Contents

Chapter 1 Introduction to Construction Industry

Project Management, construction management

and contract management
Construction Industry and Parties involved in construction project and

Contract Management contract management

Stages and processes of construction project

Prepared by: Dr. Azeanita Suratkon

Introduction to Construction Industry Introduction to Construction Industry

Construction Construction
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The Malaysian Industrial Classification (M.I.C) refers to

construction as:
Construction refers to the processes of building physical
structures and related activities. new construction, alteration, repair and demolition.
Installation of any machinery or equipment which is built-in at the
time of the original construction is included, as well as installation
The end products are site-specific and for each product the of machinery or equipment after the original construction but
processes involve elaborate commissioning, design, which requires structural alteration in order to install.
management and assembly of resources human, finance
and materials over a period of time. The M.I.C categorises construction works into 2 categories:
General contracting covering residential, non-residential,
It encompasses all types of buildings, all civil engineering civil and engineering construction.
works and the repair and maintenance of existing structures.
Special trade contracting - covering specialist works such as
metal work, electrical, refrigeration and air-conditioning,
carpentry, planting, etc.

Introduction to Construction Industry Introduction to Construction Industry

Construction The Environment

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Category of
Construction 3D Dirty, Dusty, Danger.

Gathering of multi-sector industries.

CIVIL
BUILDING
ENGINEERING
CONSTRUCTION
CONSTRUCTION
Installation process or combination/compilation
construction materials or building components.
Industrial Dam
Agricultural Port
Community Airport
A manufacturing process?
Residential Highway
Educational Sub-marine pipeline
Recreational
& medical social.

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 Introduction to Construction Industry Introduction to Construction Industry

The Characteristics The Characteristics

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The products are heterogeneous

The products are heterogeneous The products are different in terms of design, size, location
The final process is in-situ and in terms of end-use.
The product is unique
The products differ widely in terms of the materials and
The output consists of capital goods techniques used in production.
Separation of design and construction responsibilities
The setting up of ad-hoc team The final process is in-situ
Methods of price determination The finished products are generally permanent in the
Risks particular location where the construction takes place.
Consequently, the final process of construction must be in-
situ, although some sections of the completed products may
be produced elsewhere.

Introduction to Construction Industry Introduction to Construction Industry

The Characteristics The Characteristics

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The final process is in-situ (contd) The output consists of capital goods
There is a limit on the potential for prefabrication. Prefabrication Capital or investment goods refer to products required for
refers to using component parts or sections of a structure the production of other goods or services in an economy.
produced elsewhere, perhaps on the basis of economies of scale.
There must always be a balance between the savings that may be The products of construction including roads, railways, air
gained from prefabrication and the ensuing costs of and sea ports, telecommunication, electricity generation and
transportation of components parts or sections of a structure to the transmission, water supply, buildings for factories, offices,
construction site. hospitals, schools, houses, etc. are all regarded as capital or
investment goods.
Since the products of construction are site-specific, generally they
cannot be produced in advance of demand but rather have to be This makes the construction sector highly susceptible to
sold before they are produced. Construction therefore, follows a variations in the level of activity in the economy.
sequential process of planning, ordering and the final production
on the particular location where they are required.

Introduction to Construction Industry Introduction to Construction Industry

The Characteristics The Characteristics

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Separation of design and construction responsibilities The setting up of ad-hoc team

The general trend in the construction sector is that the party that A construction project requires the setting up of an ad-hoc
designs the project is normally different from the party that team consisting of persons and firms, each specialising in a
constructs the project.
particular area of expertise, to work together to complete
This approach referred to as the traditional system of construction the project.
procurement follows a pattern of activities that is sequential in
nature: a client engages a team of designers to produce design Since a construction project is one of its kind it is unlikely for
tender documents are prepared and tenders are invited from the same team to work together again and if they do so it
contracting firms award the project to successful contracting firm. would be for a different project and in a different location.
However, there are alternative approaches (such as design-build
or turnkey system and management-oriented systems) were
developed in response to problems that may arise from the
separation of the responsibility for the design from the
responsibility for construction.

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 Introduction to Construction Industry Introduction to Construction Industry

The Characteristics The Characteristics

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Methods of price determination Risks

The common methods used for determining price: measurement- Construction work involves risks, the level of risk is considered much
based method and cost reimbursement-based method. higher than in other types of economic activities.

