OCCUPATION SAFETY AND HEALTH IN LOCAL AND INTERNATIONAL STANDARD FORMS OF CONSTRUCTION

CONTRACT

Goh Poi Hung

Bachelor of Engineering with Honours (Civil Engineering)

2009

UNIVERSITI MALAYSIA SARAWAK

R13a

BORANG PENGESAHAN STATUS TESIS Judul:

OCCUPATIONAL SAFETY AND HEALTH IN LOCAL AND INTERNATIONAL STANDARD FORMS OF CONSTRUCTION CONTRACT

SESI PENGAJIAN: 2008/2009 Saya GOH POI HUNG

(HURUF BESAR)

mengaku membenarkan tesis * ini disimpan di Pusat Khidmat Maklumat Akademik, Universiti Malaysia Sarawak dengan syarat-syarat kegunaan seperti berikut:

1. Tesis adalah hakmilik Universiti Malaysia Sarawak. 2. Pusat Khidmat Maklumat Akademik, Universiti Malaysia Sarawak dibenarkan membuat salinan untuk

tujuan pengajian sahaja. 3. Membuat pendigitan untuk membangunkan Pangkalan Data Kandungan Tempatan. 4. Pusat Khidmat Maklumat Akademik, Universiti Malaysia Sarawak dibenarkan membuat salinan tesis ini

sebagai bahan pertukaran antara institusi pengajian tinggi. 5. ** Sila tandakan ( a ) di kotak yang berkenaan

SULIT (Mengandungi maklumat yang berdarjah keselamatan atau kepentingan Malaysia seperti yang termaktub di dalam AKTA RAHSIA RASMI 1972). TERHAD (Mengandungi maklumat TERHAD yang telah ditentukan oleh organisasi/ badan di mana penyelidikan dijalankan). a TIDAK TERHAD Disahkan oleh (TANDATANGAN PENULIS) (TANDATANGAN PENYELIA)

Alamat tetap: NO.154, Lorong 15 F Jalan Arang, Ir. Ting Sim Nee (Nama Penyelia) 93250 Kuching, Sarawak.

Tarikh: 06 APR 2009 Tarikh: 06 APR 2009

CATATAN * Tesis dimaksudkan sebagai tesis bagi Ijazah Doktor Falsafah, Sarjana dan Sarjana Muda. ** Jika tesis ini SULIT atau TERHAD, sila lampirkan surat daripada pihak berkuasa/organisasi

berkenaan dengan menyatakan sekali sebab dan tempoh tesis ini perlu dikelaskan sebagai SULIT dan TERHAD.

The following Final Year Project:

Title: Occupation Safety and Health in Local and International Standard Forms of

Construction Contract

Author: Goh Poi Hung

Metric: 14069

has been read and certified by

____________________ 06 Apr 2008 Ir. Ting Sim Nee Date Supervisor

OCCUPATION SAFETY AND HEALTH IN LOCAL AND INTERNATIONAL STANDARD FORMS OF CONSTRUCTION

CONTRACT

GOH POI HUNG

This project is submitted to Faculty of Engineering,

University Malaysia Sarawak in partial fulfillment of the requirements for the

Degree of Bachelor of Engineering with Honours. (Civil Engineering) 2009

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ACKNOWLEDGEMENT

First and foremost, I would like to express my gratitude to my final year project

supervisor, Ir Ting Sim Nee, for her continuous guidance and constructive comments

throughout the preparation of this project.

Apart from that, I would like to sincerely express my appreciation to those

organisations and individuals who spared their valuable times to accept the interview.

I would like to thank my family members for their greatest supports and

encouragements during this project.

Lastly, my appreciation also dedicated to my roommates and friends who offered a

helping hand when time is need.

