LEMBAGA JURUTERA MALAYSIA

BOARD OF ENGINEERS MALAYSIA

KDN PP11720/1/2008 ISSN 0128-4347 VOL.35 SEPT - NOV 2007 RM10.00

THE INGENIEUR

Volume 35 Sept - Nov 2007

33

contents
4

Presidents Message
Editors Note

Update
Professional Indemnity Insurance

Announcement
Publication Calendar
Event Calendar
Fraudulent Offers On Engineering Council
United Kingdom Registration

Cover Feature
6 Effective Contract Management For
Construction Projects
16 Drafting Construction Contracts
24 Understanding Engineering/Construction Contracts

41

Guidelines
36 The Chartered Institute Of Arbitrators:
Code Of Professional And Ethical Conduct
Feature
37 Membendung Kerugian Berkaitan Dengan Tuntutan
Kerugian Dan Perbelanjaan Tambahan Di Dalam
Kontrak Binaan
44 Construction Disputes

56

48 Integrated Engineering Services - The ETI Centric

Professional Services
Engineering Nostalgia
56 Some Engineering Works In The 60s

THE INGENIEUR

Presidents Message

KDN PP11720/1/2008
ISSN 0128-4347

Vol. 35 Sept - Nov 2007

MEMBERS OF THE BOARD OF ENGINEERS MALAYSIA
(BEM) 2006/2007
President
YBhg. Dato Prof. Ir. Dr. Judin Abdul Karim
Registrar
Ir. Dr. Mohd Johari Md. Arif
Members
YBhg. Tan Sri Dato Ir. Md Radzi Mansor
YBhg. Datuk Ir. Hj. Keizrul Abdullah
YBhg. Mej. Jen. Dato Ir. Ismail Samion
YBhg. Dato Ir. Shanthakumar Sivasubramaniam
YBhg. Datu Ir. Hubert Thian Chong Hui
YBhg. Dato Ir. Prof. Chuah Hean Teik
Ar. Dr. Amer Hamzah Mohd Yunus
Ir. Henry E Chelvanayagam
Ir. Dr. Shamsuddin Ab Latif
Ir. Prof. Dr. Ruslan Hassan
Ir. Mohd. Rousdin Hassan
Ir. Prof. Dr. Hassan Basri
Tn Hj. Basar bin Juraimi
Ir. Ishak Abdul Rahman
Ir. Anjin Hj. Ajik
Ir. P E Chong
EDITORIAL BOARD
Advisor
YBhg. Dato Prof. Ir. Dr. Judin Abdul Karim
Chairman
YBhg Datuk Ir. Shanthakumar Sivasubramaniam
Editor
Ir. Fong Tian Yong
Members
Ir. Prem Kumar
Ir. Mustaza Salim
Ir. Chan Boon Teik
Ir. Ishak Abdul Rahman
Ir. Prof. Dr. K. S. Kannan
Ir. Prof. Dr. Ruslan Hassan
Ir. Prof. Madya Dr. Eric K H Goh
Ir. Nitchiananthan Balasubramaniam

As Malaysia celebrates its 50th anniversary,

the local construction industry has also
developed tremendously and matured. Malaysia
has earned a reputation of completing major
projects in record time such as the Petronas
Twin Tower and KLIA, just to name a few.
Many of our consultants and contractors have
ventured beyond our shores to compete with
big players on the international scene.
While we may be familiar with construction techniques
and engineering codes, contract management may differ from
one country to another. The concept of Integrated Engineering
Services as detailed in one of the papers is one such creation
that engineers need to familiarize themselves to face the
challenging world. For engineers to stay competitive, we
not only have to keep up with the new technologies and
innovations, we also need to keep track of the changing
trend of contracts.
Contact per say cannot be left to the contract division
or the quantity surveyor alone. Engineers as the leading
consultants in major projects are often saddled with
contractual matters that require a good understanding of
the nexus of legal terms and conditions of the contract.
Knowledge and experience on this matter make an engineer
better equipped to manage a major construction project.
I hope this edition with the theme on Engineering
Construction Contracts will enrich engineers with new
thoughts on contract matters and ingredients needed to
formulate and facilitate effective contract management to
enhance project excellence.
Dato Prof. Ir. Dr. Judin Abdul Karim
President
BOARD OF ENGINEERS MALAYSIA

Executive Director
Ir. Ashari Mohd Yakub

Editors Note

Publication Officer
Pn. Nik Kamaliah Nik Abdul Rahman
Assistant Publication Officer
Pn. Che Asiah Mohamad Ali
Design and Production
Inforeach Communications Sdn Bhd
Printer
Art Printing Works Sdn Bhd
29 Jalan Riong, 59100 Kuala Lumpur
The Ingenieur is published by the Board of Engineers
Malaysia (Lembaga Jurutera Malaysia) and is distributed
free of charge to registered Professional Engineers.
The statements and opinions expressed in this
publication are those of the writers.
BEM invites all registered engineers to contribute articles
or send their views and comments to
the following address:
Publication Committee
Lembaga Jurutera Malaysia,
Tingkat 17, Ibu Pejabat JKR,
Jalan Sultan Salahuddin,
50580 Kuala Lumpur.
Tel: 03-2698 0590 Fax: 03-2692 5017
E-mail: bem1@streamyx.com; publication@bem.org.my
Website: http://www.bem.org.my
Advertising/Subscriptions
Subscription Form is on page 54
Advertisement Form is on page 55

As more local builders and professionals are

engaging in construction works, both local and
overseas, the subject of contracts has always been
popular. In this publication, readers will be taken
on a revisit to the understanding of Engineering
Construction Contracts as well as the drafting of
construction contracts by prominent writers who have salient
points to reach out to us.
On the international scene, the paper on Integrated
Engineering Services-the ETI centric professional services will
examine the supply chain of Engineering Services in FTA.
During the recent BEM road shows on Certificate of
Completion & Compliance (CCC), many questions were
raised on Professional Indemnity Insurance (PII). We hope
the section on PII addresses the concerns in this area and
we welcome further deliberation on this.
Ir. Fong Tian Yong
Editor

UPDATE 5

THE INGENIEUR

Professional Indemnity Insurance

he issue of whether Professional Indemnity

Insurance (PII) should be made mandatory for
all Engineering Consultancy Practices (ECP) was
deliberated at length by the Board of Engineers Malaysia
(BEM) when the proposed amendment to the Registration
of Engineers Act was redrafted last year. This was in
view of the proposed amendment to the Street, Drainage
and Building Act 1974, Act 133 whereby Professional
Architects and Engineers are given the responsibility to
issue the Certificate of Completion and Compliance (CCC)
for development projects for which they are the principal
submitting persons. Although the bill was finally approved
by Parliament without any mention on PII, the Board
encourages all ECPs to take up PII voluntarily.
In fact, a number of ECPs have PII coverage since
their formation and some have taken up PII on their
own initiative to safeguard their interest. Meanwhile, the
Board is exploring other forms of PII which are practiced
in other countries which may be more beneficial and
affordable to local ECP.
The public, particularly house buyers may not have the
right perception of PII. Professional indemnity policies

provide an indemnity for legal liability arising out of a

breach of professional duty by way of neglect, error or
omission. In addition, many professional indemnity policies
incorporate additional clauses or extensions, such as libel
and slander, loss of documents in insured custody or
control. Certain PII policies do cover legal costs up to a
stated amount) in connection with legal proceedings taken
by the Professional Engineer (PE) claiming for damages
arising out of the infringement of any copyright vested
in the PE. The policy, however does not cover civil or
criminal and/or other penalties financial or otherwise as
liability on the part of the PE. PII does not cover third
party claim against the engineer if such claims are not
connected with the tortuous act on design or work related
to it. Similarly PII does not cover fraud.
As the public is getting more litigious, the Board urges
ECPs to take up PII to safeguard their own interest.

Dato Prof. Ir. Dr. Judin bin Abdul Karim

President
Board of Engineers Malaysia

ANNOUNCEMENT

E ve n t C a l e n d a r
The following list is the Publication
Calendar for the year 2007 - 2008. While we
normally seek contributions from experts for
each special theme, we are also pleased to
accept articles relevant to themes listed.
Please contact the Editor or the Publication
Officer in advance if you would like to make
such contributions or to discuss details and
deadlines.
December 2007: PROJECT FINANCING
March 2008: POWER
June 2008: ASSET MANAGEMENT

Fraudulent Offers on Engineering Council

United Kingdom (ECUK) Registration
The Engineering Council United Kingdom (ECUK) is aware
that there is a fraudulent operation in place which, amongst
other things, offers to arrange registration with ECUK.
The ECUK never processes applications through third
parties. All applicants must deal directly with ECUK and
its constituent engineering institutions.
For further details on registration procedures with
ECUK, please visit www.engc.org.uk. Anyone who receives
an offer from an agent to facilitate registration should
contact ECUK.

Conference on Sustainable Building South-East Asia

Strategies forImplementation& Exhibition on
Sustainable Building and Construction
Date: November 5-7, 2007
Venue: Kuala Lumpur Convention Centre,
Kuala Lumpur
Joint Organisers: KTAK, CTMC, UTM and ISI

Workshop on Dynamics of Negotiating Skills

Date: November 26-27, 2007
Venue: Hotel Bayview, Langkawi, Kedah
Organiser: SPACE UTM

Workshop on Dynamics of Strategy Management

Date: November 28-29, 2007
Venue: Hotel Bayview, Langkawi, Kedah
Organiser: SPACE UTM
Tel: 07-5218170; 5218159; 5218164
Fax: 07-5211355
Email: sp-space@utm.my
Contact: Ms. Zarina / Nurrul Ain

The Board of Engineers Malaysia

wishes all readers

Selamat
Hari Raya
Aidil Fitri

&

Happy
Deepavali

COVER FEATURE

THE INGENIEUR

Effective Contract Management

For Construction Projects
By Ong Hock Tek, Managing Director, Entrusty Group

n the context of the construction

industry, many of us would
acknowledge that successful
construction projects are often
attributed to those that achieve
the clients requirements and
project objectives set out at
the outset of the project. Such
objectives may include delivery
within the stipulated time period,
construct within the budgeted cost
and meet the quality standard
set. Other objectives, equally
important, may include meeting
functional requirements and
satisfaction of the clients and/or
end users. Notwithstanding such
requirements and objectives, the
construction industries around the
world still suffer from numerous
setbacks and problems, in
particular those associated with
the construction process.
Th e c o m m o n i s s u e s a n d
problems associated with the
construction process often lie in
the ill considered procurement
selection, traditional separation
of design from construction,
lack of integration/organisation
of the project members and
poor communication channels,
uncertainties in design and
construction, changing internal

and external environment, project

complexity and characteristics, as
well as contractual and commercial
matters. In order to overcome
these issues and problems so
as to achieve project success,
it is pertinent that the elements
or ingredients in managing the
contract effectively are well
understood and practised.
Contract Administration/
Management is about the
management of the contract/s
of a project. It involves the
understanding and management
of the roles, responsibilities,
obligations, powers and liabilities
of the contracting parties, as
well as the administration of the
contract provisions, procedures
and practices as expressed and
implied under the contract.
Is there a difference between
c o n t ra c t a d m i n i s t ra t i o n a n d
contract management? Whilst many
would view and construe contract
a d m i n i s t ra t i o n a n d c o n t ra c t
management as synonymous, the
author would draw a distinction
between the two, in practice or
practical terms.
Contract Administration
involves understanding the roles,
responsibilities, obligations, powers

and liabilities of the contracting

parties and administering the
contract provisions, procedures
and practices as expressed and
implied in the contract. The
term administration means to
administer, to execute or to
implement. In practice, the
administration of the contract is
usually carried out in a passive
or at best, reactive manner.
The person who carries out the
contract administration role,
u s u a l l y c a l l e d t h e C o n t ra c t
Administrator, executes orders,
gives directions and ensure
compliance with the contract
provisions, procedures and
instructions by the Superintending
Officer.
On the other hand, Contract
Management is different. Its about
the management of the contract
of a project, which includes
contract administration. The term
management means to manage.
Management of the contract
involves planning, organising,
communicating, co-ordinating,
monitoring and controlling the
whole contract of the project. Its a
proactive rather than just reactive
approach in the administration
of the contract. Th e p e r s o n

COVER FEATURE 7

THE INGENIEUR

who carries out the contract

management role, usually called
the Contract Manager, manages
and co-ordinates the contract
requirements together with
other project team members to
ensure not only the contract is
managed effectively, but also
the project as a whole achieves
its set objectives and meets the
clients requirements, effectively
and successfully.
The ten essential elements
or ingredients needed in
formulating and facilitating
effective contract management
to achieve project excellence
and success are:

1
2

A good understanding of the

3
4
5
6
7

9
10

Client, its Objectives and

Priorities
A detailed appraisal and
understanding of the
Project Nature and
Characteristics
A proper and structured
appraisal and management
of the Project Risks
Selection of a suitable
P r o j e c t Te a m ( D e s i g n /
Construction)
Use of a suitable Building
Procurement System
Use of a suitable Contractual
Arrangement
Having an effective
Organisation Structure
that allows efficient
communication channels
and is capable of adapting
to changes
Maintaining effective
Monitoring and Control
Systems capable of
identifying and responding
to changes
Maintaining proper
Information Recording and
Retrieval Systems
Emphasis on the importance
of good Commercial/
Business and Human
Relations

Note: 6 & 8 (adapted)

Th e e l e m e n t s a r e b r i e f l y
described and discussed, as
follows;
The Client and its Objectives
and Priorities
Whether from the private or
public sector, each client has
its own organisation and project
objectives. The former objectives
can include profit margin, growth/
expansion, strategic alliance, etc.
The latter objectives may include
delivery within the stipulated
Ti m e p e r i o d , C o s t w i t h i n
budget, meeting the required
Quality standards or Functional
requirements, as well as ensuring
customer Satisfaction.
Whatever the objectives, it is
important to know and understand
clearly the clients requirements
and priorities. Whilst some clients
may place priority on aesthetic
or prestige, early or timely
completion or price certainty,
o t h e r s m ay p l a c e e m p h a s i s
on buildability or flexibility to
accommodate changes during
construction and/or operation of

the eventual completed building

or facility.
The objectives are essentially
the Input and the Constraints can
be the priorities and requirements
on the project. In order to
ensure that the Output, which
are the deliverables, products
and/or services can be achieved
satisfactorily and successfully,
the Mechanisms, which comprise
people, resources, etc. must
be adequate and timely put in
place and properly managed.
That is to say, the effective
contract management of a
project encompasses effective
the interaction and integration
of the four basic fundamentals
or elements in the project
management process, effectively.
Diagram 1 illustrates the
project management process1
Project Nature and
Characteristics
A d e t a i l e d a p p ra i s a l a n d
understanding of the nature and
characteristics of the project
i s c r u c i a l a s e ve r y p r o j e c t

CONSTRAINTS
Time, cost, quality,
technical and other
performance parameters,
legal, environment, etc

INPUT
Business needs
and requirements

MANAGEMENT
OF THE
PROJECT

MECHANISMS
People, techniques
and tools, equipment,
organisation
Diagram 1

OUTPUT
Project
deliverables,
products and/or
services

COVER FEATURE

exhibits different nature and

characteristics.
Fo r e x a m p l e , l a r g e a n d
complex projects such as
airports, involve various unique
assemblies and complications
due to the high level of services
and specialist input, making coordination and knowledge of such
works of paramount importance.
Consequently, the emphasis is
on selection of a contractor or
builder who has the knowledge
and experience to provide the
input and expertise by partaking
in the pre-construction stage
rather than to ensure buildability
and proper co-ordination of
the works amongst the many
parties involved only during the
construction stage.
Mass housing or industrial
buildings, often involve repetitive
construction works due to the
extensive use of standardised or
prefabricated components and/or
proprietary systems. Such systems
usually have sufficient construction
information and details for the
construction works to be carried
out and completed. Hence, works
can often start early and phased
completion is often possible. As
for refurbishment works, its nature
and characteristics are again
different due to the uncertainty of
the extent of works as it is usually
messy and complicated, possibly
involving existing buildings with
unsecured site conditions. Works
are often required to be started as
soon as possible, with difficulties
in the measurement of quantities
and pricing of rates.
Project Risks
BS 4478 defines risk as a
combination of the probability,
or frequency, of occurrence
of a defined hazard and the
magnitude of the consequences
of the occurrence. In construction
project terms, risk is The likelihood
of negative occurrences adversely
affecting the project, so that its
objectives become more difficult

THE INGENIEUR

Site inspection

or impossible to achieve. Due

to the inherent characteristics of
construction projects and their
processes, they invariably give
rise to risks and must therefore
be understood and managed,
effectively. Such characteristics
include changing environment
conditions (externally and
internally), traditional separation of
design from construction, lengthy
design and construction periods,
diverse and substantial resource
requirements, sub-contracting
o f wo r k s , m u l t i - d i s c i p l i n a r y
project team members, multilevel communication channels
and multi-facetted co-ordination
of works.
Risks could stem from bad
ground and weather conditions,
inadequate design and construction
documentation, lack of resources
and/or skills/expertise, poor
planning, monitoring and/or
control and lack of teamwork
and communication. The effects
arising from these risks, if not
properly managed, may include
disruption and delays to the
construction works, budget and
costs overrun, poor quality and
standard of works, damage to
plant/equipment and/or injury
to construction personnel and
contractual or technical disputes.
H e n c e , h av i n g p r o p e r r i s k s
appraisal and management is an
essential element. It involves the
systematic application of strategies,
policies, methods and procedures
by taking positive, often proactive,
steps in identifying, assessing,
mitigating and managing the risks
to eliminate or reduce its exposure
to the party/ies concern.

Proper and structured risks

appraisal and management can
lead to a more effective project
or construction management
through better awareness and
understanding of risks, systematic
treatment of the risk issues to
reduce uncertainties and hazards,
as well as to ensure better use
of the available resources.
Managing risks effectively
facilitates the achievement of
project objectives, improves
project performance, increase
productivity and increases
eventual profitability. Hence,
specific considerations need to
be given in the appraisal of
risks, namely:

Identification of risks (the

cause) e.g. hazards - what,
where, when, how, why, etc.
Analysis of risks identified
(the analysis) e.g. likelihood
and nature of occurrences,
etc.
Assessment of risks analysed
(the effects) e.g. consequences
and extent of injuries, damages,
disruptions, delays, etc

Management of the risks

appraised, involves:

Planning and allocation of the

risks appraised (the planning
& c o n t r o l ) i . e . t o avo i d ,
transfer, share, reduction and
acceptance
Monitoring and feedback of
the actual risk occurrences (the
monitoring and feedback) i.e.
recording, checking, verifying,
comparing, reporting

Project Team
In selecting the project team
for design and construction,
several factors such as selection
criteria and its process, scope
of services/works, commitments,
responsibilities, experience,

COVER FEATURE 9

THE INGENIEUR

teamwork, communication, action

plan, etc need to be assessed and
considered properly. The selection
p r o c e s s w i l l b e ve r y m u ch
governed by the type of building
procurement system to be used
for the project. The factors to
consider in establishing a suitable
project team includes:
Commitment to defined and
measurable project objectives
Ability to foster and maintain
teamwork
Realistic action programme,
budget/price and resources
allocation
Communication structure and
channels
R e g u l a r
performance
appraisals
Suitably located for regular
formal/informal interactions
Roles and responsibilities

In order to select and appoint

a suitable design team, the
following should be considered:
Single team of consultants
or separate appointment of
independent consultants (with
or without lead consultant)
Criteria for selection and
interview
Scope and extent of services
Fees chargeable and mode of
payments
Role and duties
Terms and conditions of the
professional agreement
Compatibility of the consultants
and their teamwork spirit

In the selecting and appointing

a suitable construction team,
the following should be
considered:

Suitable selection or tendering
arrangement
Criteria for selection and
tender interview
Experience and expertise of
the contractor
Financial stability of the
contractor

Employing skilled people

Scope and extent of works

T e n d e r
requirements/
conditions
Tender documentation
Te n d e r
appraisal and
reporting
Compatibility of the contractor
and design teams

In addition, the choice of the

right people with the right attitude
for the project is important
to its eventual success. The
following pertinent points should
be observed;
Selection criteria of people and
organisations
Recognition and employing
skilled people is essential
Able and interested to meet
project objectives
Mutual trust creates the right
environment
Encourage a collaborative
working environment
S e l e c t i o n
based on
accomplishments and attitude

management contracting, design

and build/construct, project
management, package deal
or turnkey, etc. Each system
exhibits its own characteristics
and advantages/disadvantages.
Any selection should considered
together with the project nature
and characteristics, in addition to
the elements described above.
Note: Further details on the
aforesaid systems can be found
in Construction Contract
Administration/Management in
Practice10.

Note: The CIOB Code of Practice4

provides a number of checklists
and forms for the selection of the
design and construction teams.

Building Procurement
System
Building procurement systems
include traditional/conventional,

Contractual Arrangement
The contractual arrangement
leading to contract documentation
establishes the contractual rights,
obligations, responsibilities and
liabilities of the contracting parties.
Such arrangement or documentation
includes contract based on bills
o f q u a n t i t i e s , d raw i n g s a n d
specification, schedule of rates,
cost reimbursement, design and
build, etc.
In selecting a suitable
contractual arrangement, various
factors such as the elements
d e s c r i b e d p r e v i o u s l y, p l u s
change in requirements, design
completeness, cost fluctuations,
etc., need to be considered,
instead of merely using any
standard form of contract.

