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LEMBAGA JURUTERA MALAYSIA

BOARD OF ENGINEERS MALAYSIA

KDN PP11720/1/2008 ISSN 0128-4347 VOL.35 SEPT - NOV 2007 RM10.00


2 THE INGENIEUR

Volume 35 Sept - Nov 2007 contents


4 Presidents Message
Editors Note

5 Update
Professional Indemnity Insurance
6
Announcement
Publication Calendar
Event Calendar
Fraudulent Offers On Engineering Council
United Kingdom Registration

Cover Feature
6 Effective Contract Management For
33 Construction Projects

16 Drafting Construction Contracts

24 Understanding Engineering/Construction Contracts

Guidelines
36 The Chartered Institute Of Arbitrators:
Code Of Professional And Ethical Conduct
41
Feature
37 Membendung Kerugian Berkaitan Dengan Tuntutan
Kerugian Dan Perbelanjaan Tambahan Di Dalam
Kontrak Binaan

44 Construction Disputes

56 48 Integrated Engineering Services - The ETI Centric


Professional Services

Engineering Nostalgia
56 Some Engineering Works In The 60s
4 THE INGENIEUR

Presidents Message
KDN PP11720/1/2008
ISSN 0128-4347

As Malaysia celebrates its 50th anniversary,


the local construction industry has also
Vol. 35 Sept - Nov 2007
developed tremendously and matured. Malaysia
MEMBERS OF THE BOARD OF ENGINEERS MALAYSIA has earned a reputation of completing major
(BEM) 2006/2007 projects in record time such as the Petronas
President Twin Tower and KLIA, just to name a few.
YBhg. Dato Prof. Ir. Dr. Judin Abdul Karim
Many of our consultants and contractors have
Registrar ventured beyond our shores to compete with
Ir. Dr. Mohd Johari Md. Arif
big players on the international scene.
Members While we may be familiar with construction techniques
YBhg. Tan Sri Dato Ir. Md Radzi Mansor
YBhg. Datuk Ir. Hj. Keizrul Abdullah and engineering codes, contract management may differ from
YBhg. Mej. Jen. Dato Ir. Ismail Samion one country to another. The concept of Integrated Engineering
YBhg. Dato Ir. Shanthakumar Sivasubramaniam
YBhg. Datu Ir. Hubert Thian Chong Hui Services as detailed in one of the papers is one such creation
YBhg. Dato Ir. Prof. Chuah Hean Teik that engineers need to familiarize themselves to face the
Ar. Dr. Amer Hamzah Mohd Yunus
Ir. Henry E Chelvanayagam challenging world. For engineers to stay competitive, we
Ir. Dr. Shamsuddin Ab Latif
Ir. Prof. Dr. Ruslan Hassan
not only have to keep up with the new technologies and
Ir. Mohd. Rousdin Hassan innovations, we also need to keep track of the changing
Ir. Prof. Dr. Hassan Basri
Tn Hj. Basar bin Juraimi trend of contracts.
Ir. Ishak Abdul Rahman Contact per say cannot be left to the contract division
Ir. Anjin Hj. Ajik
Ir. P E Chong or the quantity surveyor alone. Engineers as the leading
consultants in major projects are often saddled with
EDITORIAL BOARD
contractual matters that require a good understanding of
Advisor the nexus of legal terms and conditions of the contract.
YBhg. Dato Prof. Ir. Dr. Judin Abdul Karim
Knowledge and experience on this matter make an engineer
Chairman
YBhg Datuk Ir. Shanthakumar Sivasubramaniam better equipped to manage a major construction project.
I hope this edition with the theme on Engineering
Editor
Ir. Fong Tian Yong Construction Contracts will enrich engineers with new
thoughts on contract matters and ingredients needed to
Members
Ir. Prem Kumar formulate and facilitate effective contract management to
Ir. Mustaza Salim enhance project excellence.
Ir. Chan Boon Teik
Ir. Ishak Abdul Rahman
Ir. Prof. Dr. K. S. Kannan
Ir. Prof. Dr. Ruslan Hassan
Dato Prof. Ir. Dr. Judin Abdul Karim
Ir. Prof. Madya Dr. Eric K H Goh President
Ir. Nitchiananthan Balasubramaniam
BOARD OF ENGINEERS MALAYSIA
Executive Director
Ir. Ashari Mohd Yakub

Publication Officer
Pn. Nik Kamaliah Nik Abdul Rahman Editors Note
Assistant Publication Officer
Pn. Che Asiah Mohamad Ali As more local builders and professionals are
Design and Production engaging in construction works, both local and
Inforeach Communications Sdn Bhd
overseas, the subject of contracts has always been
Printer popular. In this publication, readers will be taken
Art Printing Works Sdn Bhd
29 Jalan Riong, 59100 Kuala Lumpur on a revisit to the understanding of Engineering
Construction Contracts as well as the drafting of
The Ingenieur is published by the Board of Engineers
Malaysia (Lembaga Jurutera Malaysia) and is distributed construction contracts by prominent writers who have salient
free of charge to registered Professional Engineers. points to reach out to us.
The statements and opinions expressed in this On the international scene, the paper on Integrated
publication are those of the writers. Engineering Services-the ETI centric professional services will
BEM invites all registered engineers to contribute articles examine the supply chain of Engineering Services in FTA.
or send their views and comments to
the following address:
During the recent BEM road shows on Certificate of
Completion & Compliance (CCC), many questions were
Publication Committee
Lembaga Jurutera Malaysia, raised on Professional Indemnity Insurance (PII). We hope
Tingkat 17, Ibu Pejabat JKR, the section on PII addresses the concerns in this area and
Jalan Sultan Salahuddin,
50580 Kuala Lumpur. we welcome further deliberation on this.
Tel: 03-2698 0590 Fax: 03-2692 5017
E-mail: bem1@streamyx.com; publication@bem.org.my
Website: http://www.bem.org.my Ir. Fong Tian Yong
Advertising/Subscriptions
Editor
Subscription Form is on page 54
Advertisement Form is on page 55
THE INGENIEUR UPDATE 5

Professional Indemnity Insurance

T
he issue of whether Professional Indemnity provide an indemnity for legal liability arising out of a
Insurance (PII) should be made mandatory for breach of professional duty by way of neglect, error or
all Engineering Consultancy Practices (ECP) was omission. In addition, many professional indemnity policies
deliberated at length by the Board of Engineers Malaysia incorporate additional clauses or extensions, such as libel
(BEM) when the proposed amendment to the Registration and slander, loss of documents in insured custody or
of Engineers Act was redrafted last year. This was in control. Certain PII policies do cover legal costs up to a
view of the proposed amendment to the Street, Drainage stated amount) in connection with legal proceedings taken
and Building Act 1974, Act 133 whereby Professional by the Professional Engineer (PE) claiming for damages
Architects and Engineers are given the responsibility to arising out of the infringement of any copyright vested
issue the Certificate of Completion and Compliance (CCC) in the PE. The policy, however does not cover civil or
for development projects for which they are the principal criminal and/or other penalties financial or otherwise as
submitting persons. Although the bill was finally approved liability on the part of the PE. PII does not cover third
by Parliament without any mention on PII, the Board party claim against the engineer if such claims are not
encourages all ECPs to take up PII voluntarily. connected with the tortuous act on design or work related
In fact, a number of ECPs have PII coverage since to it. Similarly PII does not cover fraud.
their formation and some have taken up PII on their As the public is getting more litigious, the Board urges
own initiative to safeguard their interest. Meanwhile, the ECPs to take up PII to safeguard their own interest.
Board is exploring other forms of PII which are practiced
in other countries which may be more beneficial and
affordable to local ECP. Dato Prof. Ir. Dr. Judin bin Abdul Karim
The public, particularly house buyers may not have the President
right perception of PII. Professional indemnity policies Board of Engineers Malaysia

ANNOUNCEMENT

E ve n t C a l e n d a r
Conference on Sustainable Building South-East Asia
Strategies forImplementation& Exhibition on
Sustainable Building and Construction
The following list is the Publication Date: November 5-7, 2007
Calendar for the year 2007 - 2008. While we Venue: Kuala Lumpur Convention Centre,
normally seek contributions from experts for Kuala Lumpur
each special theme, we are also pleased to Joint Organisers: KTAK, CTMC, UTM and ISI

accept articles relevant to themes listed. Workshop on Dynamics of Negotiating Skills
Date: November 26-27, 2007
Please contact the Editor or the Publication Venue: Hotel Bayview, Langkawi, Kedah
Officer in advance if you would like to make Organiser: SPACE UTM
such contributions or to discuss details and
Workshop on Dynamics of Strategy Management
deadlines. Date: November 28-29, 2007
Venue: Hotel Bayview, Langkawi, Kedah
December 2007: PROJECT FINANCING Organiser: SPACE UTM
March 2008: POWER Tel: 07-5218170; 5218159; 5218164
June 2008: ASSET MANAGEMENT Fax: 07-5211355
Email: sp-space@utm.my
Contact: Ms. Zarina / Nurrul Ain

Fraudulent Offers on Engineering Council


United Kingdom (ECUK) Registration
The Engineering Council United Kingdom (ECUK) is aware
The Board of Engineers Malaysia
that there is a fraudulent operation in place which, amongst wishes all readers
other things, offers to arrange registration with ECUK.
The ECUK never processes applications through third Selamat Happy
parties. All applicants must deal directly with ECUK and
its constituent engineering institutions.
For further details on registration procedures with
Hari Raya & Deepavali
ECUK, please visit www.engc.org.uk. Anyone who receives Aidil Fitri
an offer from an agent to facilitate registration should
contact ECUK.
6 COVER FEATURE THE INGENIEUR

Effective Contract Management


For Construction Projects
By Ong Hock Tek, Managing Director, Entrusty Group

I
n the context of the construction and external environment, project and liabilities of the contracting
industry, many of us would complexity and characteristics, as parties and administering the
acknowledge that successful well as contractual and commercial contract provisions, procedures
construction projects are often matters. In order to overcome and practices as expressed and
attributed to those that achieve these issues and problems so implied in the contract. The
the clients requirements and as to achieve project success, term administration means to
project objectives set out at it is pertinent that the elements administer, to execute or to
the outset of the project. Such or ingredients in managing the implement. In practice, the
objectives may include delivery contract effectively are well administration of the contract is
within the stipulated time period, understood and practised. usually carried out in a passive
construct within the budgeted cost Contract Administration/ or at best, reactive manner.
and meet the quality standard Management is about the The person who carries out the
set. Other objectives, equally management of the contract/s contract administration role,
important, may include meeting of a project. It involves the u s u a l l y c a l l e d t h e C o n t ra c t
functional requirements and understanding and management Administrator, executes orders,
satisfaction of the clients and/or of the roles, responsibilities, gives directions and ensure
end users. Notwithstanding such obligations, powers and liabilities compliance with the contract
requirements and objectives, the of the contracting parties, as provisions, procedures and
construction industries around the well as the administration of the instructions by the Superintending
world still suffer from numerous contract provisions, procedures Officer.
setbacks and problems, in and practices as expressed and On the other hand, Contract
particular those associated with implied under the contract. Management is different. Its about
the construction process. Is there a difference between the management of the contract
Th e c o m m o n i s s u e s a n d c o n t ra c t a d m i n i s t ra t i o n a n d of a project, which includes
problems associated with the contract management? Whilst many contract administration. The term
construction process often lie in would view and construe contract management means to manage.
the ill considered procurement a d m i n i s t ra t i o n a n d c o n t ra c t Management of the contract
selection, traditional separation management as synonymous, the involves planning, organising,
of design from construction, author would draw a distinction communicating, co-ordinating,
lack of integration/organisation between the two, in practice or monitoring and controlling the
of the project members and practical terms. whole contract of the project. Its a
poor communication channels, Contract Administration proactive rather than just reactive
uncertainties in design and involves understanding the roles, approach in the administration
construction, changing internal responsibilities, obligations, powers of the contract. Th e p e r s o n
THE INGENIEUR COVER FEATURE 7

who carries out the contract Th e e l e m e n t s a r e b r i e f l y the eventual completed building


management role, usually called described and discussed, as or facility.
the Contract Manager, manages follows; The objectives are essentially
and co-ordinates the contract the Input and the Constraints can
requirements together with The Client and its Objectives be the priorities and requirements
other project team members to and Priorities on the project. In order to
ensure not only the contract is ensure that the Output, which
managed effectively, but also Whether from the private or are the deliverables, products
the project as a whole achieves public sector, each client has and/or services can be achieved
its set objectives and meets the its own organisation and project satisfactorily and successfully,
clients requirements, effectively objectives. The former objectives the Mechanisms, which comprise
and successfully. can include profit margin, growth/ people, resources, etc. must
The ten essential elements expansion, strategic alliance, etc. be adequate and timely put in
or ingredients needed in The latter objectives may include place and properly managed.
formulating and facilitating delivery within the stipulated That is to say, the effective
effective contract management Ti m e p e r i o d , C o s t w i t h i n contract management of a
to achieve project excellence budget, meeting the required project encompasses effective
and success are: Quality standards or Functional the interaction and integration
requirements, as well as ensuring of the four basic fundamentals

1 A good understanding of the


Client, its Objectives and
Priorities
customer Satisfaction.
Whatever the objectives, it is
important to know and understand
or elements in the project
management process, effectively.
Diagram 1 illustrates the

2 A detailed appraisal and


understanding of the
Project Nature and
clearly the clients requirements
and priorities. Whilst some clients
may place priority on aesthetic
project management process1

Project Nature and


Characteristics or prestige, early or timely Characteristics

3 A proper and structured


appraisal and management
of the Project Risks
completion or price certainty,
o t h e r s m ay p l a c e e m p h a s i s
on buildability or flexibility to
A d e t a i l e d a p p ra i s a l a n d
understanding of the nature and

4 Selection of a suitable
P r o j e c t Te a m ( D e s i g n /
Construction)
accommodate changes during
construction and/or operation of
characteristics of the project
i s c r u c i a l a s e ve r y p r o j e c t

5 Use of a suitable Building


Procurement System CONSTRAINTS

6 Use of a suitable Contractual


Arrangement
Time, cost, quality,
technical and other

7 Having an effective
Organisation Structure
that allows efficient
performance parameters,
legal, environment, etc

communication channels
and is capable of adapting
to changes

8 Maintaining effective
Monitoring and Control
Systems capable of
INPUT
Business needs
MANAGEMENT
OF THE
OUTPUT
Project
deliverables,
identifying and responding and requirements PROJECT products and/or
to changes services

9 Maintaining proper
Information Recording and
Retrieval Systems

10 Emphasis on the importance


of good Commercial/
Business and Human
MECHANISMS
People, techniques
and tools, equipment,
Relations organisation

Note: 6 & 8 (adapted) Diagram 1



8 COVER FEATURE THE INGENIEUR

exhibits different nature and Proper and structured risks


characteristics. appraisal and management can
Fo r e x a m p l e , l a r g e a n d lead to a more effective project
complex projects such as or construction management
airports, involve various unique through better awareness and
assemblies and complications understanding of risks, systematic
due to the high level of services treatment of the risk issues to
and specialist input, making co- reduce uncertainties and hazards,
ordination and knowledge of such as well as to ensure better use
works of paramount importance. Site inspection of the available resources.
Consequently, the emphasis is Managing risks effectively
on selection of a contractor or or impossible to achieve. Due facilitates the achievement of
builder who has the knowledge to the inherent characteristics of project objectives, improves
and experience to provide the construction projects and their project performance, increase
input and expertise by partaking processes, they invariably give productivity and increases
in the pre-construction stage rise to risks and must therefore eventual profitability. Hence,
rather than to ensure buildability be understood and managed, specific considerations need to
and proper co-ordination of effectively. Such characteristics be given in the appraisal of
the works amongst the many include changing environment risks, namely:
parties involved only during the conditions (externally and
construction stage. internally), traditional separation of Identification of risks (the
Mass housing or industrial design from construction, lengthy cause) e.g. hazards - what,
buildings, often involve repetitive design and construction periods, where, when, how, why, etc.
construction works due to the diverse and substantial resource
extensive use of standardised or requirements, sub-contracting Analysis of risks identified
prefabricated components and/or o f wo r k s , m u l t i - d i s c i p l i n a r y (the analysis) e.g. likelihood
proprietary systems. Such systems project team members, multi- and nature of occurrences,
usually have sufficient construction level communication channels etc.
information and details for the and multi-facetted co-ordination
construction works to be carried of works. Assessment of risks analysed
out and completed. Hence, works Risks could stem from bad (the effects) e.g. consequences
can often start early and phased ground and weather conditions, and extent of injuries, damages,
completion is often possible. As inadequate design and construction disruptions, delays, etc
for refurbishment works, its nature documentation, lack of resources
and characteristics are again and/or skills/expertise, poor Management of the risks
different due to the uncertainty of planning, monitoring and/or appraised, involves:
the extent of works as it is usually control and lack of teamwork
messy and complicated, possibly and communication. The effects Planning and allocation of the
involving existing buildings with arising from these risks, if not risks appraised (the planning
unsecured site conditions. Works properly managed, may include & c o n t r o l ) i . e . t o avo i d ,
are often required to be started as disruption and delays to the transfer, share, reduction and
soon as possible, with difficulties construction works, budget and acceptance
in the measurement of quantities costs overrun, poor quality and
and pricing of rates. standard of works, damage to Monitoring and feedback of
plant/equipment and/or injury the actual risk occurrences (the
Project Risks to construction personnel and monitoring and feedback) i.e.
contractual or technical disputes. recording, checking, verifying,
BS 4478 defines risk as a H e n c e , h av i n g p r o p e r r i s k s comparing, reporting
combination of the probability, appraisal and management is an
or frequency, of occurrence essential element. It involves the Project Team
of a defined hazard and the systematic application of strategies,
magnitude of the consequences policies, methods and procedures In selecting the project team
of the occurrence. In construction by taking positive, often proactive, for design and construction,
project terms, risk is The likelihood steps in identifying, assessing, several factors such as selection
of negative occurrences adversely mitigating and managing the risks criteria and its process, scope
affecting the project, so that its to eliminate or reduce its exposure of services/works, commitments,
objectives become more difficult to the party/ies concern. responsibilities, experience,
THE INGENIEUR COVER FEATURE 9

teamwork, communication, action


plan, etc need to be assessed and
considered properly. The selection
p r o c e s s w i l l b e ve r y m u ch
governed by the type of building
procurement system to be used
for the project. The factors to
consider in establishing a suitable
project team includes:

Commitment to defined and


measurable project objectives
Ability to foster and maintain

teamwork
Realistic action programme,

budget/price and resources


allocation Employing skilled people
Communication structure and

channels Scope and extent of works management contracting, design


R e g u l a r performance T e n d e r requirements/ and build/construct, project
appraisals conditions management, package deal
Suitably located for regular Tender documentation or turnkey, etc. Each system
formal/informal interactions Te n d e r appraisal and exhibits its own characteristics
Roles and responsibilities reporting and advantages/disadvantages.
Compatibility of the contractor Any selection should considered
In order to select and appoint and design teams together with the project nature
a suitable design team, the and characteristics, in addition to
following should be considered: In addition, the choice of the the elements described above.
right people with the right attitude
Single team of consultants for the project is important Note: Further details on the
or separate appointment of to its eventual success. The aforesaid systems can be found
independent consultants (with following pertinent points should in Construction Contract
or without lead consultant) be observed; Administration/Management in
Criteria for selection and Practice10.
interview Selection criteria of people and
Scope and extent of services organisations Contractual Arrangement
Fees chargeable and mode of Recognition and employing

payments skilled people is essential The contractual arrangement


Role and duties Able and interested to meet leading to contract documentation
Terms and conditions of the project objectives establishes the contractual rights,
professional agreement Mutual trust creates the right obligations, responsibilities and
Compatibility of the consultants environment liabilities of the contracting parties.
and their teamwork spirit Encourage a collaborative Such arrangement or documentation
working environment includes contract based on bills
In the selecting and appointing S e l e c t i o n based on o f q u a n t i t i e s , d raw i n g s a n d
a suitable construction team, accomplishments and attitude specification, schedule of rates,
the following should be cost reimbursement, design and
considered: Note: The CIOB Code of Practice4 build, etc.
provides a number of checklists In selecting a suitable
Suitable selection or tendering and forms for the selection of the contractual arrangement, various
arrangement design and construction teams. factors such as the elements
Criteria for selection and d e s c r i b e d p r e v i o u s l y, p l u s
tender interview Building Procurement change in requirements, design
Experience and expertise of System completeness, cost fluctuations,
the contractor etc., need to be considered,
Financial stability of the Building procurement systems instead of merely using any
contractor include traditional/conventional, standard form of contract.
10 COVER FEATURE THE INGENIEUR

Organisation Structure FUNCTIONAL


Director
Organisation structure is about
framework, hierarchy, authority,
control, rules, procedures, formal
Management Level Operations Tendering Sales Marketing Administration
relationships, for the people
in the organisation and/or the
project. This essential element,
allows effective and efficient
communication channels to take
place and adapts to project
environment and changes. Department Level Functional responsibility
Any structure adopted, be it
functional, project or matrix can
affect project teamwork, work
efficiencies and the eventual
project outcome. Each type of
organisation structure has its own
advantages/disadvantages. Criteria Diagram 2
such as clear objectives and
priorities, policies and procedures, PROJECT
roles and responsibilities, flexible
Director
work structure, people relations,
motivational issues, leadership,
teamwork, capacity to change, Marketing Finance Administration Tender
performance, etc need to be
properly considered when
choosing a suitable organisation
structure for the construction Project Project Manager Project Manager
Manager A B C
project.
Diagrams 2, 3, 4 illustrate the
common organisation structures
used in the construction Construction Contract Procurement/ Construction Contract Procurement/
Purchasing Purchasing
industry.

