual
issues and could be served as a template or reference for other related construction
law research.
9.7
Development of eDR Prototype
The sixth or last objective is to develop an application of eDR

prototype/system based on contractual variations. A template on eDR on contractual
variation was developed and evaluated. The data was derived from the Delphi
analysis, which was the consensus view from the twelve reputed experts in this
research field. They are legal professionals, architects, engineers, and quantity
surveyors.
Two main findings have achieved in this objective. Firstly, the court cases and
ideas from literature review were accepted as valid clarified guidelines in the
contractual variations notwithstanding the allocated contract provisions. The
guidelines could enhance the contents of the exiting contract provisions and render a
practical reference to end-users. Besides, it is also proved that the practicability of
the DwF method in the construction law related research. Subsequently, the second
important finding is the eDR template. The template is incorporated with the
information technology. This electronic method could improve the existing approach
on contract administration in term of retrieving and updating the information.
Moreover, the template is more user-friendly and organised according to the positive
response from the evaluation. It helps to promote life long learning and a more
proactive self-examination on the contractual issue.
231
In summary, the eDR is more focused and simpler compared to the
conventional approach of contract administration, particularly for the easy accessing
of data through the organised issues breakdown and keyword searching. Moreover, it
also provides a more clarified and reliable sources of information when the data of
the contract provisions have been clarified and enhanced by court cases and
literatures.
9.8
Recommendations for Future Research
The following suggestions are recommended for future research.
1.
The findings on the dispute resolution could serve as a preliminary

reference for future research in other developing countries for their
factor affecting the dispute resolution methods, so that the trend and
behaviour of dispute resolution could be identified. It would help to
reduce the gap between the uptake of dispute resolution from
academia and industry perspective.
2.
The eDR model could serve as a template for future research, even
though there are differences in the legal system and diverse local
scenario. It is because the model provides a generic approach to
dispute mitigation/prevention.
3.
The eDR prototype or template is focused on the contractual

variations. It could be fully developed into the online portal, which it
would administrate and monitor by relevant professional bodies.
Furthermore, other contractual issues are researchable using this eDR
template, especially on the delay and extension of time.
232
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APPENDIX A
247
Award
2009
: PhD Scholarship, awarded by UTAR
Research Grants
June 2009 - June 2010
: Research grant of UTARRF by Universiti Tunku

Abdul Rahman
2010 -2011
: National Research Grant by Construction Industry

Development Board (CREAM)
International Publications
1.
Chong, HY and Rosli MZ, (2008) Construction Contract Administration - an

Approach on Clarity, Journal of Clarity, 60, November, 6-10.
2.
Chong, HY and Rosli MZ, (2009) The Behaviour of Dispute Resolution in

Malaysia, IEEM 2009, 643 647 (IEEE Xplore, Inspec).
3.
Chong, HY, and Rosli MZ and Lim CC. (2009) Avoidance/Controlling of

Construction Conflicts and Disputes: Conceptual Modelling for Contractual
Issues, CIOB CONNECTION, 3, 6-9 (Chartered Institute of Building).
4.
Chong, H-Y, and Rosli MZ, (2010) A Case Study into the Language Structure
of Construction Standard Form in Malaysia, International Journal Project
Management, 28(6), 601-608 (Elsevier, Thomson ISI).
5.
Chong, H-Y, and Rosli MZ. (2010) Application of the Delphi into
Construction Law Research. International Journal of Interdisciplinary Social
Sciences, 5(1), 1-8 (Common Ground Publisher, Cabells Directory).
APPENDIX A
248
Conference/Seminar Papers
1.
Chong, HY and Rosli MZ, Application of the Delphi Method to Construction

Law Research, 5th International Conference on Interdisciplinary Social
Sciences, Cambridge, United Kingdom, 2-5 August 2010.
2.
Chong, HY, Rosli MZ and Lim CC, A Modest Proposal on e-Dispute

Resolution, CIB World Congress, Salford Quays, United Kingdom,10-13 May
2010.
3.
Chong, HY and Rosli MZ, The Behaviour of Dispute Resolution in Malaysia,

IEEM, Kowloon, Hong Kong, 8th -11th Dec 2009.
4.
Chong, HY and Rosli MZ. Development of Contractual Database to Resolve

