TOPIC 3:

CONTRACTUAL ARRANGEMENT:
PART 1

By NOREHAN HAJI MOHD NOOR

Before, we had explored "what is a Tender?"
Then, we learned about the Types of Tenders, and how Tenders are
processed - there are 5 stages, begin with:
1) Initial Stage - Preparation of documents for Tender;
2) Invitation Tender - Tender are open and publicly advertised in
suitable medium - purpose is to bid / offer the reasonable cost,
until Tender is closed & submitted;
3) Tender Analysis / Evaluation - During in 'Tender closed' period - the
Tender Document will be in Evaluation stage.
4) Tender Report - After analysis & evaluation done, Summary of
tender contents is written in the form of Report - purpose to
recommend one or a group of the compentent contractor to be
selected.
5) Tender Award - The tender report must submit to the Tender
Comuittee Members who will conduct a meeting and agreed to
appoint the qualified contractor. With the approval, Tender was
awarded.
Lets to know
everything
about
TENDER
DOCUMENT
CONTENT
CONTRACTUAL ARRANGEMENT
– start form
T E N D E R PROCUREMENT
T E N D E R procurement
 Is about ‘HOW TENDER IS CARRIED OUT?’
or
 ‘HOW CONTRACT ARRANGED?’

 - IT DEPENDS ON WHOM THE OWNER

OF PROJECTS.

 TWO CATEGORY OF OWNER

- PRIVATE SECTOR &
PUBLIC SECTORS.
 T E N D E R procurement
 The administration of a construction contract is
complex.
 A variety of factors including the forms of
contract used, parties involved, the system of
procurement used, constraints in terms of time,
money and quality would have impact on the
outcome of the contract.
 Therefore, effective and efficient administration of
the contract is not only necessary but also vital in
order to achieve success.
 Tender In Public Sector - MALAYSIA SCENARIO
THE RULES:
• IN MALAYSIA, PUBLIC SECTOR is the largest owner or main actor in
construction industry.

• It is contended that in the Public Sector project, the tendering

procedures must follow or in accordance with structured and
formalized process.

• The tendering procedures always governed by factors such as

sources of funding and type, nature and estimated cost of projects.

• In Malaysia practice, it is mandatory to let projects estimated to cost

more than RM500,000.00 each through OPEN TENDER.

• Only in specific cases, such as urgency of the work or for security

reasons or need for sophisticated design, so, the SELECTIVE
TENDERING or NEGOTIATED TENDER are allowed (must seek prior
approval from the Ministry of Finance).
 Tender in Public Sector - MALAYSIA SCENARIO
THE RULES…..
• the Government Fund - It is also mandatory for all
public tenders are funded by the Government’s own
source or financial.

• Tenders to be opened to Malaysian contractor firms only.

• The exception to this rule are (PENGECUALIAN):
1. Malaysian contractor are not capable or incompetent
(inexperienced etc.) in certain type of works.
2. For LARGE civil engineering works or specialist works which
estimated cost more than RM50 million each, the Joint-venture
(JV) agreement or MOU arrangement are allowed. Where the
selected foreign contractors are invited to JV with Malaysian
contractors through Pre-qualification exercise.
 TENDER
DOCUMENTS
 apa yang perlu disediakan
Tender content must
SO….
reflect or
illustrating the The contract
contract system has is usually
been selected in the based on
project proposal either
Isi kandungan tender
mestilah mengambarkan
sistem kontrak yang Drawing &
telah dipilih dalam Specification
cadangan project
tersebut

Bills of Quantities
 THE TENDER DOCUMENT CONTENTS

The agency or
Consultant that 1. Instruction to tenderer
produce the 2. Scope of Works
tender, have to 3. Tender Form
prepare the 4. Tender Regulations
tender documents 5. Condition of Contract
which in 6. Bills of Quantities / Tender
generally contain summary
the following 7. Schedule of Rate
matters:- 8. Technical drawing / Plans
9. Contract Period
10.Proposal Technology Transfer
11.Performed / Track Record
12.Profile and Financial Status
 TENDER DOCUMENT PREPARATION

• In general, contractual procedures differ with the forms of

contract used.
• In public sector (Malaysia), the most often used forms of
contract are the JKR 203 (Pind. 10/83) / PWD203
(Rev.10/83) for contracts based on DRAWINGS AND
SPECIFICATIONS, and

• JKR 203A (Pind. 10/83) / PWD 203A (Rev.10/83) for

contracts based on BILLS OF QUANTITIES.

