The client wishes to develop a RM600 million hotel and shopping complex in Kuala Lumpur within 20 months to take advantage of tourists for the upcoming Commonwealth Games. Some key issues are the short timeframe, uncertainty over final costs, inexperienced client, and need for transparency in contractor selection. Management contracting is proposed where one contractor oversees design and construction packages. Key contract terms include fixed fees for contractors, quality standards, payment schedules to incentivize on-time completion, and clauses addressing delays and defaults.

1. A client from an established public listed company wishes to develop a RM 600 million hotel and shopping complex
in the center of the Golden Triangle, Kuala Lumpur within the shortest time possible perhaps within 20 months in
order to take advantage of the influx of tourist as the country will be hosting the COMMONWEALTH GAMES in 24
months from now

2. Problems or Needs
● Nature of project - A high rise building which requires heavy machineries such as crane
● Scope of works - Mixed development of hotel and shopping complex
● Measure of control by client -Client wants hands-on approach, owns full control of the design and are able to
introduce changes from start to completion of the project
● Accountability - Client is accountable to other stakeholders and board of directors
● Appointment of contractor -Client expects a transparent tendering process as well as to eliminate
non- performing contractors

3. ● Certainty of final cost -Client has flexible budget which allows an uncertain final cost
● Start and completion time -Client prefers an overlapping on design and construction
programme
● Restrictions - Working hours from 8am to 5pm from Monday to Saturday, no
work allowed on Sundays and public holidays
● Changes during constructions -Changes are allowed to be made
● Assessment of risks -Risk of time and quality bear by contractor while risk of cost
bear by client
● Client -Inexperienced, not a regular player in the industry
● Time constraint -The project need to be completed before start of COMMONWEALTH GAMES
to take advantage of tourist
Problems or Needs

4. MANAGEMENT CONTRACTING

5. Advantages
● Deal with lesser parties
● Time savings
● Competitively tendering
● Flexibility for changes
● Roles, risk and responsibilities for all
parties all clear
Disadvantages
● Price uncertainty
● Required sufficient information
MANAGEMENT CONTRACTING
P r o c u r e m e n t

6. ADVANTAGES
● Transparent tendering process
● Eliminate non-performing
contractors
● Higher quality
● Reduce Risk
DISADVANTAGES
● Longer tendering process
● Higher prices compared to other
methods
T E N D E R I N G METHOD
TWO STAGE SELECTIVE TENDERING

7. Cost Plus Contract with
GMP
a variation of cost-reimbursement contract
Type of Contract

8. Percentage fee or fixed fee or fluctuate fee?
Fixed Fee !
Reasons:
- Contractor will not be able to fluctuate the price to claim more
- As an incentive for contractor to work efficiently
Type of Contract

9. Agreement of both parties to share
cost savings
G M P
GUARANTEED MAXIMUM PRICE
Reduce client’s cost risk However, if the actual cost is
higher than GMP, such sum need
to be paid by contractor

10. Advantages:
Incentive
Allocation of risk
Disadvantages :
Overestimate
Mutual agreement on GMP
G M P
GUARANTEED MAXIMUM PRICE

11. Modified Form of Contract
PAM 2006 (with quantities) ------------------------------- as a basis
Management contractor --------------------------------------- ‘Employer’ & ‘Architect’
Work packages contractors----------------------------------------------builders

12. CLIENT
MANAGEMENT
CONTRACTOR ARCHITECT
QUANTITY
SURVEYOR ENGINEER
WORK PACKAGES
CONTRACTOR

13. Management contractor’s obligations
- The term ‘architect’ and ‘employer’ refers to Management contractor
- To pay such sum to contractor as agreed by both parties stated in the
contract
- To instruct WC & issues certificates
Work packages contractor’s obligations
Refers to Clause 1.0 Contractor’s obligations
- Refers to work packages contractor’s obligations
- Dual obligations to ‘carry out’ and to ‘complete’ Works

14. Employer’s Commercial Consideration
Q U A L I T Y
Clause 6.1- Standards of works, materials, goods and workmanship
● Quality and standards of work materials, goods & workmanship shall be
following the specification in contract
● Any discrepancy, MC can instruct him to rectify or demolish such works
Clause 15.4 - DLP
● Obliged to rectify such works within 28 days after receipt of schedule of
defects

15. Clause 11.6 -Valuation rules
- Contractors are not able to claim without site measurement
- Thus, MC will not be charged to those undone works
Clause 30.0 -Payment and certificates
- If WC fails to submit application to claim, MC has the right to not issuing
Interim certificate
Clause 30.5 -Retention fund
- A readily accessible amount of money is on hold in the event of default
arises
C O S T
Employer’s Commercial Consideration

16. Clause 23.4 - CERTIFICATE OF EXTENSION OF TIME
- MC has the right to consider or reject WC’s application of EOT
Clause 23.6 - CONTRACTOR TO PREVENT DELAY
- It is WC’s obligations to prevent and to reduce delays
T I M E
Employer’s Commercial Consideration

17. Contractor’s Defaults PAM 2006 (as reference)
Fails to commence Works in accordance with the contract Clause 25.1(a)
Suspension of Works Clause 25.1(b)
Fails to proceed regularly and diligently Clause 25.1(c)
Failure to comply with Management contractor’s instructions Clause 25.1(d)
Assignment or sub-letting without consent Clause 25.1(e)
Abandoned the contract Clause 25.1(f)
Contractor’s bankruptcy Clause 25.3
Fail to rectify defect works Clause 15.3
Examples of contractor’s defaults

18. Brief description of relevant clauses PAM 2006 (as reference)
The contractor must empty the site and remove all machineries and
personnel that belongs to him
Clause 25.4(a) & (c)
The contractor is not entitled to get any payment even though it is
certified until after completion of the outstanding works by the Employer
Clause 25.4(d)
The contractor must assign to the Employer, contracts with his suppliers
and sub-contractors upon notice by the Employer
Clause 25.4(a) & (b)
The employer can claim expenses, loss and damages suffered Clause 25.4(d)
Employer can employ and pay other person to rectify defect works and
such cost will be set off
Clause 15.3 (c)
Examples of rights of Employer

19. Employer’s Defaults PAM 2006 (as reference)
Failure to pay Clause 26.1(a)
Interference with Certificates Clause 26.1(b)
Suspension of Works Clause 26.1(d)
Failure to appoint Management contractor upon his death Clause 26.1(c)
Employer’s insolvency Clause 26.3
Examples of Employer’s defaults

20. Brief description of relevant clauses PAM 2006 (as reference)
The contractor to remove all temporary buildings, equipment, personnel
from site (including his sub-contractors)
Clause 26.4(a)
The contractor is entitled to payment of the total value of works
executed on site
Clause 26.4(b)
The contractor is entitled for loss and expense suffered Clause 26.4(b)
Examples of rights of Contractor

21. T H A N K Y O U
N G I E N G T I E N Y U N G 0 3 2 0 2 2 1
N G O J I A H A U R 0 3 2 0 1 4 4
O O I Y I N J I 0 3 1 9 9 6 2
P A N G K A I Y U N 0 3 1 9 8 0 2
S A M W E I Y I N 0 3 2 0 3 6 4