10

COVER FEATURE

THE INGENIEUR

FUNCTIONAL

Organisation Structure
Organisation structure is about
framework, hierarchy, authority,
control, rules, procedures, formal
relationships, for the people
in the organisation and/or the
project. This essential element,
allows effective and efficient
communication channels to take
place and adapts to project
environment and changes.
Any structure adopted, be it
functional, project or matrix can
affect project teamwork, work
efficiencies and the eventual
project outcome. Each type of
organisation structure has its own
advantages/disadvantages. Criteria
such as clear objectives and
priorities, policies and procedures,
roles and responsibilities, flexible
work structure, people relations,
motivational issues, leadership,
teamwork, capacity to change,
performance, etc need to be
properly considered when
choosing a suitable organisation
structure for the construction
project.
Diagrams 2, 3, 4 illustrate the
common organisation structures
used in the construction
industry.

Director

Management Level

Operations

Sales

Marketing

Department Level

Administration

Functional responsibility

Diagram 2

PROJECT
Director

Marketing

Finance

Project
Manager A

Construction

Administration

Project Manager
B

Tender

Project Manager
C

Procurement/
Purchasing

Contract

Monitoring and
Control Systems

Construction

Construction

Contract

Procurement/
Purchasing

Procurement/
Purchasing

Contract

Diagram 3

MATRIX
Director

Tender &
Contracts

Project
Manager A
Project
Manager B
Project
Manager X

Diagram 4

Marketing

Finance

Purchasing

Project responsibility
Functional responsibility

E f f e c t iv e m o n i t o r i n g a n d
control systems are capable of
identifying and responding to
changes ensure project objectives
can be met. Proper monitoring
and control systems enable timely
provision of information/details,
smooth progress of works, costs
within the budget, identification
of changes/variations, timely
supervision, testing and inspection
of works, etc.
Increasingly, the project team
should adopt quality assurance
programmes such as ISO
9001:2001 to ensure a consistency
and systematic approach to the
organisations work processes
and procedures. Quality is not

Tendering

Others

COVER FEATURE 11

THE INGENIEUR

just about achieving technical

requirements, but also the various
elements in Project Management.
There must be greater emphasis
on meeting clients requirements
and customer satisfaction, which
demands continuous improvements
in delivery and products. Such
quality practices and improvements
enhance competitiveness through
better organisational effectiveness
and performance efficiency in
construction projects. There is also
a broader and more encompassing
philosophy, often known as Total
Quality Management1, which is
aimed at identifying the clients
wants, organisations mission,
measuring performance to meet
required standards throughout
the whole construction process,
thereby involving the whole
organisation in a system of
continuous improvements.
The Masters Builders Association
Malaysia (MBAM) has adopted
a group quality scheme using
Value-Managed Quality System
(VMQS) to facilitate contractors

and sub-contractors in Malaysia

to achieve their ISO 9001:2000
certification. This is in line
with the associations aspiration
to promote and encourage
contractors, sub-contractors and
others to deliver quality works on
their building and construction
projects, both in Malaysia and
overseas.
In essence, VMQS, which
incorporates Value Management is
about Doing the right things right
in order to enhance the efficiency
and effectiveness of the quality
delivery process to ensure that
the end product or service can
satisfy the customers or clients
requirements. A typical outcome
of using the fast approach on the
work environment is shown in the
following Diagram 5.
VMQS is an innovative
quality management approach
aimed at changing the traditional
organisational mindset and
c o n s t r u c t i o n a p p r o a ch i n t o
dynamic, quality and performance
excellence at international

HOW

Information Recording and

Retrieval Systems
Good records are like snapshots
of the events or actions taken at
the particular moment, often
referred to as contemporaneous
records. And, good retrieval
systems are like going into a
library to find the information
required.
Going back to basics, records
such as tender/contract documents,
drawings register, correspondence
files, programmes, progress reports,
site diaries, instructions, dayworks,
claims, etc. should always be
up to-date and maintained,
properly. The use of ICT to assist
in systematically organising,
recording and retrieval of the said
documents have reduced the time
taken to undertake such tasks,
effectively and efficiently.

WHY

OBJECTIVES
Efficient Working
Tools

quality standards. Such value

achievements and improvements
lead to sustainable competitive
advantages.

Improve ICT &

Networking

Invest in ICT

NEEDS

Provide Area &

Personnel for Storage

Better Working
Space & Layout
Improve
Productivity

Storage & Library

Larger Working
Area
Facilitate People
Movements

Provide Confortable
Working Area

Minimise Physical
Hindrance
Land Scaping
Safe Work Area

Conducive
Environment

Security

Project Good Image

Good Communication
& Interaction
Promote Staff
Interaction

Improve Interpersonel
Relatives
Boost Employee
Spirit

Diagram 5

Proper Space /
Relocation
Prevent Eating on
Working Area
Confortable & Relax
Atmosphere
Reduce Noise
Interference

WANTS

12

COVER FEATURE

THE INGENIEUR

contractual and commercial routes

to ensure the successful outcome
of a construction project, which
essentially means to be able to
achieve a win-win outcome
for all the parties involved in
the construction project. In this
regard, Partnering approach 17,
which promotes win-win solutions,
has been adopted at the outset
of many construction projects,
overseas.
Conclusion

Recording and retrieval systems using ICT

Note: Practical examples, various
forms and checklists on information
recording and retrieval systems
can be found in the Appendices of
the CIOB Code of Practice 4 and in
the Practical Construction Contract
Administration/Management 8

Commercial/Business and
Human Relations
Emphasis on the importance
of good commercial/business
and human relations is the
final essential element, if not
most important element, in
effective contract management to
achieve excellence and success in
managing construction projects.
Commercial or business
relation is about fostering business
links/relations and communication
with other organisations. Human
relations is about understanding
and fostering interpersonal
relationship with another individual
or group. For human relations to
be effective and harmonious,
criteria such as people selection,
team commitments, meeting
organisation and project objectives,
sharing common objectives and
values, motivational issues, and
skills development need to be
seriously taken into account.
Failure to manage the construction

project effectively and amicably

c a n l e a d t o p r o b l e m s s u ch
as disputes or conflicts. The
contracting parties may end up in
arbitration or court proceedings
to resolve their disputes.
Not all contractually or legally
correct action is commercially
right. Sometimes, even
commercially sound decisions,
may be contractually wrong.
Whilst it is important to know
and understand the contractual
rights, responsibilities, powers
and liabilities, it does not
necessarily mean that every
contract provisions must be
followed and enforced in the
strictest sense. To go down the
contractual route usually means
having to rely on the provisions
expressed/implied under the
contract i.e. needing to work or
resolve matters within the ambit
of the contract. This is known to
be as the hard approach.
To go down the commercial
route virtually opens up a
wider and borderless scope for
negotiation and settlement of the
disputes/conflicts without/partly
relying on contractual/legal route.
This is called the soft approach.
Neither approach should be
followed to the extreme.
Therefore, there is a need
to strike a balance between

Construction industries around

the world suffer from numerous
setbacks and problems, in
particular those associated with
the construction process. There is
therefore an urgent need to ensure
that the setbacks and problems
are eliminated or mitigated by
effective management of the
construction process in order for
the projects to be successful.
In order to achieve excellence
and success in the management
of construction projects, it
is paramount to appreciate,
understand and practice the ten
essential elements or ingredients
necessary in formulating and
facilitating effective contract
management.
Effective Contract Management
is essentially about managing the
contract of a project by ensuring
that the planning, organising, coordination, monitoring and control
of the project from inception to
completion will meet the project
objectives in order to achieve
success.
Editors Note: Th i s a r t i c l e i s
based on and adapted from the
conference paper on Effective
Project Management Essential
Elements in Successful Projects
presented by the Author at the
Inaugural Construction Conference
2007 jointly organised by CIOB
Singapore and National University
of Singapore on January 25,
2007. BEM

COVER FEATURE 13

THE INGENIEUR

REFERENCES
1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

Association of Project Management (APM),

Project Management Body of Knowledge, 4th
Edition, 2000.
BS ISO 10006:1997 British Standard, Quality
Management Guidelines to Quality in Project
Management, BSI 06 - 2000.
BS 6079-1:2002 British Standard, Project
Management Part 1 Guide to Project
Management.
Chartered Institute of Building, Code of Practice
for Project Management for Construction and
Development, 3rd Edition, Blackwell Publishing,
2002.
Ong, H.T., Building Procurement, Tendering
and Contractual Arrangement, Construction
Management Seminars/Workshops, CIOB
Malaysia, November 16, 1996.
Ong, H.T., Effective Contracts Management
Construction Management Seminars by
The Chartered Institute of Building, Malaysia.
December 16, 2000.
Ong, H.T., Construction Contracts in Malaysia
a paper presented at Construction Conference
2002 ~ A One-Day Conference jointly organised
by The Chartered Institute of Building, Malaysia
(CIOBM) and Master Builders Association,
Malaysia on in-conjunction with MALBEX
and International Construction Week 2002,
September 12, 2002.
Ong, H.T., Practical Construction Contract
Administration/Management, 12-Modules
Training Programme Lectures and Workshops,
March- September 2003.
Ong, H.T., Achieving Excellence through ValueManaged Quality System - A paper delivered
at the International Conference on Managing
Excellence in Construction, Chongqing, ChinaOrganised by CIOB China, May 26, 04
Ong, H.T., Construction Contract Administration/
Management in Practice - Two Day Intensive
S e m i n a r / Wo r k s h o p o r g a n i s e d E n t r u s t y
Management Sdn Bhd, December 9 & 10,
2003.
Ong, H.T., Value-Managed Quality System
(VMQS) Towards A Value-Added Quality
Management System 6th International Value
Management Conference organised by Hong
Kong Institute of Value Management, Nov 26
& 27, 2003
Ong, H.T., Value & Risk Management, FIABCICIDB Brown Paper Bag Seminar, University
Malaya, 2004
O n g , H . T. , R i s k s a n d I t s M a n a g e m e n t ,
International Conference on Construction Law
& Arbitration, April 26 28th, 2005, organised

14.

15.

16.
17.

18.

by Kuala Lumpur Regional Centre for Arbitration

(KLRCA) & Malaysian Institute of Arbitrators
(MIArb), April 27, 05
O n g , H . T. , R i s k s a n d U n c e r t a i n t i e s i n
Construction Projects One Day Executive
Workshop on Construction Business Financing
and Risk Analysis for Non-Construction
Financial & Risk Managers/Executives
organised by Business & Advanced Technology
Centre (BATC), Universiti Teknologi Malaysia,
August 3, 2005
Pro-Value Management Sdn. Bhd/Applied
Facilitation & Training, An Introduction to
Risk Management for KLCC Berhad, Training
Manual/Materials, September 11, 2002.
Project Management Institute, PMI Guide to
the Body of Knowledge, PMI 1996.
Stevens, David., Strategic Thinking : Success
secrets of big business projects, Advantage
Quest Publications 2004.
Ong, H.T., Effective Project Management
~ Essential Elements in Successful Projects,
Inaugural Construction Conference 2007 jointly
organised by CIOB Singapore and National
University of Singapore on January 25, 2007.

16

COVER FEATURE

THE INGENIEUR

Drafting Construction
Contracts
By N. Pathmavathy and Kamraj Nayagam, Skrine & Co.
Editors Note: This article was extracted from Volume 3/2004 of Legal
Insights the Newsletter of Messrs. Skrine, Advocates & Solicitors

construction or building
contract can be loosely
defined as an agreement for
the construction, repair, renovation
or restoration of building or
engineering works. It ought to
specify what work has to be
done by the contractor, where
the work is to be done, when
this work must be completed, to
what standard the work should
be done, how the contract is to
be administered and how is to
be paid to the contractor by the
employer.
The many types of construction
contracts include traditional
building contracts, engineering
contracts, design and build
contracts, fee based contracts
and build operate and transfer
contracts. Although each contract
will obviously be unique, broad
conceptual types of contract
may be identified, and even a
contract created specifically to
meet the individual requirement
of a given situation will inevitably
have points of similarity to other
contracts.
Nevertheless, such is the
complexity of the typical
construction contract in the modern
age, that any awareness of the
workings of construction contracts
must of necessity be founded upon
a thematic understanding of the
various procurement strategies
and the underlying forces which
drive them.
In general, familiarity with
the available standard form of
construction contract, and of the
types of construction contract, will
enable the prudent Employer to at
least ensure that it will achieve the

appropriate contractual framework

for the physical execution of its
desires.
STANDARD FORM
CONTRACTS
Standard Form construction
contracts provide a basic framework
identifying the rights, obligations
and duties of the parties, establish
the ambit of the powers and duties
of the contract administrator as well
as put in place the administrative
procedures necessary for operation
of the contract.
The standard form contracts
commonly used in Malaysia include
the PAM98 Form issued under the
sanction of the Pertubuhan Arkitek
Malaysia, JKR or PWD Forms issued
by the Public Works Department
of Malaysia, CIDB Standard
Form of Contract for Building
Works issued by the Construction
Industry Development Board, IEM
forms issued by the Institution
of Engineers Malaysia, FIDIC
Forms issued by the Federation
Internationale des IngenieurConseils and the ICE Forms
issued by the Federation of Civil
Engineering Contractors.
One of the advantages of
most standard forms is that most
construction professionals are
familiar with their operation,
limitations and drawbacks. Such
familiarity leads to administrative
and cost efficiency. As there is a
body of judicial pronouncements
accumulated over the years on
standard forms, there is some
certainty in meaning. Accordingly,
there are appreciable savings in
time and costs when standard

forms are used compared to

the costs of drawing up fresh
contracts.
The disadvantages include the
following. The forms are arrived
at by a process of compromise
between different parties to
those entering the contract, often
reflecting other concerns than
those of the parties. The judicial
pronouncements which have
accumulated are often contrary
to the previous understanding
of those in the industry, which
is why it is sometimes best to
have a new form of words. In
a Malaysian context, the forms
used are often from overseas and
may not reflect peculiarities of
local law. The dense wording of
the standard forms makes them
very difficult to amend effectively.
Hasty amendments often have
unintended and unforeseen
consequences, whilst properly
considered amendments often
involve large amounts of effort.
The creation of any
construction contract requires a
balancing act between conflicting
imperatives. This process starts at
the conceptualisation stage, and
requires the prospective Employer
to be aware of its wishes and
intentions before even considering
the identity of the Contractor.
The prospective Employer,
desirous of maintaining control
and certainty, is torn between
the shackles of precedent and
the pro-active crafting of solutions
appropriate to his precise situation.
The latter course may amount to
no more than the re-invention of
the wheel, with all the attendant
inefficiency and expense. Hence

COVER FEATURE 17

THE INGENIEUR

the attraction of the standard

form contract, as outlined above.
However, such a contract is unlikely
to reflect in full the intentions and
concerns of the parties, leading
to the temptation to amend the
same. Such modification, whether
by way of addition, deletion, or
revision is not to be undertaken
lightly. Arbitrary revisions can
create serious problems, as
discussed above. As a rule of
thumb, revisions to standard form
contracts should be kept to a
minimum and only implemented
after a thorough review.
In conclusion, there is no
simple solution to the creation of
the perfect construction contract,
and this is not to be wondered
at, for, as has been observed,
major construction projects are the
most complex sphere of human
endeavour short of warfare. In
such a scenario, it is only prudent
that those about to embark
on such an endeavour should
give a commensurate amount of
consideration to the preparation of
the document which will govern
the course of the endeavour.
The stages in a construction
contract are shown in Diagram 1.
The parties involved in a contract
includes:

Employer or Owner
Contractor
Architect
Engineer
Quantity Surveyor
Consultants
Project Manager
Sub-Contractor
Supplier

ROLE OF RESPECTIVE
PARTIES IN A TRADITIONAL
BUILDING CONTRACT
CONTEXT
The Employer commissions an
architect to prepare the design
for the building. The Contractor
is then employed to construct the
project for a fixed price. (See
Diagram 2)

Project
Brief

Decision to Build

Design

Conditions
of Contract,
Drawings ,
BQs,
Specifications

Design
Drawings

Tender Documentation
Tender Invitation

Contractor
Tenders &
Proposals

Evaluation & Award

Construction Works

LOI /
Award
Contract
Documents

Diagram 1: Stages in Typical Construction Project

Role Of Employer
Procure the design to be
prepared by professional
architects
Secure planning permission
and building permits
M a k e p a y m e n t s r e g u l a r l y
according to contract
Give adequate site possession
to contractor
Ensure non-interference with
construction
Role Of Contractor
T o
carry out the works
according to the design issued
by architects
To complete the works on or
before the contractual date of
completion
Responsible for the materials
and the workmanship aspects
of the contract

Consulting
Agreement

Responsible for the performance

of his sub-contractors

Role Of Architect
Complete the design
Oversee development of the
Project
Co-ordinate design work of
other consultants
Supervise the building works
Issue certificates and approvals
Role Of Quantity Surveyor
E s t i m a t e
quantities from
architects plans and put into
bills of quantities
Prepare of tender documents
Oversee contract
documentation
Assist evaluation of progress
claims and variation work
Recommend amounts to be
certified

Employer
Main
Contractor

Architect

Consultants

Subcontractors

Diagram 2: Traditional Building Contract

Suppliers

18

COVER FEATURE

Role Of Consultants
C & S Engineer
M & E
Engineer
Acoustics Consultant
Landscape Architect
CONTRACT DOCUMENTS
The contract documents include
Articles of Agreement, Conditions of
Contract, Plans & Drawings, Bill of
Quantities, Specifications and Other
Documents specifically included.
Articles Of Agreement
Brief description of Project
Location of Site
Commencement Date
Name of the parties
Obligation of parties
Price to be paid
Name of consultants
Time for Completion
List of contract documents
Conditions Of Contract
Elaborate set of legal terms
which regulate the contractual
relationship between parties to
the contract
Define duties and rights of
parties
Address some of the likely
events which may arise during
the course of works
Plans & Drawings
Numbered according to series
and separate series used for
each consulting discipline :
architecture, structural and civil
engineering, mechanical and
electrical engineering
Each drawing signed and scales
clearly stated
Enable the price for works to
be computed
Bill Of Quantities
C o n s i s t s o f p r e l i m i n a r i e s
(site overheads), trades bills,
schedule of provisional sums
Trade bill divided into six
columns
(i) alphabetical reference for
the item
(ii) brief description of item
(iii) unit

THE INGENIEUR

(iv) quantity
(v) unit price rate for each
item of work
(vi) grossing up column
[unit price rate x quantity]

Specifications
Standards for execution of
works
Source for applicable technical
standards and codes
Other Documents Specifically
Included
Tender
Method statement
Works programme
TYPES OF PROCUREMENT
METHODS
Classification according
to how contractor is
remunerated
(a) Lump Sum Contract
(b) Measure &

Value Contract
(c) Cost Plus Contract
(d) Term Contract

Classification by reference
to nature of Contractors
obligations
(a) Design-Bid-Build
Contract
(b) Design &

Build Contract
(c) Turnkey Contract
(d) Management Contract

ENGINEERING
CONTRACTS

EP
EPC
EPCC
EPCM

WHY USE STANDARD

FORM CONTRACTS?
The Standard Form Contracts
provide a basic legal framework,
establish the ambit of the powers
and duties of the contract
administrator and put in place
the necessary administrative
procedures.
Advantages
Compromise solution
Risks are allocated relatively
fairly
Time-tested
Certainty in meaning
Saves time and costs
STAGES OF PROJECT
MANAGEMENT
Contract Drafting (See Diagrams
3 & 4)
Contract Administration
Dispute Resolution

RISK ALLOCATION

Optimal risk allocation

maximum risk transfer

EFFECTIVE CONTRACT DRAFTING

CLARITY

Contract Terms must be

clearly drafted
A good Contract must :
(a) spell out risks, rights and
obligations
(b) set out consequences of
breach & termination
(c) be consistent
Dont ignore terms during
project execution
Reach shared understanding
on obligations
Improve project team
communication channels

FAIRNESS

If Parties feel the Contract is

fair, they will be less likely to
seek relief
Appreciate what the other
Party wants out of the Contract
Allocate risks to the party best
able to control, manage and
insure the risk
NB: onerous provisions risk
being declared unenforceable
e.g. forfeiture clauses of all
sums paid (see Johor Coastal
Development v Constrajaya
Sdn Bhd)

Diagram 3 Effective Contract Drafting

COVER FEATURE 19

THE INGENIEUR

Components of a Good
Contract

Benefits

Clearly Stated Scope of

Works

Ensures that employer gets what they have

paid for and that contractor is clear as to what
their responsibilities include

Performance Standards
Defined

Ensures accountability and provides measurable

standards and goals to be achieved

Limitation of liability

Allocation of risk

Price Structure

Detailed cost estimate from contractor provides

up-front awareness of total costs

Completion Date

Ensures that project will be accomplished in a

given period of time

Penalty for Failure to

Complete on Time

Makes contractor accountable for achieving the

negotiated goals within agreed time period

Choice of Law

Important where contracting parties are from

different jurisdictions

Diagram 4 Components of a Good Contract

Risks should be allocated to
parties best able to manage
them
General rule, risks within the
control of the employer to be
allocated to the employers and

risks within the control of the

contractor to be allocated to
the contractors
Identifying Parties interest and
effective risk management is
the key to prevent disputes

Who will absorb Contractor / Employer ?

