ESTIMATING & CONTRACT

(BEC 402)

Mohd Ashraf Fateh

Dip. QS, Bsc. QS (Hons.), Msc. ICPM
LECTURE INFORMATION
Credit Hours

Evaluations and Marks Distribution

60% Final Exam
40% Carry Marks
Attendance
Test
Assignment
Exercise
Punctuality, Dress Code & Attitude

Class Representative/Asst. Class Representative

Calculator

Dimension Paper

SMM 2

Basic Math Formula

COURSE LEARNING OUTCOME (CLO)
CLO OUTCOME
CLO 1 to recognize the estimating method
CLO 2 to describe the procedures, flows and routine in
tendering a project

CLO 3 to differentiate the type of contracts in the construction

industry

CLO 4 to discuss the method of dispute resolution in

construction.
SUBJECT OBJECTIVES
To understand the basic principles in
estimating and contract

To understand any works related to

estimating and contract

To appreciate the tendering procedure

LECTURE FRAMEWORK
Introduction of measurements principles
Introduction to SMM2
Standard method of measurement
Measurement of Site Clearing
Measurement of Work Below Lowest Floor Finish
(Substructure)
Introduction of construction cost estimating
Building cost estimating methods
Law of Contract
Standard Forms and Types of Construction Contract
Tendering
Dispute Resolution Method
Payment
REFERENCES
Ahamad Abdullah (2003). Pengukuran Kuantiti Bangunan. 1 st Edition, Pearson

Ahamad Abdullah (2006). Anggaran Kos Kerja Bangunan. 2 nd Edition. Pearson

Bockrath, J., (2000). Contracts and the Legal Environment for Engineers and
Architects, 6th. Edition, McGraw-Hill.

Hinze, J., (2001). Construction Contracts, 2nd. Edition, McGraw-Hill.Dearle and

Henderson, (1988). Management Contracting, E&FN Spon, London.

Seely, Ivor H., (1987). Civil Engineering Quantities, 4th. Edition, MacMillan Education
Ltd.

Bunni, N.G., (1991). The FIDIC form of contract, BSP Professional book, London.

Dearle and Henderson, (1988). Management Contracting, E&FN Spon, London.

Smith, R.C., (1986). Estimating and Tendering for Building Works, Longman Inc.,
New York.

Bockrath, J., (2000). Contracts and the Legal Environment for Engineers and
Architects, 6th. Edition, McGraw-Hill.
 INTRODUCTION TO
MEASUREMENT PRINCIPLES
 INTRODUCTION TO
MEASUREMENT PRINCIPLES
Why do we need to do a measurement/taking
off?
What is a Bill of Quantities?
MEASUREMEN TOTAL
BQ
T / TAKING PRICING AMOUNT FOR
PRODUCTION
OFF PROJECT

Functions of Bill of Quantities:

A part of document tender/contract
As a basis for a interim payment
As a basis to evaluate variation order
To assist in managing the project
As a source of cost data
BILL OF QUANTITIES (BoQ)
Prepared by Qs
A documents setting out in schedule forms where

the quantities, descriptions and rates of the

works to be undertaken
The tenderer need to price the BoQ

MEASUREMEN TOTAL
BQ
T / TAKING PRICING AMOUNT FOR
PRODUCTION
OFF PROJECT
ADVANTAGES OF BILL OF
QUANTITIES (BoQ)

SAVE
SAME REFEREN
RESOURCE
BASIS S
S

VALUTIONS PROCURING
STANDARD METHOD OF
MEASUREMENT (GETTING STARTED)
EQUIPMENT & INFO PROCEDURES
SMM 2 Prepare taking off

Measurement list & query list

equipment: Verify all drawings &

Ball Pen specification

Blue/Black Page title & number
Red Sequence of jobs
Dimension Paper
NEAT & TIDY!!!
Scale Ruler
Calculator
Get all the math
formula (all shapes)
STANDARD METHOD OF
MEASUREMENT (SMM 2)
Standard Method of Measurement of
Building Works (Second Edition) (SMM 2)
Timeline:

1959 = SMM 1(Imperial Edition)SMM 4, 1948

(UK)
1976 = SMM 1(Metric Edition)
2000 = SMM 2SMM 6, 1979 (UK)
STANDARD METHOD OF
MEASUREMENT (TAKING OFF LIST)
NO. ITEM UNIT

1. Concrete grade 30 in landing M3

slab

2. Formwork to soffits of M2
landing slab

3. Main Bar Reinforcement in KG

landing slab

4 Link, stirrups and binder in KG

landing slab
STANDARD METHOD OF
MEASUREMENT (QUERY LIST)
STANDARD METHOD OF
MEASUREMENT (DIMENSION PAPER)
An A4 paper
Widely used during the 90s
 STANDARD METHOD OF
MEASUREMENT
A : Timesing Column
(Multiplying/Dividing)
B : Dimension Column
Meter (m) 1
dimension
Meter Square (m2) 2
dimension
Cubic Meter (m3) 3
dimension
Item / No. 1 dimension
C :Squaring Column
D : Description
Column & Side Cast
EXAMPLES OF EXAMPLES OF
DIMENSION TIMESING
L
W Cubic Meter
T/D (m3)

L
W Meter Square
(m2)

L Meter (m)

