SCHOOL OF ARCHITECTURE, BUILDING & DESIGN

BACHELOR OF QUANTITY SURVEYING (Hons)

PROFESSIONAL PRACTICE I (QSB60604)

LECTURERS : MR. WONG CHONG WEI

SR. ANG FUEY LIN

GROUP ASSIGNMENT

SUBMISSION DATE: 28th November 2017, 8am

PREPARED BY: (GROUP 5)

NO. NAME STUDENT ID

1 KENNETH TAN SIN KWANG 0322482

2 CHAN YI FUNG 0323057

3 LEE FONG YEN 0321976

4 LEE LIN HUI 0322797

5 LEONG LI JING 0323628

6 LEONG MIN HUI 0327596

7 ADELE LU KHAI SYN 0323151

8 LEW QUO MING 0322884

9 WONG JIA JING 0327221

10 YEAP PHAY SHIAN 0322243

11 YEE JYH LIN 0322408

 TABLE OF CONTENT

NO. CONTENT PAGE NO.

1.0 Introduction 2

2.0 Procurement

2.1 Recommendation - Traditional Procurement Method 3

2.2 Justification of Other Procurement Method

2.2.1 - Design & Build 6

2.2.2 - Management Contracting 6

2.2.3 - Construction Management 7

3.0 Tendering Methods

3.1 Recommendation - Two Stage Selective Tendering 8

3.2 Justification of Other Tendering Methods

3.2.1 - Single Stage Selective Tendering 10

3.2.2 - Open Tendering 10

3.2.3 - Negotiated Tendering 10

4.0 Contractual Arrangement 11

5.0 References 16

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1.0 Introduction

The main purpose of this project is to deliberately explain the most suitable procurement method,
types of tendering method as well as the contractor arrangement which meets the project
requirements for the client. Choosing the appropriate method is very important due to ways it can
help to control risk, cost, quality and time of the particular project.

The objectives of these project are:

- Determine the most suitable procurement method that helps client add value in relation to
the project in term of cost, quality and time.
- Determine the type of tendering method to ensure that the client is able to appoint the
most competitive tender with the most reasonable prices or best reputable contractor.
- Determine the type of contract used for the project where it is a legal binding agreement
the client and contractor.
- Have a good contractual arrangement to protect the client from liquidated damages.

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2.0 Procurement
2.1 Recommendation : Traditional Procurement Method

The recommended procurement method that suitable for clients requirement is traditional
procurement method. This is the most commonly used method in Malaysia especially in
procuring building work. The procedures are well known and familiar to the professionals in the
construction field. Firstly, client appoints consultant team which involves Architect, Engineer,
etc. to carry out design process during pre-tender stage. Client can involve in design process
with consultant team to ensure it is within clients requirement. After design is completed, the
works will then be tendered out and the tenderer with the most competitive price will be selected
to carry out the work in accordance with consultant teams design. The contractor is normally not
responsible for the design but only the construction works on site.

Based on the three basic criterias which are time, cost and quality, it is difficult to achieve all the
basic criterias in a single procurement method. The requirement of duration for this project is 5
years, which cause time is not a constraint because it is sufficient for this Mega project.
Therefore, the priority will fall into cost and quality instead of time, which traditional
procurement method is more suitable. However, this method provides medium time risk to client
because it requires longer time frame that the tendering process and contract award can only take
place after the design is completed. Besides, due to fixed contract date, contractor has the right to
claim for extension of time if it is caused by any relevant event in PAM Form of Contract 2006
Clause 23.8 such as employer delayed the site possession.

Since Kuala Lumpur Twin Tower is a tourist area and the landmark of Malaysia, quality must be
taken into account. Traditional procurement method able to provide client lower quality and
design risk, which allow client to have full control of design and quality as majority of the
work is designed by the consultant team which work directly with the client. Other than that,
client able to make decision and changes during design stage with the consultant team and also
able to provide instructions to design team from the beginning until the completion, which will
lead to better quality of work.

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Based on this scenario, the client is not interest to deal with too many parties except the few key
members of the project. Traditional procurement method is appropriate because the client only
have to communicate with the consultant team and only have contractual relationship with
the main contractor and consultants. Thus, this fulfilled the requirement because main
contractor will deal with the subcontractors. Besides, this method also suitable for both
experienced and inexperienced client because client can get advice from the consultant team
regarding to the project.