Price Increase

Risk Allocation
If risk is allocated to contractor, contractor may
limit liability for any price increase

Diagram 5 Price Escalation

Failure to Complete
on Time

Contractors Default

Risk to be allocated
to Contractor

Not due to
Contractors Default

Risk to be allocated
to Employer by way
of EOT clause

Diagram 6 - Failure to complete on time

EXAMPLES OF RISKS
ENCOUNTERED DURING
PROGRESS OF PROJECT
(i) Price escalation

(See Diagram 5)
(ii) Failure to complete on time

(See Diagram 6)
(iii) Unforeseen Ground
Conditions
Not all standard form contracts
have provisions in relation to
unforeseen ground conditions
Absence of such provisions
may lead to dispute as to who
will be responsible and bear
the costs for additional works
arising from the unforeseen
ground conditions
E m p l o y e r
may consider
employing a more interactive
selection or bidding process
to identify and reduce any
uncertainties that may be
encountered during the progress
of the project
(iv) Default in payment
I t i s n o t u n c o m m o n f o r
contractor to allocate any risk
of any payment default by the
employer to his sub-contractor
Such risk allocation can be
done by way of pay when
paid clauses
KEY TERMS AND
CONDITIONS OF
CONSTRUCTION CONTRACT
(i) Obligations of Parties

(See Diagram 7)
(ii) Key Contractual Dates

(See Diagram 8)
(iii) Standard of Performance
Implied term: the contractor
must perform the works in
good and workmanlike manner.
If higher standards are required,
these must be expressly
stipulated in the contract.
Examples of higher standards
for consideration include:
- Fitness for purpose i.e.
the works performed and
materials ordered must be

20

COVER FEATURE

THE INGENIEUR

Contractor

Employer

To perform and complete the works To give possession of the site to

To design the works in accordance

with the employers requirements

(where applicable)

To provide all plants, tools and

materials necessary for the

completion of the works
To be responsible for the adequacy

and safety of all site operations

and methods of construction
To comply with statutory

requirements

the contractor
To make timely payments to the
contractor
To appoint an architect, engineer
or surveyor as the superintending
officer (S.O.) for contract
administration
Not to interfere with or improperly
influence the S.O. in his
certification duties
Not to interfere with the progress
of the works by the contractor
To issue instructions and give
information in good time

To remedy defects in the works

Diagram 7

Key dates in a Construction Contract

Effect
Execution Date

Date of Site Possession

Commencement Date

Completion Date

Expiry of Defects
Liability Period (DLP)

Action Required
Contractor to furnish

Date when the contract

comes into force

performance security & do

preparatory works

Employer to give possession

of the Site to the Contractor
Date the contractor must gain
Contractor to be responsible
possession of the Site
over safety of the Site and
mobilise to the Site
Date the contractor can
Contractor to commence
commence construction
construction
works
Contractor to complete the
Date the contractor must
works
complete the works (subject
SO to issue certificate of
to extensions of time)
practical completion

Date by which the contractor

must make good defects
which had appeared during
DLP

Contractor to make good

defects
ER to issue certificate of

making good defects

Diagram 8 - Key dates in a Construction Contract

Pro
Employer

Unconditional
& on-demand
bankers
guarantee
Valid from
commencement of
works to expiry of DLP

Conditional
bankers
guarantee

Parent company
guarantee

Valid from commencement

of works to expiry of DLP
but value reduced to half
upon completion of works

Valid from
commencement of works
to completion of works

Chart 1

Contract
Price

fit for the purpose for which

they are required.
- S p e c i f i e d p e r f o r m a n c e
guarantees
- Established international
benchmarks

(iv) Performance Security

Contractor is commonly required
in construction contracts to
furnish performance security
for due performance of the
works
Performance security usually
takes the form of an ondemand and irrevocable
bankers guarantee
Parent company guarantee or
insurance guarantee may be an
acceptable alternative in some
instances
The value of performance
security typically required by
employers in Malaysia is 5%
to 10% of the contract price
Employer may require design
bond as additional security
against any defect in the
design. (See Chart 1)
To ensure the contractor
furnishes the performance security
to the employer:
the contract may stipulate
the provision of performance
security as a condition
precedent to commencement
of works and payments by the
employer
the contract may entitle the
employer to terminate the
contractors engagement in
the event the contractor fails
to furnish the performance
security within the requisite
period
the contractor may entitle the
employer to withhold monies
which may become due to the
contractor under the contract
in the event the contractor
fails to furnish the requisite
performance security
(v) Interim Payments
Stage Payments v Periodic
Payments
Periodic payments are sums

COVER FEATURE 21

THE INGENIEUR

payable to the contractor based

on a periodical valuation of
the work done to date. Such
valuation are usually conducted
on a monthly basis.
Stage payments are fixed
installment sums payable
to the contractor upon the
achievement of certain
prescribed milestones.
General view is that stage
payments offer the benefit of
certainty in the sums payable
to the contractor and savings
in professional fees and time.
NB: Stage payments may not
be appropriate for contractors
with poor cash flow.
(vi) Time for Completion
It is important to expressly
stipulate in the contract
the time for completion of
the works as otherwise the
contractor only has an implied
obligation to complete the
works within a reasonable
period.
Extension of time provisions
must be included to prevent
time being at large should the
employer causes any delay
to the works. Otherwise, the
employers right to claim
liquidated damages may be
affected.

See Peak Construction

(Liverpool) Ltd v McKinney
Foundations Ltd (1970) 1 BLR
111 where CA held:
The stipulated time for
completion having ceased to
be applicable by reason of the
employers own default and
the extension of time clause
having no application to that, it
seems to follow there is in such
a case no date from which
liquidated damages could run
and the right to recover them
has gone.

Examples of events of delay

which would entitle the
contractor to extension of
time:
(a) act of prevention by
employer
(b) delay in giving possession of
the site to the contractor
(c) i n t e r f e r e n c e b y t h e
employers contractors
(d) delay by the employer
in issuing necessary
instructions
(e) suspension of works by
the employer without
reasonable cause

It is important to specify in
a construction contract what

Contractor to issue
notice when works
ready to be
Taken over

Contractor to
complete works

If Employer
not satisfied

Employer to give
reasons & specify
works to be done

Employer to
inspect works
If Employer
satisfied

Practical
Completion is
achieved

Chart 2 - Workflow for Taking Over

Employer to
issue Certificate of
Practical Completion

remedies are available to the

employer in the event the
contractor fails to complete
the works within the stipulated
time of completion.
Such remedies may include the
right to:
(a) issue instructions to the
contractor to expedite the
works
(b) impose LAD
(c) terminate the contract
(d) c a l l o n p e r f o r m a n c e
security
(vii) Completion & Taking Over
The employer may take over
the works when the works have
been completed in accordance
with the contract and the
relevant certificate has been
issued certifying the completion
of the works.
What constitutes completion of
the works may differ from one
project to another. Typically,
substantial completion will
suffice where the employer has
the full and proper beneficial
use of the works with only
minor defects. Other conditions
may also be imposed such
as the issuance of CF and
completion of testing and
commissioning of the works to
the satisfaction of the employer.
(See Chart 2)
(viii) Defects Liability Period
It is common in construction
contracts to require the
contractor to warrant that the
works upon completion are
free from defects and to make
good defects which appear
during the defects liability
period.
It is during the defects liability
period that the employer has the
right to call for the contractors
physical return to the site
after the employer has taken
over the works. The employer
must serve a notification of
defect on the contractor and
the contractor is required to
make good the defect within
a reasonable period.

22

COVER FEATURE

If defects appeared after the

expiry of the defects liability
period, the employers remedy
in most cases is limited to
pursuing a legal claim in
damages.
Remedies available to the
employer in the event the
contractor fails to make good
defects during DLP may include
the right to:
(a) carry out the remedial
works himself or employ
other contractors and
deduct all reasonable
costs incurred from the
retention monies;
(b) determine a reasonable
reduction in contract price
to reflect the diminution
in value of the works by
reason of the defects;
(c) call on the performance
security;
(d) terminate the contract
I n p r a c t i c e , s u c h d e f e c t
liability period clauses also
work to the advantage of the
contractor given that remedial
works can usually be carried
out more cheaply by the
contractor than other 3rd
party contractors.

(ix) Consequences of Default in

Payment
Mere breach of a payment
obligation by the employer does
not constitute a repudiation
under common law, entitling
the contractor to terminate the
contract. Default in payment
must be sufficiently serious to
justify termination.
Courts in Commonwealth
jurisdictions have consistently
refused to imply a right to
suspend works by the contractor
in the event of the employers
default in payment.
To protect the contractors
interest in this regard, clear
provisions affording the right to
the contractor to terminate the
contract and suspend the works
on the basis of the employers
default in payment should be
incorporated.

THE INGENIEUR

(x) Termination
Termination clauses should
set out clearly :
(a) the mechanism within
which either party may
terminate the contract by
giving notice of default,
followed by notice of
termination should the
defaulting party fail
to remedy the default
within requisite period;
(b) e v e n t s o f d e f a u l t
entitling the party to
terminate (distinguish
defaults capable of
being remedied and nonremediable defaults)
(c) r e m e d i e s a v a i l a b l e
to the non-defaulting
party in the event of
termination

Examples of remedies available

to the employer in the event
of termination on the basis of
contractors default:
(a) T h e c o n t r a c t o r m u s t
vacate the site and
remove all equipment
and personnel (including
his sub-contractors)
(b) The employer is entitled
by himself or employ
others to complete the
outstanding works
(c) The contractor is not
entitled to any monies
until after completion of
the outstanding works
by the employer (except
certified sums)
(d) The contractor must assign
to the employer contracts
with his suppliers and
sub-contractors upon
notice by the employer
(e) The contractor must issue
or procure the issuance of
letters of release

Examples of remedies available

to the contractor in the event
of termination on the basis of
employers default:
(a) The contractor to cease
works and vacate the site
and remove all equipment

and personnel (including

his sub-contractors)
(b) The employer is entitled
by himself or employ
others to complete the
outstanding works
(c) The contractor is entitled
to be paid the amount
representing the value of
the works done to-date and
loss and expense suffered
by the contractor resulting
from the termination
(d) T h e c o n t r a c t o r i s
entitled to be returned
any
performance
security furnished to the
employer

(xi) Liquidated and Ascertained

Damages (LAD)
LAD serve as a reasonable
compensation to the employer
for:
(a) the contractors failure to
complete the works within
the stipulated time for
completion;
(b) the contractors failure to satisfy
the performance guarantees
prescribed in the contract
(c) LAD clauses are usually
incorporated to protect the
employers interest, avoid
expense and effort to prove
damages and provide certainty
to the consequences of
breach
(d) NB: LAD clause may also
work to the advantage of the
contractor as it may act as a
ceiling to which the employer
can claim for damages
Section 75 of the Contracts Act
1975:
When a contract has been
broken, if a sum is named in
the
contract as the amount to
be paid in case of breach, or if
the contract contains any other
stipulation by way of penalty, the
party complaining of the breach
is entitled, whether or not actual
damage or loss is proved to have
been caused thereby, to receive
from the party who has broken the
contract reasonable compensation

COVER FEATURE 23

THE INGENIEUR

not exceeding the amount so

named or, as the case may be,
the penalty stipulated for.
See Selva Kumar a/l Murugiah
v Thiagarajah a/l Retnasamy
[1995] 1 MLJ 817
The Federal Court in Selva
Kumar held:
A plaintiff (employer) who is
claiming for actual damages or the
reasonable compensation in an
action for breach of contract must
still prove the actual damages
or the reasonable compensation
in accordance with the settled
principles in Hadley v Baxendale
[1854] 9 Exch 341. Any failure to
prove such damages will result in
the refusal of the court to award
such damages.
Applied in Lion Engineering
Sdn Bhd v Pauchuan Development
Sdn Bhd [1997] 4 AMR 3315

Example Of LAD Clause:

If the Contractor fails to

complete the Works by the
Date for Completion or within
any extended time ... and the
Architect certifies in writing that
in his opinion the same ought
reasonably so to have been
completed, then the Contractor
shall pay to the Employer a sum
calculated at the rate stated in

the Appendix as Liquidated and

Ascertained Damages (LAD) for
the period from the Date for
Completion or any extended
date where applicable to the
date of Practical Completion.
The Employer may deduct such
sum as a debt from any monies
due or to become due to the
Contractor under this Contract.
(Clause 22.1 of PAM 1998)
A n e m p l oye r i s e n t i t l e d
to deduct LAD upon the
certification of non-completion
of the works.
See Lion Engineering Sdn Bhd
v Pauchuan Development Sdn
Bhd [1997] 4 AMR 3315 where
it was stated:
From the plain reading of
Clause 22 of the PAM Contract,
the architect has to certify in
writing the non-completion of
the works before the defendant
is said to be entitled to deduct
LAD. It is appropriate to say that
the certificate of non-completion
is a condition precedent to the
deduction of LAD
See also Bell and Son v CBF
Residential Care and House
Association [1986] 46 BLR
102 where it was held that
as the architect did not issue
a valid Certificate of NonCompletion after fixing the new

PAM

IEM

FIDIC

Performance Bond

EOT strict notice

provisions (CP)

Extension of DLP

LAD Anti-Selva
Kumar Clause

Right to suspend
works upon
payment default

Risk Assumption by
Contractor of
Unforeseen Ground
Conditions

Termination for
Convenience
Direct Payment to
NSC
Objection to NSCs
Nomination

Table 1

Completion date, no LAD could

be deducted.
Contracting out of Section 75
of Contracts Act

E.g. Clause 22.2 of PAM 1998:

The Liquidated and Ascertained
Damages stated in the Appendix
is to be deemed to be as the
actual loss which the Employer
will suffer in the event that the
Contractor is in breach of the
Clause hereof. The Contractor
by entering into this Contract
agrees to pay to the Employer
the said amount(s) if the same
become due without the need of
the Employer to prove his actual
damage or loss.
E.g. Clause 47(1)(a) of ICE
FORM OF CONTRACT:
Where the whole of the Works
is not divided into Sections
the Appendix to the Form of
Te n d e r s h a l l i n c l u d e a s u m
which represents the Employers
genuine pre-estimate (expressed
per week or per day as the
case may be) of the damages
likely to be suffered by him if
the whole of the Works is not
substantially completed within
the time prescribed
(See Table 1)
TOOLS FOR
EFFECTIVE CONTRACT
ADMINISTRATION
Good understanding and
application of the contractual
regime
H a v i n g
a good contract
administrator
Effective supervision and close
monitoring of the works
Adherence to Work Programme
and milestones
Proper issuance of Instructions
and Notices
R e c o r d - K e e p i n g
and
Documentation BEM

24

COVER FEATURE

THE INGENIEUR

Understanding Engineering/
Construction Contracts
By Ir. Harbans Singh K.S, Director, HSH Consult Sdn Bhd

Nature of
construction contracts

n engineering/construction
contract (in short a
construction contract, for
the purposes of this article, is a
contract under which one party 1
(commonly called the contractor)
agrees for valuable consideration
to undertake to carry out works for
another party (commonly called
the employer 2) involving design
(where applicable), fabrication,
erection, alteration, repair or
demolition of structures and/or
installations on a site 3 made
available by the latter. It covers
a whole range of contracts i.e.
from a simple oral agreement to
repair a house roof to a mega
highway contract. Such contracts
are usually termed building
contracts where they relate
to buildings and engineering
contracts when they relate to
infrastructure 4, systems 5 and
equipment installations 6 . The
distinction between these terms
is of no legal significance, and
indeed construction contracts as
a class are regarded by Malaysian
law, not as a separate category
of contracts, but a part of the
general law of contract.
In most cases, the only parties
to a construction contract are the
employer and the contractor 7 .
However, in actual practice, in all
likelihood, a construction project
frequently involves a large number
of contributors or participants
who are contractually interlinked by a matrix of contractual
arrangements. The roles of such
contributors are discussed in this
article.

Forms of
construction contracts
The main matters for which
a construction contract normally
makes provision are, the extent
of obligations undertaken by the
parties and the means by which
those obligations may be varied
from time to time; the time for
completion and interim control
of the progress of the works; the
machinery for payment of the
contractor; supervision of the
works on behalf of the employer;
insurance against a range of risks;
and the remedies available to the
parties in respect of default.
The Malaysian construction
industry relies essentially on a
number of types of forms of
contract; these being notably
the standard forms of contract,
modified standard forms of
contract and ad hoc or bespoke
forms of contract. The principal
standard forms in common
use include those published
by the various institutions e.g.
the Institution of Engineers,
Malaysia and the Pertubuhan
A k i t e k M a l ay s i a . Fo r p u b l i c
sector contracts, the Public
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Construction contracts

Works Department 8 has drafted

a n d p u b l i s h e d a n e m p l oye r
specific standard set of forms of
contract. Lately, the Construction
Industry Development Board
(CIDB) has issued a standard
form of contract for building
works 9. Many of the standard
forms as alluded to hereabove
are adumbrated below. These
forms of contract may be used as
published, but they are frequently
amended. A true standard form
i.e. one which is produced by a
body which is representative of
the industry e.g. the Construction
Industry Development Board
(CIDB), is in principle unlikely
to attract the operation of the
contra proferantum principle 10.

This includes a corporation.

Also called the client or the purchaser or the authority.
Land or place which may be allotted or used for the purposes of
carrying out the work.
Such as highways, airports, harbours, etc.
Inclusive of utilities.
Such as Mechanical, Electrical, Telecommunication, Heavy Engineering,
etc.
In a sub-contract, the main contractor is in effect the employer and
the sub-contractor is in effect the contractor.
or, Jabatan Kerja Raya (JKR).
Which includes a Main Contract Form and one for the Nominated
Sub-Contract.
Union Workshop (Construction) Co. v Ng Chow Ho Construction Co.
Sdn. Bhd. [1978] 2 MLJ 229.

COVER FEATURE 25

THE INGENIEUR

However, the position may well

be different where an employer
or contractor repeatedly contracts
on the basis of standard form
contract containing his own
amendments 11 or one that is selfstyled as a standard form 12.
Other standard forms of
contract in use in the construction
industry include those published
by particular employers e.g.
Tenaga Nasional Berhad, Putrajaya
H o l d i n g s , Te l e k o m M a l ay s i a
Berhad and the like for their
specific projects and a sprinkling
of foreign forms. The latter
include those standard forms
generated by bodies such as the
Joint Contracts Tribunal (JCT),
the Institution of Civil Engineers
(ICE), the International Federation
of Consulting Engineers (FIDIC)
and various international bodies
for use in relation to specialist
works 13.

to exercise certification and

other decision-making powers
which are binding upon both the
employer and the contractor.
Th e p r i n c i p a l c o n t ra c t
administrator has traditionally
been the engineer or architect
responsible for designing the
works, although this is by no
means necessary.
A recent
trend especially in Design and
Build and Management types
of contracts has been for nonprofessionals such as project
managers, construction managers
and the like to undertake the said
role. In addition, many contracts
provide for the appointment of a
quantity surveyor to carry out some
of the administrative functions.

A sub-contractor is one who

carries out part of the contract
works under a contract with the
main contractor who is for all
intents and purposes of the subcontract, the formers employer.
A sub-contractor who supplies
only materials but undertakes no
work or other services under the
sub-contract is commonly called
a supplier. Sub-contractors
and suppliers are referred to
as domestic where they are
selected by and the responsibility
of the main contractor; they are
often referred to as nominated
where they are selected by the
employer, who then instructs the
main contractor to enter into the
relevant sub-contract 18.

TYPES OF CONTRACT
PROCUREMENT

be prepared by his professional

designers 20 and then invites the
contractor to tender on the basis
of the completed design 21. The
contractor builds or manufactures
what the designers have specified.
Since the design element is within
the ambit of the employers
obligations, it accordingly assumes
all responsibility for all design
work undertaken. The contractor
is only answerable for the building
or construction aspects of the
works i.e. the quality of materials
used and workmanship involved
in the contract.

Traditional general contracts

Roles of the parties

In addition to the employer and
the contractor, the operation of a
construction contract commonly
involves a number of other persons
not party to the contract itself 14.
Except where the contractor
undertakes to design as well as to
construct the works, the employer
will usually either undertake
the design departmentally 15 or
commission the design from a
professionally qualified person
e.g. architect or engineer whose
rights and obligations will be
governed by the contract under
which he is engaged 16.
Most sizeable construction
contracts make provision for
the employer to be represented
during the progress of the
works by one or more contract
administrators 17. Such person
or persons may be given authority
to act as the employers agent
in supervising the works and
transmitting information and
instructions to the contractor;
they may also be empowered by
the construction contract itself

Appearing under various labels

such as General contracts,
Employer-design contracts and
Design-bid-build contracts,
these contracts are basically
characterized by the separation
of the design from the production
or manufacture 19 elements of the
contract. Under this contract
procurement route, the employer
causes the design of the works to
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Chester Grosvenor Hotel Co Ltd v Alfred McAlpine Management

Ltd (1991) 56 BLR 115. See also Barnard Pipeline Technology Ltd. v
Marston Construction Co Ltd [1992] CILL 743.
E.g. the JKR or PWD Standard Forms.
Notably the Institution of Electrical Engineers, the Institution of
Mechanical Engineers and the Institution of Chemical Engineers to
name a few.
See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Law and Principles at P10-19.
Example, the Public Works Department by in-house designers.
e.g. BEM Standard Form of Agreement (BEM Form 2000 Edn)
Called S.O., Engineer, Architect, Employers Representative, etc.
depending on the form of contract employed.
Other common categories of sub-contractors include designated (or
named) sub-contractors, selected sub-contractors, specified subcontractors, etc.
i.e. construction or installation.
either, in-house or external consultants.
See JKR 203 & 203A Forms, PAM 98 With Quantities and Without
Quantities Edns. Forms, etc.

