Professional practice 1 (1)

School of Architecture,Building & Design

SCHOOL OF ARCHITECTURE, BUILD AND DESIGN
BACHELOR OF QUANTITY SURVEYING (HONOURS)
PROFESSIONAL PRACTICE 1 (QSB 60604)
Assignment 1 -Report
NAME STUDENT ID
Yong Qing Yi 0325303
Nadhirah Mohd Zain 0321366
Wong Qin Kai 0320024
Wah Yun Chen 0319115
Yam Hui Shan 0316058
Ng Huoy Miin 0319097
0

TABLE OF CONTENT
DESCRIPTION PAGE
1.0 Introduction 2
2.0 Procurement
2.1 Management Contractor
2.2 Advantages of MC Procurement method
2.3 Recommendation
2.4 Why not choosing other procurement
method?
3-6
3.0 Tendering Method
3.1 Recommendation 7-8
4.0 Contract Arrangement
4.1 Factor affecting decision making
4.2 Cost reimbursement contract
4.2.1 Reason for the decision made
4.3 Type of contract
4.3.1 Modified Form of Contract based on
PAM Contract 2006
9-12
5.0 References 13-14
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1.0 Introduction
A public listed company who is not familiar with the construction industry has approached our
Consultant Quantity Surveyor firm to propose the best procurement method, tendering and contract
arrangement. This project will be a development of RM600 million and it consists of hotel and shopping
complex. It is located in the center of Golden Triangle, Kuala Lumpur.
The client requires to have full control of the design and be able to introduce changes during the process
of the whole project. The client is also concerned about the time length of project therefore, construction
work has to start before the completion of the design and he would like to complete the project in 20
months time before the start of COMMONWEALTH GAME in 24 months from now. Moreover, the
client’s budget is flexible and he requires to only deal with the key member of the project daily but not
too many parties. The process to select a successful contractor has to be reasonably transparent and be
able to eliminate contractors who are not performing well.
By considering the factors, our Consultant Quantity Surveyor have to come out with the best
procurement method, tendering and contract arrangement to accommodate the client’s needs. The
tendering proposed have to be ensured that the contractors that is awarded can perform potentially.
Furthermore, contract arrangement selected has to protect the client from any non-potential performance
and damages which will affect the project.
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2.0 Procurement
Procurement is taken from the word “ procure” which literally means “ to obtain by care or effort”, “to
bring about” and to acquire”. Basically, procurement is the process of obtaining goods and services from
provider who are outside of the organization (Wiley et al., 2011).
2.1 Management contract
Management contract basically is a written agreement between an employer and a contractor which the
contractor is selected by the competition in the tendering process where the contractor will quote lump
sum fixed fees or fees of management. Management contractor will plan, organize, coordinate, supervise
and manage the construction activities of the project. In the management contract, employer and
contractor will have the direct contractual relationship when the contractor enters the contract. Employer
engages a team of consultant and between an employer and consultant team has a direct contractual
relationship but the consultant team will coordinate with the management contractor.
Management contractor normally will appointed by the employer in the early stage to involve in the
construction process and design stage which the contractor can advise the design team on the buildability
of the design, tender action, construction programmes and delivery of goods and materials based on their
expertise on construction methods and experienced. This mean, in this management contracting
procurement method can shorten the overall development time because of the advice given by the
contractor for the design drawing in the design stage and ensure they properly understand the design
drawing details. Through this, miscommunication between the team of consultant and contractor will
decrease. Besides, management contractor manage the work through works contractors which they are
contractually accountable to the management contractor. Hence, in the management contracting
procurement, the contractor normally is providing advisory services and management.
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Management contractor is generally engages to construction of a project and manage the planning and
engage sub-contractors working under him to execute the construction work. Client's consultant is
responsible for the overall design while the management contractor is responsible for defining of work
packages which means the works are separated into various packages of work and those work packages
will distribute to the work packages subcontractors by the management contractor. Then the packages of
work which will be tendered out and work package subcontractors which successfully win the tender will
enter direct contract with management contractor.
Diagram: Management Contracting
-
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2.3 Recommendation
As a consultant quantity surveyor, I would like to recommend the Management Contracting
procurement method for this project. The reason is this procurement is suitable for the construction of
large complex projects which totally meet to the client’s wishes of build up Rm600 million hotel and
shopping complex in the center of the Golden Triangle, Kuala Lumpur.
Every construction project might occur vary due to various matters. In Management contracting, there
can be a high degree of flexibility on design matters which means that the design can be adjusted and
finalized as the construction proceeds but without having the loss of cost control. It allows the client to
change the design during construction and the client can definitely have full control of the design. They
are able to introduce the changes from the beginning until the completion of the project.
Besides that, the detailed design work can proceed together with the site operations for some work
packages. This can reduce the time needed before the project starts on-site. Management contracting have
the potential for time savings as the overlapped of design and construction activities. Parallel working is
inherent which can shorten the time and as accomplish “fast track”. It can achieve the client’s wishes to
finished this project at shortest time possible perhaps within 20 months instead of 24 months, an early
completion of the construction work. Therefore, the project is sure to be done before the start of
COMMONWEALTH GAMES.
By the requirement of the client, management contracting is the most fit to his company as this
procurement will only need to deal with only one firm. He only needs to meet the key members of the
project which might be the consultants and management contractor instead of too many parties. The
contractor uses his knowledge and management expertise to help the client to coordinate with the design
team and supervise the work package subcontractors to ensure the quality of the performance and the
project does not delay.
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The construction work of this procurement will start without the fully completed of detail drawings to
reduce time. It is much difficult to have the estimated final cost to show to the client and it will remain
uncertain until the end of the contract. But as we know the client has a flexible budget, therefore the
company may not worry about the financial limitation.
2.4 Why not choosing other procurement?
➢ Traditional Procurement Method
- Overall project duration may be longer prior to completion of design
- Contractor cannot input into to design and planning of the project
- Taking the risk associated with a fixed price
➢ Design and Build Procurement Method
- Clients meet difficulties preparing sufficiently comprehensive brief
- Hard to comparing bids since each design is different
- Because of the absence of a bill of quantities, it get into the difficulty to value the variation and
this will restricts the clients to make changes to the design
- The changes of project scope can be expensive
- The employer get less control of the aspect of the project because D&B contractor control every
parties of project
➢ Construction Management Procurement Method
- Client has more direct trades contractors need to deal with
- Developer has a contractual relationship with the works package contractors
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3.0 Tendering Method (Selective tendering method)
Recommendation
There are three types of tendering method available for contractors to submit their tender document by a
stipulated date. However, these tender methods can be broken down into open tendering, negotiated
tendering and selective tendering.
Through our professional staff in the company’s in-depth understanding and detailed analysis, my
company will strongly recommend the selective tendering process for further development. Other than
that, the selective tendering process can be either single stage or two stage. For two stage tendering, it is
utilized to permit the early appointment of a supplier and completion of all the data required to empower
them to offer a fixed cost. In the primary stage, a restricted appointment is concurred to enable them to
start works and a fixed cost is consulted for the contract in the second stage.
The reason why we chose this tendering method is that it has some benefits and also meets the client
needs since the client is an established public-listed company and wishes to complete before the start of
Commonwealth Games. For example, time & cost saving, better quality of tender and chances of default
minimized.
Firstly, it is about the time. As we know that the client is very unfamiliar with the construction industry
so they may absence of the capability and abilities to decide and recognize the appropriate tenderer.
Hence, it sets aside a ton of time for them to read through the profile of as well a large number of
tenderers and also the tender documentation. For this situation, selective tendering method is appropriate
for them because the contractors are chosen based on their ability, uprightness and attributes before they
are welcome to tender stage. Nevertheless, it takes after that exclusive firms of adequate standing and
involvement in that specific type of work will only be drawn nearer. In this manner, client doesn’t have to
invest too much time in assessing the tenders.
7