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ABSTRAK

Kerajaan Malaysia, badan berkuasa, serta institusi yang berkaitan telah berusaha

untuk melaksanakan keselamatan dan kesihatan pekerjaan dalam industri pembinaan

untuk mengurangkan kadar kemalangan di samping meningkatkan keadaan kerja

yang selamat dan sihat untuk pekerja dan orang awam. Walau bagaimanapun,

keberkesanan usaha tersebut masih tidak menentu. Matlamat kajian ini adalah untuk

mengkaji syarat-syarat dalam klausa kontrak pembinaan tempatan dan luar negara

yang berkaitan dengan amalan keselamatan dan kesihatan perkerjaan. Borang yang

akan dikaji adalah seperti Borang JKR 203A, Borang PAM 2006 (dengan kuantiti),

Lembaga Pembangunan Industri Pembinaan 2000, dan AS(2124 – 1992). Klausa

yang dikaji akan dibahagikan kepada empat (4) aspek, iaitu syarat jaminan, syarat

insurans, syarat pekerja, dan akhir sekali ialah syarat keselamatan. Empat aspek ini

akan dikaji dengan lebih terliti dari segi keseluruhan, kelengkapan, tatacara, dan

kesamaan keadilan. Temuramah dijalankan sebagai sampingan bagi mendapat

pendapat para perserta berdasarkan pengalaman mereka untuk mengkaji

keberkesanan syarat-syarat yang tersedia ada demi mengurangkan kebahayaan di

tempat kerja. Diharapkan gambaran yang lebih jelas tentang tempat kerja di tapak

pembinaan yang sebenar boleh didapati, dan mengakui bagaimana borang kontrak

dapat membekalkan apa yang diperlukan untuk OSH, serta mencari cara-cara

menggunakan borang kontrak pembinaan sebagai langkah untuk memperbaik amaln

keselamatan dan kesihatan perkerjaan di tapak bina tempatan.

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ABSTRACT

The Malaysia government and other authoritative bodies or institutions have put in

substantial amount of effort in the implementation of Occupational Safety and Health

(hereafter, OSH) in the local construction industry so as to minimize the rate of

accidents as well as enhancing a safe and healthy working environment to the

workers and the public. However, the effectiveness of such efforts is yet to be

confirmed. The aim of this research is to study the construction contract clauses in

relation to the current OSH practice in the local and international Standard Forms of

Construction Contracts, namely the PWD Form 203A (Rev.2007), PAM Contract

2006 (With Quantities), CIDB 2000 and AS (2124 – 1992). The clauses are classified

into four (4) main aspects that are the indemnity provision, insurance provision,

workmen provision and lastly safety provision. Comparisons are made for these four

(4) aspects in detail as well as their comprehensiveness, completeness, procedures,

and equal provision. Interviews are also conducted to obtain opinions from the local

construction participants to learn their perceptions of the OSH practice and Standard

Forms of Construction Contracts. Through this research, it is hoped that a clearer

picture of what the real construction workplace needs or lack of can be obtained; and

to acknowledge to what extent our contract forms had catered for OSH; and to

further find ways to use construction contract forms as a mean to improve the

insufficiency of OSH practice in our local construction industry.