Monitoring and Construction Contract Procurement/


Control Systems Purchasing

E f f e c t iv e m o n i t o r i n g a n d Diagram 3
control systems are capable of
identifying and responding to MATRIX
changes ensure project objectives
Director
can be met. Proper monitoring
and control systems enable timely
provision of information/details,
smooth progress of works, costs Tender & Marketing Finance Purchasing Others
Contracts
within the budget, identification
of changes/variations, timely
Project responsibility
supervision, testing and inspection Project
Functional responsibility

of works, etc. Manager A

Increasingly, the project team Project


should adopt quality assurance Manager B
programmes such as ISO
9001:2001 to ensure a consistency Project
Manager X
and systematic approach to the
organisations work processes
and procedures. Quality is not Diagram 4
THE INGENIEUR COVER FEATURE 11

just about achieving technical and sub-contractors in Malaysia quality standards. Such value
requirements, but also the various to achieve their ISO 9001:2000 achievements and improvements
elements in Project Management. certification. This is in line lead to sustainable competitive
There must be greater emphasis with the associations aspiration advantages.
on meeting clients requirements to promote and encourage
and customer satisfaction, which contractors, sub-contractors and Information Recording and
demands continuous improvements others to deliver quality works on Retrieval Systems
in delivery and products. Such their building and construction
quality practices and improvements projects, both in Malaysia and Good records are like snapshots
enhance competitiveness through overseas. of the events or actions taken at
better organisational effectiveness In essence, VMQS, which the particular moment, often
and performance efficiency in incorporates Value Management is referred to as contemporaneous
construction projects. There is also about Doing the right things right records. And, good retrieval
a broader and more encompassing in order to enhance the efficiency systems are like going into a
philosophy, often known as Total and effectiveness of the quality library to find the information
Quality Management1, which is delivery process to ensure that required.
aimed at identifying the clients the end product or service can Going back to basics, records
wants, organisations mission, satisfy the customers or clients such as tender/contract documents,
measuring performance to meet requirements. A typical outcome drawings register, correspondence
required standards throughout of using the fast approach on the files, programmes, progress reports,
the whole construction process, work environment is shown in the site diaries, instructions, dayworks,
thereby involving the whole following Diagram 5. claims, etc. should always be
organisation in a system of VMQS is an innovative up to-date and maintained,
continuous improvements. quality management approach properly. The use of ICT to assist
The Masters Builders Association aimed at changing the traditional in systematically organising,
Malaysia (MBAM) has adopted organisational mindset and recording and retrieval of the said
a group quality scheme using c o n s t r u c t i o n a p p r o a ch i n t o documents have reduced the time
Value-Managed Quality System dynamic, quality and performance taken to undertake such tasks,
(VMQS) to facilitate contractors excellence at international effectively and efficiently.

HOW WHY
OBJECTIVES NEEDS
Efficient Working Improve ICT & Invest in ICT
Tools Networking

Provide Area &


Personnel for Storage
Larger Working
Area
Storage & Library
Facilitate People
Better Working Movements
Space & Layout
Provide Confortable Minimise Physical
Working Area Hindrance
Improve
Productivity Land Scaping

Safe Work Area


Conducive
Environment Security

Project Good Image Proper Space /


WANTS
Relocation
Good Communication
& Interaction Prevent Eating on
Working Area
Promote Staff Improve Interpersonel
Interaction Relatives Confortable & Relax
Atmosphere
Boost Employee
Spirit Reduce Noise
Interference
Diagram 5
12 COVER FEATURE THE INGENIEUR

contractual and commercial routes


to ensure the successful outcome
of a construction project, which
essentially means to be able to
achieve a win-win outcome
for all the parties involved in
the construction project. In this
regard, Partnering approach 17,
which promotes win-win solutions,
has been adopted at the outset
of many construction projects,
overseas.

Conclusion

Construction industries around


the world suffer from numerous
Recording and retrieval systems using ICT setbacks and problems, in
particular those associated with
Note: Practical examples, various project effectively and amicably the construction process. There is
forms and checklists on information c a n l e a d t o p r o b l e m s s u ch therefore an urgent need to ensure
recording and retrieval systems as disputes or conflicts. The that the setbacks and problems
can be found in the Appendices of contracting parties may end up in are eliminated or mitigated by
the CIOB Code of Practice 4 and in arbitration or court proceedings effective management of the
the Practical Construction Contract to resolve their disputes. construction process in order for
Administration/Management 8 Not all contractually or legally the projects to be successful.
correct action is commercially In order to achieve excellence
right. Sometimes, even and success in the management
Commercial/Business and commercially sound decisions, of construction projects, it
Human Relations may be contractually wrong. is paramount to appreciate,
Whilst it is important to know understand and practice the ten
Emphasis on the importance and understand the contractual essential elements or ingredients
of good commercial/business rights, responsibilities, powers necessary in formulating and
and human relations is the and liabilities, it does not facilitating effective contract
final essential element, if not necessarily mean that every management.
most important element, in contract provisions must be Effective Contract Management
effective contract management to followed and enforced in the is essentially about managing the
achieve excellence and success in strictest sense. To go down the contract of a project by ensuring
managing construction projects. contractual route usually means that the planning, organising, co-
Commercial or business having to rely on the provisions ordination, monitoring and control
relation is about fostering business expressed/implied under the of the project from inception to
links/relations and communication contract i.e. needing to work or completion will meet the project
with other organisations. Human resolve matters within the ambit objectives in order to achieve
relations is about understanding of the contract. This is known to success.
and fostering interpersonal be as the hard approach.
relationship with another individual To go down the commercial Editors Note: Th i s a r t i c l e i s
or group. For human relations to route virtually opens up a based on and adapted from the
be effective and harmonious, wider and borderless scope for conference paper on Effective
criteria such as people selection, negotiation and settlement of the Project Management Essential
team commitments, meeting disputes/conflicts without/partly Elements in Successful Projects
organisation and project objectives, relying on contractual/legal route. presented by the Author at the
sharing common objectives and This is called the soft approach. Inaugural Construction Conference
values, motivational issues, and Neither approach should be 2007 jointly organised by CIOB
skills development need to be followed to the extreme. Singapore and National University
seriously taken into account. Therefore, there is a need of Singapore on January 25,
Failure to manage the construction to strike a balance between 2007. BEM
THE INGENIEUR COVER FEATURE 13

REFERENCES

1. Association of Project Management (APM), by Kuala Lumpur Regional Centre for Arbitration
Project Management Body of Knowledge, 4th (KLRCA) & Malaysian Institute of Arbitrators
Edition, 2000. (MIArb), April 27, 05
2. BS ISO 10006:1997 British Standard, Quality 14. O n g , H . T. , R i s k s a n d U n c e r t a i n t i e s i n
Management Guidelines to Quality in Project Construction Projects One Day Executive
Management, BSI 06 - 2000. Workshop on Construction Business Financing
3. BS 6079-1:2002 British Standard, Project and Risk Analysis for Non-Construction
Management Part 1 Guide to Project Financial & Risk Managers/Executives
Management. organised by Business & Advanced Technology
4. Chartered Institute of Building, Code of Practice Centre (BATC), Universiti Teknologi Malaysia,
for Project Management for Construction and August 3, 2005
Development, 3rd Edition, Blackwell Publishing, 15. Pro-Value Management Sdn. Bhd/Applied
2002. Facilitation & Training, An Introduction to
5. Ong, H.T., Building Procurement, Tendering Risk Management for KLCC Berhad, Training
and Contractual Arrangement, Construction Manual/Materials, September 11, 2002.
Management Seminars/Workshops, CIOB 16. Project Management Institute, PMI Guide to
Malaysia, November 16, 1996. the Body of Knowledge, PMI 1996.
6. Ong, H.T., Effective Contracts Management 17. Stevens, David., Strategic Thinking : Success
Construction Management Seminars by secrets of big business projects, Advantage
The Chartered Institute of Building, Malaysia. Quest Publications 2004.
December 16, 2000. 18. Ong, H.T., Effective Project Management
7. Ong, H.T., Construction Contracts in Malaysia ~ Essential Elements in Successful Projects,
a paper presented at Construction Conference Inaugural Construction Conference 2007 jointly
2002 ~ A One-Day Conference jointly organised organised by CIOB Singapore and National
by The Chartered Institute of Building, Malaysia University of Singapore on January 25, 2007.
(CIOBM) and Master Builders Association,
Malaysia on in-conjunction with MALBEX
and International Construction Week 2002,
September 12, 2002.
8. Ong, H.T., Practical Construction Contract
Administration/Management, 12-Modules
Training Programme Lectures and Workshops,
March- September 2003.
9. Ong, H.T., Achieving Excellence through Value-
Managed Quality System - A paper delivered
at the International Conference on Managing
Excellence in Construction, Chongqing, China-
Organised by CIOB China, May 26, 04
10. Ong, H.T., Construction Contract Administration/
Management in Practice - Two Day Intensive
S e m i n a r / Wo r k s h o p o r g a n i s e d E n t r u s t y
Management Sdn Bhd, December 9 & 10,
2003.
11. Ong, H.T., Value-Managed Quality System
(VMQS) Towards A Value-Added Quality
Management System 6th International Value
Management Conference organised by Hong
Kong Institute of Value Management, Nov 26
& 27, 2003
12. Ong, H.T., Value & Risk Management, FIABCI-
CIDB Brown Paper Bag Seminar, University
Malaya, 2004
13. O n g , H . T. , R i s k s a n d I t s M a n a g e m e n t ,
International Conference on Construction Law
& Arbitration, April 26 28th, 2005, organised
16 COVER FEATURE THE INGENIEUR

Drafting Construction
Contracts
By N. Pathmavathy and Kamraj Nayagam, Skrine & Co.

Editors Note: This article was extracted from Volume 3/2004 of Legal
Insights the Newsletter of Messrs. Skrine, Advocates & Solicitors

A
construction or building appropriate contractual framework forms are used compared to
contract can be loosely for the physical execution of its the costs of drawing up fresh
defined as an agreement for desires. contracts.
the construction, repair, renovation The disadvantages include the
or restoration of building or STANDARD FORM following. The forms are arrived
engineering works. It ought to CONTRACTS at by a process of compromise
specify what work has to be between different parties to
done by the contractor, where Standard Form construction those entering the contract, often
the work is to be done, when contracts provide a basic framework reflecting other concerns than
this work must be completed, to identifying the rights, obligations those of the parties. The judicial
what standard the work should and duties of the parties, establish pronouncements which have
be done, how the contract is to the ambit of the powers and duties accumulated are often contrary
be administered and how is to of the contract administrator as well to the previous understanding
be paid to the contractor by the as put in place the administrative of those in the industry, which
employer. procedures necessary for operation is why it is sometimes best to
The many types of construction of the contract. have a new form of words. In
contracts include traditional The standard form contracts a Malaysian context, the forms
building contracts, engineering commonly used in Malaysia include used are often from overseas and
contracts, design and build the PAM98 Form issued under the may not reflect peculiarities of
contracts, fee based contracts sanction of the Pertubuhan Arkitek local law. The dense wording of
and build operate and transfer Malaysia, JKR or PWD Forms issued the standard forms makes them
contracts. Although each contract by the Public Works Department very difficult to amend effectively.
will obviously be unique, broad of Malaysia, CIDB Standard Hasty amendments often have
conceptual types of contract Form of Contract for Building unintended and unforeseen
may be identified, and even a Works issued by the Construction consequences, whilst properly
contract created specifically to Industry Development Board, IEM considered amendments often
meet the individual requirement forms issued by the Institution involve large amounts of effort.
of a given situation will inevitably of Engineers Malaysia, FIDIC The creation of any
have points of similarity to other Forms issued by the Federation construction contract requires a
contracts. Internationale des Ingenieur- balancing act between conflicting
Nevertheless, such is the Conseils and the ICE Forms imperatives. This process starts at
complexity of the typical issued by the Federation of Civil the conceptualisation stage, and
construction contract in the modern Engineering Contractors. requires the prospective Employer
age, that any awareness of the One of the advantages of to be aware of its wishes and
workings of construction contracts most standard forms is that most intentions before even considering
must of necessity be founded upon construction professionals are the identity of the Contractor.
a thematic understanding of the familiar with their operation, The prospective Employer,
various procurement strategies limitations and drawbacks. Such desirous of maintaining control
and the underlying forces which familiarity leads to administrative and certainty, is torn between
drive them. and cost efficiency. As there is a the shackles of precedent and
In general, familiarity with body of judicial pronouncements the pro-active crafting of solutions
the available standard form of accumulated over the years on appropriate to his precise situation.
construction contract, and of the standard forms, there is some The latter course may amount to
types of construction contract, will certainty in meaning. Accordingly, no more than the re-invention of
enable the prudent Employer to at there are appreciable savings in the wheel, with all the attendant
least ensure that it will achieve the time and costs when standard inefficiency and expense. Hence
THE INGENIEUR COVER FEATURE 17

the attraction of the standard


form contract, as outlined above. Project
Decision to Build
However, such a contract is unlikely Brief
to reflect in full the intentions and Conditions
concerns of the parties, leading Design
of Contract,
to the temptation to amend the Drawings ,
Design Drawings
same. Such modification, whether BQs,
Specifications
by way of addition, deletion, or
revision is not to be undertaken Tender Documentation
Contractor
lightly. Arbitrary revisions can
Tenders &
create serious problems, as Tender Invitation Proposals
discussed above. As a rule of
thumb, revisions to standard form LOI /
Award
contracts should be kept to a Evaluation & Award
minimum and only implemented
after a thorough review. Contract
Documents
In conclusion, there is no Construction Works
simple solution to the creation of
the perfect construction contract, Diagram 1: Stages in Typical Construction Project
and this is not to be wondered
at, for, as has been observed, Role Of Employer Responsible for the performance
major construction projects are the Procure the design to be of his sub-contractors
most complex sphere of human prepared by professional
endeavour short of warfare. In architects Role Of Architect
such a scenario, it is only prudent Secure planning permission Complete the design
that those about to embark and building permits Oversee development of the
on such an endeavour should M a k e p a y m e n t s r e g u l a r l y Project
give a commensurate amount of according to contract Co-ordinate design work of
consideration to the preparation of Give adequate site possession other consultants
the document which will govern to contractor Supervise the building works
the course of the endeavour. Ensure non-interference with Issue certificates and approvals
The stages in a construction construction
contract are shown in Diagram 1. Role Of Quantity Surveyor
The parties involved in a contract Role Of Contractor E s t i m a t e quantities from
includes: T o carry out the works architects plans and put into
according to the design issued bills of quantities
Employer or Owner by architects Prepare of tender documents
Contractor To complete the works on or Oversee contract
Architect before the contractual date of documentation
Engineer completion Assist evaluation of progress
Quantity Surveyor Responsible for the materials claims and variation work
Consultants and the workmanship aspects Recommend amounts to be
Project Manager of the contract certified
Sub-Contractor
Supplier

ROLE OF RESPECTIVE Employer


PARTIES IN A TRADITIONAL Consulting
BUILDING CONTRACT Agreement
Main
CONTEXT
Architect Contractor
The Employer commissions an
architect to prepare the design
for the building. The Contractor Sub- Suppliers
is then employed to construct the contractors
Consultants
project for a fixed price. (See
Diagram 2)
Diagram 2: Traditional Building Contract
18 COVER FEATURE THE INGENIEUR

Role Of Consultants (iv) quantity ENGINEERING


C & S Engineer (v) unit price rate for each CONTRACTS
M & E Engineer item of work
Acoustics Consultant (vi) grossing up column EP
Landscape Architect [unit price rate x quantity] EPC
EPCC
CONTRACT DOCUMENTS Specifications EPCM
Standards for execution of

The contract documents include works WHY USE STANDARD


Articles of Agreement, Conditions of Source for applicable technical FORM CONTRACTS?
Contract, Plans & Drawings, Bill of standards and codes
Quantities, Specifications and Other The Standard Form Contracts
Documents specifically included. Other Documents Specifically provide a basic legal framework,
Included establish the ambit of the powers
Articles Of Agreement Tender and duties of the contract
Brief description of Project Method statement administrator and put in place
Location of Site Works programme the necessary administrative
Commencement Date procedures.
Name of the parties TYPES OF PROCUREMENT
Obligation of parties METHODS Advantages
Price to be paid Compromise solution
Name of consultants Classification according Risks are allocated relatively
Time for Completion to how contractor is fairly
List of contract documents remunerated Time-tested
(a) Lump Sum Contract Certainty in meaning
Conditions Of Contract (b) Measure & Saves time and costs
Elaborate set of legal terms Value Contract
which regulate the contractual (c) Cost Plus Contract STAGES OF PROJECT
relationship between parties to (d) Term Contract MANAGEMENT
the contract
Define duties and rights of Classification by reference Contract Drafting (See Diagrams
parties to nature of Contractors 3 & 4)
Address some of the likely obligations Contract Administration
events which may arise during (a) Design-Bid-Build Dispute Resolution
the course of works Contract
(b) Design & RISK ALLOCATION
Plans & Drawings Build Contract
Numbered according to series (c) Turnkey Contract Optimal risk allocation
and separate series used for (d) Management Contract maximum risk transfer
each consulting discipline : EFFECTIVE CONTRACT DRAFTING
architecture, structural and civil
engineering, mechanical and CLARITY FAIRNESS
electrical engineering
Each drawing signed and scales Contract Terms must be If Parties feel the Contract is
clearly drafted fair, they will be less likely to
clearly stated seek relief
Enable the price for works to A good Contract must : Appreciate what the other
be computed (a) spell out risks, rights and Party wants out of the Contract
obligations Allocate risks to the party best
Bill Of Quantities (b) set out consequences of able to control, manage and
breach & termination insure the risk
C o n s i s t s o f p r e l i m i n a r i e s
(c) be consistent NB: onerous provisions risk
(site overheads), trades bills, being declared unenforceable
Dont ignore terms during e.g. forfeiture clauses of all
schedule of provisional sums project execution sums paid (see Johor Coastal
Trade bill divided into six Reach shared understanding Development v Constrajaya
columns on obligations Sdn Bhd)
(i) alphabetical reference for Improve project team
communication channels
the item
(ii) brief description of item
(iii) unit Diagram 3 Effective Contract Drafting
THE INGENIEUR COVER FEATURE 19

EXAMPLES OF RISKS
Components of a Good
Contract
Benefits ENCOUNTERED DURING
PROGRESS OF PROJECT
Ensures that employer gets what they have
Clearly Stated Scope of
paid for and that contractor is clear as to what
Works
their responsibilities include
(i) Price escalation
(See Diagram 5)
Performance Standards Ensures accountability and provides measurable (ii) Failure to complete on time
Defined standards and goals to be achieved
(See Diagram 6)
Limitation of liability Allocation of risk
(iii) Unforeseen Ground
Detailed cost estimate from contractor provides Conditions
Price Structure
up-front awareness of total costs Not all standard form contracts
Completion Date Ensures that project will be accomplished in a have provisions in relation to
given period of time unforeseen ground conditions
Absence of such provisions
Penalty for Failure to Makes contractor accountable for achieving the
Complete on Time negotiated goals within agreed time period
may lead to dispute as to who
will be responsible and bear
Important where contracting parties are from the costs for additional works
Choice of Law
different jurisdictions
arising from the unforeseen
ground conditions
Diagram 4 Components of a Good Contract
E m p l o y e r may consider
employing a more interactive
Risks should be allocated to risks within the control of the selection or bidding process
parties best able to manage contractor to be allocated to to identify and reduce any
them the contractors uncertainties that may be
General rule, risks within the Identifying Parties interest and encountered during the progress
control of the employer to be effective risk management is of the project
allocated to the employers and the key to prevent disputes
(iv) Default in payment
I t i s n o t u n c o m m o n f o r

contractor to allocate any risk


Price Increase Who will absorb -
Contractor / Employer ? of any payment default by the
employer to his sub-contractor
Such risk allocation can be