Secondly is about the cost. In this tendering method, it can minimize the cost of tendering such as
lessened the fees of tender documentation and financial utilization of resources. For an analogy, the cost
of printing the tender document will be lower since the number of participants are foreseen. Then, it is
about the quality of the tender. Since just a couple of contractors are chosen, each contractor knows he
has a sensible possibility of picking up the agreement and in this way has an impetus to study the tender
document altogether.
Lastly is about the chances of default. It will be minimized as only the properly qualified tenderers such
as a person with very good reputation and experiences on past projects will only be involved in this
tendering process.
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4.0 Contract Arrangement
It is a legal contractual agreement between the client and the contractor. This legal binding agreement
indicate the contractor will receive specific amount of compensation based on the job executed or method
on how the compensation will be distributed. They are four type of contract arrangement that are usually
practise in construction industry which are Traditional Method (lump sum contract, measurement
contract, cost reimbursement contract), Design and Built (single entity and competitive), Management
Contract and Construction management.
4.1 Factor affecting decision making
There are many factor to consider in selecting the most suitable contract arrangement for the client to
apply. The following are some of the factors that we had consider when selecting the contract
arrangement:
● Nature of project
● Scope of works
● Measure control by client
● Accountability
● Certainty of final costs
● Start and completion time
● Change during construction
● Assessment of risk
Based on the factors and the client’s requirement, we recommend that our client to use cost
reimbursement contract of traditional method as his contract arrangement.
9

