FACULTY OF BUILT ENVIRONMENT (FOBE)

BTQS3024 CONTRACT MANAGEMENT TUTORIAL 3

WEEK 3 (2020)

Please answer the following question based on the information from the lecture notes, reference
books or journals.

1. The Contractor submitted a payment application no. 5 on 30 January 2020. The Joint
Valuation was carried on 2 February 2020. The Consultant QS issued the QS’s Payment
Certificate on 10 February 2020. Advise the Architect when the Interim Certificate must
issue and quote the relevant clause using PAM Contract 2018.

Answer:

By clause 30.1, the Architect must issue Interim Certificate within 21 days from the date of
Contractor’s payment application. Thus the latest date for the Architect to issue Interim
Certificate is 19 February 2020.

2. A building contract was executed under PWD 203A 2010. The Contractor submitted
payment application after 30 days of mobilization with the claim work done RM35,000. The
signed Letter of Acceptance also not returned to the S.O.
In the Appendix to Conditions clause 28.1 stated value of works before 1st Interim Certificate
RM50,000.
Based on the above situation., clarify to the S.O. on the issuance of Interim Certificate.

Answer

Clause 28.1 provided, “When the total value of work has reached the sum referred to in
Appendix, the S.O. is only obliged to carry out valuation for issuing the 1 st interim certificate”.
The clause also provided “The SO shall issue an Interim Certificate within 14 days, provided
the Contractor returned the signed Letter of Acceptance.
The Contractor has failed to fulfill the above requirement before the 1 st interim certification,
therefore, the S.O. is not required to issue the Interim Certificate.

3a. Refer to CIDB 2000, explain the different between payment bond and performance security
bond.
3b. The awarded Contract Sum is RM25,863,000. Calculate the amount of performance security
bond.

Answer
3a. Payment bond submitted by the Employer to the Contractor, for the due performance
and observance of the Employer.
The Performance Security Bond submitted by the Contractor to the Employer, for the due
performance, observance and obligations of the Contractor.

3b. Performance security bond = RM25,863,000 x 5% = RM1,293,150

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4. ABC Construction gave HC Architect a written notice on 28 June 2019 to notified the Work
has been practically completed. ABC Construction requested the issuance of Certificate
of Practical Completion. However, found some minor but the Employer can use the
building.
Based on PAM Contract 2018, advice the Architect, whether he should issue the Certificate.
If can issue, what date should the Architect put in the Certificate.

Answer
By clause 15.1, allow for for Practical Completion with MINOR DEFECTS to the works subject
to the Employer having full use of the completed works for their intended purpose and the
Contractor having given their WRITTEN UNDERTAKING to complete and make good all
defects within a reasonable time as specified by the Architect.
T The Architect has to carry out joint physical inspection with the Contractor and
representative of the Employer.
As there still minor defects, the Architect shall issue the CPC within 14 days from the date of
receipt of the Contractor’s written undertaking.

5. A mixed development comprises 4 Tower block, car park podium and 2 levels of retail. In
order to ease the project cashflow, the Employer decided to occupy the retail levels before
the handing over the whole project. The Employer’s decision was not recorder in the Letter
of Award and not planned before.
Brief the Employer on this entitlement and contractual implication to the Contractor based
on PAM Contract 2018.

Answer
The Employer can partially take over the retail levels by refer to clause 16.1(a), partial
completion, provided with the consent from the Contractor.
Contractual implication to the Contractor:
1. The Employer may take possession of the occupied part.
2. The Architect issued the Certificate of Partial Completion.
3. The interim certificate to state the estimated value of the occupied part.
4. Defects liability periods commence from the CPC.
5. Amount for liquidated damages shall reduce accordingly.
6. Retention fund adjust by the ratio reduced of the contract value.

6. By refer to IEM CE 2011, explain 2 scenarios when the retention monies can release to the
Contractor.
If the Contract Sum is RM1,500,000, calculate the quantum to release the retention monies
in each scenario.

Answer

By clause 58.7(4) the Engineer must release half of the Limit of Retention upon issuance of
Certificate of Completion.
By clause 58.7(5) the Engineer must release remaining half of the Limit of Retention upon
issuance of Certificate of Making Good Defects.

Limit of retention = RM1,500,000 x 5% = RM75,000

1st Limit of retention = RM75,000 x 50% = RM37,500
Remaining Limit of retention = RM75,000 x 50% = RM37,500
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