Risk Allocation done by way of pay when


paid clauses
If risk is allocated to contractor, contractor may
limit liability for any price increase KEY TERMS AND
CONDITIONS OF
Diagram 5 Price Escalation CONSTRUCTION CONTRACT

(i) Obligations of Parties


(See Diagram 7)
Failure to Complete (ii) Key Contractual Dates
on Time (See Diagram 8)

(iii) Standard of Performance


Not due to Implied term: the contractor
Contractors Default must perform the works in
Contractors Default
good and workmanlike manner.
If higher standards are required,
these must be expressly
Risk to be allocated Risk to be allocated
stipulated in the contract.
to Contractor to Employer by way
Examples of higher standards
of EOT clause
for consideration include:
- Fitness for purpose i.e.
the works performed and
Diagram 6 - Failure to complete on time materials ordered must be
20 COVER FEATURE THE INGENIEUR

fit for the purpose for which


Contractor v Employer

they are required.
- S p e c i f i e d p e r f o r m a n c e
guarantees
To perform and complete the works To give possession of the site to - Established international
the contractor
To design the works in accordance benchmarks
To make timely payments to the
with the employers requirements contractor
(where applicable) To appoint an architect, engineer (iv) Performance Security
To provide all plants, tools and or surveyor as the superintending Contractor is commonly required
officer (S.O.) for contract
materials necessary for the administration in construction contracts to
completion of the works furnish performance security
Not to interfere with or improperly
To be responsible for the adequacy influence the S.O. in his for due performance of the
and safety of all site operations certification duties
works
and methods of construction Not to interfere with the progress
of the works by the contractor Performance security usually
To comply with statutory
To issue instructions and give takes the form of an on-
requirements information in good time demand and irrevocable
To remedy defects in the works
bankers guarantee
Parent company guarantee or

insurance guarantee may be an


Diagram 7
Key dates in a Construction Contract acceptable alternative in some
instances
Effect Action Required The value of performance

security typically required by


Contractor to furnish
Execution Date
Date when the contract performance security & do employers in Malaysia is 5%
comes into force preparatory works to 10% of the contract price
Employer to give possession Employer may require design
Date the contractor must gain of the Site to the Contractor
Date of Site Possession possession of the Site Contractor to be responsible bond as additional security
over safety of the Site and against any defect in the
mobilise to the Site
design. (See Chart 1)
Date the contractor can Contractor to commence
Commencement Date commence construction construction
works To ensure the contractor
Contractor to complete the
Date the contractor must furnishes the performance security
works
Completion Date complete the works (subject to the employer:
SO to issue certificate of
to extensions of time)
practical completion the contract may stipulate
Date by which the contractor Contractor to make good the provision of performance
Expiry of Defects must make good defects defects
Liability Period (DLP) which had appeared during ER to issue certificate of
security as a condition
DLP making good defects precedent to commencement
of works and payments by the
Diagram 8 - Key dates in a Construction Contract employer
the contract may entitle the

employer to terminate the


Pro
Employer Unconditional
contractors engagement in
& on-demand the event the contractor fails
bankers
to furnish the performance
guarantee
security within the requisite
Valid from
commencement of period
Conditional works to expiry of DLP the contractor may entitle the
bankers employer to withhold monies
guarantee
which may become due to the
Valid from commencement
of works to expiry of DLP contractor under the contract
Parent company
but value reduced to half in the event the contractor
upon completion of works
guarantee fails to furnish the requisite
performance security
Valid from
commencement of works
to completion of works Contract (v) Interim Payments
Price
Stage Payments v Periodic

Payments
Chart 1 Periodic payments are sums
THE INGENIEUR COVER FEATURE 21

payable to the contractor based See Peak Construction remedies are available to the
on a periodical valuation of (Liverpool) Ltd v McKinney employer in the event the
the work done to date. Such Foundations Ltd (1970) 1 BLR contractor fails to complete
valuation are usually conducted 111 where CA held: the works within the stipulated
on a monthly basis. time of completion.
Stage payments are fixed The stipulated time for Such remedies may include the

installment sums payable completion having ceased to right to:


to the contractor upon the be applicable by reason of the (a) issue instructions to the
achievement of certain employers own default and contractor to expedite the
prescribed milestones. the extension of time clause works
General view is that stage having no application to that, it (b) impose LAD
payments offer the benefit of seems to follow there is in such (c) terminate the contract
certainty in the sums payable a case no date from which (d) c a l l o n p e r f o r m a n c e
to the contractor and savings liquidated damages could run security
in professional fees and time. and the right to recover them
NB: Stage payments may not has gone. (vii) Completion & Taking Over
be appropriate for contractors The employer may take over

with poor cash flow. Examples of events of delay the works when the works have
which would entitle the been completed in accordance
(vi) Time for Completion contractor to extension of with the contract and the
It is important to expressly time: relevant certificate has been
stipulate in the contract (a) act of prevention by issued certifying the completion
the time for completion of employer of the works.
the works as otherwise the (b) delay in giving possession of What constitutes completion of

contractor only has an implied the site to the contractor the works may differ from one
obligation to complete the (c) i n t e r f e r e n c e b y t h e project to another. Typically,
works within a reasonable employers contractors substantial completion will
period. (d) delay by the employer suffice where the employer has
Extension of time provisions in issuing necessary the full and proper beneficial
must be included to prevent instructions use of the works with only
time being at large should the (e) suspension of works by minor defects. Other conditions
employer causes any delay the employer without may also be imposed such
to the works. Otherwise, the reasonable cause as the issuance of CF and
employers right to claim completion of testing and
liquidated damages may be It is important to specify in commissioning of the works to
affected. a construction contract what the satisfaction of the employer.
(See Chart 2)

(viii) Defects Liability Period


It is common in construction
Contractor to issue
Contractor to notice when works contracts to require the
complete works ready to be contractor to warrant that the
Taken over
works upon completion are
free from defects and to make
If Employer
good defects which appear
not satisfied during the defects liability
Employer to give Employer to period.
reasons & specify inspect works It is during the defects liability
works to be done period that the employer has the
If Employer right to call for the contractors
satisfied physical return to the site
after the employer has taken
Practical Employer to
Completion is over the works. The employer
issue Certificate of
achieved Practical Completion
must serve a notification of
defect on the contractor and
the contractor is required to
make good the defect within
Chart 2 - Workflow for Taking Over
a reasonable period.
22 COVER FEATURE THE INGENIEUR

If defects appeared after the (x) Termination and personnel (including


expiry of the defects liability Termination clauses should his sub-contractors)
period, the employers remedy set out clearly : (b) The employer is entitled
in most cases is limited to (a) the mechanism within by himself or employ
pursuing a legal claim in which either party may others to complete the
damages. terminate the contract by outstanding works
Remedies available to the giving notice of default, (c) The contractor is entitled
employer in the event the followed by notice of to be paid the amount
contractor fails to make good termination should the representing the value of
defects during DLP may include defaulting party fail the works done to-date and
the right to: to remedy the default loss and expense suffered
(a) carry out the remedial within requisite period; by the contractor resulting
works himself or employ (b) e v e n t s o f d e f a u l t from the termination
other contractors and entitling the party to (d) T h e c o n t r a c t o r i s
deduct all reasonable terminate (distinguish entitled to be returned
costs incurred from the defaults capable of any performance
retention monies; being remedied and non- security furnished to the
(b) determine a reasonable remediable defaults) employer
reduction in contract price (c) r e m e d i e s a v a i l a b l e
to reflect the diminution to the non-defaulting (xi) Liquidated and Ascertained
in value of the works by party in the event of Damages (LAD)
reason of the defects; termination LAD serve as a reasonable
(c) call on the performance compensation to the employer
security; Examples of remedies available for:
(d) terminate the contract to the employer in the event (a) the contractors failure to
I n p r a c t i c e , s u c h d e f e c t of termination on the basis of complete the works within
liability period clauses also contractors default: the stipulated time for
work to the advantage of the (a) T h e c o n t r a c t o r m u s t completion;
contractor given that remedial vacate the site and (b) the contractors failure to satisfy
works can usually be carried remove all equipment the performance guarantees
out more cheaply by the and personnel (including prescribed in the contract
contractor than other 3rd his sub-contractors) (c) LAD clauses are usually
party contractors. (b) The employer is entitled incorporated to protect the
by himself or employ employers interest, avoid
(ix) Consequences of Default in others to complete the expense and effort to prove
Payment outstanding works damages and provide certainty
Mere breach of a payment (c) The contractor is not to the consequences of
obligation by the employer does entitled to any monies breach
not constitute a repudiation until after completion of (d) NB: LAD clause may also
under common law, entitling the outstanding works work to the advantage of the
the contractor to terminate the by the employer (except contractor as it may act as a
contract. Default in payment certified sums) ceiling to which the employer
must be sufficiently serious to (d) The contractor must assign can claim for damages
justify termination. to the employer contracts
Courts in Commonwealth with his suppliers and Section 75 of the Contracts Act
jurisdictions have consistently sub-contractors upon 1975:
refused to imply a right to notice by the employer When a contract has been
suspend works by the contractor (e) The contractor must issue broken, if a sum is named in
in the event of the employers or procure the issuance of the contract as the amount to
default in payment. letters of release be paid in case of breach, or if
To protect the contractors the contract contains any other
interest in this regard, clear Examples of remedies available stipulation by way of penalty, the
provisions affording the right to to the contractor in the event party complaining of the breach
the contractor to terminate the of termination on the basis of is entitled, whether or not actual
contract and suspend the works employers default: damage or loss is proved to have
on the basis of the employers (a) The contractor to cease been caused thereby, to receive
default in payment should be works and vacate the site from the party who has broken the
incorporated. and remove all equipment contract reasonable compensation
THE INGENIEUR COVER FEATURE 23

not exceeding the amount so the Appendix as Liquidated and Completion date, no LAD could
named or, as the case may be, Ascertained Damages (LAD) for be deducted.
the penalty stipulated for. the period from the Date for
See Selva Kumar a/l Murugiah Completion or any extended Contracting out of Section 75
v Thiagarajah a/l Retnasamy date where applicable to the of Contracts Act
[1995] 1 MLJ 817 date of Practical Completion.
The Employer may deduct such E.g. Clause 22.2 of PAM 1998:
The Federal Court in Selva sum as a debt from any monies
Kumar held: due or to become due to the The Liquidated and Ascertained
A plaintiff (employer) who is Contractor under this Contract. Damages stated in the Appendix
claiming for actual damages or the (Clause 22.1 of PAM 1998) is to be deemed to be as the
reasonable compensation in an actual loss which the Employer
action for breach of contract must A n e m p l oye r i s e n t i t l e d will suffer in the event that the
still prove the actual damages to deduct LAD upon the Contractor is in breach of the
or the reasonable compensation certification of non-completion Clause hereof. The Contractor
in accordance with the settled of the works. by entering into this Contract
principles in Hadley v Baxendale See Lion Engineering Sdn Bhd agrees to pay to the Employer
[1854] 9 Exch 341. Any failure to v Pauchuan Development Sdn the said amount(s) if the same
prove such damages will result in Bhd [1997] 4 AMR 3315 where become due without the need of
the refusal of the court to award it was stated: the Employer to prove his actual
such damages. From the plain reading of damage or loss.
Applied in Lion Engineering Clause 22 of the PAM Contract,
Sdn Bhd v Pauchuan Development the architect has to certify in E.g. Clause 47(1)(a) of ICE
Sdn Bhd [1997] 4 AMR 3315 writing the non-completion of FORM OF CONTRACT:
the works before the defendant
Example Of LAD Clause: is said to be entitled to deduct Where the whole of the Works
LAD. It is appropriate to say that is not divided into Sections
If the Contractor fails to the certificate of non-completion the Appendix to the Form of
complete the Works by the is a condition precedent to the Te n d e r s h a l l i n c l u d e a s u m
Date for Completion or within deduction of LAD which represents the Employers
any extended time ... and the See also Bell and Son v CBF genuine pre-estimate (expressed
Architect certifies in writing that Residential Care and House per week or per day as the
in his opinion the same ought Association [1986] 46 BLR case may be) of the damages
reasonably so to have been 102 where it was held that likely to be suffered by him if
completed, then the Contractor as the architect did not issue the whole of the Works is not
shall pay to the Employer a sum a valid Certificate of Non- substantially completed within
calculated at the rate stated in Completion after fixing the new the time prescribed

PAM IEM FIDIC (See Table 1)


Performance Bond X
TOOLS FOR
EOT strict notice X X X
provisions (CP)
EFFECTIVE CONTRACT
Extension of DLP X X
ADMINISTRATION

LAD Anti-Selva X X Good understanding and


Kumar Clause
application of the contractual
Right to suspend X X regime
works upon
H a v i n g a good contract
payment default
Risk Assumption by X X
administrator
Contractor of Effective supervision and close
Unforeseen Ground monitoring of the works
Conditions
Adherence to Work Programme
Termination for X X
Convenience and milestones
Direct Payment to Proper issuance of Instructions
NSC and Notices
Objection to NSCs X
R e c o r d - K e e p i n g and
Nomination
Documentation BEM
Table 1
24 COVER FEATURE THE INGENIEUR

Understanding Engineering/
Construction Contracts
By Ir. Harbans Singh K.S, Director, HSH Consult Sdn Bhd

Nature of Forms of
construction contracts construction contracts

A
n engineering/construction The main matters for which
contract (in short a a construction contract normally
construction contract, for makes provision are, the extent
the purposes of this article, is a of obligations undertaken by the
contract under which one party 1 parties and the means by which
(commonly called the contractor) those obligations may be varied
agrees for valuable consideration from time to time; the time for
to undertake to carry out works for completion and interim control
another party (commonly called of the progress of the works; the Construction contracts
the employer 2) involving design machinery for payment of the
(where applicable), fabrication, contractor; supervision of the Works Department 8 has drafted
erection, alteration, repair or works on behalf of the employer; a n d p u b l i s h e d a n e m p l oye r
demolition of structures and/or insurance against a range of risks; specific standard set of forms of
installations on a site 3 made and the remedies available to the contract. Lately, the Construction
available by the latter. It covers parties in respect of default. Industry Development Board
a whole range of contracts i.e. The Malaysian construction (CIDB) has issued a standard
from a simple oral agreement to industry relies essentially on a form of contract for building
repair a house roof to a mega number of types of forms of works 9. Many of the standard
highway contract. Such contracts contract; these being notably forms as alluded to hereabove
are usually termed building the standard forms of contract, are adumbrated below. These
contracts where they relate modified standard forms of forms of contract may be used as
to buildings and engineering contract and ad hoc or bespoke published, but they are frequently
contracts when they relate to forms of contract. The principal amended. A true standard form
infrastructure 4, systems 5 and standard forms in common i.e. one which is produced by a
equipment installations 6 . The use include those published body which is representative of
distinction between these terms by the various institutions e.g. the industry e.g. the Construction
is of no legal significance, and the Institution of Engineers, Industry Development Board
indeed construction contracts as Malaysia and the Pertubuhan (CIDB), is in principle unlikely
a class are regarded by Malaysian A k i t e k M a l ay s i a . Fo r p u b l i c to attract the operation of the
law, not as a separate category sector contracts, the Public contra proferantum principle 10.
of contracts, but a part of the
general law of contract. 1. This includes a corporation.
In most cases, the only parties 2. Also called the client or the purchaser or the authority.
to a construction contract are the 3. Land or place which may be allotted or used for the purposes of
employer and the contractor 7 . carrying out the work.
However, in actual practice, in all 4. Such as highways, airports, harbours, etc.
5. Inclusive of utilities.
likelihood, a construction project 6. Such as Mechanical, Electrical, Telecommunication, Heavy Engineering,
frequently involves a large number etc.
of contributors or participants 7. In a sub-contract, the main contractor is in effect the employer and
who are contractually inter- the sub-contractor is in effect the contractor.
linked by a matrix of contractual 8. or, Jabatan Kerja Raya (JKR).
arrangements. The roles of such 9. Which includes a Main Contract Form and one for the Nominated
Sub-Contract.
contributors are discussed in this
10. Union Workshop (Construction) Co. v Ng Chow Ho Construction Co.
article. Sdn. Bhd. [1978] 2 MLJ 229.
THE INGENIEUR COVER FEATURE 25

However, the position may well to exercise certification and A sub-contractor is one who
be different where an employer other decision-making powers carries out part of the contract
or contractor repeatedly contracts which are binding upon both the works under a contract with the
on the basis of standard form employer and the contractor. main contractor who is for all
contract containing his own Th e p r i n c i p a l c o n t ra c t intents and purposes of the sub-
amendments 11 or one that is self- administrator has traditionally contract, the formers employer.
styled as a standard form 12. been the engineer or architect A sub-contractor who supplies
Other standard forms of responsible for designing the only materials but undertakes no
contract in use in the construction works, although this is by no work or other services under the
industry include those published means necessary. A recent sub-contract is commonly called
by particular employers e.g. trend especially in Design and a supplier. Sub-contractors
Tenaga Nasional Berhad, Putrajaya Build and Management types and suppliers are referred to
H o l d i n g s , Te l e k o m M a l ay s i a of contracts has been for non- as domestic where they are
Berhad and the like for their professionals such as project selected by and the responsibility
specific projects and a sprinkling managers, construction managers of the main contractor; they are
of foreign forms. The latter and the like to undertake the said often referred to as nominated
include those standard forms role. In addition, many contracts where they are selected by the
generated by bodies such as the provide for the appointment of a employer, who then instructs the
Joint Contracts Tribunal (JCT), quantity surveyor to carry out some main contractor to enter into the
the Institution of Civil Engineers of the administrative functions. relevant sub-contract 18.
(ICE), the International Federation
of Consulting Engineers (FIDIC)
and various international bodies TYPES OF CONTRACT be prepared by his professional
for use in relation to specialist PROCUREMENT designers 20 and then invites the
works 13. contractor to tender on the basis
Traditional general contracts of the completed design 21. The
Roles of the parties contractor builds or manufactures
Appearing under various labels what the designers have specified.
In addition to the employer and such as General contracts, Since the design element is within
the contractor, the operation of a Employer-design contracts and the ambit of the employers
construction contract commonly Design-bid-build contracts, obligations, it accordingly assumes
involves a number of other persons these contracts are basically all responsibility for all design
not party to the contract itself 14. characterized by the separation work undertaken. The contractor
Except where the contractor of the design from the production is only answerable for the building
undertakes to design as well as to or manufacture 19 elements of the or construction aspects of the
construct the works, the employer contract. Under this contract works i.e. the quality of materials
will usually either undertake procurement route, the employer used and workmanship involved
the design departmentally 15 or causes the design of the works to in the contract.
commission the design from a
professionally qualified person
11. Chester Grosvenor Hotel Co Ltd v Alfred McAlpine Management
e.g. architect or engineer whose
Ltd (1991) 56 BLR 115. See also Barnard Pipeline Technology Ltd. v
rights and obligations will be Marston Construction Co Ltd [1992] CILL 743.
governed by the contract under 12. E.g. the JKR or PWD Standard Forms.
which he is engaged 16. 13. Notably the Institution of Electrical Engineers, the Institution of
Most sizeable construction Mechanical Engineers and the Institution of Chemical Engineers to
contracts make provision for name a few.
the employer to be represented 14. See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Law and Principles at P10-19.
during the progress of the 15. Example, the Public Works Department by in-house designers.
works by one or more contract 16. e.g. BEM Standard Form of Agreement (BEM Form 2000 Edn)
administrators 17. Such person 17. Called S.O., Engineer, Architect, Employers Representative, etc.
or persons may be given authority depending on the form of contract employed.
to act as the employers agent 18. Other common categories of sub-contractors include designated (or
in supervising the works and named) sub-contractors, selected sub-contractors, specified sub-
contractors, etc.
transmitting information and
19. i.e. construction or installation.
instructions to the contractor; 20. either, in-house or external consultants.
they may also be empowered by 21. See JKR 203 & 203A Forms, PAM 98 With Quantities and Without
the construction contract itself Quantities Edns. Forms, etc.
26 COVER FEATURE THE INGENIEUR

