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

Problems or Needs

● Nature of project - A high rise building which requires heavy machineries such as crane

● Scope of works - Mixed development of hotel and shopping complex

● Measure of control by client -Client wants hands-on approach, owns full control of the design and are able to

introduce changes from start to completion of the project

● Accountability - Client is accountable to other stakeholders and board of directors

● Appointment of contractor -Client expects a transparent tendering process as well as to eliminate

non- performing contractors

● Certainty of final cost -Client has flexible budget which allows an uncertain final cost

● Start and completion time -Client prefers an overlapping on design and construction

programme

● Restrictions - Working hours from 8am to 5pm from Monday to Saturday, no work allowed on Sundays and public holidays

● Changes during constructions -Changes are allowed to be made

● Assessment of risks -Risk of time and quality bear by contractor while risk of cost bear by client

● Client -Inexperienced, not a regular player in the industry

● Time constraint -The project need to be completed before start of COMMONWEALTH GAMES to take advantage of tourist

Problems or Needs

MANAGEMENT CONTRACTING

Advantages

● Deal with lesser parties● Time savings● Competitively tendering● Flexibility for changes ● Roles, risk and responsibilities for all

parties all clear

Disadvantages

● Price uncertainty● Required sufficient information

MANAGEMENT CONTRACTINGP r o c u r e m e n t

ADVANTAGES

● Transparent tendering process

● Eliminate non-performing

contractors

● Higher quality

● Reduce Risk

DISADVANTAGES

● Longer tendering process

● Higher prices compared to other

methods

T E N D E R I N G METHODTWO STAGE SELECTIVE TENDERING

Cost Plus Contract with GMP

a variation of cost-reimbursement contract

Type of Contract

Percentage fee or fixed fee or fluctuate fee?

Fixed Fee !

Reasons:- Contractor will not be able to fluctuate the price to claim more- As an incentive for contractor to work efficiently

Type of Contract

Agreement of both parties to share cost savings

G M PGUARANTEED MAXIMUM PRICE

Reduce client’s cost risk However, if the actual cost is higher than GMP, such sum need

to be paid by contractor

Advantages:

Incentive

Allocation of risk

Disadvantages :

Overestimate

Mutual agreement on GMP

G M PGUARANTEED MAXIMUM PRICE

Modified Form of Contract

PAM 2006 (with quantities) ------------------------------- as a basis

Management contractor --------------------------------------- ‘Employer’ & ‘Architect’

Work packages contractors----------------------------------------------builders

CLIENT

MANAGEMENT CONTRACTOR ARCHITECT QUANTITY

SURVEYOR ENGINEERWORK PACKAGES

CONTRACTOR

Management contractor’s obligations- The term ‘architect’ and ‘employer’ refers to Management contractor- To pay such sum to contractor as agreed by both parties stated in the

contract- To instruct WC & issues certificates

Work packages contractor’s obligations

Refers to Clause 1.0 Contractor’s obligations- Refers to work packages contractor’s obligations- Dual obligations to ‘carry out’ and to ‘complete’ Works

Employer’s Commercial Consideration

Q U A L I T Y

Clause 6.1- Standards of works, materials, goods and workmanship● Quality and standards of work materials, goods & workmanship shall be

following the specification in contract● Any discrepancy, MC can instruct him to rectify or demolish such works

Clause 15.4 - DLP ● Obliged to rectify such works within 28 days after receipt of schedule of

defects

Clause 11.6 -Valuation rules- Contractors are not able to claim without site measurement- Thus, MC will not be charged to those undone works

Clause 30.0 -Payment and certificates- If WC fails to submit application to claim, MC has the right to not issuing

Interim certificate

Clause 30.5 -Retention fund- A readily accessible amount of money is on hold in the event of default

arises

C O S T

Employer’s Commercial Consideration

Clause 23.4 - CERTIFICATE OF EXTENSION OF TIME- MC has the right to consider or reject WC’s application of EOT

Clause 23.6 - CONTRACTOR TO PREVENT DELAY- It is WC’s obligations to prevent and to reduce delays

T I M E

Employer’s Commercial Consideration

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

Examples of contractor’s defaults

Brief description of relevant clauses PAM 2006 (as reference)The contractor must empty the site and remove all machineries and personnel that belongs to him

Clause 25.4(a) & (c)

The contractor is not entitled to get any payment even though it is certified until after completion of the outstanding works by the Employer

Clause 25.4(d)

The contractor must assign to the Employer, contracts with his suppliers and sub-contractors upon notice by the Employer

Clause 25.4(a) & (b)

The employer can claim expenses, loss and damages suffered Clause 25.4(d)Employer can employ and pay other person to rectify defect works and such cost will be set off

Clause 15.3 (c)

Examples of rights of Employer

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

Examples of Employer’s defaults

Brief description of relevant clauses PAM 2006 (as reference)The contractor to remove all temporary buildings, equipment, personnel from site (including his sub-contractors)

Clause 26.4(a)

The contractor is entitled to payment of the total value of works executed on site

Clause 26.4(b)

The contractor is entitled for loss and expense suffered Clause 26.4(b)

Examples of rights of Contractor

T H A N K Y O U

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