Construction Conflicts/Disputes. 2nd CIRAIC, Legend Hotel, Kuala Lumpur,
Malaysia, 3rd - 5th Nov 2009.
5.
Chong, HY and Rosli MZ, Contract Administration - a Modest Proposal on EDispute Resolution, International Conference on Project Management Achieving Excellence Through Project Management, ICoPM 2008, Hilton
Hotel, Petaling Jaya, Malaysia, 18th 20th Nov 2008, pp. 611-618.
6.
Chong, HY, Rosli MZ and Lim CC, Expert System on Alternative Dispute
Resolution (ADR): A Proactive Approach of Decision Making in Contract
Administration, 4th Post-Graduate Seminar - Theoretical and Preliminary
Findings, M Suite Hotel, Johor, Malaysia, 19th March 2008, pp. 1-11.
7.
Norazam O, Rosli MZ, Lee, CY and Chong, HY, Clarity Issues in Drafting
Construction Contracts: Guidelines to Future Contract Drafters, The Quantity
Surveying
International
Convention-Construction
Contract
and
Cost
Management: The Next Generation, QSIC 2008, Hotel Istana, Kuala Lumpur,
21st 22nd Oct 2008, pp.1-9.
8.
Chong, HY, Rosli MZ and Norazam O, Clarity of Construction Contracts,

National Seminar on Civil Engineering Research (SEPKA), UTM, 11-12
December 2007, pp.1-10
APPENDIX A
249
Appointments
Editorial Board Member:
International Journal of Project Organisation and

Management (IJPOM) 1 paper reviewed since 2009
Invited Reviewer:
International Journal of Project Management 5

papers reviewed since 2009
Keynote/Main Speaker:
Half day seminar organised by Econcos Consulatants

Sdn Bhd as to this research and granted CPD points
by Board of Quantity Surveyors Malaysia (27 March
2009).
APPENDIX B
250
1990
Arbitration Survey on user satisfaction
Investigation into construction disputes
Resolving disputes over contract notice requirements
1992
Resolving construction disputes based on misrepresentation
Resolving construction disputes by mediation Hong Kong
1993
Application of computer simulation in resolving construction dispute
Important of teaching construction specification
1994
5 steps resolve dispute without litigation
Are contract dispute predictable
Construction claim and disputes cost & time overrun
Construction documentation in arbitration
Contractor -Construction claim avoidance
Dispute resolution in Britain
Interpretation of construction contract
Use ADR in construction industry
1996
Case-based reasoning for intelligent support of construction negotiation
Means of avoid dispute during construction
1997
A clarity compare of NEC and traditional contact
ADR in Government
ADR resoling disputes with less wear and tear
At the cutting edge: conflict avoidance and resolution in the US construction

industry
Conflict and dispute in construction
Guest editorial: Special issue on law and dispute resolution in construction
Improving management of claim - contractor's perspective
Perceptions of alternative dispute resolution as constraints upon its use in the

UK construction industry
APPENDIX B
251
1998
A better way to estimate and mitigate disruption
A review of the role of IT in construction claim management
Consequences of construction conflict - A HK perspective
Research information: The role of emotional factors in building disputation
The effectiveness of the Dispute Resolution Advisor system-a critical

appraisal
1999
Bargaining tactics in construction disputes
Critical factors affecting the use of ADR process in construction
Survey of construction lawyers' attitudes and practice in the use of ADR in

contractors' disputes
The emergence of ADR in business today
The role of nonbinding alternative dispute resolution in litigation
2000
Alternative dispute resolution
An investigation into the merits of encouraging conflict in the construction

industry
Construction delay a quantitative analysis
Contractual methods for dispute avoidance and resolution (DAR)
Innovations to manage disputes: DRB and NEC
Project dispute resolution satisfaction classification through Neural
Structural equation model of construction contract dispute
2001
Causes of construction delay - traditional contract
Construction contractors claim process framework
Decision support system for risk management - a case study
Model for understanding, preventing and resolving for project dispute
2002
A multi-attribute utility model for dispute resolution strategy selection
Arbitration using the closest offer principle of arbitrator
Construction contract mistrust
Fundamentals of Alternative Dispute Resolution Processes
APPENDIX B
252
Learning in multi-agent systems a case study of construction claim

negotiation
2003
A database management system to document n analysis in claim
ADR in US public work proposed model
Disputes Examination of the Singapore National Legal System for arbitration
Disputology in international construction industry
Here Comes the JudgeDuties and Responsibilities of Design Professionals

When deciding multistep dispute resolution in design and construction
industry
Multiagent system for Construction Claims Negotiation
Resolution of dispute- a review on current methodologies
Substantiation and assessment of claims for extensions of time
2004
Applications of electronically facilitated bidding model to prevent

construction disputes
Analytical model for analyzing construction claims and opportunistic bidding
Construction Negotiation Online
Cost effective strategies arbitration
Dispute review boards elements of a convincing recommendation
Empowering collaborative decision in complex construction project scenarios
New trend and bad result in construction contract1
New trend and bad result in construction contract2
United Kingdom construction claims by view of professional
2005
A study of construction mediator tactics Part I Taxonomies of dispute sources,

mediator tactics and mediation outcomes
Design professionals engaged in the resolution of construction industry

disputes
Dispute resolution transactional cost quantification: What does resolving a

construction dispute really cost
Delay analysis method using delay section
APPENDIX B
253
Insolvency and resolution of construction contract disputes by adjudication in

the UK construction industry
Predicting construction litigation outcome using PSO
Predicting the outcome of construction litigation using Boosted Decision