Another significant characteristic culpable. Its redress is solely at Management contracts


of this form of procurement is the contractors expense 28.
that a single main contractor 22 Selection of the contractor is A comparatively recent
undertakes total responsibility to normally based on competitive development on large and complex
the employer for all the work tendering or negotiations and projects has been the emergence
under the contract. In so far payment effected on either an of the management contractor,
as parts of the work are in fact interim, milestone or lump sum whose only role is to manage, co-
carried out by other organisations, basis. It is common under such ordinate and supervise the work
these operate as sub-contractors an arrangement to find that of numerous specialists by whom
to the main contractor and do the supervisory powers of the the whole of the construction
not enter into direct contractual employers representative are more work is carried out. Under a
relations with the employer 23. limited than those of a contract modern management contract,
However, where sub-contractors administrator under a traditional these specialists are employed
are selected by the employer 24, general contract 29. Hence, unlike as sub-contractors 31 to the main
the main contractors responsibility traditional general contracting, or management contractor 32 ,
is frequently less onerous and a the employers representative but the latter is relieved of any
limited form of contract is entered plays a limited administrative responsibility to the employer for
between the employer and the role which may be confined to sub-contractor defaults 33. The
chosen sub-contractor. conducting independent checks underlying philosophy of this
and auditing the contractors species of contract procurement
Design and build contracts works. The contractor, his sub- is that the management of the
contractors 30 and professional construction process constitutes
A design and build contract 25, advisors are responsible for all a particular expertise which
also known as a package deal aspects of the works inclusive of can be distinctly identified and
or turnkey contract 26, is one managing the contract up to its accordingly addressed through the
u n d e r wh i ch t h e c o n t ra c t o r final realization. employment of the management
undertakes both to design and contractor. The latter is for
to construct the contract works, all intents and purposes not a
which are to be completed builder in the strict sense but an
in such a way as to meet the independent professional providing
requirements of the employer 27. essentially a management service.
The defining characteristic of This common thread runs, in
this type of contract is the addition through the construction
combination of most (if not management route of contract
all) of the essential tasks of a procurement.
project e.g. design procurement, Compared to traditional general
manufacture, fabrication, contracting or design and build
production, construction and types of contracts, management
management into a single Brick laying c o n t ra c t i n g i s u n f o r t u n a t e l y
package. Taken to the extreme,
the arrangement also places
22. Sometimes called a General Contractor or Contractor (in short).
the task of financing, procuring 23. Hence avoiding any privity of contract between the parties.
approvals, complete fitting out, 24. Where this is so (as frequently in respect of specialist work) the
technology-transfer and the like employer may dictate the terms of the sub-contract as well as the
on the contractor. Accordingly, sub-contractors identity.
the contractor shoulders full 25. or Design and Construct Contract.
26. Turnkey Contract was defined in High Mark (M) Sdn. Bhd. v Patco
responsibility and sole liability
Malaysia Sdn. Bhd. [1984] 28 BLR 129
for the design and construction 27. Such contracts are normally entered into on a lump sum basis.
elements of the works in so far 28. See Greaves (Contractors) Ltd. v Baynham Meikle and Partners [1975]
as these are included within 4 BLR 56; [1975] 1 WLR 1095, CA.
the ambit of his obligations. In 29. See PWD Form DB/T 2002 Edn.
instances of default or breach by 30. Who should ideally of the domestic type although there is a tendency
the contractor, the onus is not on to include nominated ones.
31. Popularly called Works Contractors or Trade Contractors.
the employer to distinguish the 32. The management contractor is normally entitled to be reimbursed for
particular element involved be all payments made to sub-contractors in addition to his own fee for
this design, quality of materials or the management services provided.
workmanship or the party actually 33. See JCT Management Contract - JCT MC 87.
THE INGENIEUR COVER FEATURE 27

deficient in the availability of Hybrids Term contracts


standard forms of conditions of
contract. On the local level, no In addition to the main types A term contract is one by
particular authority, institution of contract strategy described which an employer seeks to make
or body has published any such above, there have also developed provision for the carrying out of
form. Hence, there is a tendency hybrids such as 40: certain categories of work (usually
to use either bespoke forms or minor works of alteration or
modified foreign forms such as 'Develop and Construct' repair and/or maintenance) during
JCT MC 87 34 or the ICE New contract: This is similar to a a specified period of time 42 .
Engineering Contract 35. design and build contract, but Depending upon the terms on
a concept design is prepared which tenders are invited and
Construction management by independent professionals accepted, the resulting legal
engaged by the employer relationship may be a contract
As aptly named, construction before the design and build which binds the contractor to
management contracts are a contractor is selected 41. carry out whatever work of the
sub-set of the general corpus specified description the employer
of management type of 'Design and Manage' contract: chooses to order during the
contracts and as such share This is similar to a management period stated 43 . Alternatively,
common characteristics with contract, but the contractor is the acceptance of a tender may
management contracts. These also responsible for detailed result in a standing offer by the
have metamorphosed recently design or for managing the contractor, which ripens into a
into an alternative to the latter design process. contract on each occasion that
type of contracts and are being an order is placed but which may
employed mainly on large 'Design and construction be revoked at any time 44.
and complex projects having management' contract: This At the moment, there is no
a multiplicity of trades, users is similar to construction local standard form of conditions
and designers 36. In essence, a management but the construction of contract for a term contract
construction management contract manager is also responsible for though there is a tendency to
is an arrangement under which detailed design or for managing either modify the JCT Standard
t h e e m p l oye r e n t e r s i n t o a the design process. Form of Measured Term Contract
direct contractual relationship (1989 Edition) or to generate
w i t h e a ch o f t h e s p e c i a l i s t There are no published standard bespoke forms.
contractors 37, while at the same form of contracts governing any of
time employing a construction the above hybrids and the local Miscellaneous Contracts
manager to provide managerial practice is to employ ad hoc
and supervisory services for or bespoke forms customized Over and above the common
the project. The obligations for the particular project or methods of contract procurement
undertaken by the construction application. described above, there exist other
manager in such a case depend
upon the terms of the contract by
34. JCT Standard Form of Management Contract (1987 Edn).
which it is employed 38.
35. ICE New Engineering Contract Option F - Management Contract.
Owing to the novelty of this 36. See Construction Management Form - Report and Guidance the Centre
method of contract procurement, for Strategic Studies in Construction, University of Reading [1991].
there is a paucity of standard forms 37. Also called Trade Contractors or Works Contractors.
of conditions of contract available 38. See Rosehaugh Stanhope (Broadgate phase 6) plc v Redpath Dorman
for use by the local construction Long Ltd. [1990] 50 BLR 69, CA; Beaufort House Development Ltd
industry. The tendency is to v Zimmcor (International) Inc [1990] 50 BLR 91, CA.
39. The JCT Standard Form of Construction Management (1994 Edition).
either employ a bespoke form
40. See Piyush Joshi Law Relating to Infrastructure Projects at P22-25.
or to use the JCT CM 94 Form 39, 41. This being basically to avoid the purported shortcomings of the other
albeit in a modified form. A forms of Package Deal types of contracts.
further alternative is to draw up 42. The period is usually 1 year but there are instances in local practice
a series of contracts i.e. between where a longer period of up to 5 years has been employed.
the employer and firstly the 43. Percival Ltd. v LCC Asylums and Mental Deficiency Committee (1918)
87 LJKB 677. The JCT Measured Term Contract (1989) permits either
construction manager, secondly
party to determine the contract by giving notice, but requires the
each member of the design team contractor to carry out all orders which can be completed before the
and thirdly each specialist trade expiry of such notice.
contractor. 44. Great Northern Rly Co v Witham [1873] LR 9 CP 16.
28 COVER FEATURE THE INGENIEUR

types of contracts that are being Partnering contract: this services whereby the party
utilized by the local construction contract is in essence an undertaking a stipulated task
industry. These are essentially extension to the normal serial for an agreed consideration is
variations of the conventional contract whereby over a pre- free to select his own mode
methods and have been developed determined period of time, of doing it. It is neither
to address specific uses. Such the contractor automatically under the control or direction
contracts include, inter alia, the receives all new contracts of the other 51.
following: from the employer with
p ay m e n t t o b e m a d e by There are no published local
Build, operate and transfer 45 reference to an initially standard forms of conditions of
contract: this is a type of agreed formula 50. contract governing the above
a privately financed contract miscellaneous contracts and use
whereby the contractor Independent contract: this is made of ad hoc or bespoke
finances the project, designs is essentially a contract for forms.
it, undertakes the construction,
owns and operates it over the
concession period and on its
expiry transfers the beneficial SPECIAL PARTIES the applicable statutes are the
ownership of the project back Government Contracts Act 1949
to the employer 46. The Government and The Government Proceedings
departments Act 1956 53.
Serial contract: this is a In general, a construction
contract resulting from The extent to which contracts contract entered into on behalf of
a procedure called serial can be made on behalf of the the Government 54 is enforceable
tendering. Fundamentally, a Federal Government, and the by and against the Government.
serial tender is a standing offer Governments of the states is Accordingly, the Government is
to carry out work for more governed by the Government bound by a contract made by a
than one project in accordance Contracts Act 1949 52. For the proper agent acting within the
with the tender submitted for procedure pertaining to the scope of his authority but not
the initial project, or based on enforcement of such contracts and otherwise 55 . A Government
hypothetical bills of quantities matters relating to proceedings by Officer who enters into a
representing the average project and against the Federal Government contract within the scope of his
of a series 47. and the Government of the states, authority is not liable to be sued

Continuation contract: this is


a more ad hoc arrangement 45. Also called BOT Contract. See also Piyush Joshi Law Relating to
to extend the scope of the Infrastructure Projects at P22-25.
initial or original contract 46. See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Pre-Contract Award Practice at P132-138.
beyond its original ambit i.e.
47. See The Aqua Group Tenders and Contracts for Building (2nd Edn.)
there is no standing offer at P 119.
to do more work than that 48. See Ir. Harbans Singh K.S Engineering and Construction Contracts
originally envisaged. The Management: Law and Principles at P256.
original and continuation 49. See Robinson, Lavers, Tan & Chan Construction Law in Singapore
contracts are dealt with and Malaysia [2nd Edn.] at P428.
50. See Dispute Avoidance and Resolution Task Force (DART) of the
s e p a ra t e l y. I f a n d wh e n
American Arbitration Association Report on partnering at P86.
the latter arises, the original 51. E.g. Consultants, Suppliers, etc. See Stevenson Jordan & Harrison v
contract may be used as MacDonald & Evans [1952] 1 TLR 101 and Syed Mubarak bin Syed
a basis for realizing the Ahmad v Majlis Peguam Negara [2001] 4 MLJ 167.
continuation contract 48. 52. Rev. 1973 (Act 120)
53. Rev. 1988 (Act 359). See generally also the Rules of the High Court
Periodic contract: this is 1980 Ord. 73 for proceeding by and against the Government.
54. It does not include municipal councils and public corporations.
similar to a term contract, 55. Under the Government Contract Act 1949 (Act 120) SS 2 & 3, all
but the execution of work or contracts made in Malaysia on behalf of the Government shall, if
supply of goods is required reduced in writing, be made in the name of the Government and
at intervals, regularly or on signed or authorized as provided for under the Act. Any authorization
demand rather than being under S 2 or 3 shall be in the form set out in the schedule to the
continuous for a stated time 49. Government Contracts Act 1949 (Act 120).
THE INGENIEUR COVER FEATURE 29

personally upon any contract Contracts made by or on behalf partnership, the partnership
made in that capacity 56. Actions of a corporation which if made by will be liable under the
by or against the Government private persons would be required contract if the contracting
are instituted or defended by the to be in writing, or which would party was acting within the
Attorney General 57. be valid although made by parol s c o p e o f h i s a u t h o r i t y 68.
only, may be similarly made on In general a member of a
Local authorities behalf of a corporation by any partnership is regarded as an
person acting under its express agent of the firm and binds
A l o c a l a u t h o r i t y 5 8 m ay or implied authority whether by the other partners in making
enter into contracts inclusive of seal or not. any contract falling within the
construction contracts necessary For partnerships 67 , when normal course of business of
for the discharge of any of its either party is a member of the the firm 69 .
functions 59. A local authority must
make standing orders with regard
to contracts for the execution of FORMATION OF CONTRACT ordinary contractual rules of
works or the supply of goods offer and acceptance 70. Where
or materials 60 . However, a Negotiated contracts a contractor quotes a price for
contractor is not bound to inquire works in a document headed
whether the relevant standing The formation of construction estimate this may be treated as
orders have been complied with, contracts is governed by the an offer 71. Acceptance must
and non-compliance by itself does
not invalidate any contract 61.
A local authority is bound 56. Government Contracts Act 1949 (Act 120) S 8 also provides that a
public officer shall be personally liable when he expressly pledges his
by any contract entered into
personal credit or where he contracts otherwise than as an agent of
by a committee to which the the Government. According to S 6, no contracts entered into except
necessary powers have been in accordance with the Act shall be deemed to have been made by
delegated 62, or by any officer the authority of the Government. See also Dunn v Macdonald [1897]
a c t i n g w i t h i n his actual or 1 QB 401; affd [1897] 1 QB 555, CA; Sim Siok Eng v Government
ostensible authority 63. Protection of Malaysia [1978] 1 MLJ 15.
57. For the Federal Government, the Attorney General. For the state of
is afforded to local authorities or
Sabah and Sarawak, the Attorney General of such state and for all
persons acting in the execution other states, the Legal Advisor of such state.
of statutory or other public duties 58. Defined in Local Government Act 1976 (Act 171) to include any City
in respect of any act, neglect or Council, Municipal Council or District Council. S13 stipulates that
default done or committed by every local authority shall be a body corporate.
the Public Authorities Protection 59. See Local Government Act 1976 (Act 171) S 36(1).
Act 1948 64. 60. See Local Government Act 1976 (Act 171) S 36(2).
61. See North West Leicestershire District Council v East Midlands Housing
Association Ltd. [1981] 3 All ER 364, [1981] 1 WLR 1396, CA.
Companies, corporations and 62. See Local Government Act 1976 (Act 171) S 36(2).
partnerships 63. As to the ostensible authority of various officers see A Roberts & Co
Ltd. v Leicestershire County Council [1961] Ch 555, [1961] 2 All
Companies, corporations ER 545; Carlton Contractors v Bexley Corpn [1962] 60 LGR 331. Cf
and partnerships may enter into North West Leicestershire District Council v East Midlands Housing
Association Ltd. [1981] 3 All ER 364, [1981] 1 WLR 1396, CA.
construction contracts like any
64. Act 198, See also Local Government Act 1976 (Act 171) S124.
other person. In fact, the formalities 65. See e.g. Companies Act 1965 (Act 125), Partnership Act 1961
required for the execution (Act 135), etc.
o f c o n t ra c t s by c o m p a n i e s , 66. Companies Act 1965 (Act 125) S 35(4).
corporations and partnerships are 67. For a definition of a partnership see Partnership Act 1961 (Act 135)
effectively identical to those for S 3(1) and Gulazam v Noorazman and Sobath [1957] 23 MLJ 45;
Ratna Ammal & Anor v Tan Chow Soo [1964] 30 MLJ 399.
individuals, save for particular
68. See Partnership Act 1961 (Act 135) S 7 & 8. See also Pembinaan
requirements as stipulated in the Thin Chai Sdn Bhd v Citra Muda Sdn Bhd & Anor [2002] 3
respective statutory enactments 65. MLJ 107.
A company may choose to make 69. See Chan King Yue v Lee @ Wong [1962] MLJ 379; Bannatyne v D&C
a contract in writing, under its Mac Iyer [1906] 1 K.B. 103.
common seal or a contract may 70. See Ir. Harbans Singh K.S. Engineering and Construction Contracts
be made on behalf of the person Management: Law and Principles at P61 to 81.
71. Croshaw v Pritchard and Renwick [1899] 16 TLR 45. An inaccurate
by any person under its express estimate which is not an offer may give rise to liability in the tort of
or implied authority 66. negligence: see J & J C Abrams Ltd v Ancliffe [1978] 2 NZLR 420.
30 COVER FEATURE THE INGENIEUR

be absolute and unqualified 72 is made by deed or given for by the employer to pay for such
and in full conformity with any consideration 84. services may be implied where
requirements laid down in the An unsuccessful tenderer is the work involved far exceeds
offer 73. normally not entitled to recover what would normally be required
Any purported acceptance may, the cost of preparing his tender o f t h e c o n t ra c t o r o r wh e r e
if it alters the terms of the offer or from the employer 85 , except the employer is able to make
introduces new terms, be regarded where the invitation to tender was profitable use of the information
as a counter-offer and thus a given fraudulently and without supplied 87.
rejection of the original offer 74. any intention of accepting it in Where an employer invites
Where the parties negotiate by any event 86. However, a promise tenders from contractors to supply
delivering inconsistent standard- such work or goods as the
form documents to each other, employer may require during
the usual outcome is that, when a specified period, the legal
work commences or materials are relationship which is brought into
supplied, this will be deemed to existence by the acceptance of a
constitute acceptance of the last tender depends upon the terms
document delivered 75. of the invitation to tender.
Where a contract is
concluded after the contractor Purchase Orders
has commenced the works, it
may easily be concluded that The purchase order system is
the parties intended the contract one of the methods of contract
to govern all the work, including procurement based essentially on
what has already been done 76. Pipe laying the nature of the work and its

Tenders

In general, an invitation to 72. Section 7(a) Contracts Act 1950 (Act 136).
73. See Rajeswari Thedshana Murthy v Kin Nam Realty Development Sdn.
contractors to submit tenders to Bhd. [1993] 1 MLJ 88.
carry out construction works is not 74. Hyde v Wrench [1840] 3 Beav. 334, 49 ER 132; Trollope & Colls Ltd.
an offer but merely an invitation and Holland, Hannen & Cubitts Ltd. v Atomic Power Construction
to treat 77; the employer is in Ltd. [1962] 3 All ER 1035.
consequence under no obligation 75. Chichester Joinery Ltd. v John Mowlem & Co plc. [1987] 42 BLR 100;
to accept the lowest or any of Butler Machine Tool Co. v Ex-Cell-O-Corp. [1979] 1 All ER 965.
76. Trollope & Colls Ltd and Holland, Hannen & Cubitts Ltd v Atomic
the tenders received 78. However,
Power Constructions Ltd [1962] 3 All ER 1035 [1963] 1 WLR 333.
an express undertaking by the 77. Defined by Lord Parker as an offer to receive offers in Fisher v Bell
employer to accept the lowest [1961] QB 394.
tender will be binding upon the 78. Spencer v Harding [1870] LR 5 CP 561.
submission of a tender which 79. Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986]
conforms with any conditions AC 207, [1985] 2 All ER 966, HL.
80. Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council
laid down 79 . Moreover, the
[1990] 3 All ER 25, [1990] 1 WLR 1195, CA; cf Fairclough Building
employer may in other cases be Ltd v Port Talbot Borough Council [1992] 62 BLR 82, CA; Hughes
under an implied obligation to Aircraft Systems International v Airservices Australia [1997] 146 ALR
give reasonable consideration 1.
t o a ny t e n d e r s u b m i t t e d i n 81. Section 5(1) Contracts Act 1950 (Act 136).
accordance with the published 82. Section 6 Contracts Act 1950 (Act 136). See also Cook Islands
conditions 80. Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422.
83. Routledge v Grant [1828] 4 Bing 653; Dickinson v Dodds [1876] 2
The unconditional acceptance Ch D 463.
of a tender creates a binding 84. The Canadian courts have upheld such undertakings despite the absence
contract. Until such acceptance of consideration: see R v Ron Engineering Ltd [1981] 119 DLR (3d)
occurs, the contractor is free to 267. Most local employers protect themselves against withdrawal by
withdraw his tender 81 by giving requiring the contractor to furnish a tender or bid bond.
notice of withdrawal to the 85. Harris v Nickerson [1873] LR 8 QB 286; William Lacey (Hounslow)
Ltd v Davis [1957] 2 All ER 712 at 715.
employer 82. This will be so
86. Richardson v Silvester [1873] LR 9 QB 34.
notwithstanding any undertaking 87. William Lacey (Hounslow) Ltd. v Davis [1957] 2 All ER 712, [1957]
by the contractor to keep his offer 1 WLR 132; Marston Construction Co. Ltd. v Kigass Ltd. [1989] 46
open 83, unless that undertaking BLR 109.
THE INGENIEUR COVER FEATURE 31