Moreover, having a completed design before tendering process can provide the client certainty of
cost and design quality. Minimum variation to the contract price during the construction is one of
clients concern. The construction cost given is RM 1.2 billion. Thus, traditional procurement
method is more suitable as it provide lower cost risk to the client due to the use of lump sum
contract. The amount is agreed between the parties in the contract before the construction start.
This method also provide easier budgetary control for client with minimal variation and any
overcharging fees will be bear by the contractor.

In conclusion, traditional procurement method is the most suitable method to fulfill the
requirements and expectations of the client.

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Diagram 2.1: Traditional Procurement Method Route

Diagram 2.2: Traditional Procurement Method Route

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2.2 Justification of Other Procurement Method

2.2.1 - Design and Build

Design and Build does fulfill clients requirement in a way that it saves time due to obtaining site
materials and start construction before the detail design complete. Aside from that, there is a
single point of responsibility by the contractor so the client has only one contractor to deal with.

However, our client is not well experienced in construction industry and would face difficulties
in dealing with items such as Employers Requirement. Besides that, our client would have
minimal control over the entire project as the D&B contractor is responsible for handling all
parties involved.

2.2.2 - Management Contracting

Management contracting offers client to have contractual links and deal with only the consultant
team and the management contractor. This fulfilled one of the requirement because management
contractor will deal with all the parties including works packages contractor. Client can also have
full control of design and introduce changes from throughout the design stage as the consultant
team appointed will complete the design under clients requirement.

However, management contracting offer client medium cost risk as the actual cost of the project
is unknown until the last works packages contract has been signed. Other than that, there will be
more variations and re-measurement because this method provide greater opportunity to make
changes in the design during construction period as the design and construction process is
overlapped. Hence, this will increase the possibility of work delay and the total project duration
is uncertain until the last works packages contract has been signed.

Management contracting procurement method focuses more on quality instead of time and cost.
As time is not a constraint in this scenario, it is safer to choose traditional procurement method
where it focuses more on quality and cost instead of time.

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2.2.3 - Construction Management

Client appoints an external organisation to manage and co-ordinate the design and construction
phases of the project. They provide specified common user and service facilities but does not
normally execute any of the permanent works, which are undertaken by construction contractors.
Construction Management can accelerate project duration, improve overall buildability,
encompass flexibility and facilitate price competition. Construction Manager becomes an
employed agent of the client and not an independent business entity.

Under this procurement method, it offers clients the direct contractual relationship with the work
packages contractor, which means there will be more direct trades to deal with. However, in this
particular case, our client wish to deal with not too many parties, we excluded this procurement
method as the first choice.

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3.0 Tendering Method

3.1 Recommendation: Selective Tendering (Two Stage Selective Tendering)

As for tendering method, the recommended tender method for the client from Landowner WCW
& AFL Berhads case and requirements is Two Stage Selective Tendering. For two stage
selective tendering, certain contractors are invited to tender. The potential contractors are
selected based on their integrity and ability before they are invited to tender. The consultants
would have a list of prospective contractors which are selected by their track records and their
suitability for the nature and size of the project.

In the initial stage of two stage selective tendering, there is a selection process of tenderers which
is known as pre-qualification stage. For pre-qualification stage, an advertisement will be
published in newspapers to invite interested tenderers to submit their company profiles for
evaluation in the Pre-qualification Form. Some of the criteria for selection includes the
companys standard of workmanship, financial capability, company size and grade class as well
as past experiences on similar works.

A list of pre-qualified contractors will then be included in the final tender list and invited to
collect the tender documents. The aim of pre-qualification stage is to eliminate potentially non-
performing contractors, thereby reducing the risk of selecting inexperienced and unknown
contractors. Building an extension of the Kuala Lumpur Twin Tower by developing a RM1.2
billion hotel and shopping complex in the heart of Kuala Lumpur is considered as a significant
project. The selection of a well performing and experienced contractor is crucial to ensure that
the extension can take place successfully and it meets all of the clients requirements.

Furthermore, since the tender procedure of Two Stage Selective Tendering involves the
placement of advertisement for tender, the clients requirement to have a reasonably
transparent selection process of the successful contractor is met. Being a public-listed
company and accountable to other shareholders and board of directors, it is important that the
tender selection process of the successful contractor is reasonably transparent.

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The list of pre-qualified contractors will proceed on to the tendering process. After the evaluation
process of tender submissions from the list of pre-qualified contractors, the most competent and
suitable contractor will be selected to carry out the works for the project.

The selected contractor will proceed on to the negotiation process. The contractor has to prepare
a detailed document that describe the proposed work and the bill of quantities which is priced
based on the first stage tender. The price negotiation would take place until an agreement is
reached and both parties are satisfied, leading them to enter into contract for construction works
to commence.