4.2 Cost reimbursement contract
Cost reimbursement contract is also known as cost plus contracts. The contractor is reimbursed by the
actual costs, which they incur in carrying out the works plus an additional fee. In the event that the nature
or scope of the work cannot be properly defined at the outset and the risk are high, cost reimbursement
contract may be used for emergency work, emergency change, maintenance work, building failure or
immediate rebuild so that the client can continue to operate the business. Tendering can be based on
outline requirements, any drawings and cost estimates. For the client, this is a high-risk form of contract,
because the final cost is not known when the contract is made.
The costs that the contractor is allowed to reimburse must be specified in the contract. This is a
complicated procedure that needs to be carefully considered since some direct costs may be relatively
straightforward but other "shared" costs may not. The direct costs are attributable to a single project may
include labor, materials, hiring of plants and subcontractors. These costs may be calculated on a pro-rata.
Detail costing must be made and should be classified as direct or indirect costs. There are multiple
variations for Cost plus contracts and the most common are:
● Cost Plus Fixed Percentage
● Cost Plus Fixed Fee
● Cost Plus with Guaranteed Maximum Price Contract
● Cost Plus with Guaranteed Maximum Price and Bonus Contract
For this variation, we recommend to implement the cost plus fixed fee.
.
4.2.1 Recommendation
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There is a lot of unknown in this project, therefore cost reimbursement contract will be more suitable for
this project. Cost reimbursement contract can bring advantages to the client as the contractor does not
need to add big “fudge factor” in his bid to cover the unknown on uncertainty work (Bliss, n.d.).
Cost reimbursement contract requires a good documentation of the cost that occurred on the project to
assure that the contractor will be compensated for all the work executed and that the company will not
pay for something that is not complete (Wiley et al., 2011). The document will include working hours and
billing rates for direct labour supplied by the contractor together with the invoices for materials and
subcontractors easier for the client to check and to make sure that there is not overcharges.
Furthermore, if the client is concerned that the job cost will be over budget, the contractor can provide a
guaranteed maximum price. If the job done is lower than the maximum price, the contractor will share the
extra cost with the client. The client also has the right to terminate the contract if the client is over budget
by certain percentage at any draw by the contractor (Bliss, n.d.).
The method to compensate the contractor will be cost-plus-a-fixed-fee. Cost-plus-a-fixed-fee benefit the
client more compare to cost-plus-a-percentage. In cost-plus-a-percentage, the client is charged by the
contractor for his direct costs of labour, materials and subs, plus a percentage to cover his overhead and
profit which will hinder the contractor to finish the project faster. This method give a lot of profit to
contractor as the longer he takes to complete the project, the larger the profit will be which could be a
hindrance to the client as he is concerned about the completion time. Cost-plus-a-fixed-fee give an upper
hand to the client as the client will be charged by the contractor for direct costs, plus a fixed fee for
overhead and profit. In this case, the contractor is encouraged to complete the job quickly and cheaply.
In the nutshell, cost reimbursement contract is a more suitable contract arrangement to be used in this
project. This contract benefit the client as he wanted the project to start early with a full control of the
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design and able to make change from the beginning until the completion of the project. When applying
cost-plus-a-fixed-fee method, the job can be complete on time and on budget as the client request it to be
finished before the COMMONWEALTH GAMES which has to done in a short time period. Lastly, it
provide the client with a better product as the contractor is selected based on their qualification.
4.3 Form of Contract
The effectiveness of a project is depend on the administration of a contract. Administration of a contract
means to ensure that the contractor is performed according to the article of agreement and condition of
contract and within the framework of related laws and the practices of the construction industry (Zakaria,
Ismail and Md Yusof, 2013). Pertubuhan Arkitek Malaysia (PAM), Public Work Department (PWD) and
International Federation of Consulting Engineers (FIDIC) are the standard form of contract available in
Malaysia. To practise each of it depends on the type and nature of the project and also financing involved.
4.3.1 Modified Form of Contract based on PAM Contract 2006.
As there is no standard form of contract for management contracting, modified form of contract based
on PAM Contract 2006. Based on Agreement and Condition of PAM Contract 2006, architect has
significant role in managing and supervising the building contract. Since we proposed to use this contract,
the role of the architect mentioned in article 3 will be done by the managing contractor and this will
favour the client as he requested to deal with one party only. All consultant team including the architect
only involved in pre tender stage and the authority transfer to MC during the post tender. This means, the
MC become one of the design team and contribute his construction knowledge and management
expertise.
There are clauses from the PAM contract that could be use to protect our client. First clause would be
Clause 10 where a site staff will be hired to watch over the management contractor to make sure he
12