Measurement-based method the contractor is paid for the A construction entrepreneur moves from one location to another, organise
work based upon the actual quantities of work that formed the the logistics required to complete each project, and follows a bespoke
finished project multiplied by the respective unit rates. The design for each project.
quantities of work is measured prior to commencement or Most contracts are awarded through some forms of competitive tenders
alternatively after the work is completed. The contractor is also contractors have to estimate the cost based on assumptions about
paid for costs of plant hire, temporary materials, contractors many factors including weather, site conditions, availability and
overheads and profits, etc. productivity of labours, availability and timely supplies of materials and
plant, time constraint, interest rates, political and social scenarios, etc.
Reimbursement of costs method the contractor is paid for the
actual costs of materials that have been used, the time spent on
the project by the operatives and an agreed amount for the
contractors profit and overheads.

Introduction to Construction Industry Project Mgmt, Construction Mgmt & Contract Mgmt

The Characteristics Project Management

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Project: A temporary endeavour undertaken to create a

TIME CONSUMING
UNIQUE unique product through a set of inter-related tasks (Proj.
FRAGMENTED INDUSTRY
Mgmt. Inst.).
In engineering/construction industry, e.g. a building project
RELYING TO OTHER
would constitute a temporary endeavour where a myriad of
INDUSTRIES CHARACTERISTCS JOB OPPORTUNITIES
skills and materials are brought together to create a unique
OF product (i.e., the building) through a set of inter-related tasks
CONSTRUCTION (i.e. the relevant activities)
LACK OF INDUSTRY
COORPERATION
Project Management: The planning, monitoring and control
RISKY INVESTMENT

of all aspects of a project (i.e. financial, technical,

administrative etc.) and the motivation of all those involved
SEPARATED PROCESSES
VAST WORK LOAD in it from inception right up to eventual completion with the
COMPLEX
ultimate objectives of delivering the end product within the
ORGANISATIONS specified cost, time, quality and performance.

Project Mgmt, Construction Mgmt & Contract Mgmt Project Mgmt, Construction Mgmt & Contract Mgmt

Construction Management Contract Management

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A term used to describes: Contract: A legally binding agreement between two or more
the particular type of contract procurement method or persons which creates mutual rights and duties, enforceable at
the actual process of running of a construction project law, or
The planning, monitoring and control of all aspects of the a legal device for conducting exchanges between parties/
construction process from pre-tender to the completion stage. binding parties to future performance.
Entails the planning, monitoring and control of essentially the
construction aspects of a project. Contract Management: A term to describe the control and
The scope of construction management includes not only the
administration of the legally binding agreement between
activities pertaining to the construction stage but also all the two or more parties from its inception up to its final discharge.
preliminary enabling matters at the pre-contract stage.
Construction management is weighted heavily to the construction
process.

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 Project Mgmt, Construction Mgmt & Contract Mgmt Project Mgmt, Construction Mgmt & Contract Mgmt

Scope of Contract Management Purpose of Contract Management

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the planning for the legal framework or transaction that is to The contract entered into by the parties is efficiently and fairly
be entered into by the parties to a project; administered to ensure that:
The administration and enforcement of the provisions, the parties perform their respective obligations/duties under
procedures and practices (as expressly or impliedly the contract fully;
stipulated) in the contract each party to the contract receives the full benefit due under
The management of the roles, responsibilities, powers, the contract;
rights, duties and liabilities of the contracting parties the contract is completed within the time frame and cost
agreed between the parties;
The implementation of relevant sanctions to induce
performance or to compensate for the non-performance on the quality of the finished product as agreed upon by the
part of the parties parties is not compromised in terms of material, workmanship
and design (as applicable); and
First line resolution of disputes between the contracting disputes and contentious issues are minimised or resolved
parties completely without having to resort to litigation or arbitration.

Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Construction Stakeholders Employer

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Also called the client/ purchaser/ authority

Normally the person or party who wishes to have
development project constructed on a piece of land
The employer is the most important party to a contract as
he is in reality the paymaster who initiates and ultimately
uses the tangible fruits of the contract.
The employer may be a public entity (government bodies)
or private entity (developers/ owners/ investors).
He will appoints consultants, employs contractors and supply
the necessary fund to implement the project

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Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Contractor Contractor
The contractor is the person or legal entity (partnership or Owing to the complexities of the nature of the contracts
company) who under the contract is actually entrusted to entered into between the employer and the contractor, the
carry out construction works. contractor may be further described as a:
He is variously labeled as the contractor, the builder, the main or general contractor; or
installer, the erector, etc. depending on the nature of the turnkey contractor; or
contract involved. design and build/design and construct contractor; or
management contractor; or
Construction development can only remain at blue-print and construction management contractor
drawing board stage without contractor and builders to
actually translate the project into reality. Normally these contractors enter into a main contract with
the owner for the execution and completion of a construction
contract.
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 Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Sub-Contractor Sub-Contractor

A sub-contractor is a person or firm to whom part of the Depending on the complexity of the works, the specialist
main contract works are sub-let. skills required, the extent of detailing or design work
involved, the method of contract procurement adopted, sub-
A sub-contract is a contract made between a main- contractors can be further classified as:
contractor and another contractor (sub-contractor) for part
domestic sub-contractors; or
of the work which the main contractor has already
contracted to carry out as part of his contract with the nominated sub-contractors; or

employer. designated (or named) sub-contractors; or

selected sub-contractors; or

specified or named sub-contractors.

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Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Sub-Contractor Supplier
A person or firm undertaking the supply of goods or
Nominated Sub-Contractor (NSC) materials to a contract. The suppliers contract is with the
Specialist contractor nominated by owner/architect/ main contractor
engineer, who sign their respective sub-contract with the
main contractor and perform their respective duties and In essence, a supplier is a sub-contractor concerned solely
responsibilities under sub-contracts. with supplying goods or materials as compared to
undertaking services or labour.
In Malaysia, there is a prevalent practice of sub-contractors
further sub-letting portions of their work to an array of sub- As for sub-contractors, a supplier may be a domestic/
sub-contractors, i.e. labour, material supply, fabrication, nominated/ designated/ selected/ specified supplier.
erection/installation, etc. In practice, the common types of suppliers encountered are
of the domestic, nominated or designated types.
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Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Professionals Professionals
The professionals are not parties to the various contracts Owing to the peculiarities of Malaysian law, in most
employed between employer and main contractor, main instances only the qualified person is entrusted with the
contractor and subcontractor, and sub-contractor and his design and supervision of the works undertaken.
sub-contractors/suppliers.
The definition of the qualified person encompasses mainly
The professionals may have his own services agreement architects and engineers.
whereby he may contract to undertake either all or some of
the following work depending on his term of employment:
design work; supervision work; contract administration;
auditing or independent checking of turnkey/design &
build contractors work; project management; facilities
management.
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 Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Architect Engineers
In most building projects, i.e. of the traditional general Person who practises the profession of either civil, structural,
contracting type, the professional team during the design and
mechanical or electrical engineering and usually designs
construction stage is normally led by the architect.
and submits plans for approval by the approving
Person who practises the profession of architecture and usually
authorities.
submits the application on behalf of the owner to obtained
development order and designs and submit building plans for In projects, i.e. of essentially engineering or infrastructure
approval. origin, the engineers are expressly stipulated in the contract
Building By-Laws defines architect as any person who is as the principal designers and contract administrators.
registered as an architect under any law relating to the In this country, the law restricts the label engineer to any
registration of architects and who under that law is allowed to person who is registered as a Professional Engineer under
practice or carry on business as an architect. any law relating to the registration of engineers and who
The Architects Act 1967 restricts the usage of the word to a under the law is allowed to practice or carry on the business
person registered as such by the Board of Architects, Malaysia of a Professional Engineer.
for the practice of architecture. 31 32

Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Quantity Surveyors (QS) Other professionals

Person who practises the profession of quantity surveying Land Surveyor person who carries out boundary and
and building economics and usually prepares bills of contour surveys and other surveys on land, submits survey
quantities, tender and contract processes, evaluates interim plans for amalgamation and sub-division of land, applies on
payment and final accounts of the project. behalf of owner for qualified titles and final titles from the
land office.
QS maybe engaged by the architect or engineer or may be
directly appointed by the employer to play a role during Town Planner - person who practises the profession of town
the pre-contract and post-contract award stages. and country planning covering land use, zoning, density, the
type, mode and form of development, traffic pattern, infra-
There is a necessity for the QS to be registered with the structural requirements, impact of development with other
Board of Quantity Surveyors under the Quantity Surveyors developments in the vicinity etc.
Act 1997.