Trees
The contingent use of tactics
The potential effects of variation orders on institutional building projects
Visually improving construction contract
2006
A catastrophe model of construction conflict behavior
A study of styles and outcomes in construction dispute negotiation
Alternative dispute resolution methods using Alliance Contracts
Arbitrator directed arbitration - a modest
Avoiding and minimizing construction delay claim disputes in relational

contracting
Causes and effects of delays in Malaysian construction industry
Conflict Resolution in construction disputes using the Graph model
Construction claims in United Arab Emirates: Types, causes, and frequency
Construction project dispute resolution for effective dispute avoidance and

management
How relational are construction contracts
Logistic likelihood analysis of mediation outcomes
Mandatory use of ADR in constructionA fundamental change from

voluntary participation
MAUT based dispute resolution selection model prototype for international

construction project
Preventing disputes with empathy
Quantification of cost for dispute resolution procedures in construction

industry
Risk allocation in Lamp-Sum contracts - concept or latent dispute
Selecting a delay analysis method in resolving construction claims
The effective mediator
APPENDIX B
254
The relationship between distribution of control, fairness and potential for

dispute in the claims handling process
Toward a typology of construction mediator tactics
2007
A multiple criteria decision support on-line system for construction
Application of a PSO-based neural network in analysis the outcome of

construction claim
Common sense applied to the definition of a dispute
Contract interpretation: the impact of readability
Insight into resolving construction disputes by mediation, adjudication in

Hong Kong
International statutory adjudication: its development and impact
Introduction to good faith in construction contracts
Legal Framework for alternative dispute resolution
litigation vs ADR
Modeling risk allocation decision in construction contracts
Resolving crises through automated bilateral negotiations
Risk allocation and increased claims in the construction industry
The engineer under FIDIC's conditions of contract for construction
Understanding time delays in construction contract
APPENDIX C
255
Objective: To identify the behaviour and practice of dispute resolution methods in

Malaysian construction industry;
SECTION A: PERSONAL PARTICULARS
The details provided will ONLY be used for the analysis purpose for the research
and will be treated as highly confidential.
Please fill in the blanks or tick the relevant answer box.
1) Position: [ ] Project manager
[ ] Contract executive
[ ] Contract manager
[ ] Director
[ ] others, please specify:
2) What type of work your company is typically involved in:

[ ] Residential projects
[ ] Industrial projects
[ ] Commercial projects
[ ] Highway
3) What type of project your company mostly completed?

[ ] Government projects
[ ] Private sector
[ ] Joint venture
[ ] other, please specify:
4) Gender: [ ] Male
[ ] Female
5) Age
[ ] 31-40 years
: [ ] 21-30 years
[ ] 41- 50 years
6) Education Qualification:
[ ] PMR or equivalent
[ ] Degree or equivalent
[ ] SPM/ STPM or equivalent
[ ] Master or PhD
[ ] Diploma
7) Working Experience (s):

[ ] Less than 5 years
[ ] 16 - 20 years
[ ] 5 - 10 years
[ ] Over 20 years
[ ] 11 - 15 years
[ ] > 51 years
APPENDIX C
SECTION B: DISPUTE RESOLUTI0N METHODS
There are TWO parts for Section B. Part 1 is about philosophy of conflicts and
disputes and Part B is selection factors for dispute resolution methods.
PART 1:
1. Average, how many cases of conflict happen in a construction project?
Rate it accordingly:
] Nil
]1-5
] 6 - 10
] more than 10
2. How many construction dispute cases annually involved by your company?

[
] Nil
]1-5
(Please continue to Part 2 in next page)
] 6 - 10
] more than 10
256
APPENDIX C
257
PART 2
What are the factors will you consider while choosing the Dispute Resolution methods, i.e. Negotiation, Mediation, Adjudication
(refer oversea practice - UK, Australia, New Zealand and Singapore), Arbitration and Litigation?
Agree
Neutral
Strongly
agree
257
Non complex dispute (e.g. Negotiation, Mediation, Adjudication)