In addition, since the client is unfamiliar with the construction industry, it is better to choose two
stage selective tendering based on the consultants recommendation list. High quality
workmanship can be assured as the contractors past records have been checked through to
evaluate their capabilities and qualifications.

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3.2 Justification of Other Tendering Methods

3.2.1 - Single Stage Selective Tendering

Single stage tendering does not have pre-qualification stage and two stages of screening. As
such, the likelihood of selecting a non-performing contractor would be higher. In addition,
favouritism may occur as the consultant may favour a particular contractor more. As such, it
does not align with the clients objective of having a transparent selection process.

3.2.2 - Open Tendering

Open tendering provides opportunity to all interested bidders and normally contractor with the
lowest bid would win the tender. As such, there may be risk of selecting unknown and
inexperienced contractors which may produce poor workmanship as the client and consultant are
not familiar with the contractor.

3.2.3 - Negotiated Tender

Negotiated tender acquire the advantages of being more flexible comparing to other method but
the project costs may be driven up by the lack of competitive bidding and became less attractive
for the client. Not only that, this method lack of transparency as only one or two contractors are
approached.

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4.0 Contract Arrangement

4.1 Type of Contract

Lump Sum Contract

Lump Sum contract is a single lump sum price for all the work agreed before the work begin
whereby contractor is required to submit a total and global price instead of bidding on individual
trades or items. Since our client is unfamiliar with the construction industry, lump sum contract
which is a widely accepted and understood as a method of contracting would be suitable and at
the same time lower risk apportioned to the client since a fixed rate is agreed upon. This proposal
is based on a the project of the extension of Kuala Lumpur Twin Tower which is expected to
have a well-defined scope of construction projects, which enable the contractor to accurately
price the work they are being asked to carry out. With this, contractor is responsible for
executing the complete contract work for a stated total sum of money. However, there is actually
more risk to the contractor compared to other types of contract such as measurement contract and
cost-plus contract due to the lack of mechanisms to enable contractor to vary their price. Since
our client wish to have minimum variation to contract price during construction, with lump sum
contract, the better defined the works are when the contract is agreed, the less likely the contract
sum will change. Unlike measurement contract where work design are not given sufficient detail
for bill of quantity to be produced.
Although lump sum contract is said to provide a fixed price to be let out for tender, price of lump
sum contract can change during construction stage due to changes introduced. Having said that,
some clear mechanism are put in place to serve varying conditions during the course of
construction by adding necessary provisions such as:

A.Variation
In a complex mega project like this, some degree of change is inevitable. Therefore, in lump sum
contract, agreement which include terms for contractor to go with such design, material or
quantity variation is signed and agreed to cover such variation without initiating any dispute.

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B. Relevant Event
Relevant event are event listed under clauses in the contract which entitle the contractor to claim
for losses from the employer in the event if the listed event occur and affect the construction
regular work progress.

C.Provisional Sum
Provisional sum are included in the contract for works that the client has intention to build
character of work but cannot be determined precisely at the time the Bills of Quantity is
prepared. By adding provisional sum into contract document, it helps to prevent the employer in
cases where the employer may not prefer to pay for undefined work done.

D. Fluctuations in Inflation
Chances of inflation for this project is high since the duration of this project is long (construction
period 5 years). Provision are added to the lump sum contract in order to suitably compensate
contractors in case of inflation whereby tender is based on current price and contract should be
paid in case of price change that occur during the entire project commencement period.

Another reason why lump sum contract is chosen over other types of contract is because our
client wish to deal with only few key parties of the work, lump sum construction contract
promote better interaction and association between the owner, contractor and designer only.

Based on all the client requirement stated, lump sum contract will therefore be the most suitable
type of contract for this mega project.

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4.2 Form of Contract
PAM Contract 2006 (With Quantities)
For this extension of Kuala Lumpur Twin Tower, we proposed to our client to use PAM Form
of Contract 2006 with quantities because it is a private sector project. By using PAM 2006, there
is no need to draft and no need to worry about uncertain terms in the form of contract. PAM
2006 form of contract also equally spread risks between employer and contractor. Since the
traditional procurement method is chosen for this project, the superintendent officer is usually
the architect which supports why PAM form of contract is suitable.

4.3 Employers Consideration and Requirement

Since the extension of Kuala Lumpur is considered as a mega project, our client has emphasis on
a few key consideration and requirement toward this project such as project to be completed on
time, quality of building work and health and safety requirement. Therefore, by reviewing the
clients requirement, PAM Contract 2006 and a few other acts are chosen to support and fulfill
the clients requirement. Besides that, preliminaries in the contract document must include the
few key requirements which are, workmanship, health and safety.