value utilized by employers as Consideration given without consideration and


distinct from the tender system is thus unenforceable 100, unless
discussed above 88. Synonymous To be enforceable at law, the court is able to discern
with the quotation system, the a promise must be supported sufficient practical benefit to the
purchase order system is used by valuable consideration 98 . employer from the arrangement 101.
principally for minor works 89. A unilateral declaration is not Furthermore, a contractor may
The calling of quotations by the enough to make a contract and found a claim on an act done
employer is in the legal sense that no question of contract under prior to a promise made by the
tantamount to an invitation to seal arises unless it fell within employer provided the contractor
treat. The contractors submission one of the exceptions in Section had done or abstained from doing
of a quotation in response to the 26 of the Contracts Act 1950 99. something pursuant to the desire of
employers request will legally An undertaking by a contractor to the employer and not necessarily
constitute the making of an offer carry out work where no price is in pursuance of a promise to be
or proposal. The mere labeling agreed is generally enforceable, made by the latter 102.
of the submission as a quotation since consideration exists in the
is not conclusive of its legal form of an implied promise by the Formalities
effect. The contents will have to employer to pay a reasonable sum.
be carefully scrutinized to elicit A promise by an employer to pay The general legal position
the intention of the submitting an additional sum in return for the is that the formation of a
party 90. The formal issue of the contractors mere carrying out of construction contract requires
purchase order by the employer existing contractual obligations is no particular formalities. Such
constitutes an acceptance of
the quotation (or offer) in the
contractual sense and thereby
perfects the contract. 88. See Ir. Harbans Singh K.S. Engineering and Construction Contract
Management: Pre-Contract Award Practice at P511 to 515.
Letters of intent 89. E.g. supply items, repair, renovation, maintenance, etc.
90. Croshaw v Pritchard [1899] 16 TLR 45. See also Zain Azahari bin
A letter of intent is a document Zainal Abidin v Wearne Brothers (1983) Sdn Bhd [2002] 1 MLJ
254.
which expresses an intention
91. Its normal purpose is to reassure the recipient. Cf the letter of comfort
to enter into a contract with sent by a parent company: Kleinwort Benson Ltd v Malaysia Mining
the recipient at some time in Corpn Bhd [1989] 1 All ER 785, CA.
the future 91. Its legal effects, 92. British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984]
if any, depend upon the true 1 All ER 504 at 509-510 per Robert Goff J.
construction of the words used 92 93. Mashaha Navigation Sdn. Bhd. v Palm Oil Products (M) Bhd. & Anor
[1989] 1 CLJ 393, HC.
and the relevant circumstances
94. As in Ayer Hitam Tin Dredging Malaysia Bhd. v YC Chin Enterprises
between the parties 93 . The Sdn. Bhd. [1994] 2 MLJ 754, [1994] 2 SCR 90, SC.
document may have no legal effect 95. Turriff Construction Ltd v Regalia Knitting Mills Ltd [1971] 9 BLR 20;
at all 94; it may constitute an offer cf Monk Construction Ltd v Norwich Union Life Assurance Society
of payment which the recipient [1992] 62 BLR 107, CA.
is free to accept by performance 96. Such a contract might also render the recipient liable for defective
o f s p e c i f i e d s e r v i c e s 95; o r performance.
97. British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984]
(exceptionally) it may create
1 All ER 504, in which the absence of a contract precluded a counter-
an ancillary or interim contract claim by the employer for alleged delays in performing the work in
which will entitle the recipient question. See also Contracts Act 1950 (Act 136) S71 and Siow Weng
to recover his wasted costs if the Fatt v Susur Rotan Mining Ltd. [1967] 2 MLJ 118, PC and Wilson
intended future contract does not Smithelt & Cape (Sugar) Ltd. v Bangladesh Sugar & Food Industries
materialize 96. Corpn [1986] 1 Lloyds Rep 378.
98. See Section 2(d) Contracts Act 1950 (Act 136) for the definition of
Where a letter of intent
consideration.
does not result in any kind 99. Per Gill FJ in Guthrie Waugh Bhd. v Malaippan Muthucumani [1972]
of contractual relationship, a 2 MLJ 62, FC.
recipient who carries out work 100. Stilk v Myrick [1809] 2 Camp 317; Sharpe v San Paulo Rly Co [1873]
in accordance with its terms 8 Ch App 597.
may nevertheless be entitled 101. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1,
to payments on a restitutionary [1990] 1 All ER 512, CA.
102. Per Gunn Chit Tuan SCJ in South East Asia Insurance Bhd. v Nasir
basis 97 e.g. on a quantum meruit Ibrahim [1992] 2 MLJ 362, SC; cf Section 2(d) and 26(b) Contracts
basis. Act 1950 (Act 136).
32 COVER FEATURE THE INGENIEUR

a contract may be validly made and without making any express


orally 103, by conduct or in writing. acceptance, or counter-offer, the
Contracts by conduct are difficult contractor carries out the work 104.
to establish evidentially and are The bulk of construction contracts
often encountered where parties are either in writing 105 or
have had a course of dealing evidenced in writing 106. Written
before. A further illustration of evidence is also required for a
the above, occasions where an contract of guarantee 107, under
employer makes an offer to a which the contractual performance
contractor for the performance of of one of the parties is guaranteed
certain works upon stated terms, by a third party.

Architecture drawing

SCOPE OF CONTRACT commonly required to be Specifications: This document


inserted by the parties in an amplifies the contract drawings
Contract documents Appendix to the conditions by providing a verbal
before the contract is description of such methods as
Th e r e a r e n o p a r t i c u l a r executed. the scope of work 111, methods
restrictions upon the documents of construction, quality of
by which a construction contract Drawings and plans: Drawings finishes and standards of
may be formed. It is trite that the are prepared by whoever is workmanship 112 to be provided.
contents of the said documents responsible to the employer for It may also specify levels of
must accurately and completely the design of all or part of the performance which individual
record the express terms and proposed works, and are the items of work are required to
conditions of agreement reached major vehicle for conveying achieve.
by the parties inclusive of all the intentions of the designer B i l l o f q u a n t i t i e s : Th i s
rights, duties, obligations and to the contractor. Among document itemises in great
liabilities. The following is a other matters, they provide detail the contract work as
brief description of the types of information as to the shape, described in the drawings
documents which constitute the appearance, location and and the specifications 113. It
contract documents 108: interaction of the component may, but need not constitute
parts of the proposed works. an exhaustive statement of
Agreement or articles of
agreement: This document 109
describes in general terms the
parties, the contract works and 103. In practice most domestic sub-contracts and minor works are made
the price, and evidences the orally. The principal problem here is merely from the evidential point
intention of the parties to be of view in the event of a dispute.
bound. 104. Peter Lind & Co. Ltd. v Mersey Docks & Harbour Board [1972] 2
Lloyds Rep. 235; New Zealand Shipping Co. Ltd. v Satterthwaite
& Co. Ltd. [1975] A.C. 154 (P.C.).
Conditions of contract: Detailed 105. See Section 10(2) Contracts Act 1950 (Act 136).
conditions, often in standard 106. As required by a particular statutory enactment.
form 110 (with or without 107. Although Section 79 Contracts Act 1950 (Act 136) permits the guarantee
amendments), amplify and to be also in an oral form.
explain the basic obligations 108. The actual contents varies with the type of contract and the
of the parties and lay down requirements of the particular form of contract used. For further details
see Ir. Harbans Singh K.S. Engineering and Construction Contracts
administrative procedures to be
Management: Pre-Contract Award Practice at P536 to 574.
followed during the progress 109. Or an informal equivalent such as an exchange of correspondence
of the works. indicating offer and acceptance.
110. Sometimes bespoke or ad hoc.
Appendix to the conditions: 111. For contract based on Drawings and Specifications. See JKR Form
Certain information specific 203 (Rev. 10/83).
112. And design where this is part of the contractors scope.
to a particular contract, such
113. Bills of quantities (or B.Q.) may not be required for smaller or less
as dates of commencement complex projects where the drawings and specifications themselves
or completion and amounts provide sufficient information or in the event the contract is of the
of liquidated damages, is package deal type.
THE INGENIEUR COVER FEATURE 33

the work which the contractor


undertakes to perform in
return for the agreed price.
Where, as is common, the
bill of quantities is required
by the contract to be drawn
up in accordance with a
particular standard method of
measurement 114, any deviation
from the prescribed method
may entitle the contractor to
claim payment for additional
work 115.

Schedule of rates 116: Where


there are no priced bill of
quantities 117 , a document
setting out rates applicable to Road pavement
various categories of contract
work may be required for documents listed above with executed by the parties. The
the assessment of interim three alternative documents c o n d i t i o n s o f c o n t ra c t m ay
payments, the valuation of comprising the 'Employer's expressly define the documents
variations or (in a measure and Requirements issued by the which constitute the contract 120,
value contract) the calculation employer and the 'Contractor's and may make provision for the
of the total amount to the Proposals' and the Contract priority of documents in the case
contractor. Sum Analysis submitted by of discrepancies 121.
the contractor 119. Standard sets of contract
Programme or method conditions are sometimes
statement: Although a contractor Incorporation and priority incorporated by reference into
is commonly required to of documents contracts which are not formally
furnish such documents 118, executed 122. Such cases can
they are frequently defined A formal construction contract lead to uncertainty as to which
by the contract in such a way usually contains a number of particular set of conditions is
that there is no obligation on documents which are incorporated intended for incorporation 123.
either party to comply with the by reference into the agreement These problems are especially
dates or methods contained
in them. In such cases these
documents are regarded merely 114. For building works this is currently the Standard Method of
as aids in project planning and Measurement of Building Works as published by the Institution of
coordination. Surveyors, Malaysia and for Civil Engineering is the Civil Engineering
Standard Method of Measurement (CESMM) as published by CIDB,
Malaysia.
Miscellaneous documents: 115. See C Bryant & Son Ltd v Birmingham Hospital Saturday Fund [1938]
Various other documents may 1 All ER 503.
be required for sufficiency, 116. Also called Schedule of Unit Rates in some contracts.
clarity and completeness 117. In contracts based on drawings and specifications or design and build
purposes. These include, contracts.
inter alia, documents such 118. See the effect of a tender submission being incorporated in Yorkshire
Water Authority v Sir Alfred McAlpine & Sons (Northern) Ltd. [1985]
as the contractors tender
32 BLR 114 and Havant Borough Council v South Coast Shipping Co.
submissions, any addenda Ltd. [1996] CILL 1146.
and/or clarifications, post 119. See PWD Form DB/T 2002 Edn.
tender submission negotiations, 120. See the second recital and clause 1(a)(i) JKR Form 203A (Rev.
documents amending the offer 10/83).
in any way and the like. 121. See clause 4.1 CIDB Standard Form of Contract for Building Works
(2000 Edn.).
122. These may arise from e.g. an exchange of correspondence, or an
Design and build documents: informal notification that a tender has been accepted.
Certain design and build 123. See e.g. Killby & Gayford Ltd v Selincourt Ltd [1973] 3 BLR 104,
contracts replace the CA; SP Chua Pte. Ltd. v Lee Kim Tah (Pte.) Ltd. [1993] 3 SLR 122.
34 COVER FEATURE THE INGENIEUR

acute in relation to sub-contracts to be adhered to 131, unless they and aids to interpretation within
which purport to incorporate lead to some absurdity or to the contract document itself be
some or all the provisions of the some repugnance or inconsistency considered in the construction
main contract 124. with the rest of the document, process. Where a contract is
in which case the words may partly oral or made by conduct
Construction of contract be modified so as to avoid that 137
, the ascertainment of the terms
absurdity or inconsistency 132. of the contract is a question of
Where a contract is made in The construction of a contract fact 138.
writing, the meaning to be given also involves the application of a
to its express terms is a question host of cannons of construction Implied terms
of law. The court will seek to and procedural guides 133 including
give effect to the intention of the the following, namely, words as A construction contract may
parties as expressed in the written interpreted must be consistent be subject to certain terms that
documents 125 . It is settled with the spirit and letter of the are expressly included in the
law that a written document is agreement 134 , typographical contract. In seeking to establish
presumed to have embodied all errors may be corrected to give the intention of the parties to a
material terms and conditions effect to the parties intention 135, contract, certain terms need to be
and no extrinsic evidence will the contract must be construed implied 139; these being namely by
be permitted to contradict, vary, as at the date it was made 136 custom and usage pertaining to a
add to or subtract from the
written terms save for exceptions
permitted by the law 126.
If a written document contains 124. See e.g. Royden (M) Sdn. Bhd. v Syarikat Pembenaan Yeoh Tiong Lay
Sdn. Bhd. [1992] 1 MLJ 33.
a n a m b i g u i t y wh i ch c a n n o t
125. See Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 4 MLJ 357;
otherwise be satisfactorily resolved, Shore v Wilson [1842] 9 Cl & F 355, HL; Investors Compensation
it will be construed adversely to Scheme v West Bromiwich Building Society [1998] 1 All ER 98,
the party who proffered it for HL.
execution under the contra 126. See Section 92 Evidence Act 1950 (Act 56); cf Tindok Besar Estate
proferantum rule 127. In seeking v Tinjar Co. [1977] 2 MLJ 229 and Foo Sam Ming v Archi Environ
Partnership [2004] 1 MLJ 449.
t h e m e a n i n g o f a c o n t ra c t ,
127. Per Lord Brightman in Kandasami v Mohamed Mustafa [1983] 2 MLJ
w r i t t e n wo r d s a r e n o r m a l l y 85, [1983] 4 PCC 183, PC. For a recent application of this rule see
presumed to take precedence over MBF Finance Bhd v Sim Peng Bee @ Sim Bay Bee & Anor [2003] 5
printed words in the event of MLJ 303.
inconsistency 128. However, this 128. Robertson v French [1803] 3 East 130 applied in Bumiputera Malaysia
presumption can be reversed by a Berhad Kuala Trengganu v Mae Perkayuan Sdn. Bhd. [1998] 2 MLJ
clear provision in the contract 129. 76; [1993] 1 SCR 385, SC.
129. John Mowlem & Co Ltd v British Insulated Callenders Pension Trust
Furthermore, clauses and words
Ltd [1977] 3 Con LR 64, DC.
are to be construed not by itself 130. Per Salleh Abbas FJ in Trengganu State Economic Development
standing alone, but in the light Corporation v Nade Finco Ltd. [1982] 1 MLJ 365, FC.
of other words appearing in the 131. See recent decision in Putra Perdana Construction Sdn. Bhd. v AMI
context in which it is used and all Insurance Bhd & Ors [2005] 2 MLJ 123 where it was held that ..
other clauses relating thereby 130. where the meaning of the words used was clear, effect must be given
to it. One should not strain the language to find an ambiguity where
Where possible, the grammatical
none exists.
and ordinary sense of words is 132. Grey v Pearson [1875] 6 HLC 61 at 106. See also Polygram Records
Sdn. Bhd. v The Search & Anor [1994] 3 MLJ 127, HC.
133. See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Law and Principles at P292 to 299.
134. Lim Yee Teck & Ors v Shell (M) Trading Sdn. Bhd. [1985] 2 MLJ,
265; [1985] 4 PCC 433, PC.
135. Ng Siew Wah & Ors v MAA Holdings Sdn. Bhd. & Anor [1985] 2
MLJ 332, SC.
136. City Investments Sdn. Bhd. v Koperasi Serbaguna Cuepacs Tanggungan
Berhad [1985] 1 MLJ 285, FC, [1988] 1 SCR 122; 4 PCC 709, PC
137. Allen v Pink [1838] 4 M & W 140; J Evans & Sons (Portsmouth) Ltd
v Andrea Merzario Ltd [1976] 2 All ER 930, CA.
138. Smith v Hughes [1871] LR 6 QB 597; British Crane Hire Corpn v
Ipswich Plant Hire Ltd [1975] QB 303 1 All ER 1059, CA.
139. Hamid Abdul Rashid, Dr. v Jurusan Malaysia Consultants (Sued as a
Tunnel construction Firm) [1997] 1 AMR 637.
THE INGENIEUR COVER FEATURE 35

Contracts (2005) Malayan Law


Journal Sdn. Bhd.

I r. H a r b a n s S i n g h K . S .
Engineering and Construction
Contracts Management: Pre-
Contract Award Practice Lexis-
Nexis.

Joshi, Piyush Law Relating


t o I n f ra s t r u c t u r e P r o j e c t s
Butterworths.
High court, Kuala Lumpur
R o b i n s o n , L av e r s , Ta n &
particular type of transaction 140
, clear expression and it must not Chan Construction Law in
the courts based on the intention contradict any express term of the Singapore & Malaysia (2 nd
of the parties 141 and certain contract 148. Where the parties Edn.), Butterworths.
provisions contained in statute, have contracted on the basis of a
or generally by law 142. detailed standard form document, S i n n a d u r a i , V. L a w o f
There is a paucity of terms the courts are generally unwilling Contract (3rd Edn.), Lexis-Nexis
implied by custom and usage and to imply terms on this basis, even Butterworths.
by statute or law in construction where to do so would improve
contracts. However, in respect of the contract 149; although there The Aqua Group Tenders and
construction contracts, the courts are exceptions 150
BEM. Contracts for Buildings (2 nd
do make various implications of Edn.)
which two broad categories may REFERENCES
be discerned 143 . First, there The Centre for Strategic Studies,
are those usual terms which the Ir. Harbans Singh K.S. Malaysian University of Reading [1991]
law implies into all contracts Precedents and Forms Vol. N: Construction Management
of a certain type unless the Engineering and Construction Form Report & Guidance.
parties have shown an intention
to exclude or modify them. In
relation to construction contracts, 140. Hamzah & Yeang Sdn. Bhd. v Lazar Sdn. Bhd. [1985] 1 CLJ 72, FC
s u ch i m p l i e d t e r m s i n c l u d e and Udachin Development Sdn. Bhd. v Datin Peggy Taylor [1985] 1
the employers obligations to MLJ 121, FC.
141. Sababumi (Sandakan) Sdn. Bhd. v Datuk Yap Pak Leong [1998] 3 MLJ
co-operate with and not to
151, FC.
hinder the contractor and the 142. E.g. S14 to 16 Sale of Goods Act 1957 (Act 382), S6 Hire Purchase
contractors obligations as to the Act 1967 (Act 212), etc.
standard of work and the time 143. Liverpool City Council v Irwin [1977] AC 239 at 255,257, HL.
for completion. 144. Trollope & Colls Ltd v North West Metropolitan Regional Hospital
Second, a term may be implied Board [1973] 2 All ER 260 at 268, HL, per Lord Pearson.
145. Liverpool City Council v Irwin [1977] AC 239 at 263, HL, per Lord
into an individual contract where
Salmon and Hamid Abdul Rashid, Dr. v Jurusan Malaysia Consultants
the court finds that the parties (Sued as a Firm) [1997] 1 AMR 637.
must have intended it to form part 146. The Moorcock [1889] PD 64 at P68 applied in Sababumi (Sandakan)
of their contract 144, and where Sdn. Bhd. v Datuk Yap Pak Leong [1998] 3 MLJ 151, FC; [1997] 1
the transaction would otherwise MLJ 587, CA.
be inefficacious, futile and 147. Reigate v Union Manufacturing Co (Rambottom) Ltd. [1918] 1 KB
absurd 145 . The conditions 592; and Yap Nyo Nyok v Bath Pharmacy Sdn. Bhd. [1993] 2 MLJ
25, HC.
for such an implication are 148. BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977]
that it must be reasonable and 52 ALJR 20 at 26, PC.
equitable; it must be necessary 149. See e.g. Greater London Council v Cleveland Bridge and Engineering
to give business efficacy to the Co Ltd [1986] 34 BLR 50, CA (no implied term as to regular and
contract, so that no term will diligent progress); KC Lim & Associates Sdn. v Pembenaan Udarama
be implied if the contract is Sdn. Bhd. [1980] 2 MLJ 26, FC (no implied term that developer was
able to carry on the project at or reasonably near the architects
effective without it 146; it must be
estimated costs), etc.
so obvious that it goes without 150. See Bruno Zornow (Builders) Ltd v Beechcroft Developments Ltd
saying 147; it must be capable of [1990] 51 BLR 16 (implication of fixed date for completion).
36 GUIDELINES THE INGENIEUR

