Responsibiities

Traditional method - this method can be a clear cut division of design and construction works . The client will engage different arechitects or engineers to design the works and they will take full responsibilities for construction of the works from the pre-tender stage until the completion stage .

Design and Build method
This method provides a single point contract and responsibilitity by the contractor . Therefore the contrator is solely responsible for failure in design or the constrcution . In short , the client has only one person to deal with if the project is faced with any problems .

Management Contracting Method
The client will have to choose the professional team who will be well coordinated through all the stages . The success of the project will depend on the management contractor's skills and an element of trust is essential .

Price Completion

Traditional Method - THis method allows certainty in cost and time before commitment to build . There will be clear accountability and cost monitoring at all stages .

Management Contracting method - The client is committed to start building on a cost plan , project drawings and specifications only .

Desig and Build method - The client can expect a guaranteed cost and completion date .

Risk

Design and Build Method - All the risk can lie almost wholly to th contractor .

Management Contracting Method - The client retain most of the risks

Traditional Method - The risks are generally fair and balanced between the parties to the contract .

Traditional Procurement Process

Project brief - feasibility study - concept design - detail design - tender and contract - construction - commission and handover

The Linear of Sequential Process of the Traditional Procurement System

Partnering

The creation of a special relationship between contracting parties in the design and construction industry .

THis relationship encourages the parties to change their traditional adversarial relationship to  a more co-operative , team based approach , which promotes the achievement of mutually beneficial goals , including the prevention of major disputes .

Commitment from top management
free and open exchange of information
based on equality of all partners
keep project teams together
interest in mutual profitability
problem resolution
All parties seek a win-win solution
Each partner is aware of the other partner to achieve this    
Value is placed on long-terms relationship
Overall performance is improved
All understand the no one benefits from exploiting the orher
Innovation is encouraged

Advantages
Encourages the parties to work together to attain the same desired result contract completiion - instead of engaging in fingerpointing whenver problem occur .

Helps eliminate surprisesrough incrased communications . Surprises can lead to delays and additional costs
Can minimise litigation by establishing informal confluict management procedures . Parties are able to anticipate and resolve prolems befor ethey become formal "disputes

Avoids disputes through the establishment of informal

Management system

A single organization or firm is commisioned to be responsible for designing the project and managing its construction

The firm is does carry out the work itself , but it is contracted out to a number of specialist sub-contractors or package contractprs , who enter into contract witht he client .

A design and manage firm or company is engage as a consultant for the client and become a member of the project team .

Design and management system

A single organization or firm is commissioned to be responsible for designing the project and managing its construction . 

The firm is does carry out the work itself , but it is contracted out to a number of specialist sub-contractors or package contractors , who enter into contract with the client .

A design and manage firm or company is engaged as a consultant for the client and become a member of the project team .

Constyruction management 2

Construction maangement is similar in most respects to management contracting except that wereas with management contracting the contract is between the client and the contractor ( the subcontractors are engaged through the main ontractort ) in construction managemtn the contracts for the work packages are with the client .

  The contruction manager is employed to manage the construction work . This system tends to be used only on large , specialist technical projects such as power stations .

Project manager

May be an organisation or an individual

Guides the client in the selection of a suitable procurement sytem , appoint all memebers of the construction team and control and organise the project .

Appointed on a fee basis , which is not dependent on the cost of the contract . This tends to ensure that the project manager works solely fo the client's interest , as he earns no commission .

Management contracting

" Fast-tracking " procurement approach

A contractor is contracted and paid a fee to manage , procure and supervise the construction of a project rather than to build the project .

The actual construction works are contracted out to many package or specialist contractors  sub contractors .

The management contractor is employed as a construction consultant to be part of the client's team .

The package contractor are in contract with the management contractor .

Sub-contractors
subcontractor enter into a standard JCT type of contract with the management contractor carry out construction work .

It is the management contractor who has a contratual relationship with the subcontractors who carry out the work , not the client . If any problems arise it is the management contractor who mustt pursue the subcontractor for a remedy .

Subcontractor are normally appointed by competitive tendering based on the drawings and bills of quantities .

Advantages

developer - work can start ealry - allowing deisgn and construction to overlap

To contractor - very few risks  - the PM and QS control costs - cost exceed the budget are borne by the client .

Develop and construct

Develop and construct is another of the integrated procurement approach which is very much similar to design and build .

The contractoris still given the responsibility for both the design and construction of the project .

THe difference is that , unver this method the client's design consultants prepare the concept sketches or designs and passed them to the contractor who will develop them and produced the detailed working drawings . The contractor will then construct and complete the project based on what it has deeloped and produced .

Advantages

The developer is only dealing with one organisation that has sole responsibility for the success or failure of the design and construction .

It allows the developer to be aware of the total amount of financial commitment prior to the commencement of construction .

Turnkey Contract

Turnkey contract is an American term for " all in " or package contract . Under this arragement , a contractor is commisioned to undertake the responsibilities for everthing necessary and required for the construction , competion , commisioning and hand over the project .

The word " turnkey " mean that , upon completion , the client is given the ke and he can then enter the project by " turning the key " . The contractor will have to do everthing from preparing project brief , getting approval , designig , financing , construction , furninshing and decorating to commissioning and handing over completed , cleaned and ready for use project .

Design and BUild

Design and build is under integrated procurement system

Under this ystem ,the client together with is / her consultants will prepare a tender or bidding docuement that include the project brief and client's requirements and invite a number of contractors to bid .