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Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Other professionals Other specialists

Interior Designer - person who practises the profession of Project Management Consultant
interior designing involving furnishing and finishing work Person/group of persons practising the profession of
usually for prestigious buildings project management function.
Landscape Architect - person who practises the profession The works involved ranges from feasibility report,
of landscaping architecture involving beautification of the financial projection, design of management system,
project internally and or externally by using plants of all evaluation designs prepared by consultants, co-
kinds, rocks etc. ordinating work of consultants etc.
These include traffic consultants, acoustical engineers,
information technology (IT) consultants and interior
decoration (ID) consultants.

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 Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Authorities/Regulators Other stakeholders

Federal and State Authorities Finance
Invariably the owner requires to borrow funds from
Usually interested in matters regarding land, town and
country planning, drainage and irrigation, supply of banks and other financial institutions to finance or
public utilities, fire requirements etc. provide adequate funding to their project

Local Authorities
Normally the building authorities and is therefore
entrusted with the power to approve layout plans,
building plans and services plans etc.

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Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Manpower Manpower
Craftsmen
Technicians
Represent the skilled workers of the industry especially in new
Persons who qualified by specialised technical education and
construction method it is necessary for them to appreciate not training to work under the general directions of technologists.
only the how but also the why the work they do.
Semi-Skilled Worker Technologists
Person who have a qualification and experience required for
Those who possess skill of one or more construction trades but corporate membership of professional institutions.
have not attained the requisite level of skilfulness to be paid
as skilled workers.
Unskilled Worker
Those who do not possess skill in any building trades but are
working on construction sites performing such basic functions as
carrying materials etc.
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Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Different Perspectives Different Perspectives

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 Parties involved in construction project & contract mgmt Parties involved in construction project & contract mgmt

Different Perspectives Different Perspectives

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Stages and processes of construction project Stages and processes of construction project

Stages of a project Stages of a project (Traditional)

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Undertake all testing, Commissioning

The principal phases of a typical engineering and construction and training
contract: Obtain CCC or CF (all authority
approvals)
Identify project objectives Issue tender documents Handover of project to employer/user
Pre-contract award phase: involves all activities or processes involved Resolve all land issues Prepare and submit tenders, i.e. Carry out necessary maintenance and
from the inception of the project up to the award and/or signing the Set up users requirements Contractors Proposals, etc. defect rectification during defect
engineering and construction contract pertaining to the project. Conduct feasibility studies Evaluate tender submissions liability period
Set up project organisation Award tenders Undertake migration
Post-contract award phase: involves the activities or processes arising and management structure Prepare contract documents Carry out facilities management
after the award and/or signing of the contract up to the issue of the
final certificate. Inception & Handover &
Design Tendering Construction
Feasibility Maintenance

Develop project brief further Site possession and mobilisation of

Pre-contract award phase Post-contract award phase Develop concept and schematic design resources
Obtain planning approvals Obtain necessary permits and approvals
Inception & Handover & Undertake detailed design and detailing Undertake procurement, fabrication,
Design Tendering Construction Prepare cost plan/budget installation, construction, etc.
Feasibility Maintenance
Undertake value engineering Carry out contract administration
Undertake project financing

Stages and processes of construction project Stages and processes of construction project

Parties involved in project stages

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Developer/Owner Developer/Owner
Developer/Owner Project Manager Users/Consumers Nominated / Domestic
Valuer Architect Project Manager Sub-Contractors
Research firm Engineers Architect Regulatory bodies/
Real estate agents Quantity Surveyor Engineers authorities
Financial advisors Other specialists Quantity Surveyor Facilities Manager
Architect Main Contractor Other specialists
Engineers Nominated Sub-Contractors/ Main Contractor/ Turnkey
Quantity Surveyor Suppliers Contractor/ Management
Town Planner Domestic Sub-Contractors/ Contractor/ Construction
Other specialists Suppliers Manager

Inception & Handover &

Design Tendering Construction
Feasibility Maintenance

Developer/Owner Contractor for: Project Manager Suppliers

Project Manager Turnkey Contracts Architect Construction Site Staff &
Architect Management Contracts Engineers Workers
Engineers Construction Management Quantity Surveyor Regulatory bodies/
Quantity Surveyor (if applicable ) Other specialists authorities
Town Planner Main Contractor/ Financers
Other specialists Turnkey Contractor
Regulatory bodies/ Nominated/Domestic
authorities Sub-Contractors

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 Stages and processes of construction project Stages and processes of construction project

RIBA Work Stages 2007 RIBA Work Stages 2007

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