v

LIST OF TABLES

TABLES Page

1 Comparisons of Indemnity Provisions 50

2 Comparisons of Insurance Provisions 65

3 Comparisons of Insurance for Workmen Provisions 76

4 Comparisons of Safety Provisions 86

vi

LIST OF FIGURES

FIGURES Page

1 Annual Accident Chart for the Construction Industry 11

2 SOCSO Annual Fatality Chart for Construction

Industry 11

3 Occupation’s fatalities in years 2008 13

4 Methodology Diagram 34

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ABBREVIATION

ACE – Association of Consulting Engineers

AIA – American Institute of Architects

AIHA – American Industrial Hygiene Association

AS – Australian Standard Conditions of Contract

CFMEU – Construction Forestry Mining and Energy Union

CIDB – Construction Industry Development Board

CMGD – Certificate of Making Good Defects

DOSH – Department of Safety and Health

FIDIC – French for the International Federation of Consulting Engineers

FCEC – Federation of Civil Engineering Contractors

GDP – Gross Domestic Product

JCT – Joint Contract Tribunal

ICE – International Civil Engineering

NEC – New Engineering Contract

NIOSH – National Institution Occupational Safety and Health

viii

NOHSC – National Occupational Health and Safety Commission

OSH – Occupational Safety and Health

OSHA – Occupational Safety and Health Act

PAM – Pertubuhan Arkitek Malaysia

PWD – Public Work Department

RIBA – Royal Institute of British Architects

SOCSO – Social Security Organization

TGC – Traditional General Contracting

UK – United Kingdom

TABLE OF CONTENTS

Page

Acknowledgement ii

Abstrak iii

Abstract iv

List of Table v

List of Figures vi

Abbreviation vii

CHAPTER 1 INTRODUCTION

1.1 Construction Contract 1

1.2 Types of Local and International Construction

Contract Forms 3

1.2.1 PWD Form of Contract 3

1.2.2 PAM Form of Contract 4

1.2.3 CIDB Form of Contract 5

1.2.4 British Standard Forms 5

1.2.5 American Form of Contract 6

1.2.6 Australian Standard General Condition of

Contract (AS4000-1997) 6

1.3 Occupational Safety and Health (OSH) 7

1.3.1 Occupational Safety 7

1.3.1.1 Safety Performance Measurement 8

1.3.2 Occupational Health 9

1.4 Accidents 10

1.4.1 Injury 12

1.5 An Overview of OSH Issues in Malaysia and

Australia Construction Industry 12

1.6 Problem Statement 15

1.7 Hypothesis 18

1.8 Aim and Objectives 18

1.9 Scope and Limitation of Study 19

CHAPTER 2 LITERATURE REVIEWS

2.1 Overview of the Background of Occupation Safety

and Health Practices in Malaysia 21

2.2 Overview of the Background of Occupational Safety

and Health Practices in Australia 24

2.3 Methods to Improve Occupational Safety and Health

Practices in the Construction Industry 27

2.3.1 Define and Allocate Liability for

the Cost of Risks 27

2.3.2 Incorporation of OSH Requirements into

Contract Specification 28

2.3.3 OSH Performance Criteria in Tender

Evaluation / Awarding Contract 30

2.3.4 OSH Contract Management 31

CHAPTER 3 METHODOLOGY

3.1 Generally 34

3.2 Literature Review 35

3.3 Research Methodology 36

3.4 Standard Forms of Construction Contract Clause

by Clause study 36

3.5 Interviews 37

3.6 Analyze Data 39

3.7 Conclusion and Recommendation of Research 40

CHAPTER 4 ANALYSIS AND RESULTS

4.1 Generally 41

4.2 Indemnity Provisions 42

4.2.1 PWD Form 203A (Rev. 2007) 42

4.2.2 PAM Contract 2006 (With Quantities) 45

4.2.3 CIDB 2000 46

4.2.4 AS (2124-1992) 49

4.2.5 Summary of Indemnity Provision 50

4.3 Insurance Provisions 52

4.3.1 PWD Form 203A (Rev. 2007) 52

4.3.2 PAM Contract 2006 (With Quantities) 55

4.3.3 CIDB 2000 58

4.3.4 AS (2124-1992) 60

4.3.5 Summary of Insurance Provision 65

4.4 Insurance for Workmen Provisions 68

4.4.1 PWD Form 203A (Rev. 2007) 68

4.4.2 PAM Contract 2006 (With Quantities) 71

4.4.3 CIDB 2000 73

4.4.4 AS (2124-1992) 75

4.4.5 Summary of Workmen Provision 76

4.5 Safety Provisions 78

4.5.1 PWD Form 203A (Rev. 2007) 78

4.5.2 CIDB 2000 79

4.5.3 AS (2124-1992) 81

4.5.4 Summary of Insurance Provision 86

4.6 Summary of Indemnity, Insurance,

Insurance for workmen, and safety provisions. 87

4.7 Interviewee Response 88

4.7.1 Monetary Issue 90

4.7.2 Insufficient Clauses in Construction Contract

Forms 91

4.7.3 High Turnover Rate of Works 93

4.7.4 Lack of Education 93

4.7.5 Government’s Inefficiency 94

CHAPTER 5 DISCUSSION

5.1 Generally 95