26

COVER FEATURE

Another significant characteristic

of this form of procurement is
that a single main contractor 22
undertakes total responsibility to
the employer for all the work
under the contract. In so far
as parts of the work are in fact
carried out by other organisations,
these operate as sub-contractors
to the main contractor and do
not enter into direct contractual
relations with the employer 23.
However, where sub-contractors
are selected by the employer 24,
the main contractors responsibility
is frequently less onerous and a
limited form of contract is entered
between the employer and the
chosen sub-contractor.
Design and build contracts
A design and build contract 25,
also known as a package deal
or turnkey contract 26, is one
u n d e r wh i ch t h e c o n t ra c t o r
undertakes both to design and
to construct the contract works,
which are to be completed
in such a way as to meet the
requirements of the employer 27.
The defining characteristic of
this type of contract is the
combination of most (if not
all) of the essential tasks of a
project e.g. design procurement,
manufacture, fabrication,
production, construction and
management into a single
package. Taken to the extreme,
the arrangement also places
the task of financing, procuring
approvals, complete fitting out,
technology-transfer and the like
on the contractor. Accordingly,
the contractor shoulders full
responsibility and sole liability
for the design and construction
elements of the works in so far
as these are included within
the ambit of his obligations. In
instances of default or breach by
the contractor, the onus is not on
the employer to distinguish the
particular element involved be
this design, quality of materials or
workmanship or the party actually

THE INGENIEUR

culpable. Its redress is solely at

the contractors expense 28.
Selection of the contractor is
normally based on competitive
tendering or negotiations and
payment effected on either an
interim, milestone or lump sum
basis. It is common under such
an arrangement to find that
the supervisory powers of the
employers representative are more
limited than those of a contract
administrator under a traditional
general contract 29. Hence, unlike
traditional general contracting,
the employers representative
plays a limited administrative
role which may be confined to
conducting independent checks
and auditing the contractors
works. The contractor, his subcontractors 30 and professional
advisors are responsible for all
aspects of the works inclusive of
managing the contract up to its
final realization.

Brick laying
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.

Management contracts
A comparatively recent
development on large and complex
projects has been the emergence
of the management contractor,
whose only role is to manage, coordinate and supervise the work
of numerous specialists by whom
the whole of the construction
work is carried out. Under a
modern management contract,
these specialists are employed
as sub-contractors 31 to the main
or management contractor 32 ,
but the latter is relieved of any
responsibility to the employer for
sub-contractor defaults 33. The
underlying philosophy of this
species of contract procurement
is that the management of the
construction process constitutes
a particular expertise which
can be distinctly identified and
accordingly addressed through the
employment of the management
contractor. The latter is for
all intents and purposes not a
builder in the strict sense but an
independent professional providing
essentially a management service.
This common thread runs, in
addition through the construction
management route of contract
procurement.
Compared to traditional general
contracting or design and build
types of contracts, management
c o n t ra c t i n g i s u n f o r t u n a t e l y

Sometimes called a General Contractor or Contractor (in short).

Hence avoiding any privity of contract between the parties.
Where this is so (as frequently in respect of specialist work) the
employer may dictate the terms of the sub-contract as well as the
sub-contractors identity.
or Design and Construct Contract.
Turnkey Contract was defined in High Mark (M) Sdn. Bhd. v Patco
Malaysia Sdn. Bhd. [1984] 28 BLR 129
Such contracts are normally entered into on a lump sum basis.
See Greaves (Contractors) Ltd. v Baynham Meikle and Partners [1975]
4 BLR 56; [1975] 1 WLR 1095, CA.
See PWD Form DB/T 2002 Edn.
Who should ideally of the domestic type although there is a tendency
to include nominated ones.
Popularly called Works Contractors or Trade Contractors.
The management contractor is normally entitled to be reimbursed for
all payments made to sub-contractors in addition to his own fee for
the management services provided.
See JCT Management Contract - JCT MC 87.

COVER FEATURE 27

THE INGENIEUR

deficient in the availability of

standard forms of conditions of
contract. On the local level, no
particular authority, institution
or body has published any such
form. Hence, there is a tendency
to use either bespoke forms or
modified foreign forms such as
JCT MC 87 34 or the ICE New
Engineering Contract 35.

Hybrids

Term contracts

In addition to the main types

of contract strategy described
above, there have also developed
hybrids such as 40:

A term contract is one by

which an employer seeks to make
provision for the carrying out of
certain categories of work (usually
minor works of alteration or
repair and/or maintenance) during
a specified period of time 42 .
Depending upon the terms on
which tenders are invited and
accepted, the resulting legal
relationship may be a contract
which binds the contractor to
carry out whatever work of the
specified description the employer
chooses to order during the
period stated 43 . Alternatively,
the acceptance of a tender may
result in a standing offer by the
contractor, which ripens into a
contract on each occasion that
an order is placed but which may
be revoked at any time 44.
At the moment, there is no
local standard form of conditions
of contract for a term contract
though there is a tendency to
either modify the JCT Standard
Form of Measured Term Contract
(1989 Edition) or to generate
bespoke forms.

Construction management
As aptly named, construction
management contracts are a
sub-set of the general corpus
of management type of
contracts and as such share
common characteristics with
management contracts. These
have metamorphosed recently
into an alternative to the latter
type of contracts and are being
employed mainly on large
and complex projects having
a multiplicity of trades, users
and designers 36. In essence, a
construction management contract
is an arrangement under which
t h e e m p l oye r e n t e r s i n t o a
direct contractual relationship
w i t h e a ch o f t h e s p e c i a l i s t
contractors 37, while at the same
time employing a construction
manager to provide managerial
and supervisory services for
the project. The obligations
undertaken by the construction
manager in such a case depend
upon the terms of the contract by
which it is employed 38.
Owing to the novelty of this
method of contract procurement,
there is a paucity of standard forms
of conditions of contract available
for use by the local construction
industry. The tendency is to
either employ a bespoke form
or to use the JCT CM 94 Form 39,
albeit in a modified form. A
further alternative is to draw up
a series of contracts i.e. between
the employer and firstly the
construction manager, secondly
each member of the design team
and thirdly each specialist trade
contractor.

'Develop and Construct'

contract: This is similar to a
design and build contract, but
a concept design is prepared
by independent professionals
engaged by the employer
before the design and build
contractor is selected 41.
'Design and Manage' contract:
This is similar to a management
contract, but the contractor is
also responsible for detailed
design or for managing the
design process.
'Design and construction
management' contract: This
is similar to construction
management but the construction
manager is also responsible for
detailed design or for managing
the design process.

There are no published standard

form of contracts governing any of
the above hybrids and the local
practice is to employ ad hoc
or bespoke forms customized
for the particular project or
application.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.

44.

Miscellaneous Contracts
Over and above the common
methods of contract procurement
described above, there exist other

JCT Standard Form of Management Contract (1987 Edn).

ICE New Engineering Contract Option F - Management Contract.
See Construction Management Form - Report and Guidance the Centre
for Strategic Studies in Construction, University of Reading [1991].
Also called Trade Contractors or Works Contractors.
See Rosehaugh Stanhope (Broadgate phase 6) plc v Redpath Dorman
Long Ltd. [1990] 50 BLR 69, CA; Beaufort House Development Ltd
v Zimmcor (International) Inc [1990] 50 BLR 91, CA.
The JCT Standard Form of Construction Management (1994 Edition).
See Piyush Joshi Law Relating to Infrastructure Projects at P22-25.
This being basically to avoid the purported shortcomings of the other
forms of Package Deal types of contracts.
The period is usually 1 year but there are instances in local practice
where a longer period of up to 5 years has been employed.
Percival Ltd. v LCC Asylums and Mental Deficiency Committee (1918)
87 LJKB 677. The JCT Measured Term Contract (1989) permits either
party to determine the contract by giving notice, but requires the
contractor to carry out all orders which can be completed before the
expiry of such notice.
Great Northern Rly Co v Witham [1873] LR 9 CP 16.

28

COVER FEATURE

types of contracts that are being

utilized by the local construction
industry. These are essentially
variations of the conventional
methods and have been developed
to address specific uses. Such
contracts include, inter alia, the
following:

Build, operate and transfer 45

contract: this is a type of
a privately financed contract
whereby the contractor
finances the project, designs
it, undertakes the construction,
owns and operates it over the
concession period and on its
expiry transfers the beneficial
ownership of the project back
to the employer 46.
Serial contract: this is a
contract resulting from
a procedure called serial
tendering. Fundamentally, a
serial tender is a standing offer
to carry out work for more
than one project in accordance
with the tender submitted for
the initial project, or based on
hypothetical bills of quantities
representing the average project
of a series 47.
Continuation contract: this is
a more ad hoc arrangement
to extend the scope of the
initial or original contract
beyond its original ambit i.e.
there is no standing offer
to do more work than that
originally envisaged. The
original and continuation
contracts are dealt with
s e p a ra t e l y.
I f a n d wh e n
the latter arises, the original
contract may be used as
a basis for realizing the
continuation contract 48.
Periodic contract: this is
similar to a term contract,
but the execution of work or
supply of goods is required
at intervals, regularly or on
demand rather than being
continuous for a stated time 49.

THE INGENIEUR

Partnering contract: this

contract is in essence an
extension to the normal serial
contract whereby over a predetermined period of time,
the contractor automatically
receives all new contracts
from the employer with
p ay m e n t t o b e m a d e by
reference to an initially
agreed formula 50.
Independent contract: this
is essentially a contract for

SPECIAL PARTIES
The Government
departments
The extent to which contracts
can be made on behalf of the
Federal Government, and the
Governments of the states is
governed by the Government
Contracts Act 1949 52. For the
procedure pertaining to the
enforcement of such contracts and
matters relating to proceedings by
and against the Federal Government
and the Government of the states,

45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.

services whereby the party

undertaking a stipulated task
for an agreed consideration is
free to select his own mode
of doing it. It is neither
under the control or direction
of the other 51.
There are no published local
standard forms of conditions of
contract governing the above
miscellaneous contracts and use
is made of ad hoc or bespoke
forms.

the applicable statutes are the

Government Contracts Act 1949
and The Government Proceedings
Act 1956 53.
In general, a construction
contract entered into on behalf of
the Government 54 is enforceable
by and against the Government.
Accordingly, the Government is
bound by a contract made by a
proper agent acting within the
scope of his authority but not
otherwise 55 . A Government
Officer who enters into a
contract within the scope of his
authority is not liable to be sued

Also called BOT Contract. See also Piyush Joshi Law Relating to
Infrastructure Projects at P22-25.
See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Pre-Contract Award Practice at P132-138.
See The Aqua Group Tenders and Contracts for Building (2nd Edn.)
at P 119.
See Ir. Harbans Singh K.S Engineering and Construction Contracts
Management: Law and Principles at P256.
See Robinson, Lavers, Tan & Chan Construction Law in Singapore
and Malaysia [2nd Edn.] at P428.
See Dispute Avoidance and Resolution Task Force (DART) of the
American Arbitration Association Report on partnering at P86.
E.g. Consultants, Suppliers, etc. See Stevenson Jordan & Harrison v
MacDonald & Evans [1952] 1 TLR 101 and Syed Mubarak bin Syed
Ahmad v Majlis Peguam Negara [2001] 4 MLJ 167.
Rev. 1973 (Act 120)
Rev. 1988 (Act 359). See generally also the Rules of the High Court
1980 Ord. 73 for proceeding by and against the Government.
It does not include municipal councils and public corporations.
Under the Government Contract Act 1949 (Act 120) SS 2 & 3, all
contracts made in Malaysia on behalf of the Government shall, if
reduced in writing, be made in the name of the Government and
signed or authorized as provided for under the Act. Any authorization
under S 2 or 3 shall be in the form set out in the schedule to the
Government Contracts Act 1949 (Act 120).

COVER FEATURE 29

THE INGENIEUR

personally upon any contract

made in that capacity 56. Actions
by or against the Government
are instituted or defended by the
Attorney General 57.
Local authorities
A l o c a l a u t h o r i t y 5 8 m ay
enter into contracts inclusive of
construction contracts necessary
for the discharge of any of its
functions 59. A local authority must
make standing orders with regard
to contracts for the execution of
works or the supply of goods
or materials 60 . However, a
contractor is not bound to inquire
whether the relevant standing
orders have been complied with,
and non-compliance by itself does
not invalidate any contract 61.
A local authority is bound
by any contract entered into
by a committee to which the
necessary powers have been
delegated 62, or by any officer
a c t i n g w i t h i n his actual or
ostensible authority 63. Protection
is afforded to local authorities or
persons acting in the execution
of statutory or other public duties
in respect of any act, neglect or
default done or committed by
the Public Authorities Protection
Act 1948 64.
Companies, corporations and
partnerships
Companies, corporations
and partnerships may enter into
construction contracts like any
other person. In fact, the formalities
required for the execution
o f c o n t ra c t s by c o m p a n i e s ,
corporations and partnerships are
effectively identical to those for
individuals, save for particular
requirements as stipulated in the
respective statutory enactments 65.
A company may choose to make
a contract in writing, under its
common seal or a contract may
be made on behalf of the person
by any person under its express
or implied authority 66.

Contracts made by or on behalf

of a corporation which if made by
private persons would be required
to be in writing, or which would
be valid although made by parol
only, may be similarly made on
behalf of a corporation by any
person acting under its express
or implied authority whether by
seal or not.
For partnerships 67 , when
either party is a member of the

partnership, the partnership

will be liable under the
contract if the contracting
party was acting within the
s c o p e o f h i s a u t h o r i t y 68.
In general a member of a
partnership is regarded as an
agent of the firm and binds
the other partners in making
any contract falling within the
normal course of business of
the firm 69 .

FORMATION OF CONTRACT

ordinary contractual rules of

offer and acceptance 70. Where
a contractor quotes a price for
works in a document headed
estimate this may be treated as
an offer 71. Acceptance must

Negotiated contracts
The formation of construction
contracts is governed by the
56.

57.
58.
59.
60.
61.
62.
63.

64.
65.
66.
67.
68.
69.
70.
71.

Government Contracts Act 1949 (Act 120) S 8 also provides that a

public officer shall be personally liable when he expressly pledges his
personal credit or where he contracts otherwise than as an agent of
the Government. According to S 6, no contracts entered into except
in accordance with the Act shall be deemed to have been made by
the authority of the Government. See also Dunn v Macdonald [1897]
1 QB 401; affd [1897] 1 QB 555, CA; Sim Siok Eng v Government
of Malaysia [1978] 1 MLJ 15.
For the Federal Government, the Attorney General. For the state of
Sabah and Sarawak, the Attorney General of such state and for all
other states, the Legal Advisor of such state.
Defined in Local Government Act 1976 (Act 171) to include any City
Council, Municipal Council or District Council. S13 stipulates that
every local authority shall be a body corporate.
See Local Government Act 1976 (Act 171) S 36(1).
See Local Government Act 1976 (Act 171) S 36(2).
See North West Leicestershire District Council v East Midlands Housing
Association Ltd. [1981] 3 All ER 364, [1981] 1 WLR 1396, CA.
See Local Government Act 1976 (Act 171) S 36(2).
As to the ostensible authority of various officers see A Roberts & Co
Ltd. v Leicestershire County Council [1961] Ch 555, [1961] 2 All
ER 545; Carlton Contractors v Bexley Corpn [1962] 60 LGR 331. Cf
North West Leicestershire District Council v East Midlands Housing
Association Ltd. [1981] 3 All ER 364, [1981] 1 WLR 1396, CA.
Act 198, See also Local Government Act 1976 (Act 171) S124.
See e.g. Companies Act 1965 (Act 125), Partnership Act 1961
(Act 135), etc.
Companies Act 1965 (Act 125) S 35(4).
For a definition of a partnership see Partnership Act 1961 (Act 135)
S 3(1) and Gulazam v Noorazman and Sobath [1957] 23 MLJ 45;
Ratna Ammal & Anor v Tan Chow Soo [1964] 30 MLJ 399.
See Partnership Act 1961 (Act 135) S 7 & 8. See also Pembinaan
Thin Chai Sdn Bhd v Citra Muda Sdn Bhd & Anor [2002] 3
MLJ 107.
See Chan King Yue v Lee @ Wong [1962] MLJ 379; Bannatyne v D&C
Mac Iyer [1906] 1 K.B. 103.
See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Law and Principles at P61 to 81.
Croshaw v Pritchard and Renwick [1899] 16 TLR 45. An inaccurate
estimate which is not an offer may give rise to liability in the tort of
negligence: see J & J C Abrams Ltd v Ancliffe [1978] 2 NZLR 420.

30

COVER FEATURE

be absolute and unqualified 72

and in full conformity with any
requirements laid down in the
offer 73.
Any purported acceptance may,
if it alters the terms of the offer or
introduces new terms, be regarded
as a counter-offer and thus a
rejection of the original offer 74.
Where the parties negotiate by
delivering inconsistent standardform documents to each other,
the usual outcome is that, when
work commences or materials are
supplied, this will be deemed to
constitute acceptance of the last
document delivered 75.
Where a contract is
concluded after the contractor
has commenced the works, it
may easily be concluded that
the parties intended the contract
to govern all the work, including
what has already been done 76.

THE INGENIEUR

is made by deed or given for

consideration 84.
An unsuccessful tenderer is
normally not entitled to recover
the cost of preparing his tender
from the employer 85 , except
where the invitation to tender was
given fraudulently and without
any intention of accepting it in
any event 86. However, a promise

by the employer to pay for such

services may be implied where
the work involved far exceeds
what would normally be required
o f t h e c o n t ra c t o r o r wh e r e
the employer is able to make
profitable use of the information
supplied 87.
Where an employer invites
tenders from contractors to supply
such work or goods as the
employer may require during
a specified period, the legal
relationship which is brought into
existence by the acceptance of a
tender depends upon the terms
of the invitation to tender.
Purchase Orders

Pipe laying

The purchase order system is

one of the methods of contract
procurement based essentially on
the nature of the work and its

Tenders
In general, an invitation to
contractors to submit tenders to
carry out construction works is not
an offer but merely an invitation
to treat 77; the employer is in
consequence under no obligation
to accept the lowest or any of
the tenders received 78. However,
an express undertaking by the
employer to accept the lowest
tender will be binding upon the
submission of a tender which
conforms with any conditions
laid down 79 . Moreover, the
employer may in other cases be
under an implied obligation to
give reasonable consideration
t o a ny t e n d e r s u b m i t t e d i n
accordance with the published
conditions 80.
The unconditional acceptance
of a tender creates a binding
contract. Until such acceptance
occurs, the contractor is free to
withdraw his tender 81 by giving
notice of withdrawal to the
employer 82. This will be so
notwithstanding any undertaking
by the contractor to keep his offer
open 83, unless that undertaking

72.
73.
74.
75.
76.
77.
78.
79.
80.

81.
82.
83.
84.

85.
86.
87.

Section 7(a) Contracts Act 1950 (Act 136).

See Rajeswari Thedshana Murthy v Kin Nam Realty Development Sdn.
Bhd. [1993] 1 MLJ 88.
Hyde v Wrench [1840] 3 Beav. 334, 49 ER 132; Trollope & Colls Ltd.
and Holland, Hannen & Cubitts Ltd. v Atomic Power Construction
Ltd. [1962] 3 All ER 1035.
Chichester Joinery Ltd. v John Mowlem & Co plc. [1987] 42 BLR 100;
Butler Machine Tool Co. v Ex-Cell-O-Corp. [1979] 1 All ER 965.
Trollope & Colls Ltd and Holland, Hannen & Cubitts Ltd v Atomic
Power Constructions Ltd [1962] 3 All ER 1035 [1963] 1 WLR 333.
Defined by Lord Parker as an offer to receive offers in Fisher v Bell
[1961] QB 394.
Spencer v Harding [1870] LR 5 CP 561.
Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986]
AC 207, [1985] 2 All ER 966, HL.
Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council
[1990] 3 All ER 25, [1990] 1 WLR 1195, CA; cf Fairclough Building
Ltd v Port Talbot Borough Council [1992] 62 BLR 82, CA; Hughes
Aircraft Systems International v Airservices Australia [1997] 146 ALR
1.
Section 5(1) Contracts Act 1950 (Act 136).
Section 6 Contracts Act 1950 (Act 136). See also Cook Islands
Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422.
Routledge v Grant [1828] 4 Bing 653; Dickinson v Dodds [1876] 2
Ch D 463.
The Canadian courts have upheld such undertakings despite the absence
of consideration: see R v Ron Engineering Ltd [1981] 119 DLR (3d)
267. Most local employers protect themselves against withdrawal by
requiring the contractor to furnish a tender or bid bond.
Harris v Nickerson [1873] LR 8 QB 286; William Lacey (Hounslow)
Ltd v Davis [1957] 2 All ER 712 at 715.
Richardson v Silvester [1873] LR 9 QB 34.
William Lacey (Hounslow) Ltd. v Davis [1957] 2 All ER 712, [1957]
1 WLR 132; Marston Construction Co. Ltd. v Kigass Ltd. [1989] 46
BLR 109.