Complex dispute (e.g. Arbitration, Litigation)
Confidentiality of the process (e.g. Arbitration, Adjudication)
Flexibility of the process (e.g. Negotiation, Mediation, Arbitration)
Speedy of the process (e.g. Negotiation, Mediation, Adjudication)
Voluntary process (e.g. Negotiation, Mediation)
Economical (e.g. Negotiation, Mediation, Adjudication)
Controlling of the process by the parties (e.g. Negotiation, Mediation)
Long period of the process (e.g. Arbitration, Litigation)
Bindingness of the decision (e.g. Adjudication, Arbitration, Litigation)
Ability to appeal if not satisfy with the result (e.g. Adjudication, Arbitration, Litigation)
Preservation of relationship (e.g. Negotiation, Mediation, Adjudication)
Saving in trial expenses (e.g. Arbitration)
Improvement of cash flow (e.g. Adjudication)
Finality of the settlement (e.g. Adjudication, Arbitration)
Formality of the process (e.g. Arbitration, Litigation)
Enforceability of the decision (e.g. Adjudication, Arbitration, Litigation)
Third party helps to negotiate and narrow down the issues (e.g. Mediation, Adjudication)
Disagree
Factors to consider while choosing dispute resolution methods
Strongly
Disagree
Please put a mark / in the bracket below.
Strongly
agree
Agree
Neutral
258
Disagree
Factors to consider while choosing dispute resolution methods
Strongly
agree
APPENDIX C
Providing a qualified, neutral experts to hear complex matter (e.g. Mediation, Adjudication,
Arbitration)
Privacy of the process are protected (e.g. Mediation, Adjudication, Arbitration)

Help the parties to understand each other demands (e.g. Negotiation, Mediation)
Provide the parties with the relevant information background in the process for consensus
agreement (e.g. Mediation)
Expertise judgment in construction of those involve in process (e.g. Adjudication, Arbitration)
Meet the budget and schedule of the process (e.g. Negotiation, Mediation, Adjudication)
Both parties are fairly treated during negotiation process before any official hearing and
ruling (e.g. Mediation)
Resolving the dispute without involving legal profession (e.g. Negotiation, Mediation, Adjudication)
The parties are free to look for other dispute resolution methods (without legal liability) if
they are not satisfied with the result (e.g. Negotiation, Mediation)
Company Cop and Signature
258
~ Thank you for your participation ~
APPENDIX D
259
Please rate the score (0-10) for the four aspects of variations under PAM 2006 (with quantities) as: 0=Absolutely disagree,
1=Strongly disagree, 2= Highly disagree, 3=Quite disagree, 4=Slightly disagree 5=Neutral, 6=Slightly agree, 7=Quite agree,
8=Highly agree, 9=Strongly agree, & 10=Absolutely agree.
No
A
CONTRACTUAL ASPECTS OF VARIATIONS

ISSUANCE OF VARIATIONS
> The right Person is the Professional Architect or other form of practice registered under Architect Act
1967 and named in the contract.1
Score
(0-10)
(
AQ2
> The right person also includes the Employer of the contract.
AQ3
> Architect issues variations or sanctions contractors variations provided that the variation will not vitiate
the original contract.2
AQ4
> Architects power is restricted, which he cant omit a work because to give it to other contractor. 3
AQ5
> If Architect issues variations that outside the scope of Contract and without expressed authority from the
Employer, he may be liable to the Employer.4
Period of Issuance
> Architect can issue variations at any time before issuance of the Certificate of Practical Completion
(CPC).5
But, after CPC period, the variations must be necessitated by obligations or compliance with the
local authorities and service providers requirements towards the Work,6 or
> Provisional Quantity means the estimated quantities of work, materials or goods in the BQ which cannot
be determined or detailed at the time.10
Provisional Quantity describes as the tasks are with rates and prices for the pre-estimate quantity
and it subject to re-measurement for the actual value.
> Provisional Sums means Sums provided in the Contract and/or for Nominated Sub-Contract for work,
materials or goods in the BQ which cannot be determined or detailed at the time.11
Expenditure of Provisional Sums describes as the tasks but without detailed information for its
quantity, and rates.
> Provisional Quantity does not necessary require an AI for carrying out the work, like piling length in the
Bill of Quantities (BQ).
> AI is mandatory for expenditure of Prime Cost Sums or Provisional Sums.12
AQ1
AQ6
AQ7
AQ8
AQ9
AQ10
AQ11
AQ12
AQ13
AQ14
AQ15
AQ16
AQ17
During DLP if the contractor fails to rectify the defects and with the consent of Employer,
Architect can issue omission for leaving the defects from the set-off. The omission constitutes a
valid issuance of variation7.
> Contractor must conform to the local authorities and service providers requirements and proceed the work
if no AI in response for the inconsistencies with statutory requirements within 7 days of the given written
notice.8
> AI to rectify Contractors default is not considered as a variation either before or after the CPC.
Provisional Sums
> There are two parts of provisional items for variations, i.e., Provisional Quantity and expenditure of
Provisional Sums.9
Feedback and comment:

Clause 11.2
4
5
Clause 11.3
6
Clause 11.3
7
Clause 15.4
8
Clause 4.3
9
Clause 11.6
10
Article 7 (at)
11
Article 7 (au)
12
Clause 11.4
2
3
APPENDIX D
B
BQ1
BQ2
BQ3
BQ4
BQ5
VALIDITY OF VARIATIONS
Written Instruction
> Written notice in AI is mandatory.13
> The written notice must be in a valid mode, duly served and proved as:14
1.
by hand, at the time of delivery and a signed of acknowledgement of receipt;
2.
by ordinary mail or registered post, after 3 days of posting and a receipt of posting from Post
Office; or
3.
by facsimile transmission, at time of transmission and a transmission report generated by the
transmitting equipment.
> If the delivered notice was not according to the requirements in the contract, it would construe as an
invalid notice and bear no liability of legal effect.15
260
(
(
)
)
BQ6
> Generally, if BQ is not prepared in accordance with applicable Standard Method of Measurement, it could
be a contractual basis for a variation.16
BQ7
> Any errors or inaccuracies in the BQ are at the risk of employer as it constitutes a variation. 17
BQ8
> However, if Contractor finds any discrepancy or divergence between documents; he must send a written
notice to Architect before commencement of the work.18
BQ9
> Contactor must execute variation entirely at his own cost if to rectify his negligence, omission, default
and/or breach of contract.19
BQ10
Addition
> Variations define as addition of design, quality or quantity of the Works.20
BQ11
> An additional work is under statutory requirement but not provided in the contract, it construed as a valid
variation.21
BQ12
> If an additional work is so peculiar, so unexpected and different from the contract, then it would constitute
a separate contract or an invalid variation.22
BQ13
> An additional work has caused the cardinal changes of agreed sum or nature of the Works, it construed as
an invalid variation.23
BQ14
E.g., increased of 60% in excavation, 40% in sewer length and 90% in concrete, it construed as an
invalid variation.24
13
Clause 2.2
Clause 36.1, 36.2 and 36.3
Central Provident Fund Board v Ho Bock Kee (1981)
16
Clause 12.1, Bryant and Sons Ltd v Birmingham Hospital Saturday Fund (1938)
17
Patman and Fortheingham Ltd v Pilditch (1904)
18
Clause 1.4
19
Clause 11.1(last sentence)
20
Clause 11.1(a)
21
Clause 4.3
22
Blue Circle Industries v Holland Dredging Co (1987)
23
Lindsay Parkinson and co Ltd v Commissioners of His Majestys Works and Public Buildings (!950)
24
Wegan Construction Pty Ltd v Wodonga Sewerage Authority (1978)
14
15
APPENDIX D
BQ15
Omission
> Variations define as omission of design, quality or quantity of the Works.25
261
BQ16
> An omitted work is the part of the Work that no longer needed in the project, it construed as a valid
omission.
BQX
> An omitted work is also referred to a reduction of the quantities of the Works.
BQ17
> If the part of the Work is omitted because to give it to other contractor, it construed as an invalid
omission.26
BQ18
BQ19
> An omitted work changes the fundamental basis of the contract, it construed as an invalid omission.
E.g., deletion of 98% made on the specified wall finish27.

Substitution
> Variations define as changing the work of another for its design, quality or quantity of the Work.28
(
(
)
)
> If the changed work has caused the cardinal changes of agreed sum or nature of the Works, it construed as
an invalid substitution.29
> Variations define as alteration or changing and modification of the kind or standard of materials or goods
to be used in the Work.30
BQ20
BQ21
BQ22
BQ23
> If the changed materials/goods are so different from the contract, it would constitute an invalid variation.24
BQ24
> Materials supplied by the Contractor are more superior than that specified without any instruction is not
considered as a variation.
BQ25

> Variations define as removal from site any executed works, materials and goods which are in accordance
with the contract.31
BQ26

> Any limitation of working hours e.g., working at night-time only.32
BQ27
> Working space e.g., changing of original space to a smaller or restricted one, either inside the building or
external area of the project.33
BQ28
> Access to or utilisation of any specific part of the Site e.g., difficulty to access or use on the land or part
of the site.34
BQ29
> The execution and completion of the work in specific order e.g., changing of method of statement,
construction method, etc. 35
Feedback and Comment:
25
Clause 11.1(a)
Carr v JA Berriman Pty Ltd (1953) and Commissioner for Main Roads v Reed and Stewart Pty Ltd and another (1974)
27
Chadmax Plastics v Hanson and Yuncken (1984)
28
Clause 11.1(a)
29
Thorn v Mayor and Commonalty of London (1876) and Blue Circle Industries v Holland Dredging Co (1987)
30
Clause 11.1(b)
31
Clause 11.1 (c)
32
Clause 11.1(d)(i)
33
Clause 11.1(d)(ii)
34
Clause 11.1(d)(iii)
35
Clause 11.1(d)(iv)
26
APPENDIX D
C
CQ1
VALUATION RULES OF VARIATIONS