5.2 Indemnity Provision Aspect 95

5.3 Insurance Provision Aspect 97

5.4 Insurance for Workmen Provision Aspect 98

5.5 Safety Provision 100

CHAPTER 6 CONCLUSION AND RECOMMENDATION

6.1 Generally 102

6.2 Research’s Findings 102

6.2.1 Finding 1: Occupational Safety and Health is

important and need to be practiced widely 103

6.2.2 Finding 2: Safety Provision is insufficient I

the local Standard Forms of Contract 103

6.2.3 Finding 3: Each Standard Forms of

Construction Contract has its strength

and weakness 104

6.2.4 Finding 4: CIDB 2000 Form is not commonly

used despite its well drafted clauses 104

6.2.5 Finding 5: Lack of OSH practice is not

constituted by the insufficiency of Safety

and Health clauses in the Standard

Forms of Construction Contract 105

6.3 Recommendation 105

6.4 Conclusion 109

6.5 Further Research 110

BIBLIOGRAPHY / REFERENCES 111

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CHAPTER 1

INTRODUCTION

1.1 Construction Contract

According to Ashworth (1998), contract is defined as a legally binding

agreement made between two or more parties, by which rights are acquired by one or

more acts or forbearances on the part of the other or others. Hinze (2001) declared

that once construction contract had been signed, construction operations could start

with guidance provided by the contract documents. In an engineering construction

contract, the constituent clauses of Conditions of Contract are written with great care

so as to be clear, precise, unambiguous, and also allocates risks and duty fairly

between the parties (Williams, 1992).

According to Singh (2002), the purpose and function of the contract documents

are to serve as the primary evidence of agreements and legal relationships between

the parties involved; express the terms and conditions mutually agreed by the parties

involved; provide descriptions and details of the scope of work undertaken by the

contractor, state the amount to be paid by the employer to the contractor in

accordance with the agreements; and also outline the administrative procedures to be

fulfilled by the parties involved.

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According to Bockrath (2000), standard forms with general conditions can

actually save time and expenses when preparing the contract documents and it is

usually to avoid omissions and mistakes. Moreover, standard forms with general

conditions are also to allocate the risk fairly between the parties. The risk will be

shared proportionally between the contracted parties which will eliminate contractor

from increasing his premium (Singh, 2002).

Malaysian construction contract documents usually comprises of Form of

Tender, Letter of Acceptance, Conditions of Contract, Preambles, Contract Drawings,

Bills of Quantities or Schedule of Rates, Specification, Treasury Instruction and

other related documents (Williams, 1992).

One of the important documents in forming an engineering construction

contract is Conditions of Contract. In an engineering construction contract, the

constituent clauses of Conditions of Contract are generally written with great care so

as to be clear and precise. It is because the Conditions of Contact constitute much of

the legal basis on which any court official decision would be made in the event of a

dispute (Williams, 1992).

The Conditions of Contract set out the legal and contractual constraints

applying to the contract and these represent the main operative provisions in the

contract (Rajoo, 1999). According to Ashworth (1998), the Conditions of Contract

seek to establish the legal framework under which the construction work is to be

undertaken.

3

Apart from that, Contract Drawings and Specifications also form as important

part of the Contract Document. According to Mohamad and Madon (2006), a good

construction contract shall have well drafted drawings and specifications, where it

tells clearly and comprehensively what the scope of the contractor to be fulfilled.

1.2 Types of Local and International Construction Contract Forms

In Malaysia, there are several authorities and professional bodies which

contribute to the production of various types of Standard Form of Construction

Contracts are such as PWD Form of Contract, PAM Form of Contract and CIDB

Form of Contract.