COVER FEATURE 31

THE INGENIEUR

value utilized by employers as

distinct from the tender system
discussed above 88. Synonymous
with the quotation system, the
purchase order system is used
principally for minor works 89.
The calling of quotations by the
employer is in the legal sense
tantamount to an invitation to
treat. The contractors submission
of a quotation in response to the
employers request will legally
constitute the making of an offer
or proposal. The mere labeling
of the submission as a quotation
is not conclusive of its legal
effect. The contents will have to
be carefully scrutinized to elicit
the intention of the submitting
party 90. The formal issue of the
purchase order by the employer
constitutes an acceptance of
the quotation (or offer) in the
contractual sense and thereby
perfects the contract.

Letters of intent
A letter of intent is a document
which expresses an intention
to enter into a contract with
the recipient at some time in
the future 91. Its legal effects,
if any, depend upon the true
construction of the words used 92
and the relevant circumstances
between the parties 93 . The
document may have no legal effect
at all 94; it may constitute an offer
of payment which the recipient
is free to accept by performance
o f s p e c i f i e d s e r v i c e s 95; o r
(exceptionally) it may create
an ancillary or interim contract
which will entitle the recipient
to recover his wasted costs if the
intended future contract does not
materialize 96.
Where a letter of intent
does not result in any kind
of contractual relationship, a
recipient who carries out work
in accordance with its terms
may nevertheless be entitled
to payments on a restitutionary
basis 97 e.g. on a quantum meruit
basis.

Consideration
To be enforceable at law,
a promise must be supported
by valuable consideration 98 .
A unilateral declaration is not
enough to make a contract and
that no question of contract under
seal arises unless it fell within
one of the exceptions in Section
26 of the Contracts Act 1950 99.
An undertaking by a contractor to
carry out work where no price is
agreed is generally enforceable,
since consideration exists in the
form of an implied promise by the
employer to pay a reasonable sum.
A promise by an employer to pay
an additional sum in return for the
contractors mere carrying out of
existing contractual obligations is

88.

given without consideration and

is thus unenforceable 100, unless
the court is able to discern
sufficient practical benefit to the
employer from the arrangement 101.
Furthermore, a contractor may
found a claim on an act done
prior to a promise made by the
employer provided the contractor
had done or abstained from doing
something pursuant to the desire of
the employer and not necessarily
in pursuance of a promise to be
made by the latter 102.
Formalities
The general legal position
is that the formation of a
construction contract requires
no particular formalities. Such

See Ir. Harbans Singh K.S. Engineering and Construction Contract

Management: Pre-Contract Award Practice at P511 to 515.
89. E.g. supply items, repair, renovation, maintenance, etc.
90. Croshaw v Pritchard [1899] 16 TLR 45. See also Zain Azahari bin
Zainal Abidin v Wearne Brothers (1983) Sdn Bhd [2002] 1 MLJ
254.
91. Its normal purpose is to reassure the recipient. Cf the letter of comfort
sent by a parent company: Kleinwort Benson Ltd v Malaysia Mining
Corpn Bhd [1989] 1 All ER 785, CA.
92. British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984]
1 All ER 504 at 509-510 per Robert Goff J.
93. Mashaha Navigation Sdn. Bhd. v Palm Oil Products (M) Bhd. & Anor
[1989] 1 CLJ 393, HC.
94. As in Ayer Hitam Tin Dredging Malaysia Bhd. v YC Chin Enterprises
Sdn. Bhd. [1994] 2 MLJ 754, [1994] 2 SCR 90, SC.
95. Turriff Construction Ltd v Regalia Knitting Mills Ltd [1971] 9 BLR 20;
cf Monk Construction Ltd v Norwich Union Life Assurance Society
[1992] 62 BLR 107, CA.
96. Such a contract might also render the recipient liable for defective
performance.
97. British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984]
1 All ER 504, in which the absence of a contract precluded a counterclaim by the employer for alleged delays in performing the work in
question. See also Contracts Act 1950 (Act 136) S71 and Siow Weng
Fatt v Susur Rotan Mining Ltd. [1967] 2 MLJ 118, PC and Wilson
Smithelt & Cape (Sugar) Ltd. v Bangladesh Sugar & Food Industries
Corpn [1986] 1 Lloyds Rep 378.
98. See Section 2(d) Contracts Act 1950 (Act 136) for the definition of
consideration.
99. Per Gill FJ in Guthrie Waugh Bhd. v Malaippan Muthucumani [1972]
2 MLJ 62, FC.
100. Stilk v Myrick [1809] 2 Camp 317; Sharpe v San Paulo Rly Co [1873]
8 Ch App 597.
101. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1,
[1990] 1 All ER 512, CA.
102. Per Gunn Chit Tuan SCJ in South East Asia Insurance Bhd. v Nasir
Ibrahim [1992] 2 MLJ 362, SC; cf Section 2(d) and 26(b) Contracts
Act 1950 (Act 136).

32

COVER FEATURE

a contract may be validly made

orally 103, by conduct or in writing.
Contracts by conduct are difficult
to establish evidentially and are
often encountered where parties
have had a course of dealing
before. A further illustration of
the above, occasions where an
employer makes an offer to a
contractor for the performance of
certain works upon stated terms,

THE INGENIEUR

and without making any express

acceptance, or counter-offer, the
contractor carries out the work 104.
The bulk of construction contracts
are either in writing 105 or
evidenced in writing 106. Written
evidence is also required for a
contract of guarantee 107, under
which the contractual performance
of one of the parties is guaranteed
by a third party.
Architecture drawing

SCOPE OF CONTRACT

commonly required to be
inserted by the parties in an
Appendix to the conditions
before the contract is
executed.

Contract documents
Th e r e a r e n o p a r t i c u l a r
restrictions upon the documents
by which a construction contract
may be formed. It is trite that the
contents of the said documents
must accurately and completely
record the express terms and
conditions of agreement reached
by the parties inclusive of all
rights, duties, obligations and
liabilities. The following is a
brief description of the types of
documents which constitute the
contract documents 108:

Agreement or articles of
agreement: This document 109
describes in general terms the
parties, the contract works and
the price, and evidences the
intention of the parties to be
bound.
Conditions of contract: Detailed
conditions, often in standard
form 110 (with or without
amendments), amplify and
explain the basic obligations
of the parties and lay down
administrative procedures to be
followed during the progress
of the works.
Appendix to the conditions:
Certain information specific
to a particular contract, such
as dates of commencement
or completion and amounts
of liquidated damages, is

Drawings and plans: Drawings

are prepared by whoever is
responsible to the employer for
the design of all or part of the
proposed works, and are the
major vehicle for conveying
the intentions of the designer
to the contractor. Among
other matters, they provide
information as to the shape,
appearance, location and
interaction of the component
parts of the proposed works.

Specifications: This document

amplifies the contract drawings
by providing a verbal
description of such methods as
the scope of work 111, methods
of construction, quality of
finishes and standards of
workmanship 112 to be provided.
It may also specify levels of
performance which individual
items of work are required to
achieve.
B i l l
o f q u a n t i t i e s : Th i s
document itemises in great
detail the contract work as
described in the drawings
and the specifications 113. It
may, but need not constitute
an exhaustive statement of

103. In practice most domestic sub-contracts and minor works are made
orally. The principal problem here is merely from the evidential point
of view in the event of a dispute.
104. Peter Lind & Co. Ltd. v Mersey Docks & Harbour Board [1972] 2
Lloyds Rep. 235; New Zealand Shipping Co. Ltd. v Satterthwaite
& Co. Ltd. [1975] A.C. 154 (P.C.).
105. See Section 10(2) Contracts Act 1950 (Act 136).
106. As required by a particular statutory enactment.
107. Although Section 79 Contracts Act 1950 (Act 136) permits the guarantee
to be also in an oral form.
108. The actual contents varies with the type of contract and the
requirements of the particular form of contract used. For further details
see Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Pre-Contract Award Practice at P536 to 574.
109. Or an informal equivalent such as an exchange of correspondence
indicating offer and acceptance.
110. Sometimes bespoke or ad hoc.
111. For contract based on Drawings and Specifications. See JKR Form
203 (Rev. 10/83).
112. And design where this is part of the contractors scope.
113. Bills of quantities (or B.Q.) may not be required for smaller or less
complex projects where the drawings and specifications themselves
provide sufficient information or in the event the contract is of the
package deal type.

COVER FEATURE 33

THE INGENIEUR

the work which the contractor

undertakes to perform in
return for the agreed price.
Where, as is common, the
bill of quantities is required
by the contract to be drawn
up in accordance with a
particular standard method of
measurement 114, any deviation
from the prescribed method
may entitle the contractor to
claim payment for additional
work 115.

Schedule of rates 116: Where

there are no priced bill of
quantities 117 , a document
setting out rates applicable to
various categories of contract
work may be required for
the assessment of interim
payments, the valuation of
variations or (in a measure and
value contract) the calculation
of the total amount to the
contractor.
Programme or method
statement: Although a contractor
is commonly required to
furnish such documents 118,
they are frequently defined
by the contract in such a way
that there is no obligation on
either party to comply with the
dates or methods contained
in them. In such cases these
documents are regarded merely
as aids in project planning and
coordination.
Miscellaneous documents:
Various other documents may
be required for sufficiency,
clarity and completeness
purposes. These include,
inter alia, documents such
as the contractors tender
submissions, any addenda
and/or clarifications, post
tender submission negotiations,
documents amending the offer
in any way and the like.
Design and build documents:
Certain design and build
contracts replace the

Road pavement

documents listed above with

three alternative documents
comprising the 'Employer's
Requirements issued by the
employer and the 'Contractor's
Proposals' and the Contract
Sum Analysis submitted by
the contractor 119.
Incorporation and priority
of documents
A formal construction contract
usually contains a number of
documents which are incorporated
by reference into the agreement

executed by the parties. The

c o n d i t i o n s o f c o n t ra c t m ay
expressly define the documents
which constitute the contract 120,
and may make provision for the
priority of documents in the case
of discrepancies 121.
Standard sets of contract
conditions are sometimes
incorporated by reference into
contracts which are not formally
executed 122. Such cases can
lead to uncertainty as to which
particular set of conditions is
intended for incorporation 123.
These problems are especially

114. For building works this is currently the Standard Method of

Measurement of Building Works as published by the Institution of
Surveyors, Malaysia and for Civil Engineering is the Civil Engineering
Standard Method of Measurement (CESMM) as published by CIDB,
Malaysia.
115. See C Bryant & Son Ltd v Birmingham Hospital Saturday Fund [1938]
1 All ER 503.
116. Also called Schedule of Unit Rates in some contracts.
117. In contracts based on drawings and specifications or design and build
contracts.
118. See the effect of a tender submission being incorporated in Yorkshire
Water Authority v Sir Alfred McAlpine & Sons (Northern) Ltd. [1985]
32 BLR 114 and Havant Borough Council v South Coast Shipping Co.
Ltd. [1996] CILL 1146.
119. See PWD Form DB/T 2002 Edn.
120. See the second recital and clause 1(a)(i) JKR Form 203A (Rev.
10/83).
121. See clause 4.1 CIDB Standard Form of Contract for Building Works
(2000 Edn.).
122. These may arise from e.g. an exchange of correspondence, or an
informal notification that a tender has been accepted.
123. See e.g. Killby & Gayford Ltd v Selincourt Ltd [1973] 3 BLR 104,
CA; SP Chua Pte. Ltd. v Lee Kim Tah (Pte.) Ltd. [1993] 3 SLR 122.

34

COVER FEATURE

acute in relation to sub-contracts

which purport to incorporate
some or all the provisions of the
main contract 124.
Construction of contract
Where a contract is made in
writing, the meaning to be given
to its express terms is a question
of law. The court will seek to
give effect to the intention of the
parties as expressed in the written
documents 125 . It is settled
law that a written document is
presumed to have embodied all
material terms and conditions
and no extrinsic evidence will
be permitted to contradict, vary,
add to or subtract from the
written terms save for exceptions
permitted by the law 126.
If a written document contains
a n a m b i g u i t y wh i ch c a n n o t
otherwise be satisfactorily resolved,
it will be construed adversely to
the party who proffered it for
execution under the contra
proferantum rule 127. In seeking
t h e m e a n i n g o f a c o n t ra c t ,
w r i t t e n wo r d s a r e n o r m a l l y
presumed to take precedence over
printed words in the event of
inconsistency 128. However, this
presumption can be reversed by a
clear provision in the contract 129.
Furthermore, clauses and words
are to be construed not by itself
standing alone, but in the light
of other words appearing in the
context in which it is used and all
other clauses relating thereby 130.
Where possible, the grammatical
and ordinary sense of words is

Tunnel construction

THE INGENIEUR

to be adhered to 131, unless they

lead to some absurdity or to
some repugnance or inconsistency
with the rest of the document,
in which case the words may
be modified so as to avoid that
absurdity or inconsistency 132.
The construction of a contract
also involves the application of a
host of cannons of construction
and procedural guides 133 including
the following, namely, words as
interpreted must be consistent
with the spirit and letter of the
agreement 134 , typographical
errors may be corrected to give
effect to the parties intention 135,
the contract must be construed
as at the date it was made 136

and aids to interpretation within

the contract document itself be
considered in the construction
process. Where a contract is
partly oral or made by conduct
137
, the ascertainment of the terms
of the contract is a question of
fact 138.

Implied terms
A construction contract may
be subject to certain terms that
are expressly included in the
contract. In seeking to establish
the intention of the parties to a
contract, certain terms need to be
implied 139; these being namely by
custom and usage pertaining to a

124. See e.g. Royden (M) Sdn. Bhd. v Syarikat Pembenaan Yeoh Tiong Lay
Sdn. Bhd. [1992] 1 MLJ 33.
125. See Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 4 MLJ 357;
Shore v Wilson [1842] 9 Cl & F 355, HL; Investors Compensation
Scheme v West Bromiwich Building Society [1998] 1 All ER 98,
HL.
126. See Section 92 Evidence Act 1950 (Act 56); cf Tindok Besar Estate
v Tinjar Co. [1977] 2 MLJ 229 and Foo Sam Ming v Archi Environ
Partnership [2004] 1 MLJ 449.
127. Per Lord Brightman in Kandasami v Mohamed Mustafa [1983] 2 MLJ
85, [1983] 4 PCC 183, PC. For a recent application of this rule see
MBF Finance Bhd v Sim Peng Bee @ Sim Bay Bee & Anor [2003] 5
MLJ 303.
128. Robertson v French [1803] 3 East 130 applied in Bumiputera Malaysia
Berhad Kuala Trengganu v Mae Perkayuan Sdn. Bhd. [1998] 2 MLJ
76; [1993] 1 SCR 385, SC.
129. John Mowlem & Co Ltd v British Insulated Callenders Pension Trust
Ltd [1977] 3 Con LR 64, DC.
130. Per Salleh Abbas FJ in Trengganu State Economic Development
Corporation v Nade Finco Ltd. [1982] 1 MLJ 365, FC.
131. See recent decision in Putra Perdana Construction Sdn. Bhd. v AMI
Insurance Bhd & Ors [2005] 2 MLJ 123 where it was held that ..
where the meaning of the words used was clear, effect must be given
to it. One should not strain the language to find an ambiguity where
none exists.
132. Grey v Pearson [1875] 6 HLC 61 at 106. See also Polygram Records
Sdn. Bhd. v The Search & Anor [1994] 3 MLJ 127, HC.
133. See Ir. Harbans Singh K.S. Engineering and Construction Contracts
Management: Law and Principles at P292 to 299.
134. Lim Yee Teck & Ors v Shell (M) Trading Sdn. Bhd. [1985] 2 MLJ,
265; [1985] 4 PCC 433, PC.
135. Ng Siew Wah & Ors v MAA Holdings Sdn. Bhd. & Anor [1985] 2
MLJ 332, SC.
136. City Investments Sdn. Bhd. v Koperasi Serbaguna Cuepacs Tanggungan
Berhad [1985] 1 MLJ 285, FC, [1988] 1 SCR 122; 4 PCC 709, PC
137. Allen v Pink [1838] 4 M & W 140; J Evans & Sons (Portsmouth) Ltd
v Andrea Merzario Ltd [1976] 2 All ER 930, CA.
138. Smith v Hughes [1871] LR 6 QB 597; British Crane Hire Corpn v
Ipswich Plant Hire Ltd [1975] QB 303 1 All ER 1059, CA.
139. Hamid Abdul Rashid, Dr. v Jurusan Malaysia Consultants (Sued as a
Firm) [1997] 1 AMR 637.

COVER FEATURE 35

THE INGENIEUR

Contracts (2005) Malayan Law

Journal Sdn. Bhd.
I r. H a r b a n s S i n g h K . S .
Engineering and Construction
Contracts Management: PreContract Award Practice LexisNexis.
Joshi, Piyush Law Relating
t o I n f ra s t r u c t u r e P r o j e c t s
Butterworths.
High court, Kuala Lumpur

particular type of transaction

,
the courts based on the intention
of the parties 141 and certain
provisions contained in statute,
or generally by law 142.
There is a paucity of terms
implied by custom and usage and
by statute or law in construction
contracts. However, in respect of
construction contracts, the courts
do make various implications of
which two broad categories may
be discerned 143 . First, there
are those usual terms which the
law implies into all contracts
of a certain type unless the
parties have shown an intention
to exclude or modify them. In
relation to construction contracts,
s u ch i m p l i e d t e r m s i n c l u d e
the employers obligations to
co-operate with and not to
hinder the contractor and the
contractors obligations as to the
standard of work and the time
for completion.
Second, a term may be implied
into an individual contract where
the court finds that the parties
must have intended it to form part
of their contract 144, and where
the transaction would otherwise
be inefficacious, futile and
absurd 145 . The conditions
for such an implication are
that it must be reasonable and
equitable; it must be necessary
to give business efficacy to the
contract, so that no term will
be implied if the contract is
effective without it 146; it must be
so obvious that it goes without
saying 147; it must be capable of
140

clear expression and it must not

contradict any express term of the
contract 148. Where the parties
have contracted on the basis of a
detailed standard form document,
the courts are generally unwilling
to imply terms on this basis, even
where to do so would improve
the contract 149; although there
BEM.
are exceptions 150
REFERENCES
Ir. Harbans Singh K.S. Malaysian
Precedents and Forms Vol. N:
Engineering and Construction

R o b i n s o n , L av e r s , Ta n &
Chan Construction Law in
Singapore & Malaysia (2 nd
Edn.), Butterworths.
S i n n a d u r a i , V. L a w o f
Contract (3rd Edn.), Lexis-Nexis
Butterworths.
The Aqua Group Tenders and
Contracts for Buildings (2 nd
Edn.)
The Centre for Strategic Studies,
University of Reading [1991]
Construction Management
Form Report & Guidance.

140. Hamzah & Yeang Sdn. Bhd. v Lazar Sdn. Bhd. [1985] 1 CLJ 72, FC
and Udachin Development Sdn. Bhd. v Datin Peggy Taylor [1985] 1
MLJ 121, FC.
141. Sababumi (Sandakan) Sdn. Bhd. v Datuk Yap Pak Leong [1998] 3 MLJ
151, FC.
142. E.g. S14 to 16 Sale of Goods Act 1957 (Act 382), S6 Hire Purchase
Act 1967 (Act 212), etc.
143. Liverpool City Council v Irwin [1977] AC 239 at 255,257, HL.
144. Trollope & Colls Ltd v North West Metropolitan Regional Hospital
Board [1973] 2 All ER 260 at 268, HL, per Lord Pearson.
145. Liverpool City Council v Irwin [1977] AC 239 at 263, HL, per Lord
Salmon and Hamid Abdul Rashid, Dr. v Jurusan Malaysia Consultants
(Sued as a Firm) [1997] 1 AMR 637.
146. The Moorcock [1889] PD 64 at P68 applied in Sababumi (Sandakan)
Sdn. Bhd. v Datuk Yap Pak Leong [1998] 3 MLJ 151, FC; [1997] 1
MLJ 587, CA.
147. Reigate v Union Manufacturing Co (Rambottom) Ltd. [1918] 1 KB
592; and Yap Nyo Nyok v Bath Pharmacy Sdn. Bhd. [1993] 2 MLJ
25, HC.
148. BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977]
52 ALJR 20 at 26, PC.
149. See e.g. Greater London Council v Cleveland Bridge and Engineering
Co Ltd [1986] 34 BLR 50, CA (no implied term as to regular and
diligent progress); KC Lim & Associates Sdn. v Pembenaan Udarama
Sdn. Bhd. [1980] 2 MLJ 26, FC (no implied term that developer was
able to carry on the project at or reasonably near the architects
estimated costs), etc.
150. See Bruno Zornow (Builders) Ltd v Beechcroft Developments Ltd
[1990] 51 BLR 16 (implication of fixed date for completion).

36

GUIDELINES

THE INGENIEUR

The Chartered Institute Of Arbitrators

Code Of Professional And Ethical Conduct

Submitted by Ir. Leon Weng Seng

INTRODUCTION
A. This Code of Conduct is published
pursuant to the bye-laws of the
Institute. It sets out the minimum
standards of conduct to be observed
by members when acting as neutrals
in any dispute resolution process.
A breach of the Code amounts to
professional misconduct.
B. This Code of Conduct provides
ethical guidelines and does not form
part of the rules of any dispute
resolution process.
C. This Code of Conduct is not
intended to override or replace any
applicable law or the applicable rules
of any dispute resolution process or
to create new or additional grounds
for judicial review of any dispute
resolution process. In the event that
this Code of Conduct or any part of it
is inconsistent with any applicable law
or the applicable rules of any dispute
resolution process, the member shall
comply with the applicable law and/or
the applicable rules.
D. This Code of Conduct shall be
observed regardless of where the
dispute resolution process is being
conducted. Any additional ethical
standards or legal requirements to
which the member is personally subject
and/or of the place where the dispute
resolution process is being conducted
shall also be observed.
THE CODE
1. Behaviour
1.1 A member shall adhere to all Rules,
Codes, Guidelines, Regulations and
other professional requirements
adopted by the Institute from time
to time.
1.2 A member shall not act in manner
which might reasonably be
perceived as conduct unbecoming
a member of the Institute.
2. Integrity and fairness
2.1 A member shall maintain the
integrity and fairness of the

dispute resolution process and

shall withdraw if illegal conduct
or substantive unfairness is
apparent.

appropriate to the process and

not in a manner which might
reasonably be perceived to be
improper, partial or biased.