> The Quantity Surveyor (QS) shall measure and value all variations.36
CQ2
262
> The contractor shall provide assistance to the QS for any recording of site information and/or site
measurements are carried out at the site.33
CQ3
> The word similar used in valuation rules cannot be taken as identical, it should consider the
background information and facts of the variation.
CQ4
> The Rules apply to expenditure of Provisional Sums and Provisional Quantity.37
> It uses the original rate and prices of BQ to determine the valuation.38
CQ5
CQ6
> This rule applies to the variation of a similar character and executed under similar conditions. It does not
significantly change the quantity of work as set out in the BQ.34
CQ7
E.g., a variation caused a little change in quantity for a concrete structure, but conditions (grade,
dimension or method) of the concrete structure remains.
> It includes a fair adjustment into the original rates and prices of BQ to determine the valuation.39
> This rule applies to the variation of a similar character and either is executed or not executed under similar
conditions but there is a significant change in the quantity of work carried out.39
> The fair will depend on the whole of the contractors pricing strategy, either properly priced or with a
handsome profit margin.40
> If properly priced, a fair valuation must include an element of profit except for special circumstances.41
>The calculation should be based upon the reasonable costs that properly incurred from the works and
included elements for the cost of labour, plant, materials, overheads and profit.42
CQ8
CQ9
CQ10
CQ11
CQ12
CQ13
CQ14
CQ16
E.g., a variation caused a significant change in quantity for a concrete structure, whether under
similar or different conditions (grade, dimension or method), but the concrete structure remains.
> It includes a fair market rates and prices for the variation of different character.43
CQ17
> A fair valuation must include an element of profit except for special circumstances.41
CQ18
>The calculation should be based upon the reasonable costs that properly incurred from the works and
included elements for the cost of labour, plant, materials, overheads and profit.42
> This fair valuation is based on the variations character, instead of the amount of changed quantities.
CQ15
CQ19
CQ20
E.g., a variation made to change a concrete structure to steel/timber structure.
36
Clause 11.5
Clause 11.6
Clause 11.6(a)
39
Clause 11.6(b)
40
Building Contract Dictionary (2001)
41
Henry Boot Construction v Alstom Combined Cycles Ltd (2000)
42
Weldon Plant Ltd v The Commissioner for The New Towns (2000)
43
Clause 11.6(c)
37
38
APPENDIX D
CQ21