Item / No.
 STANDARD METHOD OF
MEASUREMENT (DESCRIPTION)
ITEM SMM REQUIREMENT DESCRIPTION
1 1. Work classification (G.1.1b) 1 brickwall in common
BRICK 2. Type of brick (G.3.1a) brick in cement and sand
WALL 3. Type of bonding (G.3.1b) (1:6) mortar in English
4. Ratio and mixture of mortar bond, load bearing wall
(G.3.1c)
5. Wall thickness (G.3.3)
6. Class (G.3.3a)
STANDARD METHOD OF
MEASUREMENT (BRACKET)
STANDARD METHOD OF
MEASUREMENT (SIDECAST)
STANDARD METHOD OF
MEASUREMENT (ANOTATION)
STANDARD METHOD OF
MEASUREMENT (DEDUCTION)

EVERYTHING
NEED TO BE
IN RED!!
STANDARD METHOD OF
MEASUREMENT (CORRECTION)
STANDARD METHOD OF
MEASUREMENT (SHORT FORMS)
Ddt = Deduct
Ditto = As

mentioned above
A.b.d = as before

described
DIMENSION PAPER
ELEMENT: WBLFF(PADFOUNDATION, GROUNDBEAM, CONCBED) PAGE: 1OF3
DIMENSION DESCRIPTION DIMENSION DESCRIPTION

Length Length
7.200 7.200
add 2 corners (2 x 0.625) 1.250 less 2 col stump (2x0.3) -0.600
8.450 6.600

Width Depth
7.200 0.500
add 2 corners (2 x 0.625) 1.250 lean concrete 0.025
8.450 0.525

4
8.45 Excavation to remove top soil 6.60 Excavate trench to receive ground
average depth 100mm beam starting from reduce level
8.45 0.15
max depth n.e 0.25m
0.53
Depth
Concrete bed 0.125
hardcore 0.150 Allow for keeping the surfaces of
the site & excavation free of surface
0.275 Item
water
less top soil -0.100
0.175

8.45 Excavate to reduce level max depth Concrete grade 7 blinding n.e
n.e 0.25m 100mm thick laid on earth
8.45
0.18
4
Depth 1.25 (Pad Foundation)
lean concrete 0.030 1.25
footing 0.300 0.03
column stump 0.750
1.080 4
4 6.6 (Ground Beam)
1.25 Excavate pit to receive pad footing 0.15
starting from reduce level max
1.25 0.03
depth n.e 1.50m
1.08
4
1.25 Reinforced insitu concrete Grade 20
in isolated foundation Bases (Pad
1.25
Foundation), in 4 nos
0.30

4
0.30 Reinforced insitu concrete Grade 30
in isolated column stump
0.30
BASIC PRINCIPLES OF
MEASUREMENT
GIRTH / PERIMETER /
AREA

Thick brickwall

Outer Dimension
GIRTH / PERIMETER /
AREA
MEASUREMENT OF SITE CLEARING
 MEASUREMENT OF SITE
CLEARING
Section D
Two ways to measured:

D.2 D.6 (1st Method) Measured separately:

Undergrowth
Hedges
Trees
D.8 (2nd Method) Measured together but must
stated area of the clearing
MEASUREMENT OF SITE
CLEARING
REFER TO CLAUSE D.8
MEASUREMENT OF SITE
CLEARING
MEASUREMENT OF SITE
CLEARING
BILL OF QUANTITIES (BoQ)
BILL OF QUANTITIES
(FINAL SUMMARY)
 MEASUREMENT OF
WORK BELOW LOWEST
FLOOR FINISH (WBLFF)
 MEASUREMENT OF WBLFF
Any works under
ground floor slab is
called substructure or
Work Below Lowest
Floor Finish (WBLFF)
Consist of :

Excavation
Lean/Concrete Blinding
Foundation
Column Stump
Ground Beam
Hardcore
Damp Proof Membrane
Ground floor slab/bed
GENERAL RULES FOR
MEASUREMENT OF EXCAVATION
Types of excavation:
Top Soil (compulsory to all excavation)
Reduce level (compulsory to all excavation)
Pit excavation
Trench excavation
D.15 keeping the excavation free of water
(compulsory to all excavation)
GENERAL RULES FOR
MEASUREMENT OF EXCAVATION
Original
Ground Level
Section D (Top Soil)
Level After
D.10 depth
Excvation of
classification Top Soil
(Reduced
Max depth n.e 0.25m Level)
Max depth n.e 1.00m
<0.25m
Max depth n.e 2.00m <1.00m
Max depth n.e 4.00m <2.00m
And thereafter in 2.00m <4.00m
stages
D.11 starting level
MEASUREMENT OF EXCAVATION
(TOP SOIL)
D.7 & D.22
Original Ground
In Meter Square Level (Top Soil)
(m2)
Level After
Length X Width
Excvation of Top
State: Soil

To used back or
dispose
Average Depth
MEASUREMENT OF
EXCAVATION
(REDUCE LEVEL)
D.12.4 Original
In cubic meter Ground Level
(Top Soil)
(m3)
Length x Width x Level After
Depth Excavation of
Top Soil
State:
Stages of depth
Excavation to
Reduce Level
MEASUREMENT OF EXCAVATION
(PIT FOR PAD FOUNDATION)
D.12.6 Excavatio
n of pit
In cubic meter (m3) foundatio
Measure separately for n
both dimension less than
1.25m
State:
To receive what?
No.
Starting level
Stages of depth
MEASUREMENT OF EXCAVATION
(TRENCH FOR GROUND BEAM)
D.12.8