3. Conflicts of interest
3.1 A member shall disclose both
before, and shall have a continuing
obligation to disclose during, the
dispute resolution process all
interests, relationships and matters
likely to affect independence
or impartiality, or which might
reasonably be perceived to affect
independence or impartiality.
3.2 After disclosure a member shall
only continue to be involved in the
dispute resolution process with the
express consent of all the parties
to the dispute resolution process.
3.3 If, at any stage, a member
becomes incapable of maintaining
independence or impartiality,
t h e member shall withdraw
immediately.

7. Conduct of process
7.1 A member shall prepare fully
for, and conduct all stages of,
the dispute resolution process
diligently, fairly and in an entirely
impartial and independent manner,
and shall not be influenced by
outside pressure, public opinion,
fear of criticism or self-interest.
7.2 A member shall not conduct the
dispute resolution process in a
manner which may harm the
parties or worsen the dispute.
7.3 A member shall not delegate the
duty to decide to any other person
where the dispute resolution
process calls for a decision to be
made.

4. Competence
4.1 A member shall only accept an
appointment or undertake an
activity if appropriately qualified
or experienced to complete it
promptly, in a professional manner
and without undue influence by
pressure of other work.
4.2 A member shall not make any
representations or allow any
representations to be made about
the members experience or
expertise which are not truthful.

8. Trust and confidence

8.1 A member shall be faithful to and
adhere to the relationship of trust
which exists with those involved
in the dispute resolution process
and, at all times, both during and
after completion of the dispute
resolution process, shall (unless
otherwise agreed by all the parties)
keep confidential all information
acquired during the process.
8.2 A member shall not use any
information acquired during the
dispute resolution process for
personal advantage or adversely
to affect the interests of others.

5. Information
5.1 A member shall ensure that all
involved in the dispute resolution
process are fully and fairly informed
as to the procedural aspects of the
process and what is expected of
them.
5.2 A member shall not provide
legal or technical advice to those
involved in the dispute resolution
process.

9. Fees
9.1 A member shall only charge
fees and expenses which are
reasonable, taking into account
all the circumstances and shall
disclose and explain to the parties
to the dispute resolution process
the basis upon which the fees and
expenses shall be calculated and
charges.

6. Communication
6.1 A member shall only communicate
with those involved in the dispute
resolution process in the manner

10. Applicable law

10.1 A member shall conduct the
dispute resolution process in
accordance with applicable law.

FEATURE 37

THE INGENIEUR

Membendung Kerugian Berkaitan Dengan

Tuntutan Kerugian Dan Perbelanjaan
Tambahan Di Dalam Kontrak Binaan
Oleh Sr. Amran B. Mohd. Majid, Cawangan Kontrak & Ukur Bahan, JKR Malaysia

Sering terdapat persoalan sama ada kontraktor apabila

m e n a n g g u n g ke r u g i a n nya m e m p u nya i t a n g g u n g j awa b
perundangan untuk memastikan kerugian yang dialaminya itu
dibendung akan kesannya. Contohnya sekiranya majikan telah
gagal memberi milikan tapak bina pada tarikh yang telah
diperuntukkan di dalam kontrak binaan, bolehkah kontraktor
terus membawa para pekerjanya, loji-loji serta bahan-bahan
binaan ke tapak bina? Sekiranya kontraktor terus membawanya
ke tapak bina yang mana para pekerjanya serta loji-loji yang
diperlukan itu akan tersadai di tapak bina dan terbiar, maka
persoalan selanjutnya bolehkah kontraktor kemudiannya
menuntut gantirugi ke atas perbelanjaan tambahan yang
dialami itu? Ataupun adakah lebih wajar untuk kontraktor
tidak membawa para pekerjanya itu, loji-loji ataupun bahanbahan binaannya itu setelah mengetahui bahawa milikan tapak
bina tidak dapat diberikan di dalam tempoh yang telahpun
dijanjikan di dalam kontrak binaan tersebut?
Maka ini adalah satu lagi prinsip perundangan ataupun
pertikaian yang sering berlaku apabila kontraktor menuntut
gantirugi daripada majikan apabila berlaku satu kemungkiran
kontrak binaan. Majikan akan mendakwa bahawa kontraktor
mempunyai tanggungjawab untuk membendung kerugiannya
dan tidak mengambil kesempatan di dalam tempoh
kemungkiran dengan meningkatkan nilai gantirugi yang hendak
dituntut oleh kontraktor. Contohnya apabila kontraktor sedang
tekun melaksanakan kerja di tapak bina tetapi oleh kerana
kemungkiran majikan yang tidak dapat memberi milikan tapak
bina dengan sepenuhnya, kemudiannya membiarkan para
pekerjanya serta para loji-loji yang terlibat tersadai di tapak
bina; dengan alasan bahawa kontraktor berhak menuntut
kemudiannya daripada majikan; maka adakah ini adil? Adakah
tuntutan di dalam keadaan tersebut dibenarkan di dalam
perundangan?
Satu lagi persoalan setakat manakah tanggungjawab
kontraktor membendung kerugiannya itu. Adakah perlu
kontraktor membendung kerugiannya tetapi di dalam usahanya
itu akhirnya menyebabkan kontraktor mengalami perbelanjaan
yang lebih tinggi daripada gantirugi yang akan dialaminya
sekiranya usaha untuk membendung kerugian itu tidak diambil
daripada awal?
Bab ini akan cuba mengupas ser ta membincangkan
persoalan-persoalan tersebut di atas dan memperjelaskan
prinsip membendung kerugian sejajar dengan prinsip
perundangan.

rinsip perundangan tuntutan

gantirugi memperuntukkan
tanggungjawab untuk
kontraktor (penuntut) apabila
membuat tuntutan untuk
mengambil langkah-langkah yang
munasabah untuk membendung
kerugian yang dialami. Mahkamah
akan mempertimbangkan peri
tingkah laku kontraktor selepas
berlakunya tindakan kemungkiran
yang menyebabkan kontraktor
mengalami kerugian. Mahkamah
secara lazimnya akan melihat
adakah kontraktor telah mengambil
langkah-langkah yang munasabah
untuk membendung kerugian yang
dialami atau adakah kontraktor
telah mengambil kesempatan
terhadap tindakan kemungkiran
itu dengan membiarkan kerugian
yang dialami itu.
Rujukan boleh dibuat kepada
satu kes masyhur Kabatasan
Timber Extraction Company lwn.
Chong Fah Shing. 1 Di dalam
kes ini perayu adalah pembekal
kayu-kayan kepada responden,
iaitu seorang pengilang kayu.
Di dalam perjanjian tersebut,
pembekal kayu itu perlulah
menghantar kayu-kayan tersebut
ke tempat kilang kayu pengilang
tersebut. Di dalam perjanjian
itu juga memperuntukkan yang
dimaksudkan penghantaran kepada
pengilang, adalah penghantaran di
dalam lingkungan 500m daripada
kedudukan kilang.
Pa d a a w a l n y a s e m u a n y a
berjalan dengan lancar, namun
begitu, terdapat satu kiriman kayukayan telah dihantar melebihi
jarak 500m daripada kilang
1

(1969) 2 MLJ 6

38

FEATURE

oleh pembekal kayu tersebut.

Pengilang telah enggan menerima
kiriman kayu-kayan tersebut.
Pengilang tersebut kemudiannya
telah mendapat bekalan kayukayan yang lain daripada sumber
yang lain.
Pengilang telah menuntut
berkaitan dengan kos tambahan
untuk mendapat bekalan kayukayan tersebut dengan harga
tambahan dengan lingkungan nilai
sebanyak RM16,000. Mahkamah
telah meneliti fakta kes dan
mendapati bahawa pembekal
sebenarnya telah menghantar
kiriman bekalan, namun begitu
jarak penghantaran melebihi
lingkungan 500m yang telah
dipersetujui. Mahkamah juga
mendapati bahawa sekiranya
pengilang mengambil bekalan
tersebut dengan menggunakan
pihak yang lain, maka kos yang
ditanggung adalah sebanyak
RM1,000. Tetapi apa yang berlaku
adalah pengilang telah membeli
bekalan daripada pihak yang
lain. Mahkamah memutuskan
bahawa sepatutnya pengilang
membendung kerugiannya dengan
menggunakan pihak ketiga untuk
mengangkut bekalan kayu-kayan
yang telah dibekalkan tersebut,
dengan hanya nilai RM1,000.
Maka tuntutan pengilang sebanyak
RM16,000 walaupun telah
dibuktikan olehnya telah ditolak
oleh mahkamah.
MacIntyre, HMP, di dalam
penghakimannya antara lain
menyatakan:
Namun begitu, undang-undang
mengenakan satu tanggungjawab
untuk setiap orang yang telah
mengalami kerugian yang telah
disebabkan oleh kemungkiran
kontrak untuk mengambil langkahlangkah yang munasabah untuk
membendung kerugian......... Di
dalam kes ini, ia tidak memerlukan
responden untuk bersusah payah
membelanjakan pembelian kayukayan daripada tempat lain di
mana kayu-kayan itu sudahpun
berlempangan beberapa ratus kaki

THE INGENIEUR

daripada kilang di mana ia hanya

perlu mengambilnya dan apa yang
diperlukan adalah perbelanjaan
tambahan untuk mengangkutnya
ke kilang.........
Maka jelas berdasarkan kes di
atas, undang-undang mengenakan
satu tanggungjawab perundangan
terhadap seorang penuntut untuk
mengambil langkah-langkah yang
munasabah membendung kerugian.
Ia adalah satu tanggungjawab
perundangan yang mana ia tidak
perlu dimaklumkan oleh pihak
yang telah memungkiri kontrak.
Sekiranya majikan telah
memungkiri kontrak apabila gagal
memberi milikan sebahagian
daripada tapak bina, maka loji-loji
yang tersadai sekian lama di tapak
bina perlulah dibawa keluar oleh
kontraktor daripada tapak bina.
Kontraktor tidak boleh membuat
satu dalihan bahawa loji-loji
tidak dibawa keluar atas alasan
tiada arahan daripada P.P kerana
adalah menjadi tanggungjawab
perundangan bagi kontraktor
mengeluarkan loji-loji daripada
tapak bina. Sekiranya kontraktor
telah gagal berbuat demikian,
maka tuntutan kontraktor tersebut
akan menemui kegagalan.

Membendung Kerugian Kos

Bahan-Bahan dan Buruh
S a t u l a g i p e r s o a l a n ya n g
sering timbul adalah tuntutan
kontraktor berkaitan dengan kos
tambahan yang perlu ditanggung
disebabkan kemungkiran majikan.
Contohnya, sekiranya terdapat
kemungkiran majikan di mana
kelewatan P.P memberi arahan
yang sewajarnya akan melibatkan
kontraktor menanggung tambahan
kos disebabkan para pekerjanya
terpaksa menunggu tanpa
membuat apa-apa kerja di tapak
bina. Maka, bolehkah kontraktor
menuntut kos tersebut tanpa
mengambil langkah-langkah yang
sewajarnya untuk membendung
kerugiannya itu?
Untuk menjawab soalan-soalan
seperti itu, rujukan boleh dibuat
kepada kes Hong Leong Co
Ltd. lwn. Pearlson Enterprise
Ltd. 2 Di dalam kes ini plaintif
adalah pembekal bahan batubata kepada defendan yang
merupakan kontraktor untuk
kontrak pembinaan flat. Pembekal
telah didapati memungkiri kontrak
jual beli dengan kontraktor apabila
pembekal meminta bayaran serta
merta sebanyak $85 setiap 1,000

Batu-bata tersadai di tapak bina

2

(1968) 1 MLJ 262 (juga [1965 1968] SLR 736)

Nota: HMP - Hakim Mahkamah Persekutuan

P.P - Pegawai Penguasa

FEATURE 39

THE INGENIEUR

Berkaitan dengan tuntutan

gantirugi para pekerjanya yang
tersadai itu, Ambrose, H, di
dalam penghakimannya seterusnya
menyatakan:

Pekerja binaan

biji batu bata apabila dibekal.

Ini adalah bercanggah dengan
perjanjian jual beli yang mana
kontraktor hanya perlu membuat
bayaran di dalam satu tempoh
kredit.
Lanjutan daripada itu,
kontraktor telah tidak mendapat
bekalan batu-bata. Maka ia
terpaksa mendapat bekalan
d a r i p a d a p i h a k k e t i g a ya n g
mana ini akan mengambil masa.
Tambahan lagi para pekerjanya
telah tidak dapat menjalankan
kerja-kerja binaan di tapak bina
akibat ketiadaan bekalan batu-bata
tersebut selama 69 hari. Maka para
pekerjanya berada di tapak bina
tanpa membuat apa-apa kerja yang
mana ini melibatkan kontraktor
menanggung rugi apabila terpaksa
membayar gaji kepada kepada
para pekerjanya, walaupun kerja
tidak dapat dilakukan oleh mereka.
Maka kontraktor menuntut gantirugi
terhadap pembekal tersebut.
Mahkamah telah meneliti
fakta kes dan mendapati bahawa
pembekal selepas tindakan
kemungkirannya itu menawarkan
semula bekalan batu-bata itu
dengan harga yang lebih rendah
iaitu sebanyak $79 setiap 1,000
biji batu-bata. Kontraktor telah
enggan menerima tawarannya
itu tetapi telah terus mengikat
kontrak dengan pembekal yang
lain yang mana didapati ia adalah
lebih mahal.

Mahkamah kemudiannya telah

memutuskan bahawa kontraktor
seharusnya menerima tawaran
pembekal itu bagi membendung
kerugiannya itu. Mengenai
tuntutan kos tambahan berkaitan
dengan para pekerjanya yang
tersadai di tapak bina selama
69 hari, seharusnya kontraktor
boleh membendung kerugiannya
dengan menghantar mereka
pulang sehinggalah bahan batubata tersebut dapat dibekalkan.
Namun begitu mahkamah
memutuskan bahawa pembekal
sememangnya telah memungkiri
k o n t r a k t e r s e b u t . Te t a p i
memandangkan kontraktor telah
gagal membendung kerugiannya
i t u , m a k a m a h k a m a h h a nya
menganugerahkan gantirugi
nominal sebanyak $10.
Ambrose. H, di dalam
p e n g h a k i m a n n ya i t u a n t a r a
lainnya menyatakan:
Pada hemat saya tawaran
daripada plaintif pada Januari 8,
1965, adalah satu yang munasabah;
yang mana defendan sepatutnya
membendung kerugiannya dengan
menerima tawaran plaintif; dan
tiada kerugian akan ditanggung
o l e h d e f e n d a n s e k i ra nya i a
menerima tawaran tersebut. Maka
dengan itu saya menyimpulkan
bahawa defendan tersebut adalah
tidak berhak kepada apa-apa
gantirugi......

Butiran kedua berkaitan dengan

tuntutan balas sebanyak $11,868
yang dibayar kepada 18 para pekerja
untuk selama 69 hari dengan $172
sehari semasa defendan sedang
didakwa menunggu untuk batubata dibekalkan oleh plaintif.
Pada hemat saya kerugian tersebut
dapat dielakkan. Saya menerima
keterangan yang telah dikemukakan
oleh plaintif bahawa ia adalah satu
amalan di dalam tred binaan
untuk pengikat batu-bata dan
pengangkut batu-bata dihantar
keluar tanpa bayaran sekiranya
ketiadaan kerja untuk mereka oleh
kerana ketidakcukupan bekalan
batu-bata. Maka saya dengan
itu dapat menyimpulkan bahawa
defendan adalah tidak berhak
kepada apa-apa bentuk gantirugi
berkaitan dengan butiran kedua
tuntutan balas tersebut.........
Maka jelas kepada prinsip
kes tersebut, adalah menjadi
t a n g g u n g j awa b p e r u n d a n g a n
kontraktor untuk membendung
kerugiannya walaupun sekiranya
satu tindakan kemungkiran telah
dilakukan oleh majikan. Tindakan
membendung kerugian tersebut
adalah dengan membawa keluar
para pekerja yang didapati tersadai,
ataupun cuba mengagihkan para
pekerjanya di dalam aktiviti kerja
di tapak bina yang masih boleh
dijalankan. Kontraktor perlulah
m e n g e l a k k a n k e r u g i a n ya n g
didakwa ditanggung olehnya itu.
Ini adalah sejajar dengan prinsip
perundangan ekuiti iaitu sesiapa
yang berkehendakkan kepada
keadilan, dia sendiri perlulah
bersikap adil.
Satu lagi prinsip perundangan
yang perlu diambil perhatian
adalah sekiranya kontraktor gagal
membendung kerugiannya itu
dengan sewajarnya, maka tindakan
tuntutan gantiruginya itu akan

40

FEATURE

menemui kegagalan walaupun

setelah dibuktikan bahawa majikan
sememangnya telah memungkiri
kontrak. Ini jelas berdasarkan
kepada prinsip kes tersebut di
atas di mana mahkamah hanya
bersetuju untuk menganugerahkan
gantirugi nominal sebanyak $10.
Kemunasabahan Membendung
Kerugian
S a t u l a g i p e r s o a l a n ya n g
sering timbul adalah apakah yang
dimaksudkan dengan kontraktor
perlu mengambil tindakan
membendung kerugiannya
dengan mengambil langkahlangkah yang munasabah atau
s e wa j a r nya i t u ? A d a k a h i n i
bermaksud kontraktor perlulah
mengambil langkah-langkah
ya n g a k a n m e nye b a b k a n i a
menanggung kerugian yang lebih
banyak? Apa pula keadaannya
apabila kontraktor tidak dapat
mengambil langkah-langkah yang
munasabah untuk membendung
kerugiannya itu?
U n t u k m e n j awa b s o a l a n soalan tersebut rujukan boleh
d i b u a t k e p a d a k e s Pa c i f i c
Electrical Co Ltd lwn. Seng
Hup Electrical Co (S) Pte Ltd. 3
Di dalam kes ini perayu adalah
pembeli lampu-lampu hiasan
dan responden adalah pembekal
lampu-lampu tersebut. Perayu
telah memesan lampu-lampu
hiasan untuk projek pembinaan
sebuah Istana di Negara Brunei.
Pembeli telah mendapati bahawa
pembekal telah lewat sedikit
membekal lampu-lampu hiasan
tersebut daripada tarikh yang
telah dijanjikan. Maka oleh
itu, pembeli kemudiannya telah
membatalkan kontrak jual beli
tersebut.
Namun begitu pembekal
telah mengutus telegram kepada
pembeli bahawa ia akan
menghantar lampu-lampu hiasan
itu melalui pengangkutan udara
dan ia akan tiba tidak lama lagi.
Tetapi pembeli telah enggan
menerima tawaran pembekal

THE INGENIEUR

untuk membekalnya itu di dalam

tempoh yang munasabah itu.
Malah apa yang berlaku adalah
pembeli telah memesan lampulampu hiasan tersebut terus
kepada pengilangnya di Negara
Jerman walaupun bekalan lampulampu itu kemudiannya akan
lambat sampai.
Pembekal kemudiannya telah
terpaksa menerima bekalan serta
membayar lampu-lampu hiasan
tersebut kepada pengilangnya
dan terpaksa menyimpannya di
kedainya itu. Maka pembekal
kemudiannya telah mengambil
tindakan undang-undang gantirugi
terhadap pembeli disebabkan
lampu-lampu hiasan yang telah
enggan diterima oleh pembeli.
Pembeli telah membuat dalihan
bahawa sepatutnya pembekal
membendung kerugiannya
berkaitan dengan lampu-lampu
hiasannya itu dengan cuba
menjualnya kepada orang lain.
Pembekal pula telah menyatakan
bahawa oleh kerana bentuk
lampu-lampu hiasan tersebut
sebenarnya adalah luar biasa
dan hanya sesuai untuk dipakai
di Bangunan Istana atau serupa
dengannya; maka adalah agak
sukar untuk menjualnya atau
mencari pasaran yang lain agar
ia dapat dijual.
Mahkamah telah meneliti fakta
kes dan bersetuju oleh kerana
lampu-lampu hiasan tersebut
adalah unik dan hanya sesuai
untuk dipasang di Bangunan
Istana sahaja, maka oleh itu,
adalah sukar untuk mencari
pasaran alternatif. Mahkamah
juga mendapati bahawa pembeli
telah gagal mengemukakan bukti
secara munasabah bagaimanakah
pembekal dapat membendung
kerugiannya itu. Namun begitu,
oleh kerana pembekal telah tidak
dapat membuktikan kerugiannya
secukupnya, maka mahkamah
tidak dapat memberi keputusan
3

(1978) 1 MLJ 162

Nota: HMR - Hakim Mahkamah Rayuan

u n t u k n i l a i g a n t i r u g i ya n g
boleh dianugerahkannya kepada
pembekal.
Pickering, HMR, di dalam
penghakimannya antara lain
menyatakan:
.Plaintif pada waktu
itutidak lagi mempunyai
obligasi untuk menyimpan
candelier tersebut untuk
membendung kerugiannya; dan
untuk defendan mengemukakan
bukti, sekiranya mereka boleh,
berkaitan dengan usahausaha yang mungkin secara
munasabahnya boleh dibuat di
dalam tempoh interim oleh plaintif
dan apakah hasil kewangan yang
mungkin diperolehi
Leonard, HMR, di dalam
penghakimannya juga antara
lainnya, telah menambah:
.............tiada bukti
dikemukakan oleh perayu untuk
menunjukkan bagaimanakah
responden mungkin, setelah
mengambilkira bentuk candelier
ya n g l u a r b i a s a i t u , b o l e h
m e m b e n d u n g ( k e r u g i a n nya )
dan ia adalah, sudah tentu,
untuk defendan menunjukkan,
bagaimanakah plaintif dapat
membendungnya...............
Maka jelas berdasarkan
prinsip perundangan kes tersebut
di atas, apa yang dimaksudkan
dengan langkah-langkah yang
munasabah atau yang sewajarnya
itu perlulah berdasarkan hal
keadaan pasaran serta satu
penilaian persoalan fakta. Di
d a l a m k e s i n i o l e h k e ra n a
candelier tersebut adalah satu
bentuk yang luar biasa dan
tidak mungkin untuk pembekal
menjualnya semula di pasaran,
maka adalah tidak musanabah
untuknya membendung
kerugiannya itu.