The Chartered Institute Of Arbitrators


Code Of Professional And Ethical Conduct
Submitted by Ir. Leon Weng Seng

INTRODUCTION dispute resolution process and appropriate to the process and


shall withdraw if illegal conduct not in a manner which might
A. This Code of Conduct is published or substantive unfairness is reasonably be perceived to be
pursuant to the bye-laws of the apparent. improper, partial or biased.
Institute. It sets out the minimum
standards of conduct to be observed 3. Conflicts of interest 7. Conduct of process
by members when acting as neutrals 3.1 A member shall disclose both 7.1 A member shall prepare fully
in any dispute resolution process. before, and shall have a continuing for, and conduct all stages of,
A breach of the Code amounts to obligation to disclose during, the the dispute resolution process
professional misconduct. dispute resolution process all diligently, fairly and in an entirely
interests, relationships and matters impartial and independent manner,
B. This Code of Conduct provides likely to affect independence and shall not be influenced by
ethical guidelines and does not form or impartiality, or which might outside pressure, public opinion,
part of the rules of any dispute reasonably be perceived to affect fear of criticism or self-interest.
resolution process. independence or impartiality. 7.2 A member shall not conduct the
3.2 After disclosure a member shall dispute resolution process in a
C. This Code of Conduct is not only continue to be involved in the manner which may harm the
intended to override or replace any dispute resolution process with the parties or worsen the dispute.
applicable law or the applicable rules express consent of all the parties 7.3 A member shall not delegate the
of any dispute resolution process or to the dispute resolution process. duty to decide to any other person
to create new or additional grounds 3.3 If, at any stage, a member where the dispute resolution
for judicial review of any dispute becomes incapable of maintaining process calls for a decision to be
resolution process. In the event that independence or impartiality, made.
this Code of Conduct or any part of it t h e member shall withdraw
is inconsistent with any applicable law immediately. 8. Trust and confidence
or the applicable rules of any dispute 8.1 A member shall be faithful to and
resolution process, the member shall 4. Competence adhere to the relationship of trust
comply with the applicable law and/or 4.1 A member shall only accept an which exists with those involved
the applicable rules. appointment or undertake an in the dispute resolution process
activity if appropriately qualified and, at all times, both during and
D. This Code of Conduct shall be or experienced to complete it after completion of the dispute
observed regardless of where the promptly, in a professional manner resolution process, shall (unless
dispute resolution process is being and without undue influence by otherwise agreed by all the parties)
conducted. Any additional ethical pressure of other work. keep confidential all information
standards or legal requirements to 4.2 A member shall not make any acquired during the process.
which the member is personally subject representations or allow any 8.2 A member shall not use any
and/or of the place where the dispute representations to be made about information acquired during the
resolution process is being conducted the members experience or dispute resolution process for
shall also be observed. expertise which are not truthful. personal advantage or adversely
to affect the interests of others.
THE CODE 5. Information
5.1 A member shall ensure that all 9. Fees
1. Behaviour involved in the dispute resolution 9.1 A member shall only charge
1.1 A member shall adhere to all Rules, process are fully and fairly informed fees and expenses which are
Codes, Guidelines, Regulations and as to the procedural aspects of the reasonable, taking into account
other professional requirements process and what is expected of all the circumstances and shall
adopted by the Institute from time them. disclose and explain to the parties
to time. 5.2 A member shall not provide to the dispute resolution process
1.2 A member shall not act in manner legal or technical advice to those the basis upon which the fees and
which might reasonably be involved in the dispute resolution expenses shall be calculated and
perceived as conduct unbecoming process. charges.
a member of the Institute.
6. Communication 10. Applicable law
2. Integrity and fairness 6.1 A member shall only communicate 10.1 A member shall conduct the
2.1 A member shall maintain the with those involved in the dispute dispute resolution process in
integrity and fairness of the resolution process in the manner accordance with applicable law.
THE INGENIEUR FEATURE 37

Membendung Kerugian Berkaitan Dengan


Tuntutan Kerugian Dan Perbelanjaan
Tambahan Di Dalam Kontrak Binaan
Oleh Sr. Amran B. Mohd. Majid, Cawangan Kontrak & Ukur Bahan, JKR Malaysia

P
Sering terdapat persoalan sama ada kontraktor apabila rinsip perundangan tuntutan
m e n a n g g u n g ke r u g i a n nya m e m p u nya i t a n g g u n g j awa b gantirugi memperuntukkan
perundangan untuk memastikan kerugian yang dialaminya itu tanggungjawab untuk
dibendung akan kesannya. Contohnya sekiranya majikan telah kontraktor (penuntut) apabila
gagal memberi milikan tapak bina pada tarikh yang telah membuat tuntutan untuk
diperuntukkan di dalam kontrak binaan, bolehkah kontraktor mengambil langkah-langkah yang
terus membawa para pekerjanya, loji-loji serta bahan-bahan munasabah untuk membendung
binaan ke tapak bina? Sekiranya kontraktor terus membawanya kerugian yang dialami. Mahkamah
ke tapak bina yang mana para pekerjanya serta loji-loji yang akan mempertimbangkan peri
diperlukan itu akan tersadai di tapak bina dan terbiar, maka tingkah laku kontraktor selepas
persoalan selanjutnya bolehkah kontraktor kemudiannya berlakunya tindakan kemungkiran
menuntut gantirugi ke atas perbelanjaan tambahan yang yang menyebabkan kontraktor
dialami itu? Ataupun adakah lebih wajar untuk kontraktor mengalami kerugian. Mahkamah
tidak membawa para pekerjanya itu, loji-loji ataupun bahan- secara lazimnya akan melihat
bahan binaannya itu setelah mengetahui bahawa milikan tapak adakah kontraktor telah mengambil
bina tidak dapat diberikan di dalam tempoh yang telahpun langkah-langkah yang munasabah
dijanjikan di dalam kontrak binaan tersebut?
untuk membendung kerugian yang
dialami atau adakah kontraktor
Maka ini adalah satu lagi prinsip perundangan ataupun
telah mengambil kesempatan
pertikaian yang sering berlaku apabila kontraktor menuntut
terhadap tindakan kemungkiran
gantirugi daripada majikan apabila berlaku satu kemungkiran
itu dengan membiarkan kerugian
kontrak binaan. Majikan akan mendakwa bahawa kontraktor
yang dialami itu.
mempunyai tanggungjawab untuk membendung kerugiannya
Rujukan boleh dibuat kepada
dan tidak mengambil kesempatan di dalam tempoh
satu kes masyhur Kabatasan
kemungkiran dengan meningkatkan nilai gantirugi yang hendak
Timber Extraction Company lwn.
dituntut oleh kontraktor. Contohnya apabila kontraktor sedang
Chong Fah Shing. 1 Di dalam
tekun melaksanakan kerja di tapak bina tetapi oleh kerana
kes ini perayu adalah pembekal
kemungkiran majikan yang tidak dapat memberi milikan tapak kayu-kayan kepada responden,
bina dengan sepenuhnya, kemudiannya membiarkan para iaitu seorang pengilang kayu.
pekerjanya serta para loji-loji yang terlibat tersadai di tapak Di dalam perjanjian tersebut,
bina; dengan alasan bahawa kontraktor berhak menuntut pembekal kayu itu perlulah
kemudiannya daripada majikan; maka adakah ini adil? Adakah menghantar kayu-kayan tersebut
tuntutan di dalam keadaan tersebut dibenarkan di dalam ke tempat kilang kayu pengilang
perundangan? tersebut. Di dalam perjanjian
Satu lagi persoalan setakat manakah tanggungjawab itu juga memperuntukkan yang
kontraktor membendung kerugiannya itu. Adakah perlu dimaksudkan penghantaran kepada
kontraktor membendung kerugiannya tetapi di dalam usahanya pengilang, adalah penghantaran di
itu akhirnya menyebabkan kontraktor mengalami perbelanjaan dalam lingkungan 500m daripada
yang lebih tinggi daripada gantirugi yang akan dialaminya kedudukan kilang.
sekiranya usaha untuk membendung kerugian itu tidak diambil Pa d a a w a l n y a s e m u a n y a
daripada awal? berjalan dengan lancar, namun
Bab ini akan cuba mengupas ser ta membincangkan begitu, terdapat satu kiriman kayu-
persoalan-persoalan tersebut di atas dan memperjelaskan kayan telah dihantar melebihi
prinsip membendung kerugian sejajar dengan prinsip jarak 500m daripada kilang
perundangan.
1
(1969) 2 MLJ 6
38 FEATURE THE INGENIEUR

oleh pembekal kayu tersebut. daripada kilang di mana ia hanya Membendung Kerugian Kos
Pengilang telah enggan menerima perlu mengambilnya dan apa yang Bahan-Bahan dan Buruh
kiriman kayu-kayan tersebut. diperlukan adalah perbelanjaan
Pengilang tersebut kemudiannya tambahan untuk mengangkutnya S a t u l a g i p e r s o a l a n ya n g
telah mendapat bekalan kayu- ke kilang......... sering timbul adalah tuntutan
kayan yang lain daripada sumber kontraktor berkaitan dengan kos
yang lain. Maka jelas berdasarkan kes di tambahan yang perlu ditanggung
Pengilang telah menuntut atas, undang-undang mengenakan disebabkan kemungkiran majikan.
berkaitan dengan kos tambahan satu tanggungjawab perundangan Contohnya, sekiranya terdapat
untuk mendapat bekalan kayu- terhadap seorang penuntut untuk kemungkiran majikan di mana
kayan tersebut dengan harga mengambil langkah-langkah yang kelewatan P.P memberi arahan
tambahan dengan lingkungan nilai munasabah membendung kerugian. yang sewajarnya akan melibatkan
sebanyak RM16,000. Mahkamah Ia adalah satu tanggungjawab kontraktor menanggung tambahan
telah meneliti fakta kes dan perundangan yang mana ia tidak kos disebabkan para pekerjanya
mendapati bahawa pembekal perlu dimaklumkan oleh pihak terpaksa menunggu tanpa
sebenarnya telah menghantar yang telah memungkiri kontrak. membuat apa-apa kerja di tapak
kiriman bekalan, namun begitu Sekiranya majikan telah bina. Maka, bolehkah kontraktor
jarak penghantaran melebihi memungkiri kontrak apabila gagal menuntut kos tersebut tanpa
lingkungan 500m yang telah memberi milikan sebahagian mengambil langkah-langkah yang
dipersetujui. Mahkamah juga daripada tapak bina, maka loji-loji sewajarnya untuk membendung
mendapati bahawa sekiranya yang tersadai sekian lama di tapak kerugiannya itu?
pengilang mengambil bekalan bina perlulah dibawa keluar oleh Untuk menjawab soalan-soalan
tersebut dengan menggunakan kontraktor daripada tapak bina. seperti itu, rujukan boleh dibuat
pihak yang lain, maka kos yang Kontraktor tidak boleh membuat kepada kes Hong Leong Co
ditanggung adalah sebanyak satu dalihan bahawa loji-loji Ltd. lwn. Pearlson Enterprise
RM1,000. Tetapi apa yang berlaku tidak dibawa keluar atas alasan Ltd. 2 Di dalam kes ini plaintif
adalah pengilang telah membeli tiada arahan daripada P.P kerana adalah pembekal bahan batu-
bekalan daripada pihak yang adalah menjadi tanggungjawab bata kepada defendan yang
lain. Mahkamah memutuskan perundangan bagi kontraktor merupakan kontraktor untuk
bahawa sepatutnya pengilang mengeluarkan loji-loji daripada kontrak pembinaan flat. Pembekal
membendung kerugiannya dengan tapak bina. Sekiranya kontraktor telah didapati memungkiri kontrak
menggunakan pihak ketiga untuk telah gagal berbuat demikian, jual beli dengan kontraktor apabila
mengangkut bekalan kayu-kayan maka tuntutan kontraktor tersebut pembekal meminta bayaran serta
yang telah dibekalkan tersebut, akan menemui kegagalan. merta sebanyak $85 setiap 1,000
dengan hanya nilai RM1,000.
Maka tuntutan pengilang sebanyak
RM16,000 walaupun telah
dibuktikan olehnya telah ditolak
oleh mahkamah.
MacIntyre, HMP, di dalam
penghakimannya antara lain
menyatakan:

Namun begitu, undang-undang


mengenakan satu tanggungjawab
untuk setiap orang yang telah
mengalami kerugian yang telah
disebabkan oleh kemungkiran
kontrak untuk mengambil langkah-
langkah yang munasabah untuk
membendung kerugian......... Di
dalam kes ini, ia tidak memerlukan Batu-bata tersadai di tapak bina
responden untuk bersusah payah
membelanjakan pembelian kayu- 2
(1968) 1 MLJ 262 (juga [1965 1968] SLR 736)
kayan daripada tempat lain di
mana kayu-kayan itu sudahpun Nota: HMP - Hakim Mahkamah Persekutuan
berlempangan beberapa ratus kaki P.P - Pegawai Penguasa
THE INGENIEUR FEATURE 39

Berkaitan dengan tuntutan


gantirugi para pekerjanya yang
tersadai itu, Ambrose, H, di
dalam penghakimannya seterusnya
menyatakan:

Butiran kedua berkaitan dengan


tuntutan balas sebanyak $11,868
yang dibayar kepada 18 para pekerja
untuk selama 69 hari dengan $172
sehari semasa defendan sedang
didakwa menunggu untuk batu-
bata dibekalkan oleh plaintif.
Pada hemat saya kerugian tersebut
dapat dielakkan. Saya menerima
keterangan yang telah dikemukakan
Pekerja binaan oleh plaintif bahawa ia adalah satu
amalan di dalam tred binaan
biji batu bata apabila dibekal. Mahkamah kemudiannya telah untuk pengikat batu-bata dan
Ini adalah bercanggah dengan memutuskan bahawa kontraktor pengangkut batu-bata dihantar
perjanjian jual beli yang mana seharusnya menerima tawaran keluar tanpa bayaran sekiranya
kontraktor hanya perlu membuat pembekal itu bagi membendung ketiadaan kerja untuk mereka oleh
bayaran di dalam satu tempoh kerugiannya itu. Mengenai kerana ketidakcukupan bekalan
kredit. tuntutan kos tambahan berkaitan batu-bata. Maka saya dengan
Lanjutan daripada itu, dengan para pekerjanya yang itu dapat menyimpulkan bahawa
kontraktor telah tidak mendapat tersadai di tapak bina selama defendan adalah tidak berhak
bekalan batu-bata. Maka ia 69 hari, seharusnya kontraktor kepada apa-apa bentuk gantirugi
terpaksa mendapat bekalan boleh membendung kerugiannya berkaitan dengan butiran kedua
d a r i p a d a p i h a k k e t i g a ya n g dengan menghantar mereka tuntutan balas tersebut.........
mana ini akan mengambil masa. pulang sehinggalah bahan batu-
Tambahan lagi para pekerjanya bata tersebut dapat dibekalkan. Maka jelas kepada prinsip
telah tidak dapat menjalankan Namun begitu mahkamah kes tersebut, adalah menjadi
kerja-kerja binaan di tapak bina memutuskan bahawa pembekal t a n g g u n g j awa b p e r u n d a n g a n
akibat ketiadaan bekalan batu-bata sememangnya telah memungkiri kontraktor untuk membendung
tersebut selama 69 hari. Maka para k o n t r a k t e r s e b u t . Te t a p i kerugiannya walaupun sekiranya
pekerjanya berada di tapak bina memandangkan kontraktor telah satu tindakan kemungkiran telah
tanpa membuat apa-apa kerja yang gagal membendung kerugiannya dilakukan oleh majikan. Tindakan
mana ini melibatkan kontraktor i t u , m a k a m a h k a m a h h a nya membendung kerugian tersebut
menanggung rugi apabila terpaksa menganugerahkan gantirugi adalah dengan membawa keluar
membayar gaji kepada kepada nominal sebanyak $10. para pekerja yang didapati tersadai,
para pekerjanya, walaupun kerja Ambrose. H, di dalam ataupun cuba mengagihkan para
tidak dapat dilakukan oleh mereka. p e n g h a k i m a n n ya i t u a n t a r a pekerjanya di dalam aktiviti kerja
Maka kontraktor menuntut gantirugi lainnya menyatakan: di tapak bina yang masih boleh
terhadap pembekal tersebut. dijalankan. Kontraktor perlulah
Mahkamah telah meneliti Pada hemat saya tawaran m e n g e l a k k a n k e r u g i a n ya n g
fakta kes dan mendapati bahawa daripada plaintif pada Januari 8, didakwa ditanggung olehnya itu.
pembekal selepas tindakan 1965, adalah satu yang munasabah; Ini adalah sejajar dengan prinsip
kemungkirannya itu menawarkan yang mana defendan sepatutnya perundangan ekuiti iaitu sesiapa
semula bekalan batu-bata itu membendung kerugiannya dengan yang berkehendakkan kepada
dengan harga yang lebih rendah menerima tawaran plaintif; dan keadilan, dia sendiri perlulah
iaitu sebanyak $79 setiap 1,000 tiada kerugian akan ditanggung bersikap adil.
biji batu-bata. Kontraktor telah o l e h d e f e n d a n s e k i ra nya i a Satu lagi prinsip perundangan
enggan menerima tawarannya menerima tawaran tersebut. Maka yang perlu diambil perhatian
itu tetapi telah terus mengikat dengan itu saya menyimpulkan adalah sekiranya kontraktor gagal
kontrak dengan pembekal yang bahawa defendan tersebut adalah membendung kerugiannya itu
lain yang mana didapati ia adalah tidak berhak kepada apa-apa dengan sewajarnya, maka tindakan
lebih mahal. gantirugi...... tuntutan gantiruginya itu akan
40 FEATURE THE INGENIEUR

menemui kegagalan walaupun untuk membekalnya itu di dalam u n t u k n i l a i g a n t i r u g i ya n g


setelah dibuktikan bahawa majikan tempoh yang munasabah itu. boleh dianugerahkannya kepada
sememangnya telah memungkiri Malah apa yang berlaku adalah pembekal.
kontrak. Ini jelas berdasarkan pembeli telah memesan lampu- Pickering, HMR, di dalam
kepada prinsip kes tersebut di lampu hiasan tersebut terus penghakimannya antara lain
atas di mana mahkamah hanya kepada pengilangnya di Negara menyatakan:
bersetuju untuk menganugerahkan Jerman walaupun bekalan lampu-
gantirugi nominal sebanyak $10. lampu itu kemudiannya akan .Plaintif pada waktu
lambat sampai. itutidak lagi mempunyai
Kemunasabahan Membendung Pembekal kemudiannya telah obligasi untuk menyimpan
Kerugian terpaksa menerima bekalan serta candelier tersebut untuk
membayar lampu-lampu hiasan membendung kerugiannya; dan
S a t u l a g i p e r s o a l a n ya n g tersebut kepada pengilangnya untuk defendan mengemukakan
sering timbul adalah apakah yang dan terpaksa menyimpannya di bukti, sekiranya mereka boleh,
dimaksudkan dengan kontraktor kedainya itu. Maka pembekal berkaitan dengan usaha-
perlu mengambil tindakan kemudiannya telah mengambil usaha yang mungkin secara
membendung kerugiannya tindakan undang-undang gantirugi munasabahnya boleh dibuat di
dengan mengambil langkah- terhadap pembeli disebabkan dalam tempoh interim oleh plaintif
langkah yang munasabah atau lampu-lampu hiasan yang telah dan apakah hasil kewangan yang
s e wa j a r nya i t u ? A d a k a h i n i enggan diterima oleh pembeli. mungkin diperolehi
bermaksud kontraktor perlulah Pembeli telah membuat dalihan
mengambil langkah-langkah bahawa sepatutnya pembekal Leonard, HMR, di dalam
ya n g a k a n m e nye b a b k a n i a membendung kerugiannya penghakimannya juga antara
menanggung kerugian yang lebih berkaitan dengan lampu-lampu lainnya, telah menambah:
banyak? Apa pula keadaannya hiasannya itu dengan cuba
apabila kontraktor tidak dapat menjualnya kepada orang lain. .............tiada bukti
mengambil langkah-langkah yang Pembekal pula telah menyatakan dikemukakan oleh perayu untuk
munasabah untuk membendung bahawa oleh kerana bentuk menunjukkan bagaimanakah
kerugiannya itu? lampu-lampu hiasan tersebut responden mungkin, setelah
U n t u k m e n j awa b s o a l a n - sebenarnya adalah luar biasa mengambilkira bentuk candelier
soalan tersebut rujukan boleh dan hanya sesuai untuk dipakai ya n g l u a r b i a s a i t u , b o l e h
d i b u a t k e p a d a k e s Pa c i f i c di Bangunan Istana atau serupa m e m b e n d u n g ( k e r u g i a n nya )
Electrical Co Ltd lwn. Seng dengannya; maka adalah agak dan ia adalah, sudah tentu,
Hup Electrical Co (S) Pte Ltd. 3 sukar untuk menjualnya atau untuk defendan menunjukkan,
Di dalam kes ini perayu adalah mencari pasaran yang lain agar bagaimanakah plaintif dapat
pembeli lampu-lampu hiasan ia dapat dijual. membendungnya...............
dan responden adalah pembekal Mahkamah telah meneliti fakta
lampu-lampu tersebut. Perayu kes dan bersetuju oleh kerana Maka jelas berdasarkan
telah memesan lampu-lampu lampu-lampu hiasan tersebut prinsip perundangan kes tersebut
hiasan untuk projek pembinaan adalah unik dan hanya sesuai di atas, apa yang dimaksudkan
sebuah Istana di Negara Brunei. untuk dipasang di Bangunan dengan langkah-langkah yang
Pembeli telah mendapati bahawa Istana sahaja, maka oleh itu, munasabah atau yang sewajarnya
pembekal telah lewat sedikit adalah sukar untuk mencari itu perlulah berdasarkan hal
membekal lampu-lampu hiasan pasaran alternatif. Mahkamah keadaan pasaran serta satu
tersebut daripada tarikh yang juga mendapati bahawa pembeli penilaian persoalan fakta. Di
telah dijanjikan. Maka oleh telah gagal mengemukakan bukti d a l a m k e s i n i o l e h k e ra n a
itu, pembeli kemudiannya telah secara munasabah bagaimanakah candelier tersebut adalah satu
membatalkan kontrak jual beli pembekal dapat membendung bentuk yang luar biasa dan
tersebut. kerugiannya itu. Namun begitu, tidak mungkin untuk pembekal
Namun begitu pembekal oleh kerana pembekal telah tidak menjualnya semula di pasaran,
telah mengutus telegram kepada dapat membuktikan kerugiannya maka adalah tidak musanabah
pembeli bahawa ia akan secukupnya, maka mahkamah untuknya membendung
menghantar lampu-lampu hiasan tidak dapat memberi keputusan kerugiannya itu.
itu melalui pengangkutan udara
dan ia akan tiba tidak lama lagi. 3
(1978) 1 MLJ 162
Tetapi pembeli telah enggan
menerima tawaran pembekal Nota: HMR - Hakim Mahkamah Rayuan
THE INGENIEUR FEATURE 41