perform his job well. Other than that, Clause 11 will help in managing the the cost of the project to avoid
over budget. Clause 11 explains that the modification and alteration of designs can be made and this will
meet the client’s requirement. Clause 30 explains that if any failure of payment, the other party will not
receive the certificate. Furthermore, Clause 6 helps in managing the quality of the construction building.
This is due to the complexity of our project, good quality, inspection and testing is required to make sure
the building will be more stable and have good finishes. Also client would want it to be the place where
tourists visit during the COMMONWEALTH GAME therefore, good quality is needed. Lastly, to manage
the time, Clause 20 & Clause 23 states the date of commencement, postponement and completion date
and the extension time. This is to make sure the delays will not exceed the Period of Delay given in the
appendix as client’s main concern will be to finish the project within the given 20 months.
References
1. Sarah Lupton, S., Sarah Lupton, S., McPartland, R. and McPartland, R. (2017). Which
procurement method?. [online] NBS. Available at:
https://www.thenbs.com/knowledge/which-procurement-method [Accessed 20 Jun. 2017].
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2. G.M. et al., 2009. Built Environment Procurement Practice: Impediments to Innovation and
Opportunities for Changes. Built Environment Industry Innovation Council. Available at:
https://eprints.qut.edu.au/27114/1/Furneaux_-_BEIIC_Procurement_Report.pdf [Accessed
June 15, 2017].
3. TenderPoint™. (2017). 3 Methods of Tendering available to Contractors. - TenderPoint™.
[online] Available at:
http://tenderpoint.co.za/blog/3-methods-of-tendering-available-to-contractors/ [Accessed 20
Jun. 2017].
4. Jeyakumar, J. (2017). Tendering methods, Procedures in Construction - Basic Civil
Engineering. [online] Basic Civil Engineering. Available at:
http://www.basiccivilengineering.com/2016/05/tendering-methods-procedures-construction.
html [Accessed 20 Jun. 2017].
5. Bliss, S. (n.d.). Cost-Plus Contracts : Pros and Cons | BuildingAdvisor. [online]
Buildingadvisor.com. Available at:
http://buildingadvisor.com/project-management/bidding/cost-plus-bids/ [Accessed 18 Jun.
2017].
6. Rodriguez, J. (2016). 4 Types of Construction Contracts: LS, Unit Price, Cost Plus and T&M.
[online] The Balance. Available at:
https://www.thebalance.com/g00/common-types-of-construction-contracts-844483?i10c.refe
rrer= [Accessed 18 Jun. 2017].
7. Wiley, D., Ashton, K., Ashton, S., Bostwick, J., Clements, G., Drysdale, J., Francis, J.,
Harrison, B., Nan, V., Nisse, T., Randall, D., Rino, J., Robinson, J., Snyder, A., Amado, M.
and Anonymous (2011). Project Management for Instructional Designers (PM4ID). 2nd ed.
[ebook] Provo, pp.Chapter 9.5. Available at:
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https://pm4id.pressbooks.com/chapter/9-5-selecting-the-type-of-contract/ [Accessed 18 Jun.
2017].
8. Zakaria, Z., Ismail, S. and Md Yusof, A. (2013). An Overview of Comparison between
Construction Contracts in Malaysia: The Roles and Responsibilities of Contract
Administrator in Achieving Final Account Closing Success. [online] p.3. Available at:
http://www.inase.org/library/2013/rhodes/bypaper/EET/EET-02.pdf [Accessed 19 Jun.
2017].
9. Rajoo, D. (2014). Announcement Details | KLRCA. [online] Klrca.org. Available at:
https://www.klrca.org/announcements-announcements-details.php?id=82 [Accessed 20 Jun.
2017].

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