4.3.1 Time
Our client wishes to build an extension of the Kuala Lumpur Twin Tower with a construction
period of five years. According to clause 21.1, the contractor is given the possession of the site
for execution of the works on the Date of Commencement.
However in the event where the contractor fails to complete the works by the agreed Completion
Date stated in Article 7, the architect will issue a Certificate of Non-Completion by referring the
clause 22.1. With clause 22.2, the contractor have to pay for the agreed Liquidated Damages of
RM 250,000.00 a day imposed by the client for the period from the Completion Date to the date
of practical completion. The amount of Liquidated Damages imposed not only covers the
employers reputation but must also be able to bare compensation to involved authority and
publication expenses.

PAM Contract 2006 requires the Contractor to give written notice to the Architect, when the
Works are practically completed. Upon receipt of this notice, the Architect has to evaluate this

13
notice within 14 days according to clause 15.2. The Architect can either reject or accept the
notice, or accept with defect that do not affect Employers enjoyment of the building.
Based on the clauses mentioned above, the client can ensure that project to be completed on
time.

4.3.2 Quality
For this mega project, extension of Kuala Lumpur Twin Tower, our client is very much
concerned with the quality of building works. Based on PAM 2006 Clauses 6.0 Material, Goods
and Workmanship To Conform to Description, Testing And Inspection supports the requirement
of good workmanship. Contractor shall commence the work based on client requirement method
of construction and also material used as requested in the contract. Contractor is required to
provide samples to be tested and inspected for the assurance of high quality materials. In order to
fulfill good quality building works and prevent contractor from cutting corners, an AI may be
issued by the Architect for inspection to make sure works are executed in accordance to
contracts requirement. Instructions to demolish or reconstruct the works will be issued by the
Architect if works, materials used and workmanship are not in accordance to the contract.
Example Scenario : Contractor build the floor finishes of the lobby with marble but stated in
contract is granite. Clauses 6.8, if the contractor requires any warranty or guarantee in respect to
the goods or material, contractor shall procure it and it will not relieve or release the contractor
from any liabilities under the contract. Since this project is considered as a mega project whereby
good reputation is a concern, Clauses 6.0 in PAM 2006 help client assure building work quality
to be met.

4.3.3 Health and Safety requirement

Firstly, in the BQ, under preliminaries, there are some general items that shall be taken note of in
relation to safety and health issues. Some of these items include scaffolding, mosquito
prevention, first-aid kit, health and safety training for workers. Besides that, there are also

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insurances included under the preliminaries section, which are the Employees Social Security
and Workmens Compensation. During the execution of works, Contractor is required to register
all local workmen employed for that specific construction work, under the Employees Social
Security Scheme in accordance to Employees Social Security Act,1969. This act aims to carry
out accident prevention activities by increasing safety awareness and occupational health
programmes amongst employers and employees.

As for Workmens Compensation Act,1952, it is a compensation for injury to a foreign employee

or worker arising out of and in the course of employment that is paid to the worker or
dependents, as per the Workmens Compensation Act 1952.

Next, according to PAM Contract 2006 (With Quantities), the clause that specifies contractors
indemnity against injury or death to person or loss and/or damage of property and indemnity to
employer against claims by workmen is clause 18 of the PAM Contract 2006. The clause
demands the Contractor to be liable for and shall indemnify the Employer against any damage,
expense, liability, loss, claim or proceedings, from conditions arising from common law,
negligence in carrying out works, claims and payment from workmen and etc. Besides that, as
this project involves an extension to the existing building, our client should also take into
account Clause 20.C.1, whereby, the Employer, Contractor, sub-contractor and all interested
parties are to participate in a CAR insurance policy. CAR Policy, also known as Contractor All
Risks Insurance aims to provide coverage during the construction period for contract works
against loss or damage to property caused by unforeseen circumstances and also third party
liability for accidental bodily injury or property damage in connection with the performance of
the contract during the construction of works.

Lastly, Occupational Safety and Health Act 1994 (OSHA) is an Act that provides legislative
guidelines to secure the health, safety and welfare among all Malaysian workforces and to
protect against risks to safety or health in relation with activities at work. According to Section
29 of OSHA, as this mega project exceeds twenty million of total contract sum, hence,
appointment of a safety and health officer shall be needed. This assures safe and healthy working
conditions for working men and women by setting and enforcing standards and by providing
training, outreach, education and assistance.

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