Di dalam keadaan di mana


ia adalah sukar untuk penuntut
membendung kerugian, maka
adalah menjadi tanggungjawab
pihak yang membela daripada
tuntutan gantirugi itu
menunjukkan bagaimanakah
penuntut dapat membendung
kerugiannya itu.
Contohnya sekiranya para
pekerja pakar daripada luar
negara yang telah digaji oleh
kontraktor untuk menjalankan
satu tred kerja pakar, maka
adalah sukar untuk kontraktor
menghantar mereka pulang
agar ia dapat membendung
k e r u g i a n nya s e k i ra nya s a t u
tindakan kemungkiran telah
dilakukan oleh majikan yang Projek binaan yang terbengkalai
m e nye b a b k a n p a ra p e k e r j a
tersebut terpaksa tersadai di sepatutnya sekiranya langkah akan sebenarnya menanggung
tapak bina. Ini adalah kerana membendung kerugian itu tidak lebih lagi perbelanjaan yang
berkemungkinan besar kontraktor diambil. merugikannya.
telah mengikat satu kontrak Untuk memahami lebih lanjut
pekerjaan dengan para pekerja Membendung Kerugian Yang prinsip perundangan itu tadi,
pakar itu untuk satu tempoh Lazim Dan Bukan Berbentuk rujukan boleh dibuat kepada kes
yang tertentu; dan juga ia adalah Kepakaran Khusus Tansa Enterprise Sdn. Bhd. lwn.
sukar untuk menghantar mereka Temenang Engineering Sdn. Bhd.4
pulang dan juga menggaji Adalah menjadi tanggungjawab Di dalam kes ini plaintif adalah
mereka semula apabila tindakan kontraktor untuk membendung pembekal batu-bata kepada
kemungkiran oleh majikan kerugian yang secara lazimnya d e f e n d a n ya k n i k o n t r a k t o r.
berakhir. Maka adalah tidak dapat dielak. Contohnya, sekiranya Kontraktor sedang menjalankan
adil untuk majikan membuat k o n t ra k t o r t e l a h m e n g a l a m i satu kontrak kerja pembinaan
d a l i h a n b a h awa k o n t ra k t o r kerugian seperti perbelanjaan sebuah kilang kain di Johor.
sepatutnya dapat membendung l o j i - l o j i ya n g t e r s a d a i a t a u Kontraktor menuntut sebelas (11)
kerugiannya dengan menghantar buruh-buruh yang mana boleh inbois yang telah dikemukakan
mereka pulang. Ini adalah dihantar pulang, maka kontraktor kepada kontraktor yang mana
kerana ia adalah sukar dan juga adalah bertanggungjawab untuk jumlah nilai yang terkumpul
berkemungkinan adalah lebih berbuat demikian. Namun adalah sebanyak RM160,206.52.
mahal untuk berbuat demikian. begitu sebagaimana yang telah Kontraktor telah mengaku hutang
Namun demikian kesemua dibincangkan tadi, apabila tersebut tetapi tertakluk kepada
kesukaran membendung kerugian kontraktor telah mengikat kerja tuntutan gantirugi balas di
itu perlulah juga dibuktikan oleh dengan pekerja buruh yang pihaknya terhadap pembekal.
kontraktor apabila ia membuat mempunyai kepakaran yang Kontraktor telah mendakwa
tuntutannya. khusus seperti penggajian oleh kerana pembekal telah
Maka jelas kontraktor buruh di luar negara; ataupun gagal untuk membekal batu-
mempunyai tanggungjawab keadaan di mana sukar untuk b a t a s e b a nya k 7 5 , 2 4 0 b i j i ,
perundangan untuk membendung ia membendung, maka secara maka ia telah melewatkan kerja
kerugian yang dialaminya munasabahnya kontraktor boleh kontraktor. Di antara tuntutan
i t u s e c a ra m u n a s a b a h d a n menuntut kerugian yang tidak yang dituntut oleh kontraktor
s e w a j a r n ya ya n g m a n a i a dapat dibendungnya. Ini lebih- adalah berkaitan dengan Gantirugi
tidak akan memudaratkan hak lebih lagi di mana kontraktor Tertentu dan Ditetapkan, kos
kontraktor atau ia tidak akan apabila cuba membendung pengangkutan batu-bata dari
membebankan lagi tanggungan
kewangannya melebihi apa yang 4
(1994) 2 MLJ 353
42 FEATURE THE INGENIEUR

sumber yang lain dan kos Haidar, H, di dalam Perlulah diingatkan, kontraktor
pengurusan tapak bina. Namun penghakimannya antara lain dipertanggung-jawabkan untuk
begitu pembekal telah memberi menyatakan: membuktikan perkara-perkara
alasan bahawa kegagalannya tersebut di atas berkaitan dengan
untuk membekal batu-bata Ta m b a h l a g i , w a l a u p u n langkah-langkah membendung
tersebut adalah disebabkan sekiranya diandaikan bahawa kerugian yang dialaminya,
oleh kegagalan kontraktor untuk plaintif telah memungkiri kontrak, sebelum tuntutannya itu dapat
membuat bayaran untuk bekalan adalah didapati defendan tidak diluluskan. Sebagaimana yang
batu-bata yang lebih awal membendung kerugiannya. telah dibincangkan tadi,
sebelum itu yakni sebanyak Bekalan batu-bata sejajar dengan s e k i r a n ya k o n t r a k t o r g a g a l
99,520 biji. Maka sebab itulah kontrak adalah berkaitan dengan membuktikan langkah-langkah
pembekal kemudiannya telah b a t u - b a t a b i a s a d a n i a nya yang wajar dan munasabah untuk
berhenti membuat bekalan batu- bukanlah satu keluaran yang membendungkan kerugian yang
bata kepada kontraktor. khusus yang memerlukan masa dialami maka berkemungkinan
Mahkamah telah meneliti untuk dikilangkan. Tidak terdapat b e s a r t u n t u t a n nya i t u a k a n
fakta kes dan bersetuju kekurangan bekalan batu-bata menemui kegagalan dan ia hanya
bahawa pembekal adalah di pasaran pada waktu itu. akan dibayar gantirugi nominal
tidak bertanggungan terhadap ................ sekiranya ia berjaya membuktikan
tuntutan balas yang dibuat oleh Maka, sekiranya defendan tindakan kemungkiran kepadanya
kontraktor. Apabila kontraktor telah membendung kerugiannya oleh majikan.
telah secara terus menerus dengan membeli batu-bata
gagal membuat bayaran kepada daripada sumber-sumber lain, Rumusan
bekalan-bekalan yang terdahulu, defendan tersebut, sebagaimana
maka pembekal adalah berhak yang telah saya nyatakan awal Berdasarkan perbincangan
untuk tidak membekalkannya dan tadi, sebagai satu fakta, akan kes-kes undang-undang di
membatalkan kontrak bekalan tidak menanggung apa-apa Bab ini, bolehlah dirumuskan
tersebut. Ini adalah kerana kerugian.............. bahawa kontraktor mempunyai
pembekal bolehlah menganggap tanggungjawab perundangan
bahawa kontrak bekalan tersebut Maka jelas berdasarkan untuk membendung kerugiannya.
sudahpun ditolak oleh kontraktor prinsip perundangan kes di atas, Ko n t ra k t o r t i d a k l a h b o l e h
berdasarkan tindak-tanduknya apabila kemungkiran yang telah membuat dalihan bahawa
itu. berlaku terhadap kontraktor, maka sekiranya terdapat loji-loji yang
Di antara perkara-perkara yang kontraktor perlulah mengambil tersadai di tapak bina akibat
telah diputuskan oleh mahkamah langkah-langkah yang sewajarnya kemungkiran majikan, di mana
adalah tanggungjawab kontraktor untuk membendung kerugiannya. P.P. telah tidak mengarahkan
untuk membendung kerugiannya Ini termasuk langkah-langkah k o n t ra k t o r u n t u k m e m b awa
berkaitan dengan bekalan batu- seperti mencari sumber-sumber keluar para buruh serta loji-
bata yang tidak dibekalkan oleh lain apabila ia melibatkan loji yang tersadai, maka oleh
kontraktor. Sepatutnya, kontraktor kelewatan bahan binaan; ataupun i t u k o n t ra k t o r a d a l a h t i d a k
boleh mendapat bekalan batu- di mana apabila kelewatan P.P. bertanggungan dan majikan pula
bata daripada sumber atau untuk memberi arahan pada adalah bertanggungan.
pembekal lain oleh kerana waktu yang wajar maka sekiranya Kontraktor perlulah
bekalan batu-bata bukanlah terdapat para buruh atau loji- mengagihkan para buruhnya
satu bekalan yang susah dicari. loji yang tersadai yang mana serta loji-loji yang tersadai di
Di samping itu, adalah juga di ia tidak boleh diagihkan ke tapak bina di mana ia perlulah
dapati tidak terdapat kekurangan bahagian-bahagian kerja yang membawanya keluar tapak
bekalan batu-bata di pasaran. lain, maka kontraktor mestilah bina dan tidak membiarkannya
Maka kontraktor boleh mengambil mencari jalan untuk menghantar tersadai di tapak bina. Kontraktor
langkah-langkah yang wajar untuk para buruh tersebut ataupun loji- juga perlulah mencari alternatif-
membendung kerugiannya. Maka loji yang terlibat pulang. Namun alternatif lain yang difikirkan
mahkamah memutuskan bahawa begitu ini hanya terpakai kepada munasabah agar kerugiannya
kontraktor adalah bertanggungan para buruh yang mana senang itu dapat dibendung. Namun
untuk membayar hutang yang digaji kembali ataupun pada demikian langkah-langkah yang
masih belum berbayar kepada loji yang senang disewa kembali wa j a r s e r t a m u n a s a b a h i t u
pembekal bagi bekalan yang apabila kerja dapat diteruskan perlulah tidak membebankan
dibuat di peringkat awal. kemudian. kontraktor di mana sekiranya
THE INGENIEUR FEATURE 43

langkah-langkah itu diambil akan menyebabkan


kontraktor menanggung kerugian kewangan yang
melebihi daripada sepatutnya.
Maka tanggungjawab membendung kerugian
i t u a d a l a h h a nya b e r d a s a r k a n p a d a b u r u h
yang tidak khusus trednya oleh kerana ia lebih
menjurus kepada tred buruh yang khusus dan
tinggi kepakarannya di mana ia adalah sukar
untuk dicari dipasaran; contohnya tred buruh
dari luar negara; ataupun loji-loji yang khusus
yang perlu disewa dari luar negara. Ini adalah
kerana secara lazimnya perjanjian untuk menggaji
mereka ataupun menyewa loji-loji tersebut adalah
berdasarkan untuk tempoh-tempoh yang tertentu
sahaja. Ia juga adalah agak sukar untuk menggaji
mereka kembali apabila keja dapat disambung
semula. Namun kesusahan mengambil langkah-
langkah tersebut tertakluk kepada kontraktor
membuktikannya terlebih dahulu.
Akhir sekali sekiranya kontraktor didapati
telah gagal mengambil langkah-langkah yang
sewajarnya, maka tuntutan gantirugi kontraktor
itu akan menemui kegagalan. Maka sekiranya
kontraktor dapat membuktikan kemungkiran di
pihak majikan tetapi gagal membuktikan langkah-
langkah membendung kerugian yang sewajarnya
dan semunasabahnya, maka mahkamah akan hanya
menganugerahkan gantirugi nominal (di dalam
perbincangan kes undang-undang adalah di dapati
hanya sebanyak RM10) yang mana hanya bertujuan
untuk mengiktiraf kemungkiran atau pelanggaran
hak terhadap kontraktor. BEM

RUJUKAN
Penghakiman kes: Kabatasan Timber Extraction
Company lwn. Chong Fah Shing (1969) 2 MLJ
6. Malayan Law Journal Bhd.

Penghakiman kes: Hong Leong Co Ltd. lwn.


Pearlson Enterprise Ltd. 1968) 1 MLJ 262 (juga
[1965 1968] SLR 736). Malayan Law Journal
Bhd.

Penghakiman kes: Pacific Electrical Co Ltd lwn.


Seng Hup Electrical Co (S) Pte Ltd. (1978) 1 MLJ
162. Malayan Law Journal Bhd.

Penghakiman kes: Tansa Enterprise Sdn. Bhd. lwn.


Temenang Engineering Sdn. Bhd. (1994) 2 MLJ
353. Malayan Law Journal Bhd.

Salleh Buang & Nordin Torji, 1995. Undang-


Undang Kontrak Di Malaysia Edisi Kedua. Central
Law Book Corporation Sdn. Bhd.
44 FEATURE THE INGENIEUR

Construction Disputes
By Ir. Dr Ooi Teik Aun

I
t is well known that before the Court decides on Arbitral Institutions
construction is a high risk the enforceability of the Award.
industry. Consequently, more Hence the dispute resolution is The principal institutions
disputes arise out of construction a long drawn process. i n M a l ay s i a t h a t d e a l w i t h
contracts than any other contracts. Fo r a l o n g t i m e t h e A c t construction disputes/dispute
These disputes are often referred governing arbitration was the resolution are:
to arbitration in accordance to Arbitration Act 1952. It has
dispute resolution clauses in the since been replaced by the The Institution of Engineers,
contract/agreement between the new Arbitration Act 2005 which Malaysia (IEM);
parties. came into effect on March 15, The Malaysian Institute of

The essential requirement to 2006. The new Arbitration Act Architects (PAM);
initiate arbitration is to establish recognizes the need for less court The Kuala Lumpur Regional

that there exists a dispute interference and the need for Centre for Arbitration
between the parties. Very often finality of the dispute resolution (KLRCA);
the respondent is the unwilling as soon as possible. For example, The Malaysian Institute of

party to go for arbitration and the New Act contains opt-in and Arbitrators (MIArb).
consequently, the process for opt-out provisos which allow
arbitration is susceptible to delay parties the opportunity to limit K L R CA a n d e a ch o f t h e
as a result of the respondent Court interference in the case of institutions mentioned above have
dragging its feet in the proceedings. international arbitrations. their own arbitration rules.
Further delay often arises due to The Construction Industry Applications for appointment
preliminary questions that have to Development Board Malaysia of arbitrator can be made to any
be addressed before the arbitration is now working on introducing of the above institutions subject
hearings proper can begin. statutory adjudication in the to agreement by the parties.
Even when it is a clear default construction contracts in Malaysia. Under the new Arbitration Act, by
by one party, such as non- Under this regime, an adjudicator default of parties agreement with
payment of a certified claim with in effect plays the role of the regards to choice of arbitrator
no dispute on the face of it, when Superintending Officer (SO) in and the appointing authority, the
a plaintiff files a suit in court, the traditional contract in the KLRCA will be the appointing
the defendant will find reasons to determination of disputes referred authority. The parties are free to
raise a dispute as to the claim to him. As in the case of the agree on the arbitration rules to
and the court will more often SO, an adjudicators decision is follow.
than not order that the parties go binding upon the parties unless
for arbitration on the application the decision is disputed and Risk Assessment
of the defendant on the basis of finally decided by arbitration or And Allocation
there being a dispute between the litigation.
parties in relation to a contract It is important to assess the
with an arbitration clause. risks in the contract between
Obtaining a Final Award under the parties and allocate them
an arbitration is not necessarily appropriately so as to minimize the
the end of the matter either. areas of dispute. Risk in Chinese
The losing party may apply to means danger and opportunity
the High Court to remit or set and it aptly describes the situation
aside the Award and this often of risk in construction industry.
brings with it a delay in the Risk is defined in BS4778:
successful party enforcing the Section 3.1 : 1991 as: - A
Award in Court. The setting combination of the probability,
aside application can often buy or frequency, of occurrence of a
the losing party two-three years Earthworks defined hazard and the magnitude
THE INGENIEUR FEATURE 45

of the consequences of the obstruction or condition and investigation results in relation


occurrence. the words not foreseeable by to the work and the onus must
Where risk cannot be assigned an experienced contractor. This be on the contractor to assess
to either party, it should be is particularly applicable to the risk associated with the work
covered by insurance such as tunnelling activity. and allow for such mitigation if
Contractors All Risk Policy, It is important that when such necessary.
Public Liability and Workman event occurs, most construction The provision of work method
Compensation Policies. contracts provide that the statement in accordance with the
The risk of contractor not contractor is required to give work programme will help to
performing is covered by written notice immediately to the minimize the conflict between
performance bond. However, the engineer or SO who will carry the parties. The work method
risk of employer not paying is out investigation to ascertain the statement would also help the
traditionally not covered by a situation. contractor go through the thought
similar payment bond. The PWD 203A Clause 16 process on how he is going to do
on Inspection of Site puts the the work and the risk involved
Areas Of burden on the contractor to in the work and the mitigation if
Construction Dispute carry out detailed pre-contract the risk does occur.
subsoil investigation at his own
The common areas of construction expense to adequately design and Delays In Completion
dispute can be summarized as provide for the temporary works
follows: (Lim, 2004). In such a case, the Delay in contract completion
contractor should price in the risk is another common area of
Unforeseen ground and contingencies accordingly. dispute. The Employer could be
conditions Under BS 6031:1981: - the defaulting party by making
Delays in completion .no site investigation, however changes to the works during
Default in payment carefully done, ever examines the contract. A critical path
Discrepancies in ground more than a very small proportion programme of work submitted by
levels of the ground. It is necessary to the contractor during the tender
check the soil conditions revealed stage would be useful here.
Unforeseen Ground during progress of the excavations If delay in the critical path
Conditions correspond with those forming result from acts of the Employer,
the basis for earthworks design then the SO/engineer should
Unforeseen ground conditions as interpreted from the site grant the extension of time
are described in Clause 12.2 of investigation and associated cost due to the
the FIDIC COC as: - physical In other words, site investigation changes. On the other hand if the
obstructions or physical conditions, is a continuous process, from pre- delay is due to the contractors
other than climatic conditions on design to construction stage. own fault, then no extension of
the site, which obstructions or Th e a p p r e c i a t i o n o f s i t e time is granted with the result that
conditions were, in his opinion, investigation data is very much a certificate of non-completion
not foreseeable by an experienced d e p e n d e n t o n t h e r e l e va n t will be issued by the SO/engineer,
contractor experience of the contractor. It at the end of the contract period.
The limitation is on the word is important to be able to see The consequence of such a
physical on any unforeseeable the big picture from the site certificate of non-completion
is that liquidated damages are
imposed on the contractor.
Delay in completion is in
practice never as straight forward
as it seems. The need by all
parties to review and monitor
progress of work is very important
so as to ensure that any possible
delay is mitigated at the early
stage. In fact it is well known
that delay in project completion
usually brings financial losses and
Abandoned project difficulties to the contractor as
46 FEATURE THE INGENIEUR

well as the employer. The project cannot be suitably assigned to the


suffers consequently as a result parties, insurance policies must
thereof. be put in place.
Ground conditions will always
Default In Payment be an issue for dispute as ground
conditions which occur naturally
This is a very common problem are not homogenous and cannot
faced by contractors. Employers be expected to be the same from
default in payment of certified Land survey its length, breadth and depth.
claim often leads to termination Discrepancies in ground levels
of the contract by the contractor. the ground levels are different can be controlled by a joint
Payment is the lifeblood of a from that shown in the tender survey before commencement
contractor. No contractor can drawings. of actual work to avoid later
withstand the financial strain Unfortunately, the contractor disputes on the issue.
caused by irregular progress also then proceeds with the Th e p r o g r a m m e o f w o r k
payments. work for commercial reasons, and the method statement of
It is a trend for the employer for example, there is a fear work submitted at the tender
to call on the Performance that delay in commencing work stage should form the basis of
Bond when there is a dispute might impact on the time for contractors understanding of the
between the parties. In the completing it, especially in ground condition.
case of Transfield Project (M) earthworks contracts, where the Delay in completion is the
Sdn Bhd and Anor v Malaysian contract period is short. responsibility of the party that
Airlines System Bhd, the Employer Th i s o f t e n g i v e s r i s e t o caused it and the consequences
called on the performance bond employers taking advantage of that follow. A carefully monitored
when the contractor treated non- the situation by claiming that any project can help mitigate delay
payment as a repudiatory breach claim for variations arising from and control damages.
of the contract and gave notice for different ground conditions were Default in payment is
arbitration of the disputes between not agreed to by the parties as increasingly frequent with the
them. This in turn resulted in contractually provided and that uncertainties in the fast changing
an unsuccessful attempt by the the contractor is deemed to have world and the trend of spending
contractor to injunct the employer satisfied itself as to the ground the future money before it is
from dealing with the proceeds conditions before starting work. earned. Provision of payment
of the performance bond. It is therefore prudent that bonds by the employer may be
Dispute resolution either by any discrepancies in drawings the answer to this problem. BEM
litigation or arbitration is very including survey levels must
costly and time consuming. Some be brought to the attention of REFERENCES
form of assurance of payment need the engineer in writing and
to be worked in to ensure that sufficient time must be given BS 4778: Section 3.1:1991.
payment for undisputed claims for the engineer to verify such Quality Vocabulary. Part 3
are settled according to the terms discrepancies and that sufficient Availability, reliability and
of the contract particularly with provisions to allow for extension maintainability terms. Section
claims of significant amount when of time under these circumstances 3.1 Guide to concepts and
the contract sums of projects are be negotiated and provided for in related definitions, pp5
in billions of Ringgit. the contract.
BS 6031:1981. Code of Practice
Discrepancies In Conclusions for Earthworks pp10.
Ground Levels
Construction is a high risk CLJ (1999). Transfield Projects
This is another common area of venture and dispute resolution (M) Sdn Bhd & Anor v Malaysian
dispute. The tender for earthwork therein is a long drawn and costly Arline System Bhd 4 CLJ 827
is based on the survey levels by process. It is therefore necessary
the licensed surveyor engaged by to minimize and if possible avoid Lim C. F. (2004). The Malaysian
the employer. disputes. PWD Form of Construction
Very often, the contractor It is important to identify and Contract. Sweet & Maxwell
is able to identify prior to assign the risks to the appropriate Asia. Kuala Lumpur. Malaysia.
commencement of work that party in the contract. When risks
48 FEATURE THE INGENIEUR