In cubic meter (m3)

State:
To receive what?
Starting level
Stages of depth
MEASUREMENT OF EXCAVATION
(DISPOSAL OF WATER)
D.15
Compulsory to all excavation
Measured as item
An item to allow for keeping the surface of the
site and excavation free from surface water
 D.1
D.12.7

D.15
D.12.4

D.12.4
D.11 F.3.3
D.10
F.3.15
MEASUREMENT OF
CONCRETE WORKS
Concrete for substructure generally:
Lean Concrete / Concrete blinding
Foundation
Column stump
Ground beam
Lower floor/Concrete Bed
Section F
CONCRETE WORKS
(LEAN CONCRETE / CONCRETE
BLINDING)
Any structure that
laid on earth
F.1.6 & F.2.1
Measured in m3

(Length x Width x
Thickness)
Need to stated:

Thickness:
N.e 100mm
100mm 150mm
150mm 300mm
Exceeding 300mm
Grade of concrete
 CONCRETE WORKS
(PAD/BASE FOUNDATION)
F.3.1
In Cubic Meter (m3)
Length x Width x

Thickness
Stated :

Type of foundation
No.
 CONCRETE WORKS
(COLUMN STUMP)
F.3.1
In Cubic Meter (m3)
Length x Width x

Height
Stated for column

stump
CONCRETE WORKS
(GROUND BEAM)
F.3.5
In Cubic Meter (m3)
Length x Width x

Thickness
CONCRETE WORKS
(CONCRETE BED)
In cubic meter
(m3)
F.2.1, states:

N.e 100mm
100mm -150mm
150mm 300mm
Exceed 300mm
F.1.6 shall
stated where it is
poured
GENERAL RULES FOR
MEASUREMENT OF FORMWORK
Section F.10
F.10.3 measured to the surface of the finished

concrete/structure (no additional for wastage etc)

F.10.7 formwork to curved shall be measured

separately & state geometrical nature

FORMWORK
(PAD FOUNDATION, GROUND BEAM &
COLUMN STUMP)
F.11.1
In meter square (m2) if height exceeding 1.00m
In meter (m) if height n.e 1.00m, shall state

height:
N.e 250mm
250mm 500mm
500mm 1.00 meter
State the usage
 D.1

D.12.
7

D.15
D.12.4

F.1.6
F.3.1

D.12.
4
D.11
D.10

F.3.3

F.3.15
 F.3.5

F.8.4a

F.11.1

F.15
F.15.4

F.11.1
GENERAL RULES FOR
MEASUREMENT OF
REINFORCEMENT
MEASUREMENT OF
REINFORCEMENT
(MAIN BAR & LINKS)
F.8.1 Stated :
Type, quality and diameter of steel
Section of bar if other than plain circular
F.8.2 Bar reinforcement shall be measured in
meter (converted to KG)
F.8.4a for foundation, column, pier bases,

ground beams, pile caps and the like

F.8.4j for insolated column, beams and lintels
F.9.3 for fabric reinforcement (m2)
MEASUREMENT OF
REINFORCEMENT
(MAIN BAR & LINKS)
5Y12-250
5 bars of reinforcement
Y = high yield (high
tensile)
12 = 12mm diameter
250 = 250mm center to
center
6R8-225
6 bar of reinforcement
R = mild steel
8 = 8mm diamter
225 = 225mm center to
center
MEASUREMENT OF REINFORCEMENT
(MAIN BAR & LINKS)
Conversion Factor:
DIAMETER FACTOR
6MM 0.222
8MM 0.395
10MM 0.617
12MM 0.888
16MM 1.579
20MM 2.467
22MM 2.985
GENERAL RULES FOR MEASUREMENT
OF HARDCORE

As a:
base foundation
before receiving
concrete bed
Filling up to make up
level
D.26:
Thickness exceeding
250mm, measured in
m3
Thick n.e 250mm
measured in m2
(stated the thickness)
GENERAL RULES FOR MEASUREMENT
OF DAMP PROOF MEMBRANE (DPM)
K.1.1a
K.2.3:
M2 if covering > 300m
M if covering < 300m
(stating stages of 150mm)
Shall stated classification:
Flat covering or slope n.e 10
Slope > 10 n.e 45 from
horizontal
Slope > 45 from horizontal
and vertical coverings
K.2.1, stated:
Kind & quality of material
Thickness & number of coats
& layer
Nature of base
Surface treatment
 F.3.5