FEATURE 41

THE INGENIEUR

Di dalam keadaan di mana

ia adalah sukar untuk penuntut
membendung kerugian, maka
adalah menjadi tanggungjawab
pihak yang membela daripada
tuntutan
gantirugi
itu
menunjukkan bagaimanakah
penuntut dapat membendung
kerugiannya itu.
Contohnya sekiranya para
pekerja pakar daripada luar
negara yang telah digaji oleh
kontraktor untuk menjalankan
satu tred kerja pakar, maka
adalah sukar untuk kontraktor
menghantar mereka pulang
agar ia dapat membendung
k e r u g i a n nya s e k i ra nya s a t u
tindakan kemungkiran telah
dilakukan oleh majikan yang
m e nye b a b k a n p a ra p e k e r j a
tersebut terpaksa tersadai di
tapak bina. Ini adalah kerana
berkemungkinan besar kontraktor
telah mengikat satu kontrak
pekerjaan dengan para pekerja
pakar itu untuk satu tempoh
yang tertentu; dan juga ia adalah
sukar untuk menghantar mereka
pulang dan juga menggaji
mereka semula apabila tindakan
kemungkiran oleh majikan
berakhir. Maka adalah tidak
adil untuk majikan membuat
d a l i h a n b a h awa k o n t ra k t o r
sepatutnya dapat membendung
kerugiannya dengan menghantar
mereka pulang. Ini adalah
kerana ia adalah sukar dan juga
berkemungkinan adalah lebih
mahal untuk berbuat demikian.
Namun demikian kesemua
kesukaran membendung kerugian
itu perlulah juga dibuktikan oleh
kontraktor apabila ia membuat
tuntutannya.
Maka jelas kontraktor
mempunyai tanggungjawab
perundangan untuk membendung
kerugian yang dialaminya
i t u s e c a ra m u n a s a b a h d a n
s e w a j a r n ya ya n g m a n a i a
tidak akan memudaratkan hak
kontraktor atau ia tidak akan
membebankan lagi tanggungan
kewangannya melebihi apa yang

Projek binaan yang terbengkalai

sepatutnya sekiranya langkah

membendung kerugian itu tidak
diambil.
Membendung Kerugian Yang
Lazim Dan Bukan Berbentuk
Kepakaran Khusus
Adalah menjadi tanggungjawab
kontraktor untuk membendung
kerugian yang secara lazimnya
dapat dielak. Contohnya, sekiranya
k o n t ra k t o r t e l a h m e n g a l a m i
kerugian seperti perbelanjaan
l o j i - l o j i ya n g t e r s a d a i a t a u
buruh-buruh yang mana boleh
dihantar pulang, maka kontraktor
adalah bertanggungjawab untuk
berbuat demikian. Namun
begitu sebagaimana yang telah
dibincangkan tadi, apabila
kontraktor telah mengikat kerja
dengan pekerja buruh yang
mempunyai kepakaran yang
khusus seperti penggajian
buruh di luar negara; ataupun
keadaan di mana sukar untuk
ia membendung, maka secara
munasabahnya kontraktor boleh
menuntut kerugian yang tidak
dapat dibendungnya. Ini lebihlebih lagi di mana kontraktor
apabila cuba membendung
4

(1994) 2 MLJ 353

akan sebenarnya menanggung

lebih lagi perbelanjaan yang
merugikannya.
Untuk memahami lebih lanjut
prinsip perundangan itu tadi,
rujukan boleh dibuat kepada kes
Tansa Enterprise Sdn. Bhd. lwn.
Temenang Engineering Sdn. Bhd.4
Di dalam kes ini plaintif adalah
pembekal batu-bata kepada
d e f e n d a n ya k n i k o n t r a k t o r.
Kontraktor sedang menjalankan
satu kontrak kerja pembinaan
sebuah kilang kain di Johor.
Kontraktor menuntut sebelas (11)
inbois yang telah dikemukakan
kepada kontraktor yang mana
jumlah nilai yang terkumpul
adalah sebanyak RM160,206.52.
Kontraktor telah mengaku hutang
tersebut tetapi tertakluk kepada
tuntutan gantirugi balas di
pihaknya terhadap pembekal.
Kontraktor telah mendakwa
oleh kerana pembekal telah
gagal untuk membekal batub a t a s e b a nya k 7 5 , 2 4 0 b i j i ,
maka ia telah melewatkan kerja
kontraktor. Di antara tuntutan
yang dituntut oleh kontraktor
adalah berkaitan dengan Gantirugi
Tertentu dan Ditetapkan, kos
pengangkutan batu-bata dari

42

FEATURE

sumber yang lain dan kos

pengurusan tapak bina. Namun
begitu pembekal telah memberi
alasan bahawa kegagalannya
untuk membekal batu-bata
tersebut adalah disebabkan
oleh kegagalan kontraktor untuk
membuat bayaran untuk bekalan
batu-bata yang lebih awal
sebelum itu yakni sebanyak
99,520 biji. Maka sebab itulah
pembekal kemudiannya telah
berhenti membuat bekalan batubata kepada kontraktor.
Mahkamah telah meneliti
fakta kes dan bersetuju
bahawa pembekal adalah
tidak bertanggungan terhadap
tuntutan balas yang dibuat oleh
kontraktor. Apabila kontraktor
telah secara terus menerus
gagal membuat bayaran kepada
bekalan-bekalan yang terdahulu,
maka pembekal adalah berhak
untuk tidak membekalkannya dan
membatalkan kontrak bekalan
tersebut. Ini adalah kerana
pembekal bolehlah menganggap
bahawa kontrak bekalan tersebut
sudahpun ditolak oleh kontraktor
berdasarkan tindak-tanduknya
itu.
Di antara perkara-perkara yang
telah diputuskan oleh mahkamah
adalah tanggungjawab kontraktor
untuk membendung kerugiannya
berkaitan dengan bekalan batubata yang tidak dibekalkan oleh
kontraktor. Sepatutnya, kontraktor
boleh mendapat bekalan batubata daripada sumber atau
pembekal lain oleh kerana
bekalan batu-bata bukanlah
satu bekalan yang susah dicari.
Di samping itu, adalah juga di
dapati tidak terdapat kekurangan
bekalan batu-bata di pasaran.
Maka kontraktor boleh mengambil
langkah-langkah yang wajar untuk
membendung kerugiannya. Maka
mahkamah memutuskan bahawa
kontraktor adalah bertanggungan
untuk membayar hutang yang
masih belum berbayar kepada
pembekal bagi bekalan yang
dibuat di peringkat awal.

THE INGENIEUR

Haidar, H, di dalam
penghakimannya antara lain
menyatakan:
Ta m b a h l a g i , w a l a u p u n
sekiranya diandaikan bahawa
plaintif telah memungkiri kontrak,
adalah didapati defendan tidak
membendung kerugiannya.
Bekalan batu-bata sejajar dengan
kontrak adalah berkaitan dengan
b a t u - b a t a b i a s a d a n i a nya
bukanlah satu keluaran yang
khusus yang memerlukan masa
untuk dikilangkan. Tidak terdapat
kekurangan bekalan batu-bata
di pasaran pada waktu itu.
................
Maka, sekiranya defendan
telah membendung kerugiannya
dengan membeli batu-bata
daripada sumber-sumber lain,
defendan tersebut, sebagaimana
yang telah saya nyatakan awal
tadi, sebagai satu fakta, akan
tidak menanggung apa-apa
kerugian..............
Maka jelas berdasarkan
prinsip perundangan kes di atas,
apabila kemungkiran yang telah
berlaku terhadap kontraktor, maka
kontraktor perlulah mengambil
langkah-langkah yang sewajarnya
untuk membendung kerugiannya.
Ini termasuk langkah-langkah
seperti mencari sumber-sumber
lain apabila ia melibatkan
kelewatan bahan binaan; ataupun
di mana apabila kelewatan P.P.
untuk memberi arahan pada
waktu yang wajar maka sekiranya
terdapat para buruh atau lojiloji yang tersadai yang mana
ia tidak boleh diagihkan ke
bahagian-bahagian kerja yang
lain, maka kontraktor mestilah
mencari jalan untuk menghantar
para buruh tersebut ataupun lojiloji yang terlibat pulang. Namun
begitu ini hanya terpakai kepada
para buruh yang mana senang
digaji kembali ataupun pada
loji yang senang disewa kembali
apabila kerja dapat diteruskan
kemudian.

Perlulah diingatkan, kontraktor

dipertanggung-jawabkan untuk
membuktikan perkara-perkara
tersebut di atas berkaitan dengan
langkah-langkah membendung
kerugian yang dialaminya,
sebelum tuntutannya itu dapat
diluluskan. Sebagaimana yang
telah dibincangkan tadi,
s e k i r a n ya k o n t r a k t o r g a g a l
membuktikan langkah-langkah
yang wajar dan munasabah untuk
membendungkan kerugian yang
dialami maka berkemungkinan
b e s a r t u n t u t a n nya i t u a k a n
menemui kegagalan dan ia hanya
akan dibayar gantirugi nominal
sekiranya ia berjaya membuktikan
tindakan kemungkiran kepadanya
oleh majikan.
Rumusan
Berdasarkan perbincangan
kes-kes undang-undang di
Bab ini, bolehlah dirumuskan
bahawa kontraktor mempunyai
tanggungjawab perundangan
untuk membendung kerugiannya.
Ko n t ra k t o r t i d a k l a h b o l e h
membuat dalihan bahawa
sekiranya terdapat loji-loji yang
tersadai di tapak bina akibat
kemungkiran majikan, di mana
P.P. telah tidak mengarahkan
k o n t ra k t o r u n t u k m e m b awa
keluar para buruh serta lojiloji yang tersadai, maka oleh
i t u k o n t ra k t o r a d a l a h t i d a k
bertanggungan dan majikan pula
adalah bertanggungan.
Kontraktor
perlulah
mengagihkan para buruhnya
serta loji-loji yang tersadai di
tapak bina di mana ia perlulah
membawanya keluar tapak
bina dan tidak membiarkannya
tersadai di tapak bina. Kontraktor
juga perlulah mencari alternatifalternatif lain yang difikirkan
munasabah agar kerugiannya
itu dapat dibendung. Namun
demikian langkah-langkah yang
wa j a r s e r t a m u n a s a b a h i t u
perlulah tidak membebankan
kontraktor di mana sekiranya

THE INGENIEUR

FEATURE 43

langkah-langkah itu diambil akan menyebabkan

kontraktor menanggung kerugian kewangan yang
melebihi daripada sepatutnya.
Maka tanggungjawab membendung kerugian
i t u a d a l a h h a nya b e r d a s a r k a n p a d a b u r u h
yang tidak khusus trednya oleh kerana ia lebih
menjurus kepada tred buruh yang khusus dan
tinggi kepakarannya di mana ia adalah sukar
untuk dicari dipasaran; contohnya tred buruh
dari luar negara; ataupun loji-loji yang khusus
yang perlu disewa dari luar negara. Ini adalah
kerana secara lazimnya perjanjian untuk menggaji
mereka ataupun menyewa loji-loji tersebut adalah
berdasarkan untuk tempoh-tempoh yang tertentu
sahaja. Ia juga adalah agak sukar untuk menggaji
mereka kembali apabila keja dapat disambung
semula. Namun kesusahan mengambil langkahlangkah tersebut tertakluk kepada kontraktor
membuktikannya terlebih dahulu.
Akhir sekali sekiranya kontraktor didapati
telah gagal mengambil langkah-langkah yang
sewajarnya, maka tuntutan gantirugi kontraktor
itu akan menemui kegagalan. Maka sekiranya
kontraktor dapat membuktikan kemungkiran di
pihak majikan tetapi gagal membuktikan langkahlangkah membendung kerugian yang sewajarnya
dan semunasabahnya, maka mahkamah akan hanya
menganugerahkan gantirugi nominal (di dalam
perbincangan kes undang-undang adalah di dapati
hanya sebanyak RM10) yang mana hanya bertujuan
untuk mengiktiraf kemungkiran atau pelanggaran
hak terhadap kontraktor. BEM

RUJUKAN
Penghakiman kes: Kabatasan Timber Extraction
Company lwn. Chong Fah Shing (1969) 2 MLJ
6. Malayan Law Journal Bhd.
Penghakiman kes: Hong Leong Co Ltd. lwn.
Pearlson Enterprise Ltd. 1968) 1 MLJ 262 (juga
[1965 1968] SLR 736). Malayan Law Journal
Bhd.
Penghakiman kes: Pacific Electrical Co Ltd lwn.
Seng Hup Electrical Co (S) Pte Ltd. (1978) 1 MLJ
162. Malayan Law Journal Bhd.
Penghakiman kes: Tansa Enterprise Sdn. Bhd. lwn.
Temenang Engineering Sdn. Bhd. (1994) 2 MLJ
353. Malayan Law Journal Bhd.
Salleh Buang & Nordin Torji, 1995. UndangUndang Kontrak Di Malaysia Edisi Kedua. Central
Law Book Corporation Sdn. Bhd.

44

FEATURE

THE INGENIEUR

Construction Disputes
By Ir. Dr Ooi Teik Aun

t is well known that

construction is a high risk
industry. Consequently, more
disputes arise out of construction
contracts than any other contracts.
These disputes are often referred
to arbitration in accordance to
dispute resolution clauses in the
contract/agreement between the
parties.
The essential requirement to
initiate arbitration is to establish
that there exists a dispute
between the parties. Very often
the respondent is the unwilling
party to go for arbitration and
consequently, the process for
arbitration is susceptible to delay
as a result of the respondent
dragging its feet in the proceedings.
Further delay often arises due to
preliminary questions that have to
be addressed before the arbitration
hearings proper can begin.
Even when it is a clear default
by one party, such as nonpayment of a certified claim with
no dispute on the face of it, when
a plaintiff files a suit in court,
the defendant will find reasons to
raise a dispute as to the claim
and the court will more often
than not order that the parties go
for arbitration on the application
of the defendant on the basis of
there being a dispute between the
parties in relation to a contract
with an arbitration clause.
Obtaining a Final Award under
an arbitration is not necessarily
the end of the matter either.
The losing party may apply to
the High Court to remit or set
aside the Award and this often
brings with it a delay in the
successful party enforcing the
Award in Court. The setting
aside application can often buy
the losing party two-three years

before the Court decides on

the enforceability of the Award.
Hence the dispute resolution is
a long drawn process.
Fo r a l o n g t i m e t h e A c t
governing arbitration was the
Arbitration Act 1952. It has
since been replaced by the
new Arbitration Act 2005 which
came into effect on March 15,
2006. The new Arbitration Act
recognizes the need for less court
interference and the need for
finality of the dispute resolution
as soon as possible. For example,
the New Act contains opt-in and
opt-out provisos which allow
parties the opportunity to limit
Court interference in the case of
international arbitrations.
The Construction Industry
Development Board Malaysia
is now working on introducing
statutory adjudication in the
construction contracts in Malaysia.
Under this regime, an adjudicator
in effect plays the role of the
Superintending Officer (SO) in
the traditional contract in the
determination of disputes referred
to him. As in the case of the
SO, an adjudicators decision is
binding upon the parties unless
the decision is disputed and
finally decided by arbitration or
litigation.

Earthworks

Arbitral Institutions
The principal institutions
i n M a l ay s i a t h a t d e a l w i t h
construction disputes/dispute
resolution are:
The Institution of Engineers,
Malaysia (IEM);
The Malaysian Institute of
Architects (PAM);
The Kuala Lumpur Regional
Centre for Arbitration
(KLRCA);
The Malaysian Institute of
Arbitrators (MIArb).

K L R CA a n d e a ch o f t h e
institutions mentioned above have
their own arbitration rules.
Applications for appointment
of arbitrator can be made to any
of the above institutions subject
to agreement by the parties.
Under the new Arbitration Act, by
default of parties agreement with
regards to choice of arbitrator
and the appointing authority, the
KLRCA will be the appointing
authority. The parties are free to
agree on the arbitration rules to
follow.
Risk Assessment
And Allocation
It is important to assess the
risks in the contract between
the parties and allocate them
appropriately so as to minimize the
areas of dispute. Risk in Chinese
means danger and opportunity
and it aptly describes the situation
of risk in construction industry.
Risk is defined in BS4778:
Section 3.1 : 1991 as: - A
combination of the probability,
or frequency, of occurrence of a
defined hazard and the magnitude

FEATURE 45

THE INGENIEUR

of the consequences of the

occurrence.
Where risk cannot be assigned
to either party, it should be
covered by insurance such as
Contractors All Risk Policy,
Public Liability and Workman
Compensation Policies.
The risk of contractor not
performing is covered by
performance bond. However, the
risk of employer not paying is
traditionally not covered by a
similar payment bond.
Areas Of
Construction Dispute
The common areas of construction
dispute can be summarized as
follows:
Unforeseen ground
conditions
Delays in completion
Default in payment
Discrepancies in ground
levels

Unforeseen Ground
Conditions
Unforeseen ground conditions
are described in Clause 12.2 of
the FIDIC COC as: - physical
obstructions or physical conditions,
other than climatic conditions on
the site, which obstructions or
conditions were, in his opinion,
not foreseeable by an experienced
contractor
The limitation is on the word
physical on any unforeseeable

Abandoned project

obstruction or condition and

the words not foreseeable by
an experienced contractor. This
is particularly applicable to
tunnelling activity.
It is important that when such
event occurs, most construction
contracts provide that the
contractor is required to give
written notice immediately to the
engineer or SO who will carry
out investigation to ascertain the
situation.
The PWD 203A Clause 16
on Inspection of Site puts the
burden on the contractor to
carry out detailed pre-contract
subsoil investigation at his own
expense to adequately design and
provide for the temporary works
(Lim, 2004). In such a case, the
contractor should price in the risk
and contingencies accordingly.
Under BS 6031:1981: .no site investigation, however
carefully done, ever examines
more than a very small proportion
of the ground. It is necessary to
check the soil conditions revealed
during progress of the excavations
correspond with those forming
the basis for earthworks design
as interpreted from the site
investigation
In other words, site investigation
is a continuous process, from predesign to construction stage.
Th e a p p r e c i a t i o n o f s i t e
investigation data is very much
d e p e n d e n t o n t h e r e l e va n t
experience of the contractor. It
is important to be able to see
the big picture from the site

investigation results in relation

to the work and the onus must
be on the contractor to assess
the risk associated with the work
and allow for such mitigation if
necessary.
The provision of work method
statement in accordance with the
work programme will help to
minimize the conflict between
the parties. The work method
statement would also help the
contractor go through the thought
process on how he is going to do
the work and the risk involved
in the work and the mitigation if
the risk does occur.
Delays In Completion
Delay in contract completion
is another common area of
dispute. The Employer could be
the defaulting party by making
changes to the works during
the contract. A critical path
programme of work submitted by
the contractor during the tender
stage would be useful here.
If delay in the critical path
result from acts of the Employer,
then the SO/engineer should
grant the extension of time
and associated cost due to the
changes. On the other hand if the
delay is due to the contractors
own fault, then no extension of
time is granted with the result that
a certificate of non-completion
will be issued by the SO/engineer,
at the end of the contract period.
The consequence of such a
certificate of non-completion
is that liquidated damages are
imposed on the contractor.
Delay in completion is in
practice never as straight forward
as it seems. The need by all
parties to review and monitor
progress of work is very important
so as to ensure that any possible
delay is mitigated at the early
stage. In fact it is well known
that delay in project completion
usually brings financial losses and
difficulties to the contractor as

46

FEATURE

THE INGENIEUR

well as the employer. The project

suffers consequently as a result
thereof.
Default In Payment
This is a very common problem
faced by contractors. Employers
default in payment of certified
claim often leads to termination
of the contract by the contractor.
Payment is the lifeblood of a
contractor. No contractor can
withstand the financial strain
caused by irregular progress
payments.
It is a trend for the employer
to call on the Performance
Bond when there is a dispute
between the parties. In the
case of Transfield Project (M)
Sdn Bhd and Anor v Malaysian
Airlines System Bhd, the Employer
called on the performance bond
when the contractor treated nonpayment as a repudiatory breach
of the contract and gave notice for
arbitration of the disputes between
them. This in turn resulted in
an unsuccessful attempt by the
contractor to injunct the employer
from dealing with the proceeds
of the performance bond.
Dispute resolution either by
litigation or arbitration is very
costly and time consuming. Some
form of assurance of payment need
to be worked in to ensure that
payment for undisputed claims
are settled according to the terms
of the contract particularly with
claims of significant amount when
the contract sums of projects are
in billions of Ringgit.
Discrepancies In
Ground Levels
This is another common area of
dispute. The tender for earthwork
is based on the survey levels by
the licensed surveyor engaged by
the employer.
Very often, the contractor
is able to identify prior to
commencement of work that

Land survey

the ground levels are different

from that shown in the tender
drawings.
Unfortunately, the contractor
also then proceeds with the
work for commercial reasons,
for example, there is a fear
that delay in commencing work
might impact on the time for
completing it, especially in
earthworks contracts, where the
contract period is short.
Th i s o f t e n g i v e s r i s e t o
employers taking advantage of
the situation by claiming that any
claim for variations arising from
different ground conditions were
not agreed to by the parties as
contractually provided and that
the contractor is deemed to have
satisfied itself as to the ground
conditions before starting work.
It is therefore prudent that
any discrepancies in drawings
including survey levels must
be brought to the attention of
the engineer in writing and
sufficient time must be given
for the engineer to verify such
discrepancies and that sufficient
provisions to allow for extension
of time under these circumstances
be negotiated and provided for in
the contract.
Conclusions
Construction is a high risk
venture and dispute resolution
therein is a long drawn and costly
process. It is therefore necessary
to minimize and if possible avoid
disputes.
It is important to identify and
assign the risks to the appropriate
party in the contract. When risks

cannot be suitably assigned to the

parties, insurance policies must
be put in place.
Ground conditions will always
be an issue for dispute as ground
conditions which occur naturally
are not homogenous and cannot
be expected to be the same from
its length, breadth and depth.
Discrepancies in ground levels
can be controlled by a joint
survey before commencement
of actual work to avoid later
disputes on the issue.
Th e p r o g r a m m e o f w o r k
and the method statement of
work submitted at the tender
stage should form the basis of
contractors understanding of the
ground condition.
Delay in completion is the
responsibility of the party that
caused it and the consequences
that follow. A carefully monitored
project can help mitigate delay
and control damages.
Default in payment is
increasingly frequent with the
uncertainties in the fast changing
world and the trend of spending
the future money before it is
earned. Provision of payment
bonds by the employer may be
the answer to this problem. BEM
REFERENCES
BS 4778: Section 3.1:1991.
Quality Vocabulary. Part 3
Availability, reliability and
maintainability terms. Section
3.1 Guide to concepts and
related definitions, pp5
BS 6031:1981. Code of Practice
for Earthworks pp10.
CLJ (1999). Transfield Projects
(M) Sdn Bhd & Anor v Malaysian
Arline System Bhd 4 CLJ 827
Lim C. F. (2004). The Malaysian
PWD Form of Construction
Contract. Sweet & Maxwell
Asia. Kuala Lumpur. Malaysia.