Integrated Engineering
Services The ETI Centric
Professional Services
By Ir. Rocky H.T. Wong, Past Chairman ACEM; Chairman IEM pro-ETI Bureau and
Head Commissioner ASEAN Engineers Register

I
n the United Nations (UN) systems, under CPC 8672 ENGINEERING SERVICES
the administration of the UN Statistical office, 86721 Advisory and consultative

there is a Central Product Classification (CPC) engineering services


code system. CPC constitutes a complete product Assistance, advisory and recommendation
classification covering goods and services. services concerning engineering matters.
WTO, being an organ of the UN, has therefore Included here are the undertaking of
adopted the CPC code system in all trade agreements; preparatory technical feasibility studies and
among which is the General Agreement in Trade project impact studies. Examples are: study
in Services (GATS). Services sector classifications of the impact of topography and geology on
addressed in the GATS are defined in the so-called the design, construction and cost of a road,
W/120 List or the official WTO documents: - MTN. pipeline or other transportation infrastructure;
GNS/W/120. study of the quality or suitability of materials
Under the WTOs GATS classification, there are intended for use in a construction project
12 services sectors, and they are:- and the impact on design, construction and
Business Services cost of using different materials; study of
Communication Services the environmental impact of a project; study
Construction & related Engineering Services of the efficiency gains in production as a
Distribution Services result of alternative process, technology or
Education Services plant layout. The provision of these services
Environment Services is not necessarily related to a construction
Finance & Insurance project. It may consist, for example, of the
Health & Social Services appraisal of the structural, mechanical and
Tourism Services electrical installations of buildings, of expert
Recreational, Cultural & Sporting Services testimony in litigation cases, of assistance to
Transport Services Government bodies in drafting laws, etc.
Other Services

86722 Engineering design services for the


Each of the above stated services sectors, in turn, construction of foundations and
has various sub-sectors; e.g. under the Engineering building structures
and related construction services sectors, we have Structural engineering design services for load-
the following:- bearing framework of residential and commercial,
industrial and institutional buildings. Design
CPC Code Nos. Sub-sector services consist of one or a combination of
8671 Architectural Services the following: preliminary plans, specifications
8672 Engineering Services and cost estimates to define the engineering
8673 Integrated Engineering Services design concept; final plans, specifications and
8674 Urban Planning Services cost estimates, including working drawings,
511 to 518 All aspects of specifications regarding materials to be used,
Construction Services method of installation, time limitations and
(which are trade & skills driven) other specifications necessary for tender
submission and construction and expert
Focussing on engineering related services, we advice to the client at the time of calling for
have the following sub-sectors as defined by the and accepting tenders; services during the
CPC:- construction phase.
THE INGENIEUR FEATURE 49

Exclusion: Engineering services for buildings if


they are an integral part of the engineering design
service for a civil work or production plant or
facility.

86723 Engineering design services for


mechanical and electrical installations
for buildings
Mechanical and electrical engineering design
services for the power system, lighting system,
fire alarm system, communication system and
other electrical installations for all types of
buildings and/or the heating, ventilating, air LRT station
conditioning, refrigeration and other mechanical
installations for all types of buildings. Design 86725 Engineering design services for
services consist of one or a combination of industrial processes and production
the following: preliminary plans, specifications Engineering design services for production
and cost estimates to define the engineering processes, procedures and facilities. Included
design concept; final plans, specifications and here are design services as they relate to methods
cost estimates, including working drawings, of cutting, handling and transporting logs and
specifications regarding materials to be used, logging site layout; mine development layout
method of installation, time limitations and other and underground construction, the complete
specifications necessary for tender submission civil, mechanical and electrical mine surface
and construction and expert advice to the client plant installations including hoists, compressors,
at the time of calling for and accepting tenders; pumping stations, crushers, conveyors and ore
services during the construction phase. and waste-handling systems; oil and gas recovery
procedures, the construction, installation and/or
86724 Engineering design services for the maintenance of drilling equipment, pumping
construction of civil engineering works stations, treating and storage facilities and other
Engineering design services for the construction oil field facilities; materials flows, equipment
of civil engineering works, such as bridges and layout, material handling systems, processes and
viaducts, dams, catchment basins, retaining process control (which may integrate computer
walls, irrigation systems, flood control works, technology) for manufacturing plants; special
tunnels, highways and street including machinery, equipment and instrumentation
interchanges and related works, locks, systems; and any other design services for
canals, wharves and harbours works, water production procedures and facilities. Design
supply and sanitation works such as water services consist of one or a combination of
distribution systems, water, sewage, industrial the following: preliminary plans, specifications
and solid waste treatment plants and other and cost estimates to define the engineering
civil engineering projects. design concept; final plans, specifications and
cost estimates, including working drawings,
Design services consist of one or a combination specifications regarding materials to be used,
of the following: preliminary plans, specifications method of construction and/or installation, time
and cost estimates to define the engineering limitations and other specifications necessary
design concept; final plans, specifications and for tender submission and construction and
cost estimates, including working drawings, expert advice to the client at the time of calling
specifications regarding materials to be used, for and accepting tenders; services during the
method of installation, time limitations and construction phase. Included are engineering
other specifications necessary for tender design services for buildings if they are an
submission and construction and expert integral part of the engineering design service
advice to the client at the time of calling for a production plant or facility.
for and accepting tenders; services during the
construction phase. Included are engineering 86726 Engineering design services n.e.c.
design services for buildings if they are an Other specialty engineering design services.
integral part of the engineering design for a Included here are acoustical and vibration
civil engineering work. engineering designs, traffic control systems
50 FEATURE THE INGENIEUR

designs, prototype development and detailed CPC 8673 INTEGRATED ENGINEERING SERVICES
designs for new products and any other specialty 86731 Integrated engineering services for

engineering design services. transportation infrastructure turnkey


projects
Exclusion: The aesthetic design of products and Fully integrated engineering services for the
the complete design of products which do not construction of transportation infrastructure
require complex engineering (e.g. furniture) are turnkey projects. Services included here are
classified in subclass 87907 (Specialty design planning and pre-investment studies, preliminary
services). and final design, cost estimation, construction
scheduling, inspection and acceptance of contract
86727 Other engineering services during the work as well as technical services, such as the
construction and installation phase selection and training of personnel and the
Advisory and technical assistance services to provision of operation and maintenance manuals
the client during the construction to ensure and any other engineering services provided to
that construction work is in conformity with the client that form part of an integrated bundle
the final design. This involves services provided of services for a turnkey project.
both in offices and in the field, such as the
review of shop drawings, periodic visits to the 86732 Integrated engineering and project
site to assess progress and quality of the work, management services for water supply
guiding the client and the contractor in the and sanitation works turnkey projects
interpretation of contract documents and any Fully integrated engineering services for the
other advice on technical questions that may construction of water supply and sanitation works
develop during construction. turnkey projects. Services included here are
planning and pre-investment studies, preliminary
86729 Other engineering services and final design, cost estimation, construction
Engineering services not elsewhere classified. scheduling, inspection and acceptance of
Included here are geotechnical engineering contracts as well as technical services, such as
services providing engineers and architects the selection and training of personnel and the
with necessary subsurface information to design provision of operation and maintenance manuals
various projects; groundwater engineering and any other engineering services provided to
services including groundwater resources the client that form part of an integrated bundle
assessment, contamination studies and quality of services for a turnkey project.
management; corrosion engineering services
including inspection, detection and corrosion 86733 Integrated engineering services for the
control programmes; failure investigations construction of manufacturing turnkey
and other services requiring the expertise of projects
engineers. Fully integrated engineering services for the
construction of manufacturing facilities turnkey
projects. Services included here are planning
and pre-investment studies to address issues
such as the integration of operations, site
selection, pollution and effluent control and
capital requirements; all necessary structural,
mechanical and electrical design services;
production process engineering design services
including detailed process flow diagrams,
general site and plant arrangements drawings,
plant and equipment specifications; tender
specifications; construction scheduling inspection
and acceptance of work as well as technical
services, such as the selection and training
of personnel, the provision of operations and
maintenance manuals, start-up assistance and
any other engineering services that form part of
an integrated bundle of services for a turnkey
Water supply plant project.
52 FEATURE THE INGENIEUR

86739 Integrated engineering services for skills or trade centric sub-contractors or builders
other turnkey projects who will perform services as listed below:-
Fully integrated engineering services for other
construction works. Services included here are CPC Codes Sub-sectors
planning and pre-investment studies, preliminary 511 Site preparation
and final design, cost estimates, construction 512 General construction work
scheduling, inspection and acceptance of for buildings
contracts as well as technical services, such as 513 General construction for
the selection and training of personnel and the civil engineering
provision of operation and maintenance manuals 515 Special trade construction work
and any other engineering services provided to 514 Installation, Assembly Work &
the client that form part of an integrated bundle 516 Maintenance, and Repair of
of services for a turnkey project. fixed structures
517 Building completion &
From the detailed descriptions of the various sub- finishing work
sectors of CPC 8672-Engineering Services as listed 518 Renting services related to
in above, it is clear that the professional services, equipment for construction
so defined, are associated and related to Consulting or demolition of buildings or
Engineering Services, or Engineering Consultancy civil engineering works, with
Services otherwise known as Engineering Consultancy operators.
Practices(ECP) as defined in the Engineers Act.
On the other hand, the interpretations of the For a balanced over-view of the caption, it is also
professional services as detailed for the sub-sectors important to note that in the WTO/GATS definition
of CPC 8673-Integrated Engineering Services -in the of services sub-sectors, we have the following:-
Demand and Supply Equation are as follows:-
86600 Services related to Management
(a) The Demand Side:- When a firm of Engineering, Services
Technology & Innovation, i.e. ETI Services 86601 Project management services other

Provider acts as the Owners Representative than for construction


and provides the full spectrum of consultancy Coordination and supervision services of
services; the ETI firm will be performing the resources in preparing, running and completing
duties as the Owners Programme Management a project on behalf of the client. Project
Consultant(PMC) from project definition management services can involve budgeting,
and inception through the full spectrum of accounting and cost control, procurement,
professional services till commercial operation planning of timescales and other operating
of either the delivered infrastructure or the conditions, coordination of subcontractors
facilities or the assets etc. On a slightly lesser work, inspection and quality control, etc. These
scale, say in the case, when the Owner himself services consist only of management services;
has already defined and conceptualized the operating staff services are excluded.
project, the ETI firm acting as the Owners
Representative will be performing the duties as Exclusions: Construction project management
the Owners Project Management Consultant services are classified in class 8671 (Architectural
(also PMC) from initial or front-end design services), 8672 (Engineering services) and, for
till commercial operation as per foresaid. An turnkey projects, 8673 (Integrated engineering
in-house organised aquivalent will be the Project services).
Management Team, i.e. PMT.
86602 Arbitration and conciliation services
(b) The Supply End:- The firm of ETI Services Assistance services through arbitration or
Supplier will, when by way of bid-selection mediation for the settlement of a dispute between
and contracted by Project Owner (who is labour and management, between businesses or
being served by a PMC or PMT), will be the between individuals.
Engineering, Procurement, Construction &
Commissioning ie EPCC Contractor, or otherwise Exclusions: Representation services on behalf of
known as the Turn-key Contractor. Among the one of the parties in the dispute and consulting
various and varied out-sourced services an EPCC services in the field of labour relations are
Contractor will sub-contract out will be those classified in subclass 86190 (other legal
THE INGENIEUR FEATURE 53

advisory and information services), 95110


(Services furnished by business and employers
organizations) and 95200 (Services furnished by
trade unions), respectively.

Comparing the services as defined in the


sub-sectors of CPC 8673 (Integrated Engineering
Services) verses the services of sub-sector CPC
86601 (Project Management Services, other than
for construction), it is clear that whilst the services
under all the sub-sectors of CPC 8673 are those
complete services of a preferred PMC; however,
those of CPC 86601 are more the administrative
and coordination services which only form parts of Cement factory
the logistic framework of the total delivery system
of a PMC; or that of an EPCC contractor. Answer: A design/build contractor is usually a skill
However, a closer analysis of CPC 86601 (Project or trade driven contractor (defined by the CPC 511
Management Services, other than for construction), to 518 series) who supplements his delivery system
being a sub-sector of CPC 8660 (Services related of the Design element by the out-sourced efforts
to Management Services) will give rise to the of consulting engineers; whilst on the other hand,
appreciation that the said services of CPC 86601 an EPCC Contractor is ETI centric or professional
relates to, e.g. a project for the launching and engineering and technology dependent and innovation
establishing, say, the branding of a product for both driven professional services supplier (CPC 8673) who
the domestic and international market; or organising supplements his delivery system of the Construction
a major event like the wedding of the year and so element by out-sourcing to skill and/or trade based
on for projects which are non-engineering centric. sub-contractors and vendors.
Hence, the distinction between CPC 86601 and
CPC 8673! From whichever side or end of the Equation,
It is of interest to note that sub-sector CPC 86602 Integrated Engineering Services will be delivered by
Arbitration and Conciliation Services-as those a Team; the ETI Team consisting of:-
rendered in Malaysia are provided by the IEM, i.e. E n g i n e e r s ( w i t h r e c o g n i z e d e n g i n e e r i n g

by IEM members who are experienced engineers degrees),


skilled in all aspects of project management. Engineering Technologists (with engineering or

engineering technology degrees),


Remarks & Conclusion Engineering Assistants (with diplomas in

engineering or engineering technology),


The provision of Integrated Engineering Services Technicians (with either diplomas or certificates

are expanded by one of the two modes relating in engineering)


to the dynamics of either the Demand Side or
the Supply End of the Project Delivery System Not all professional engineers are, or wish to be
Equation. consulting engineers. Thus many Malaysian Engineers
On the Demand Side, Integrated Engineering (and the same with many ASEAN/Asian Engineers) are
Services is provided by engineering lead, technology not Principal Submitting Persons. But nevertheless these
and innovation driven (i.e ETI centric) team; either corporate members of engineering organizations or
as the Project Management Team (PMT) or the institutions, e.g. the IEM are professional/experienced
Project Management Consultant (PMC). engineers who are skilled in the application of
Coming from the Supply End of the Equation, technologies and are innovative in their work and
Integrated Engineering Services or professional creations. As such memberships in engineering
ETI Services, will be supplied by a contractor, organizations of the likes of IEM are engaged in or
generally referred to as a design/build contractor, associated with engineering services which are defined
but who should rightly be recognised as an ETI by both CPC 8672 and CPC 8673. It will then be
professional services supplier - the Engineering, necessary to address the accreditation of a broader
Procurement, Construction and Commissioning spectrum of qualifications, the levels of training and
(EPCC) Contractor. experience required, (and where and when necessary)
the competency tests and conformance to international
Question: What is the difference between a design/ standard-based regulatory requirements relating to ALL
build contractor and an EPCC Contractor? members of the ETI Team. This will then result in
54 FEATURE THE INGENIEUR

floating up the acceptable standards-based benchmarks the various host countries domestic regulatory
necessary for the mobility of all the professionals, regimes administered and implemented by the
skilled personnel and talents engaged in and/or relating various technical regulators is very important and
to the complete supply-chain of Engineering Services crucial to completing the project ahead of or by the
(both CPC 8672 and 8673). These related issues contracted date of commercial operation on, and
have to be addressed in the event of developing and also during the Operation and Maintenance (O&M)
framing an MRA on Engineering Services. life of the plant for latent defect issues.
Preceeding an MRA, will be the entering into force
of a FTA, which among other issues, must address Therefore in summary the Chapter or the Section
the following: in the FTA dealing with the complete supplychain
Due to the high capitalization needed to organise of Engineering Services shall address:-
an ETI or Integrated Engineering Services company, Investment policies and measures concerning

equity participation for commercial presence Commercial Presence of (legal entities) bodies-
(i.e. Mode 3)as will be scheduled in National corporate for ETI based PMC or EPCC Professional
Commitments for FTAs, shall not only be limited Service Suppliers; and
to natural persons (as in the case of CPC 8672) Alignment or harmonization on the laws and

but shall also be opened to legal entities (or regulations and other measures forming the
bodies- corporate). standards-centric regulatory regimes as implemented
A PMC or EPCC professional ETI service supplier by the various technical regulators; starting from
is usually by agreement or contract, committed the planning approval, environment impact
to supplying on schedule and within budget, assessment, etc. till those governing the operation
deliverables that include, among others, both and maintenance of plants and facilities.
functional and operational commitments and
expectations. Permitting Services to obtain local With all being considered and on balance, it can
authorities approvals and necessary licenses and be logically concluded that Integrated Engineering
permits are important and form part of the overall Services, be they provided as PMT/PMC, or supplied
Project Delivery System. Therefore, knowledge of as EPCC are ETI centric professional services. BEM

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56 ENGINEERING NOSTALGIA THE INGENIEUR

Some Engineering Works In The 60s


Contributed by Ir. Liaw Yew Peng

Jor Main Dam and the


Jor Saddle Dam

The Jor Main Dam and the


Jor Saddle Dam, situated off
the 17 th milestone along the
Tapah/Cameron Highlands road.
Both these dams are of earthfill
construction. The earthfill was
obtained from the surrounding hills
where there was an abundance
of decomposed granite.

Sultan Idris II Power


Station

The interior of the Underground


Sultan Idris II Power Station (Woh
Power Station), situated one
mile from the junction at the
7 th milestone Tapah/Cameron
Highlands road. It is more than
900 ft. below ground level. In
it there are three 50,000 kW
generators driven by vertical shaft
Francis turbines. The sets are
designed to be remotely controlled
from the control room in the
Sultan Yussuf Power Station. Three
generator transformers are also
located underground and these
step up the generated voltage from
11,000 volts to 132,000 volts.
The power is then conveyed in
three 132 kV oil filled cables up
the access tunnel, which is on a
gradient of 1 in 7, to the Woh
Switchyard Building situated near
the access tunnel portal.