F.8.4a
F.11.1

F.15
F.15.4

F.11.1
F.8.4a
D.26
D.23.1

K.2.3

F.3.1
F.3.8
F.8.4a
F.1.6

F.8.5
BILL OF QUANTITIES
(EXCAVATION & EARTHWORK)
BILL OF
QUANTITIES
(CONCRETE
WORKS)
BILL OF QUANTITIES
(CONCRETE WORKS)
BILL OF QUANTITIES
(CONCRETE WORKS)
BILL OF QUANTITIES
(FINAL SUMMARY)
ASSIGNMENT NO. 1
In a group of 4
Write a detail report on:
The Application of Information Technology in
Estimation
Topics to cover:
History/Origin
Features of the software
Advantages/Disadvantages
Comparison between using Manual & Software
Estimation in term of:
Time
Quality
Cost
SUBMIT HARD & SOFTCOPY ON (3rd
January 2013, THURSDAY)
INTRODUCTION OF
ESTIMATING
INTRODUCTION OF ESTIMATING
I WANT TO
What is an estimate? BUILD A
BUNGALOW
FOR A BUNGALOW
IT WILL COST
AN AROUND RM 2MIL
ACTIVITIES
THAT
ENABLES TO
OFFERS
TO
PRODUCE
AN OUTPUT
WITH A SUM
OF MONEY
IN A RETURN
FUNCTIONS & IMPORTANCE OF
ESTIMATING
Seeley (1996)
To produce a cost forecast for a project without a
detail design.
For clients to be more aware on financial impacts
and liabilities.

A good estimation will produce a good cost

plan for the entire project phase.
 FUNCTIONS & IMPORTANCE
OF ESTIMATING
PARTY FUNCTIONS & IMPORTANCE
Clients To prepare a sufficient monetary budget to
fund the project
To get an idea on the monetary
impacts/liabilities
As an indicator against the probable cost at
early stage of construction
To assist the clients getting the most
competitive tender

Architect / As a guidelines to design

Engineer
 FUNCTIONS & IMPORTANCE
OF ESTIMATING
PARTY FUNCTIONS & IMPORTANCE
Contractor To prepare a realistic offers to undertake
the project
Tender entry to ensure that the tender
submitted is competitve
To determine the actual construction cost,
hence to determine percentage of profit
To avoid wastage obtain accurate info
on resources

Project As a guidelines to control the project cost

Manager
FACTORS OF ESTIMATION
Types of project
Size and design
Quality and types of finishes
Method of construction
Variation of prices

Materials
Labour
Plant
SCENARIOS OF
ESTIMATION
SCENARIO OPTIONS OF ACTION
Actual Downgrades the variables on factors of
Budget > estimation
Estimate Ask for a addition funds
Stop/postpone the project

Estimate > Proceed accordingly as plan

Actual Upgrades the variables on factors of
Budget estimation
BUILDING COST
ESTIMATING METHODS
BUILDING COST ESTIMATING
METHODS
Preliminary Stage
Unit Method
Volume Method
Gross Floor Area (GFA)

Detail Stage
Approximate Quantity Method
 UNIT METHOD
Also known as Cost According to Building
Function
Related with the occupancy
Advantages:
Easiest & Fastest method
Can be done without any single drawing
Disadvantages:
Too gross (not accurate)
Only can be used for:
a standard design
related to occupancy building
UNIT METHOD
(CALCULATION)
Multiplying the amount of occupancy with
the unit price/occupancy.
Estimation of a School Building:
Occupancy = 1000 students
Unit price/occupancy = RM 1,500/students
Therefore, total estimate for a School Building is:
= Total occupancy x Unit price/occupancy
= 1000 students x RM 1,500
= RM 1,500,000.00
VOLUME METHOD
Use widely back in the 90s
Usually used for estimating building
services components
Advantages:
Fast
Disadvantages:
Too gross
Cant help architect much in designing
Difficult to get the similar past data cost
VOLUME METHOD
(CALCULATION)
Multiplying the volume (m3) of building with
the unit price/volume (m3)
VOLUME METHOD
(CALCULATION)
Estimation of a School Building:
Volume of Building = Length x Width x Height
= 20m x 10m x (1.00m+3.50m+3.50m+0.60m)
= 1720m3
Unit price/m3 = RM 550/m3
Therefore, total estimate for a School Building is:
= Volume (m3) x Unit price/volume (m3)
= 1750m3 x RM550/m3
= RM 946,000.00
 GROSS FLOOR AREA (GFA)
METHOD
The most popular in Malaysia
Plenty of cost data in the industries
Advantages:

Easy to understand by architect and client

Fast
Wide range of data cost
Disadvantages:
Doesnt consider overall design of the building
Plenty of variables need to be consider
Need to differentiate certain area:
Ventilation / Circulation
Area doesnt bring profit
GROSS FLOOR AREA (GFA)
METHOD (CALCULATION)
Multiplying the GFA (m2) of building with the
unit price/GFA (m2)
GROSS FLOOR AREA (GFA)
METHOD (CALCULATION)
Estimation of a School Building:
GFA of Building = Length x Width (29,756.25m2)
Unit price/m2 = RM 1500/m2
Therefore, total estimate for a School Building is:
= GFA (m2) x Unit price/GFA (m2)
= 29756.25m2 x RM1500/m2
= RM 44,634,375.00
APPROXIMATE QUANTITY
METHOD
The best method
Most accurate
Advantages:

Help architect in design process

Easy to make variation/changes in the future
Most accurate
Disadvantages:
Time consuming
Plenty of data needed
APPROXIMATE QUANTITY
METHOD (CALCULATION)
Quantity
need to be
calculated
grossly for
each item