> If the works cannot be properly measured and valued under the Rule 1, Rule 2 or Rule 3, the contractor
shall use Rule 4.44
263
CQ22
> The valuation is either from Daywork Rates in the Contract documents;45 or where there are no such
Daywork Rates, at the actual cost to the contractor of his materials, additional construction plant and
scaffolding, transport and labour for the work concerned, plus fifteen (15) percent, which the percentage
must include the use of all tools, standing plant, standing scaffolding, supervision, overheads & profit.46
CQ23
> In either case, vouchers are required for the valuation, signed by the Site Agent and verified by the Site
Staff, by specifying:
time spent daily upon the work, workers names, materials, additional construction plant,
scaffolding and transport
The vouchers must deliver to the Architect and QS at weekly intervals and the final records must deliver
within 14 days after completing the work.39
CQ24
CQ25
> QS shall not change the figure or hours in the agreed and signed Daywork rates or vouchers.
> A signed Daywork sheet is only for evidence or record purposes and does not signify an entitlement to the
variation.47
Rule 5 Omitted work
> It uses the original rates and prices determine the valuation of omitted work. If the omissions substantially
vary the conditions for the remaining works are carried out, the prices of such remaining works must be
valued under Rule 1, Rule 2 or Rule 3.48
> The QS shall re-measure the original BQ provisional quantities based on the actual quantities executed.
The original rates and prices determine the valuation.49
(
(
)
)
CQ26
CQ27
CQ28
D
DQ1
> The actual quantities must be based on the agreed as built drawings and/or site records.
ADDITIONAL EXPENSE & SUBSEQUENT CIRCUMSTANCES CAUSED BY VARIATIONS
> If a variation has caused or likely to cause the contractor to incur additional expenses, where he would not
be paid under the 6 Rules. He may claim it provided that given a written notice of his intention to the
Architect together with an initial estimate duly supported with all necessary calculations within 28 days from
the date of the AI or CAI. The notice is a condition precedent to the claim entitlement.50
DQ2
> Subsequently, the contractor shall send to the Architect and QS complete particulars, calculations and
contemporaneous records within 28 days of completing such variation. If the contractor fails to submit the
required particulars within the stated time or long period agreed by Architect in writing, then the contractor
has waived his rights to the claim of additional expenses.51
DQ3
> Loss of profit is not claimable in this provision as it was covered under the Rule 2, 3 or 4.
DQ4
> However, a claim for loss of profit will always be successful for the invalid omission.52
DQ5
> The Architect and QS shall access all contractors documents or records in the possession, custody or
control and with free of charge each to them if requested until all variation claims resolved. Same for the
sub-contractors and/or suppliers documents in possession, custody or control by the Contractor. 48
DQ6
> As soon as the Architect ascertained the amount of variation and/or additional expense, it will add into
Contract Sum and include into the next Interim Certificate.53
DQ7
>The Architect could ascertain the amount anytime before Final Account as no timeframe is provided.53
DQX
> However, if the contractor has applied for the properly executed variations into Interim Claim, together
with complete details and particulars, the Architect shall issue an Interim Certificate within 21 days from the
date of receipt of the payment application.54
44
Clause 11.6(d)
Clause 11.6(d)(i)
46
Clause 11.6(d)(ii)
47
Clusky v Chamberlain (1994)
48
Clause 11.8
49
Clause 11.6(f)
50
Clause 11.7 and 11.7(a)
51
Clause 11.7(b) and 11.8
52
McAlpine Humberoak Ltd v McDermott International Inc (1990) and Kin Wah JF Construction & Eng. v L&M Foundation Specialist Ltd
(2004)
53
Clause 11.9
54
Clause 30.1 and 30.2
45
APPENDIX E
Prototype demonstration and evaluation form
264
Prototype Demonstration and Evaluation

Name:
Company:
Introduction: This e-Dispute Resolution (eDR) template/prototype aims to render

clarified, organised and reliable references and guidelines on contractual variations.
It is hoped the end-users could make better decision compared to the conventional
administration that using a bunch of complicated contract documents and provisions.
Please rate your satisfaction score (0-100%, i.e., 0 = extremely dissatisfied, 30% =
dissatisfied, 50% = neither satisfied nor dissatisfied, 70% = satisfied, 100% =
extremely satisfied) on the questions below.
1. The usefulness of clarity aspects in contract administration for the references

(
)
2. The practicality of the eDR to provide references and alertness to the users
( )
3. The functionality of the e-Dispute Resolutions structure in terms of its
features and interfaces ( )
4. The coverage of the generic references concerning contractual variations
(
)
5. Overall score (
6. Comment:
APPENDIX F
List of Respondents from Developers:
1.
BANDAR SETIA ALAM SDN BHD
2.
COMTRAC GLENVIEW SDN BHD
3.
COUNTRY HEIGHTS PROPERTIES SDN BHD
4.
GALIAN JUTA PROPERTY SDN BHD
5.
GLENMARIE COVE DEVELOPMENT SDN BHD
6.
INDAH JAYA DEVELOPMENT SDN BHD
7.
KYW CORPORATION SDN BHD
8.
LOH & LOH DEVELOPMENT SDN BHD
9.
MELAWATI DEVELOPMENT SDN BHD
10.
NTS DEVELOPMENT SDN BHD
11.
PARAMOUNT PROPERTY DEVELOPMENT SDN BHD
12.
SAMUDRA (MALAYSIA) SDN BHD
13.
SEAH HONG & SONS TRADING SDN BHD
14.
SIME DARBY LAND SDN BHD
15.
SUNSHINE HEIGHTS SDN BHD
16.
SUNWAY DAMANSARA SDN BHD
List of Respondents from Contractors:
1.
AL_AMBIA SDN BHD
2.
APIC SDN BHD
3.
BRUNSFIELD CONSTRUCTION SDN BHD
4.
CASPIO BINA SDN BHD
5.
COBRAIN HOLDINGS SDN BHD
6.
CONLAY CONSTRUCTION SDN BHD
7.
C & S MANAGEMENT SDN BHD
8.
CREST BUIDER SDN BHD
265
APPENDIX F
9.
DEKAD BINA SDN BHD
10.
DHAYA MAJU INFRASTRUCTURE ASIA SDN BHD
11.
DOLOMITE INDUSTRIES COMPANY SDN BHD
12.
EDWINCON ENGINEERING & TRADING SDN BHD
13.
ENGINEERING & TRADING SDN BHD
14.
ENCORP CONSTRUCTION SDN BHD
15.
GANZ BUILD SDN BHD
16.
GLOMAC BINA SDN BHD
17.
HANAZ SDN BHD
18.
HO HUP CONSTRUCTION COMPANY BERHAD
19.
IJM CONSTRUCTION SDN BHD
20.
IJM CORPORATION BERHAD
21.
IREKA ENGINEERING & CONSTRUCTION SDN BHD
22.
JALLCON (M) SDN BHD
23.
JALEX SDN BHD
24.
JUTA KENANGAN (M) SDN BHD
25.
KASYAF BINA SDN BHD
26.
KENNEISON BROTHERS CONSTRUCTION SDN BHD
27.
KEJURUTERAAN PUTRAJAYA SDN BHD
28.
KITACON SDN BHD
29.
L'GRANDE DEVELOPMENT SDN BHD
30.
LOH & LOH CONSTRUCTIONS SDN BHD
31.
MAHASALAM SDN BHD
32.
MAKASSAR ENGINEERING & CONSTRUCTION SND BHD
33.
MASMIRIN CORPORATION SDN BHD
34.
O'CONNOR'S ENIGINEERING SDN BHD
35.
PECK CHEW PILING (M) SDN BHD
36.
PRESTIGE BUILDERS SDN BHD
37.
PUTRA PERDANA CONSTRUCTION SDN BHD
38.
SEE YONG & SON CONSTRUCTION SDN BHD
39.
STD CONSTRUCTION SND BHD
40.
SUNWAY CONSTRUCTION BERHAD
41.
TENUNAN BUDI (M) SDN BHD
42.
TRANS RESOURCES CORPORATION SDN BHD
266
APPENDIX F
43.
TRS ENGINEER SDN BHD
44.
ZELAN CONSTRUCTION SDN BHD
267