• Other standard forms of contract in use in Malaysia are the

PAM 2006/ ISM, ICE and FIDIC. Most often used by
PRIVATE SECTOR.
 More specific, the contents of Tender Document as below:-
BASED ON BQ Contract
TENDER DOCUMENT BASED ON
1. Letter invitation to tender Drawings and Specifications
2. Check list for submission of 1. Letter invitation to tender
tender 2. Check list for submission of tender
3. Articles of Agreement and 3. Articles of Agreement and condition of
condition of Contract Contract
4. Tender Form 4. Tender Form
5. The tenderers profile / CV - 5. The tenderers profile / CV - Forms for
details of tenderer’s registration as a
Forms for details of tenderer’s
contractor and of organisation,
registration as a contractor and particulars of ten job completed and
of organisation, particulars of jobs in hand
ten job completed and jobs in 6. Letter of Acceptance
hand 7. Bank and insurance guarantee forms
6. Letter of Acceptance for Performance Bond
7. Bank and insurance guarantee 8. Bank and insurance guarantee forms
forms for Performance Bond for Advance Payment
9. Specification
8. Bank and insurance guarantee
10. Summary of Tender
forms for Advance Payment 11. Schedule of Rates
9. Specification 12. Drawing & Plans
10. Bill of Quantities
11. Drawing & Plans
 SALE OF TENDER DOCUMENTS

The tender will be advertised or displayed in a formal offer,

known as TENDER NOTICE, in writing to offer a job or
request services in return for a stated amount of money and
by a stated date.

It is also an announcement indicated and delivered publicly

by the organization to inform and request interested
contractors, suppliers or firms to carry out a project, or to
cater equipment or services for the organization.
MALAYSIA’S GOVERNMENT PROCUREMENT REGIME

Sale of tender documents may commence from the date

of publication of advertisement in the dailies. Only
contractors fulfilling the local registration requirement may
purchase tender documents for local tenders. In the case
of international tender, supplies and services contractors
are exempted from the local registration requirement.
However, works contracts require foreign contractors to
register with the CIDB. The requirement to register with
CIDB is mandatory for all contractors dealing with the
construction industry in Malaysia under an Act of
Parliament
 TENDER NOTICE must consists of;
the name of the customer’s organization and its logo in
the tender notice.
the word “Tender Notice or Invitation of Tender”, and its
tender number and references.
Tender qualification or pre qualifications:
eligibility criteria on whom should participate in the
tender.
Contractors are registered with bodies such as CIDB,
Pusat Khidmat Kontraktor (PKK), Ministry of
Finance (MoF) and government agencies such as
Public Works Department (PWD) or Jabatan Kerja
Raya (JKR), MARA, Tenaga National or SIRIM to
name a few.
 …Contents of Tender Notice
Tender Description
the scope of the project and the outline of the tasks or
scope of work the customer wants the contractor to
perform or deliver.
Tender document fees and modes of payment, date
and time details:
- fees imposed to purchase the tender document
- payment method: cash, bank draft, banker’s cheque,
money order, bank guarantee and time and date when
tender document is available.
…Contents of Tender Notice
Request for site visit

- pre-tender visit (if necessary), site visits

are compulsory before the purchase a
tender document.
During Tender Document Submission

 Earnest money or Tender Deposit

To ensure that a Bidder does not submit a Dummy Bid or
back out at time of tender opening, Government Department
collects a small refundable fee from each bidder, which is called
Earnest Money Deposit (EMD).
EMD is always in form of Banker's Draft or Banker's Guarantee
of sum of money to be submitted enclosed with the tender
document to be held as a guarantee of good faith and shall be
valid from the date of tender closing until the expiry of tender
validity date.
EMD in cheques or cash are strictly not allowed. EMD or Tender
Deposit is refunded to unsuccessful tenders. This is to ensure
only parties who are really interested are involved in proceed
the tender. EMD is returned when all Bids are opened & tender
is awarded. .
 ASPECTS TO BE CONSIDERED DURING PREPARE
THE TENDER DOCUMENT

In accordance
with approved
Government Possible of being
procedures and Must free of ambiguity
performed by a
policies and discrepancies
contractor

Work specified must give

effect to the expressed Meet the requirements in
and other requirement of term of standards of
design and construction
the Client
 TENDER AWARDED
A Successfull tender should provide;

PERFORMANCE BOND
Sum of money in cash, or Treasury’s Deposit, Banker’s Draft or an
approved Banker’s or Insurance Guarantee. equal to 5% of the Contract
Sum for the due observance and performance contract.
FOR FORMAL CONTRACT IN Malaysia practice;
Formal contracts are drawn upon the receipt of the Letter of Acceptance from the
successful bidder. Bidders are required to forward Performance Bonds based on
stipulated rates according to the value of a contract. Performance Bonds must be
obtained from locally incorporated banks, insurance companies and financial
institutions that are licensed to operate in Malaysia. The current rates are as follows:
a) For Supplies and Services contract
i) 2.5 percent of contract value for contracts exceeding RM200,000 and less than
RM500,000; and
ii) 5.0 percent for contracts exceeding RM500,000.
b) For Works contract
i) 5.0 percent of the contract value exceeding RM200,000.