Unit price is
based on
CURRENT
RATES

Need to allow
some % for
unmeasured
items
APPROXIMATE QUANTITY
METHOD (CALCULATION)
APPROXIMATE QUANTITY
METHOD (CALCULATION)
APPROXIMATE QUANTITY
METHOD (CALCULATION)
 SUMMARY
METHOD PHASE KEY NOTES UNIT
OF PROJECT
Unit Preliminaries Occupancy Cost/occupancy
Feasibility Study To plan Project Cost/student
Ceiling Cost/bed

Volume Brief Proposal Usually used to Cost/m3

calculate building
services space
GFA Brief Proposal Widely used & Cost/m2
very popular

Approximate Detail Design Widely used & As per items unit

Quantity very popular M
Used for complex M2
project M3
Time consuming
EXERCISE NO. 1(Unit
Method)
Estimation of a School Building:
Occupancy = 2000 students
Unit price/occupancy = RM 2,500/students
2000 x RM 2,500 = RM5,000,000.00
 EXERCISE NO. 1 (Volume
Method)
Estimation of a School Building:

Volume of Building = Length x Width x Height

= 20m x 10m x (1.00m+5.00m+5.00m+0.60m)
= 2320m3
Unit price/m3 = RM 600/m3
2320m3 x RM 600/m3
RM 1,392,000.00
EXERCISE NO. 1 (GFA)
Estimation of a School Building:
GFA of Building = Length x Width
Unit price/m2 = RM 2000/m2
Therefore, total estimate for a School Building is:
= GFA (m2) x Unit price/GFA (m2)
= 62500m2 x RM2000/m2
= RM 125,000,000
ASSIGNMENT NO. 1
In a group of 4
Write a detail report on:

The Application of Information Technology in

Estimation
Topics to cover:

History/Origin
Features of the software
Advantages/Disadvantages
Comparison between using Manual & Software
Estimation in term of:
Time
Quality
Cost
SUBMIT THE REPORT ON THE NEXT CLASS
(23RD APRIL 2012)
CONTRACT
 INTRODUCTION TO THE LAW OF
CONTRACT
An agreement enforceable under law. The
agreement legally binding between two parties
or more, provided that certain conditions are
observed (Contract Act, 1976)
Types of contract:

Simple contract
Special contract
 SIMPLE CONTRACT
A contract will exist when:

the parties involved reached an agreement

legally recognized rights, responsibilities that arise from that

agreement.

Constituted by an offer made by 1 party (offeror) and its

acceptance by the other party (offeree) supported by
consideration.
SUPPORTED BY
OFFER
CONSIDERATION

ACCEPTANCE
SIMPLE CONTRACT
Back in 90s, most of the construction law is a
simple contract

Simple contract can be form by:

Written
Verbal
Action by parties involve (offer and acceptance)

Validity for 6 years

SIMPLE CONTRACT
SPECIAL CONTRACT
A document signed, stamping and given to all
the parties involved
Start widely used in the Government Sector
Need to be in form of written
Validity for 12 years

SUPPORTED BY
OFFER CONSIDERATION

ACCEPTANCE
SPECIAL CONTRACT
GENERAL PRINCIPLES
OF THE LAW OF
CONTRACT
 ELEMENT OF CONTRACT
INTENT - Both parties wish to make the contract
and ready to face the consequence if the contract
breach
FREE WILL All agreement & discussion is made on

free will. There are no blackmail or treats involved

CAPACITY Both parties involved is eligible &

capable to be in a contract
LEGAL all the contract need to follow common

law
SPECIFIC all information in the contract need to

be specific. There is no room for ambiguity &

unclear item
 OFFER & ACCEPTANCE
OFFER
(OFFERER)
1. Must be firm, certain &
communicated to the offeree
2. Valid if described as an estimate
(Crowshaw v Pritchard, 1899)
3. Maybe withdrawn at any in before
acceptance (Routledge v Grant
1828)
4. Withdrawal of an offer takes place
when notice received by offeree
(Routledge v Grant 1828)
5. Maybe made to specific person,
group of people or even public
(Carlill v Carbolic Smokeball Co.,
1893)
ACCEPTANCE
(OFFEREE)
1. Must be unconditional and must be
communicated to the offerer
2. Must be made within a reasonable
reason/time
3. Manner of acceptance must
correspond with the manner
prescribed by the offer
4. Cannot be withdraw without the
consent of the offerer (Routledge v
Grant 1828)
5. If the offeree inserts new terms,
then it is counter offer (destroy the
original offer) (Davies & Co.
Shopfitters Ltd v Wiliam Old, 1969)
6. A request for further info doesnt
count as counter offer (original offer
remains)
 CONSIDERATION
Some right / interest / profit or benefit accruing to one
party or some forbearance /detriment / loss /
responsible given, suffered or undertaken by the other

In forms of:
Thing/goods
Service/performance of work
Payment

Williams v Roffey Bros, 1990

CONTRACTOR

SERVICE
 COUNTER OFFER
Contractor ask Contractor ask
quotation from quotation from
supplier supplier

supplier give
supplier give
quotation to contractor
Quotation to contractor

Contractor amend some of

Offer by the quotation and return back
supplier to to the supplier
contractor
Counter offer
by contractor
Davies Shopfitters v Wiliam Old, 1969 to supplier
 CONTENTS OF A CONTRACT
(EXPRESS & IMPLIED TERMS)
All contents in a contract describes rights and
obligations of parties under the contract
The court doesnt make the contract for the

parties. The parties made for themselves. The

court function is to interpret and apply the
contract to the parties involved
Two types of terms:

Express
Implied
 EXPRESS TERMS
Contract sometimes have been reduced from
pure sentences to any kind of forms.
Anything that expressly stated & incorporated in
the contract.
Examples:
Appendix
Drawings
Schedules
Specifications
Bills of Quantity
Davis Contractors v Fareham, 1956
 IMPLIED TERMS
Not expressly stated (in writing or verbally) at the time
the contract is made but are implied in law
Examples:

The contractor will do the work in a workmanlike manner (with

proper skill and care). He will proceed with reasonable diligence
and complete within agreed time with good and proper materials

The client will give possession of the site and will supply all
necessary details within reasonable time. He will not obstruct
the contractor works and will pay reasonable sum for the
progress of works

Trollope & Colls v NWMRHB, 1973

Lynch v Thorne, 1956

STANDARD FORMS OF
CONSTRUCTIONS
CONTRACT
 STANDARD FORM OF
CONTRACT
A printed form of contract containing standards
conditions
Example:
PAM 2006
PWD 203, 203A, DB
CIDB
FIDIC
It can be amended in any way the parties
choose
Comprises of :
Articles of Agreement
Condition of Contract
Appendix
STANDARD FORM OF
CONTRACT
Advantages (Wright, 2004):
Well known & widely used
Save time & effort in negotiating, drafting new
conditions
Can be tailored to match the project
Mistakes maybe avoided
Disadvantages (Wright, 2004):
Designed for a standard situation
Every contract is different
We can make mistake over and over again
 STANDARD FORM OF
CONTRACT
(ARTICLES OF AGREEMENT)
Sets out:
Names of the parties to the contract
Location & scope work
Express agreement by contractor & client
Persons who carry out respective functions:
Architect
Engineer
Qs
Space for attestation (for signatures of parties &
witnesses)
STANDARD FORM OF
CONTRACT
(CONDITIONS OF CONTRACT)
Sets out:
The normal performance required from each party
Rules and procedures for conduction the contract
Rules on dealing with problems or disputes arise
Terms of payment to the contractor
Important to ensure there are no conflicts with
others documents the contracts
STANDARD FORM OF
CONTRACT
(APPENDIX)
It is a summary of facts of the contract:
Contract Period
Completion Date
Defect Liability Period
Rates of The Liquidated Damages
CONTRACT FORMATION

NO. 2
NO. 1

NO. 3
TYPES OF CONSTRUCTIONS
CONTRACT
 EMPLOYERS INVOLMENT IN
CONSTRUCTIONS

Some employer do get involved / some prefer to

stay away
If minimal involvement Traditional Contracting
If greater involvement Construction

Management
DESIGN & MANAGEMENT
SEPARATION
Designing & Managing a project is two different
activities
Employers may have various preferences:

Different Parties designing & managing

Same parties designing & managing
Different Parties Traditional Contractual
Same Parties Construction Management /

Package Deal
 FLEXIBILITY OF CHANGE

Reasons of changing:
Change in user requirements, rethinks
Revision / refinement of design due to incomplete
information,discripencies, unclarities
Changes due to external factors
Flexible in change Construction Management
Inflexible in change Package Deal
 CLARITY OF EMPLOYER
CONTRACTUAL REMEDIES

Nature and extent of the remedies available to

employer if breach happens
who to blame?!
Package Deal / Construction Management -

Single point responsibility

Traditional Contractual Varies point of

responsibilities
 PROJECT COMPLEXITY
Types of complexity:
Technical
Functional
Organizational
Activities/Processes
Simple Moderately complex = Package Deal
Mid range complexity = Traditional Contractual
Complexity = Constructions Management
DURATION OF CONTRACT
Being primary criteria influencing the
procurement decision
Fast = Construction Management
Slow = Traditional Contractual
 CERTAINTY OF PRICE
As a confirmation of total financial
outlay/commitment required
Why it is important to client:

His financial exposure

Whether is budget met or exceeded:
Need to:
secure additional fund
Cost cutting arises
The planning of financial disbursement (cashflow)
Late Confirmation = Construction Management
Contractual
Fast Confirmation = Traditional Contractual
 TRADITIONAL
GENERAL CONTRACT
 TRADITIONAL GENERAL
CONTRACTS

The most oldest, familiar types of contract in

industry
The origin is from UK where:

the fast growth of professional consultant at that time

A lots of bulk government project
ORGANIZATIO
N STRUCTURE
NATURE &
CHARACTERISTICS
The separation of design from building:
Employers have his own design team
The contractor only builds/manufacture what the
designers specified
Design = Employer/Professional Team
responsibilities
Construction = Contractor responsibilities
 APPLICATION
Where the design is totally complete before
selecting contractor
Where an independent project team will be used
Where employer required certainty of price
PACKAGE DEAL
CONTRACT
 PACKAGE DEAL CONTRACT
The fastest growing method in the country
Usually in lump sum basis
Design & Build type:
Most Famous
Contractor undertakes:
Design
Construction
Client:
Financing
Approvals
Turnkey type:
Contractor undertakes everything:
Financing
Approvals
Design
Construction
Employer is getting the key at the end of the project
 APPLICATION