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E-DISPUTE RESOLUTION MODEL ON CONTRACTUAL VARIATIONS

CHONG HEAP YIH

UNIVERSITI TEKNOLOGI MALAYSIA

PSZ 19:16 (Pind. 1/07)

UNIVERSITI TEKNOLOGI MALAYSIA

CHONG HEAP YIH

I declare that this thesis is classified as :

(Contains confidential information under the Official Secret

(Contains restricted information as specified by the

I agree that my thesis to be published as online open access

I acknowledged that Universiti Teknologi Malaysia reserves the right as follows:

ASSOC. PROF. IR. DR. ROSLI MOHAMAD ZIN

(NEW IC NO. /PASSPORT NO.)

I hereby declare that I have read this thesis and in

Name of Supervisor : ASSOC. PROF. IR. DR. ROSLI MOHAMAD ZIN

BAHAGIAN A Pengesahan Kerjasama*

* Jika penyediaan tesis/projek melibatkan kerjasama.

Associate Professor Sr. Dr. Hamimah Adnan

Nama dan Alamat Pemeriksa Dalam :

Associate Professor Dr. Aminah Md. Yusof

Nama Penyelia Lain (jika ada)

Disahkan oleh Timbalan Pendaftar di SPS:

E-DISPUTE RESOLUTION MODEL ON CONTRACTUAL VARIATIONS

CHONG HEAP YIH

A thesis submitted in fulfilment of the

Faculty of Civil Engineering

I declare that this thesis entitled E-DISPUTE RESOLUTION MODEL ON

CHONG HEAP YIH

Dedicated to my beloved family, friends, Joelie and Lord Jesus

Construction contracts can be a complex subject if interpretation and

LIST OF SYMBOLS AND ABBREVIATIONS

Research Significance and Expectation

Structure of the Thesis

Construction Conflicts and Disputes

Relationship between Conflicts and

Sources of Construction Conflicts and Disputes

Contractual Provisions for Dispute Resolution

Public Work Department Form 203A

Pertubuhan Arkitek Malaysia Contract

Construction Industry Development

Board Form of Building Contract 2000

Summary of Contract Forms

Stages of Dispute Resolution

Prevention Methods in Practice

2.7.1 The Process of Negotiation

Nonbinding Dispute Resolution

The Process of Mediation

Binding Dispute Resolution

2.9.1.1 The Process of Adjudication

2.9.2.1 The Process of Arbitration

2.9.3.1 The Process of Litigation

Summary of Dispute Resolution Methods

Previous Alternative Approaches

Expert System For Construction Contract

Prediction of Construction Disputes,

Disputes using Graph Model, 2006

Fuzzy Case-based Reasoning for Coping

with Construction Disputes, 2009

Summary of Critical Review of Expert

Contractual Issues in Contract Administration

3.3.1 Pre-Construction Stage

Commencement and Construction Stage