48

FEATURE

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Integrated Engineering
Services The ETI Centric
Professional Services
By Ir. Rocky H.T. Wong, Past Chairman ACEM; Chairman IEM pro-ETI Bureau and
Head Commissioner ASEAN Engineers Register

n the United Nations (UN) systems, under

the administration of the UN Statistical office,
there is a Central Product Classification (CPC)
code system. CPC constitutes a complete product
classification covering goods and services.
WTO, being an organ of the UN, has therefore
adopted the CPC code system in all trade agreements;
among which is the General Agreement in Trade
in Services (GATS). Services sector classifications
addressed in the GATS are defined in the so-called
W/120 List or the official WTO documents: - MTN.
GNS/W/120.
Under the WTOs GATS classification, there are
12 services sectors, and they are: Business Services
Communication Services
Construction & related Engineering Services
Distribution Services
Education Services
Environment Services
Finance & Insurance
Health & Social Services
Tourism Services
Recreational, Cultural & Sporting Services
Transport Services
Other Services

CPC 8672 ENGINEERING SERVICES

86721 Advisory and consultative

engineering services
Assistance, advisory and recommendation
services concerning engineering matters.
Included here are the undertaking of
preparatory technical feasibility studies and
project impact studies. Examples are: study
of the impact of topography and geology on
the design, construction and cost of a road,
pipeline or other transportation infrastructure;
study of the quality or suitability of materials
intended for use in a construction project
and the impact on design, construction and
cost of using different materials; study of
the environmental impact of a project; study
of the efficiency gains in production as a
result of alternative process, technology or
plant layout. The provision of these services
is not necessarily related to a construction
project. It may consist, for example, of the
appraisal of the structural, mechanical and
electrical installations of buildings, of expert
testimony in litigation cases, of assistance to
Government bodies in drafting laws, etc.
86722 Engineering design services for the
construction of foundations and
building structures
Structural engineering design services for loadbearing framework of residential and commercial,
industrial and institutional buildings. Design
services consist of one or a combination of
the following: preliminary plans, specifications
and cost estimates to define the engineering
design concept; final plans, specifications and
cost estimates, including working drawings,
specifications regarding materials to be used,
method of installation, time limitations and
other specifications necessary for tender
submission and construction and expert
advice to the client at the time of calling for
and accepting tenders; services during the
construction phase.

Each of the above stated services sectors, in turn,

has various sub-sectors; e.g. under the Engineering
and related construction services sectors, we have
the following:CPC Code Nos.
8671
8672
8673
8674
511 to 518

Sub-sector
Architectural Services
Engineering Services
Integrated Engineering Services
Urban Planning Services
All aspects of
Construction Services
(which are trade & skills driven)

Focussing on engineering related services, we

have the following sub-sectors as defined by the
CPC:-

FEATURE 49

THE INGENIEUR

Exclusion: Engineering services for buildings if

they are an integral part of the engineering design
service for a civil work or production plant or
facility.

86723 Engineering design services for

mechanical and electrical installations
for buildings
Mechanical and electrical engineering design
services for the power system, lighting system,
fire alarm system, communication system and
other electrical installations for all types of
buildings and/or the heating, ventilating, air
conditioning, refrigeration and other mechanical
installations for all types of buildings. Design
services consist of one or a combination of
the following: preliminary plans, specifications
and cost estimates to define the engineering
design concept; final plans, specifications and
cost estimates, including working drawings,
specifications regarding materials to be used,
method of installation, time limitations and other
specifications necessary for tender submission
and construction and expert advice to the client
at the time of calling for and accepting tenders;
services during the construction phase.

86724 Engineering design services for the

construction of civil engineering works
Engineering design services for the construction
of civil engineering works, such as bridges and
viaducts, dams, catchment basins, retaining
walls, irrigation systems, flood control works,
tunnels,
highways
and
street
including
interchanges
and
related
works,
locks,
canals, wharves and harbours works, water
supply and sanitation works such as water
distribution systems, water, sewage, industrial
and solid waste treatment plants and other
civil engineering projects.

Design services consist of one or a combination

of the following: preliminary plans, specifications
and cost estimates to define the engineering
design concept; final plans, specifications and
cost estimates, including working drawings,
specifications regarding materials to be used,
method of installation, time limitations and
other specifications necessary for tender
submission and construction and expert
advice to the client at the time of calling
for and accepting tenders; services during the
construction phase. Included are engineering
design services for buildings if they are an
integral part of the engineering design for a
civil engineering work.

LRT station

86725 Engineering design services for

industrial processes and production
Engineering design services for production
processes, procedures and facilities. Included
here are design services as they relate to methods
of cutting, handling and transporting logs and
logging site layout; mine development layout
and underground construction, the complete
civil, mechanical and electrical mine surface
plant installations including hoists, compressors,
pumping stations, crushers, conveyors and ore
and waste-handling systems; oil and gas recovery
procedures, the construction, installation and/or
maintenance of drilling equipment, pumping
stations, treating and storage facilities and other
oil field facilities; materials flows, equipment
layout, material handling systems, processes and
process control (which may integrate computer
technology) for manufacturing plants; special
machinery, equipment and instrumentation
systems; and any other design services for
production procedures and facilities. Design
services consist of one or a combination of
the following: preliminary plans, specifications
and cost estimates to define the engineering
design concept; final plans, specifications and
cost estimates, including working drawings,
specifications regarding materials to be used,
method of construction and/or installation, time
limitations and other specifications necessary
for tender submission and construction and
expert advice to the client at the time of calling
for and accepting tenders; services during the
construction phase. Included are engineering
design services for buildings if they are an
integral part of the engineering design service
for a production plant or facility.

86726 Engineering design services n.e.c.

Other specialty engineering design services.
Included here are acoustical and vibration
engineering designs, traffic control systems

50

FEATURE
designs, prototype development and detailed
designs for new products and any other specialty
engineering design services.

Exclusion: The aesthetic design of products and

the complete design of products which do not
require complex engineering (e.g. furniture) are
classified in subclass 87907 (Specialty design
services).

86727 Other engineering services during the

construction and installation phase
Advisory and technical assistance services to
the client during the construction to ensure
that construction work is in conformity with
the final design. This involves services provided
both in offices and in the field, such as the
review of shop drawings, periodic visits to the
site to assess progress and quality of the work,
guiding the client and the contractor in the
interpretation of contract documents and any
other advice on technical questions that may
develop during construction.

86729 Other engineering services

Engineering services not elsewhere classified.
Included here are geotechnical engineering
services providing engineers and architects
with necessary subsurface information to design
various projects; groundwater engineering
services
including
groundwater
resources
assessment, contamination studies and quality
management; corrosion engineering services
including inspection, detection and corrosion
control programmes; failure investigations
and other services requiring the expertise of
engineers.

Water supply plant

THE INGENIEUR

CPC 8673 INTEGRATED ENGINEERING SERVICES

86731 Integrated engineering services for
transportation infrastructure turnkey
projects
Fully integrated engineering services for the
construction of transportation infrastructure
turnkey projects. Services included here are
planning and pre-investment studies, preliminary
and final design, cost estimation, construction
scheduling, inspection and acceptance of contract
work as well as technical services, such as the
selection and training of personnel and the
provision of operation and maintenance manuals
and any other engineering services provided to
the client that form part of an integrated bundle
of services for a turnkey project.
86732 Integrated engineering and project
management services for water supply
and sanitation works turnkey projects
Fully integrated engineering services for the
construction of water supply and sanitation works
turnkey projects. Services included here are
planning and pre-investment studies, preliminary
and final design, cost estimation, construction
scheduling, inspection and acceptance of
contracts as well as technical services, such as
the selection and training of personnel and the
provision of operation and maintenance manuals
and any other engineering services provided to
the client that form part of an integrated bundle
of services for a turnkey project.

86733 Integrated engineering services for the

construction of manufacturing turnkey
projects
Fully integrated engineering services for the
construction of manufacturing facilities turnkey
projects. Services included here are planning
and pre-investment studies to address issues
such as the integration of operations, site
selection, pollution and effluent control and
capital requirements; all necessary structural,
mechanical and electrical design services;
production process engineering design services
including detailed process flow diagrams,
general site and plant arrangements drawings,
plant and equipment specifications; tender
specifications; construction scheduling inspection
and acceptance of work as well as technical
services, such as the selection and training
of personnel, the provision of operations and
maintenance manuals, start-up assistance and
any other engineering services that form part of
an integrated bundle of services for a turnkey
project.

52

FEATURE

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86739 Integrated engineering services for

other turnkey projects
Fully integrated engineering services for other
construction works. Services included here are
planning and pre-investment studies, preliminary
and final design, cost estimates, construction
scheduling, inspection and acceptance of
contracts as well as technical services, such as
the selection and training of personnel and the
provision of operation and maintenance manuals
and any other engineering services provided to
the client that form part of an integrated bundle
of services for a turnkey project.

skills or trade centric sub-contractors or builders

who will perform services as listed below:-

From the detailed descriptions of the various subsectors of CPC 8672-Engineering Services as listed
in above, it is clear that the professional services,
so defined, are associated and related to Consulting
Engineering Services, or Engineering Consultancy
Services otherwise known as Engineering Consultancy
Practices(ECP) as defined in the Engineers Act.
On the other hand, the interpretations of the
professional services as detailed for the sub-sectors
of CPC 8673-Integrated Engineering Services -in the
Demand and Supply Equation are as follows:-

CPC Codes

Sub-sectors

511
512

513

515
514
516

517

518

Site preparation
General construction work
for buildings
General construction for
civil engineering
Special trade construction work
Installation, Assembly Work &
Maintenance, and Repair of
fixed structures
Building completion &
finishing work
Renting services related to
equipment for construction
or demolition of buildings or
civil engineering works, with
operators.

For a balanced over-view of the caption, it is also

important to note that in the WTO/GATS definition
of services sub-sectors, we have the following: 86600 Services related to Management
Services
86601 Project management services other
than for construction
Coordination and supervision services of
resources in preparing, running and completing
a project on behalf of the client. Project
management services can involve budgeting,
accounting and cost control, procurement,
planning of timescales and other operating
conditions, coordination of subcontractors
work, inspection and quality control, etc. These
services consist only of management services;
operating staff services are excluded.

(a) The Demand Side:- When a firm of Engineering,

Technology & Innovation, i.e. ETI Services
Provider acts as the Owners Representative
and provides the full spectrum of consultancy
services; the ETI firm will be performing the
duties as the Owners Programme Management
Consultant(PMC) from project definition
and inception through the full spectrum of
professional services till commercial operation
of either the delivered infrastructure or the
facilities or the assets etc. On a slightly lesser
scale, say in the case, when the Owner himself
has already defined and conceptualized the
project, the ETI firm acting as the Owners
Representative will be performing the duties as
the Owners Project Management Consultant
(also PMC) from initial or front-end design
till commercial operation as per foresaid. An
in-house organised aquivalent will be the Project
Management Team, i.e. PMT.

(b) The Supply End:- The firm of ETI Services

Supplier will, when by way of bid-selection
and contracted by Project Owner (who is
being served by a PMC or PMT), will be the
Engineering, Procurement, Construction &
Commissioning ie EPCC Contractor, or otherwise
known as the Turn-key Contractor. Among the
various and varied out-sourced services an EPCC
Contractor will sub-contract out will be those

Exclusions: Construction project management

services are classified in class 8671 (Architectural
services), 8672 (Engineering services) and, for
turnkey projects, 8673 (Integrated engineering
services).
86602 Arbitration and conciliation services
Assistance services through arbitration or
mediation for the settlement of a dispute between
labour and management, between businesses or
between individuals.
Exclusions: Representation services on behalf of
one of the parties in the dispute and consulting
services in the field of labour relations are
classified in subclass 86190 (other legal

FEATURE 53

THE INGENIEUR

advisory and information services), 95110

(Services furnished by business and employers
organizations) and 95200 (Services furnished by
trade unions), respectively.
Comparing the services as defined in the
sub-sectors of CPC 8673 (Integrated Engineering
Services) verses the services of sub-sector CPC
86601 (Project Management Services, other than
for construction), it is clear that whilst the services
under all the sub-sectors of CPC 8673 are those
complete services of a preferred PMC; however,
those of CPC 86601 are more the administrative
and coordination services which only form parts of
the logistic framework of the total delivery system
of a PMC; or that of an EPCC contractor.
However, a closer analysis of CPC 86601 (Project
Management Services, other than for construction),
being a sub-sector of CPC 8660 (Services related
to Management Services) will give rise to the
appreciation that the said services of CPC 86601
relates to, e.g. a project for the launching and
establishing, say, the branding of a product for both
the domestic and international market; or organising
a major event like the wedding of the year and so
on for projects which are non-engineering centric.
Hence, the distinction between CPC 86601 and
CPC 8673!
It is of interest to note that sub-sector CPC 86602
Arbitration and Conciliation Services-as those
rendered in Malaysia are provided by the IEM, i.e.
by IEM members who are experienced engineers
skilled in all aspects of project management.
Remarks & Conclusion

The provision of Integrated Engineering Services
are expanded by one of the two modes relating
to the dynamics of either the Demand Side or
the Supply End of the Project Delivery System
Equation.
On the Demand Side, Integrated Engineering
Services is provided by engineering lead, technology
and innovation driven (i.e ETI centric) team; either
as the Project Management Team (PMT) or the
Project Management Consultant (PMC).
Coming from the Supply End of the Equation,
Integrated Engineering Services or professional
ETI Services, will be supplied by a contractor,
generally referred to as a design/build contractor,
but who should rightly be recognised as an ETI
professional services supplier - the Engineering,
Procurement, Construction and Commissioning
(EPCC) Contractor.
Question: What is the difference between a design/
build contractor and an EPCC Contractor?

Cement factory

Answer: A design/build contractor is usually a skill

or trade driven contractor (defined by the CPC 511
to 518 series) who supplements his delivery system
of the Design element by the out-sourced efforts
of consulting engineers; whilst on the other hand,
an EPCC Contractor is ETI centric or professional
engineering and technology dependent and innovation
driven professional services supplier (CPC 8673) who
supplements his delivery system of the Construction
element by out-sourcing to skill and/or trade based
sub-contractors and vendors.
From whichever side or end of the Equation,
Integrated Engineering Services will be delivered by
a Team; the ETI Team consisting of: E n g i n e e r s ( w i t h r e c o g n i z e d e n g i n e e r i n g
degrees),
Engineering Technologists (with engineering or
engineering technology degrees),
Engineering Assistants (with diplomas in
engineering or engineering technology),
Technicians (with either diplomas or certificates
in engineering)
Not all professional engineers are, or wish to be
consulting engineers. Thus many Malaysian Engineers
(and the same with many ASEAN/Asian Engineers) are
not Principal Submitting Persons. But nevertheless these
corporate members of engineering organizations or
institutions, e.g. the IEM are professional/experienced
engineers who are skilled in the application of
technologies and are innovative in their work and
creations. As such memberships in engineering
organizations of the likes of IEM are engaged in or
associated with engineering services which are defined
by both CPC 8672 and CPC 8673. It will then be
necessary to address the accreditation of a broader
spectrum of qualifications, the levels of training and
experience required, (and where and when necessary)
the competency tests and conformance to international
standard-based regulatory requirements relating to ALL
members of the ETI Team. This will then result in

54

FEATURE

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floating up the acceptable standards-based benchmarks

necessary for the mobility of all the professionals,
skilled personnel and talents engaged in and/or relating
to the complete supply-chain of Engineering Services
(both CPC 8672 and 8673). These related issues
have to be addressed in the event of developing and
framing an MRA on Engineering Services.
Preceeding an MRA, will be the entering into force
of a FTA, which among other issues, must address
the following:
Due to the high capitalization needed to organise
an ETI or Integrated Engineering Services company,
equity participation for commercial presence
(i.e. Mode 3)as will be scheduled in National
Commitments for FTAs, shall not only be limited
to natural persons (as in the case of CPC 8672)
but shall also be opened to legal entities (or
bodies- corporate).
A PMC or EPCC professional ETI service supplier
is usually by agreement or contract, committed
to supplying on schedule and within budget,
deliverables that include, among others, both
functional and operational commitments and
expectations. Permitting Services to obtain local
authorities approvals and necessary licenses and
permits are important and form part of the overall
Project Delivery System. Therefore, knowledge of

the various host countries domestic regulatory

regimes administered and implemented by the
various technical regulators is very important and
crucial to completing the project ahead of or by the
contracted date of commercial operation on, and
also during the Operation and Maintenance (O&M)
life of the plant for latent defect issues.
Therefore in summary the Chapter or the Section
in the FTA dealing with the complete supplychain
of Engineering Services shall address: Investment policies and measures concerning
Commercial Presence of (legal entities) bodiescorporate for ETI based PMC or EPCC Professional
Service Suppliers; and
Alignment or harmonization on the laws and
regulations and other measures forming the
standards-centric regulatory regimes as implemented
by the various technical regulators; starting from
the planning approval, environment impact
assessment, etc. till those governing the operation
and maintenance of plants and facilities.
With all being considered and on balance, it can
be logically concluded that Integrated Engineering
Services, be they provided as PMT/PMC, or supplied
as EPCC are ETI centric professional services. BEM

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56

ENGINEERING NOSTALGIA

THE INGENIEUR

Some Engineering Works In The 60s

Contributed by Ir. Liaw Yew Peng

Jor Main Dam and the

Jor Saddle Dam
The Jor Main Dam and the
Jor Saddle Dam, situated off
the 17 th milestone along the
Tapah/Cameron Highlands road.
Both these dams are of earthfill
construction. The earthfill was
obtained from the surrounding hills
where there was an abundance
of decomposed granite.

Sultan Idris II Power

Station
The interior of the Underground
Sultan Idris II Power Station (Woh
Power Station), situated one
mile from the junction at the
7 th milestone Tapah/Cameron
Highlands road. It is more than
900 ft. below ground level. In
it there are three 50,000 kW
generators driven by vertical shaft
Francis turbines. The sets are
designed to be remotely controlled
from the control room in the
Sultan Yussuf Power Station. Three
generator transformers are also
located underground and these
step up the generated voltage from
11,000 volts to 132,000 volts.
The power is then conveyed in
three 132 kV oil filled cables up
the access tunnel, which is on a
gradient of 1 in 7, to the Woh
Switchyard Building situated near
the access tunnel portal.