Where client wants a single responsibility party

Where project is novel and complex.
Where client want the price certainty (Lump

Sum)
MANAGEMENT
CONTRACTING
 MANAGEMENT CONTRACTING
Originated in the west as the 1920s
Enter Malaysia around 80s
a form of contractual arrangement whereby a

contractor is paid a fee to manage the project on

behalf of client
a contract to managerather than a contract to

build
The management contractor undertakes:

Planning / programming all stages / activities of project

Contribute his expertise / experience on buildability to design
process
Coordination, time, costs and quality over works contractor
The works is packaged by the management contractor
and sub it out to work contractor who actually
undertake the actual works (construction)
 APPLICATION
In complex project involve high tech and need
greater flexibility in design
Where the project is too large
Where employers to capitalize involvement of

large number of sub con

ASSIGNMENT NO. 2
In a group of 4

Write a detail report on:

TYPES OF CONSTRUCTIONS CONTRACT
(Traditional, Package Deal, Management)

Each group need to:

Conduct an interview & discussion with any company personnel /
organization

Topics to cover:
Get a case study on the type of construction contract
How they decide & what are the criteria they look into
Why they used that type
Advantages & Disadvantages
Challenges, Solutions and Recommendations

SUBMIT THE REPORT (SOFT & HARD COPY) ON (30th

JANUARY 2013)
TYPES OF TENDERING
PROCEDURES
 TENDERING
Primary purpose of tendering:
To selectsuitable contractor
Obtain an offer from contractor

Contractor A
(Offering)

Contractor B
(Offering)

Contractor C
Client (Selecting
(Offering) & Accepting)
TENDERING

PROCESS OF A PROJECT CYCLE

 OPEN TENDER
Main procedure by the Government & Private
Known as an indiscriminate request for

tenderers
Invitation to treat is used to invite the tenderer
Invitation can be:

To the world at large

To contractors having the eligibility
OPEN TENDER
OPEN TENDER
 SELECTIVE TENDER
Alternatives method to address the limitations of
the open tendering procedure
Only Limited number of contractors are

prequalified / pre-selected are invited to

submit their bids
Usage this method:

Making tendering procedure more manageable

Improve quality of the bids received
Urgency of the works
Specific reason
COMMON CRITERIA
SELECTIVE TENDER
SELECTIVE TENDER
 NEGOTIATIONS
Also known Direct Nego
Common method in the East, before open tender

is practiced
Widely spread as an aspects of human activity
Fundamental elements:

No competition
Final outcome through mutual consent / agreement
NEGOTIATIONS
NEGOTIATIONS
 TENDER
DOCUMENTATION
DISPUTE RESOLUTION
METHOD
 WHAT IS A DISPUTE?
Disputes arises when one party makes a claim against
the otherand the other party denies liability either
expressly or by conduct

Root causes which generates disputes in construction:

Unrealistic time/cost/quality by client
Uncontrollable external events
Unrealistic tender price
Inappropriate contract type
Lack of professionalism of project participation
Clients lack of information
Internal disputes
Inadequate contract documents
Inaccurate design information
Exaggerated claims
WHAT IS DISPUTE
RESOLUTION?
Dispute may be resolved by using:
Formal process
Courts/Litigation (judge)
Arbitration (arbitrator)

Informal or consensual processes (Alternative Dispute

Resolution)
Parties attempt to reach an agreement
In sense of alternative (or complementary) to formal process
Negotiation
Mediation
Conciliation
Neutral Evaluation
Adjudication
DEGREE OF FORMALITY
Litigation
LITIGATION
LITIGATION
a process of resolving a legal dispute in court and heard in public

Begins with a plaintiff issuing writ to defendant (lodging a written claim to

court)

Involve:
Oral argument
Discovery documents or evidences
Examination of witness & evidence

It is subject to any appeals

Judgment can enforced against the defendant personally or his assets

Decision based on:

Evidence presented
Application of relevant legislation and precedent cases

Factors to choose litigation:

Substantial legal issues
Proceedings are multi party
Proceedings difficult to control
Allegations of dishonesty
One party refuses to acknowledge
 LITIGATION
Advantages:
A legally qualified judge
The doctrine of judicial precedent will be applied by the judge
A binding decision
Judgments can be enforced through courts if necessary
Theres an appeal system

Disadvantages:
Very public, expensive, time consuming and complicated
Not suitable for technical issues
Lawyers is necessary
Parties have no control over the proceedings
Could ruin business relations between parties
Risk that a party may lose the case
Limited international enforceability of judgments
ARBITRATION
 ARBITRATION
where parties in dispute agree to settled by a neutral person, arbitrator (3 rd party) and
bound by that decision

Provision of the Arbitration Act 2005 (Act 646)

Each side will forward their agruementarbitrator need to find fact & apply the law &
grant to both parties

Can be agree on pre or once the disputes arise

Arbitrator can be:

Chosen by contract parties
Already being appointed during contract formation

More flexible/less formal compare to litigation, parties free to:

Select arbitrator
Choose venue, time of procedures

Parties can be represented by lawyer or other person

Decision of arbitrator expressed as an award & will bind both parties. If necessary, it
may be enforced by court.