As for international Standard Form of Construction Contracts, there are British

Standard Forms such as JCT Forms, ICE Forms and NEC Forms, American Form of

Contract such as AIA Document A201 (US), Australian Standard General Condition

of Contract, FIDIC (French for the International Federation of Consulting Engineers)

Form which has the same format and condition as ICE condition of contract form,

and etc

1.2.1 PWD Form of Contract

In Malaysia, Public Work Department (PWD) forms of contract are the

standard forms of construction contract most commonly used by public sector. PWD

4

forms of contract are produced to govern the relationship between the Government as

employer and the contractor; the relationship between the contractor and the

nominated sub-contractor and the relationship between the contractors and

nominated supplier (Rajoo, 1999). The types of form of contract for government

projects are listed as below:

o PWD 203 A with Bills of Quantities

o PWD 203 with Drawings and Specifications

o PWD 203 N for Nominated Subcontractor

o PWD 203 P for Nominated Supplier

o PWD Form DB/T (2000Edn) for Design and Built or Turnkey project

o PWD 75 (Rev. 2006)

1.2.2 PAM Form of Contract

Standard Form of Building Contract (PAM 1998 Form) is produced by the

Architect Association of Malaysia (Pertubuhan Arkitek Malaysia – PAM) and is used

essentially for private sector projects, building works and contract undertaken

through Traditional General Contracting (TGC) procurement route (Singh, 2002). It

is a standard form for lump sum project. The PAM/ISM 1969 Form was original

based and closely modeled on the Joint Contract Tribunal (JCT) 1963 Form, United

Kingdom (Rajoo,1999). The types of form of contract which commonly use by the

private construction are as following:-

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• PAM 98 with Bills of Quantities

• PAM 98 without Bills of Quantities

• PAM 98 Nominated Subcontractor Form

• PAM 2006 with Bills of Quantities

• PAM2006 without Bills of Quantities

1.2.3 CIDB Form of Contract

According to CIDB Standard Form of Contract For Building Works (2000),

Construction Industry Development Board Malaysia has introduced its own standard

form of contract for building industry. This form is known as CIDB Standard Form

of Contract for Building Works 2000 Edition. However, it is not as commonly used

while compared to others more frequently used local construction contract forms

such as PAM or PWD forms.

1.2.4 British Standard Forms

According to Jones (N/A), the first used of standard form of contract in the

construction industry was the Royal Institute of British Architects (RIBA) Form

which was published in year 1870 and this leaded to the formation of the Joint

Contracts Tribunal (hereafter, JCT). The JCT Forms were said to be direct modeled

originally from RIBA Form and was established in the year of 1931. It has produced

standard forms of contracts to be used in the construction industry for 77 years.

6

ICE Conditions of Contract 1993 (hereafter, ICE) is the most commonly used

standard form for civil engineering works in United Kingdom. According to

Williams (1992), ICE was established by the Association of Consulting Engineers

(ACE) and the Federation of Civil Engineering Contractors (FCEC). The latest

edition of ICE Contract Form was the Seventh Edition and published in the year of

2003.

NEC Engineering and Construction Contract (hereafter, NEC) was created by

the Institute of Civil Engineers and as a guidance for drafting the civil engineering

documents and construction project. The main objectives are for the purpose of

obtaining the tenders and awarding of contracts, Wikipedia (2009).

1.2.5 American Form of Contract

AIA Document A201 (US) is for the use of construction projects in United

States of America published by the American Institute of Architects (hereafter, AIA).

The latest edition is the Fifteenth Edition that was published in 1997 and known as

AIA Document A201 – 1997, AIA (1997).

1.2.6 Australian Standard General Condition of Contract (AS4000-1997)

Australian Standard Conditions of Contract are used specifically for

commercial building and construction projects in Australia which is a non profit

7

organization and is an internationally recognized leader in the facilitation of

standardization solutions. In 1997, the Australian Standard Conditions of Contract

was revised the title from AS 2124 – 1992 to AS4000-1997, (Standards Australia

Committee, N/A).

1.3 Occupational Safety and Health (OSH)

After the brief description of the types of standard forms of construction

contract, it is important to define the general terms used in OSH. According to

Oxford Advanced Learner's Dictionary (2000), occupation can be defined as a job or

profession. Safety can be define as the state of being safe and protected from danger

or harm while health defined as the state of being physically and mentally healthy.

1.3.1 Occupational Safety

According to Steen (1996), safety can be defined as lack of danger from which

harm or loss could occur. The achieved performance can be directly measure in term

of the harm or loss that occurred, and reducing losses towards evidence of

performance improvement. Success can be measured through lack of failures,

injuries, illnesses and losses.