They will be no appeal from the decision

Cost of arbitration (including the arbitrators fee)

Paid by parties in proportions they have agree OR
Usually bear by the winner
ARBITRATION
Essential element of arbitration:
There are dispute between to parties
They agree to refer to arbitration
Parties must agree the decision is final & binding

Usage:
Subject matter of dispute is highly technical
Whether insurance company is liable in full or apart
Receiving a binding opinion is relevant
Where parties wish to avoid negotiations
Where a matter involves the quantification of dispute

Differ with others ADR

Governed by Arbitration Act 2005
Arbitrator cannot be sued for negligence
ARBITRATION
Advantages Disadvantages
Privacy No collection of
Convenience precedents
Speed Understanding
Less formal the law
Business Costs
relationship Point of law
Expertise of the Enforcement
arbitrator 1 dispute per
Finality hearing
International No 3rd parties
recognition involvement
ARBITRATOR
International arbitration needs 3 arbitrator
Domestic arbitration needs only 1 arbitrator
Appointing arbitrator:

Parties can agreed on one name

Usually the president of professional institutions (PAM,
IEM or RISM) will be appointed
If fails, may request High Court for the appointments
Selection criteria:
Any qualifications specified by parties
Independent and impartial
For international arbitration, may consider arbitrator
of a nationality other than those parties
ARBITRATOR
Must act judicially

Have to:
Find facts
Taking account only argument forward by parties
Apply law & makes decision

Arbitrator can terminate the proceedings if

parties fail:
to comply with arbitrator directions
Participate in proceedings

Arbitrator is not liable for anything done unless

acting in bad faith (dishonest, malice)
 ARBITRATOR
If
parties not satisfied with arbitrator, can
remove him.
Give notice to:
Other party
Arbitrator
Apply to court

Ground for removing/replacing arbitrator:

Impartially bias
Lack of qualifications
Fails to perform the function
THE PROCESS
THE AWARD
The decision of arbitrator is also known as the award.

The award can be:

Final
Interim
Partial

Usually arbitrator will deals with issues liability then the

quantum of claim

Award shall be in writing and delivered to each party

after arbitrator sign it

It must deal with all issues that were subject to the

dispute

Content of award:
Who is successful party
Amount of damages that have been awarded
PAYMENT
IMPORTANCE OF PAYMENT
INTRODUCTION
It is clients main obligations to pay the
contractor in consideration of the execution
& completion of the works by contractor

All payment need to be done according to

conditions of contract
Adv. Payment
Final Payment
Interim Payment

Start Project Completion Project End of Project

ADVANCE PAYMENT
ADVANCE PAYMENT
The 1st payment by client to the contract BEFORE
the work start

Main Contractor entitled to receive either:

25% of builders work OR
RM10,000,000 max

NSC entitled:
20% of builders OR
RM5,000,000 max

Builders work = Contract Sum (PC Sum + Prov.

Sum + Contingencies Sum)
ADVANCE PAYMENT
(CALCULATION)
 THE RECOUPMENT
It will be recoup in interim payment

Recoupment starts when value of Builders

Works reaches 25%

When reaches 75%, full recoupment will be

made.
INTERIM PAYMENT
 INTRODUCTION
The contractor entitled to interim payment
at regular interval with a proper evaluation
Payment will done based on:

Work done
Material on site

Interim Payment

Start Project Completion Project End of Project

THE
PROCESS

< 14 days

< 30 days
 CONTRACTORS CLAIMS
Even if the contractor doesnt make any claims that month,
client still need to make a valuation

It is a good practice to set a specific date on each month to

do the valuation

All claims need to be in proper & agreed formats

Wrong estimate/calculation by contractor will not be cancel

Contractor should include everything he thinks is entitled

to be paid

Client can reject the claims due to insufficient info and ask
to resubmit
 VALUATION
The evaluation need to be carried out once a
month to evaluate:
Progress work done
Material on site

For Government project, the value of progress

work done+material on site need to exceed
RM1,000, then only payment can be made

Method of payments:
Lump Sum
Percentage work done
Pro-rate
METHOD OF PAYMENT
 MATERIAL ON SITE
Contractor entitled to payment for all unfixed material
delivered to site but not yet incorporated in the work

Material on site must not be removed without consent

of client. Contractor is responsible for the safety etc

Prerequisite for payment:

Material delivered to site
Material will be used in the permanent works (accordance to
contract)
Not prematurely brought to site
Adequately protected, stored against theft, whether or other
casualties
Contractor have paid everything to supply (contractor need to
produce a prove)

Contractor will be paid 90% of the material value.

CALCULATION
COMMON
DISPUTES
FINAL PAYMENT
 INTRODUCTION
Usually call final account

The last payment:

From client to contractor
From contractor to client

It will shows the final total cost of the completed job to

client.

This final total cost = original contract sum + adjustment

for variation works + provisional quantites + other
adjustments made

Usually the amount is not much cause all payment have

been made through interim payment

This will allows client to make final correction/adjustment

made through the interim payment (if necessary)
THE
PROCESS

< 30 days
THE EFFECTS
As a evident that the works have been
properly carried out and completed

All responsibilities of the works being

transferred to client

As a evident all adjustment in term of

monetary have been made.