For the purpose of submitting tenders , the invited contractors will produce their own design , construction and cost proposal . Very often the successful contractor will into a contract based on lump sum price and fixed duration .

The contract may be on a fixed price or cost reimbursement basis , which may be either negotiated , or subject to tender .

Uses

Normally used for standard type buildings i.e. industrial untis .

Useful for repetitive types of buildings , which the contractor has constructed previously .

Past experience and familiarity of the design and construction should result in cost savings for the client .

Package Deal

Commonly called the " all in " contracting

A contractor is given the responsibility for everthing that is required and necessary for the design , construction and delivery of the project .

The services of the contractor will include the preparation of project brief , sketch and final working drawings , getting all the aproval from authroities , project financing , construction , furnishing and commisioning of all equipments and accessories and handing over the project to the client .

Advantage and disadvantages of traditional method

Advantages

All parties have a clear picture as to the extent of their commitments . It gives a clear breakdown of the cost of all aspects of the project .

The unit rates allow ease of valuation for the stage payments of work carried out and for any variation to the original design .

Disadvantages

Length of time taken in the design and preparation of the Bill of Quantities

Cost of preparation for the Bill of Quantities ( approximatelu 3.5 percent of the contract sum ) .

Traditional method

sequential method - tendering process
accelerated method - negotiated tender

This methos usually uses the standard form of contract by the Joint Contracts Tribunal ( JCT ) or similar .

The contract requires the contractor to carry out the construction according to the drawings and specification drawn up by the design team .

All work is supervised on behalf of the client by the design team leader , which is normally the architect or on civil engineering projects , the COnsultant Civil Engineer .

A Fixed Price Contract involves the contractor agreeing to construct the building as specified in the drawings and Bills of Quantities ( B of Q ) for the client for an agreed sum , by agreed date .

Although it is called a fixed price contract it does allow for the contractor to claim additional costs for any variations to the specification .

Allowance can also be claimed by the contractor for an extension of time if there is a delay which is beyond his control .

When constructing new building it is possible to assess the cost of the work to be done , in which case a fixed price can be the basis for the contract .


Tendering prtocess
A fixed price can , however price can , however , be on the whole contract , a sectrion of work or can apply to a unit rate . The price is fixed although the amount of work is not known .

The building owner will apoint a team of consultants to act on his behalf to produce construction drawings , specification and tender document and to administer the tendering processes to select a contractor .

Once selected and awarded the contract , the contractor will carry out based on the drawings and specification prepared by the client's consultants .


Negotiated tender

Can be considered as an innovative approach to speed up the selection of contractor and the commnecement of construction ''

Involve preliminary discussion with selected few contractors , submission of fixed tender and / or cost negotiation .

Type of procurement

• Apart from the traditional aooroach , there are now other " fast-tracking " or innovative procurement systems used by the construction industry world wide .

 The different procurement systems differ froim each other in term of allocation of responsibilities , activities sequencing , process and procedure and organizational approach in project delivery .

Procurement selection

• The selection of appropriate contract arrangements is difficult owing to the diverse range of options and professional advice is available .
• In the past few years there has been a significant shift in the way that construction projects are procured .
• This partially response to the changes which have occurred within the construction industry . Individual experience , prejudices , vested interests , the desire to improve the system and familiarity with particular methods influenced procurement recommendations .
• Thos who had bad experience with a particular procurement method will be reluctant and cautions in recommending such approach again .
• In reality too little is known and too little research has been undertaken properly to evaluate the vartious procurement options .
• In practice , there are both successful and unsuccessful projects that have used identical means and methods of contract documents .
• Procurement advisers should offer advice in the absence of any vested interests or personal gains .
• Sound , reliable and impartial advise is necessary from those who have the proficient skills , knowledge and expertise . 

what is procurement

Procurement comes the word procure which literally means " to obtain by care or effort " , " to bring about " and " to acquire " .
System is about " organized method , approach , technique , process or procedure ".

Project procurement has been described as an organized methods or process and procedures of obtaining or acquiring a construction product such as a house , shopping complex or road and jetty .

The hearing

The procedure of the hearing follows the rules of evidence used in a normal court of law . The parties may or may not be represented by counsel or other representatives .
  The claimant set out the case , and call each of the withnesses in turn . Once they have given their evience they are cross-examined by the respondent ( or counsel / representative where approprite ) . The claimant is then allowed to ask these witnesses further question on matters which have been raised by the cross-examination .
  A similar procedure is then adopted by the respondent , who sets out the details of the counterclaim if this is necessary . Witnesses are examined and these in turn are cross-examined by the claimant . The clainmant then replies to the respondent's defence and counterclaim ,and presents a defence to the counterclaim . When this has been completed , the respondent sums up the case in an adress to the arbitrator known as the respondent's closing speech . The claimant then has the right of reply or the last word in the case .

  The trial is now ended and both parties await the publication of the award . The re-examine cerain  parts of the project in more detail . The arbitrator will usually make the decision in private , and will set the decisions out in the awards . This is served on the parties after the appropriate charges have been met . It is enforceabl in much the same way as a judgment debt , where the successful party can reclaim such costs as the arbitrator has awarded .

Discovery

Once the pleading s have been completed , the precise issues whioch the arbitrator is to decide should be clear . Every fact to be relied upon  must be pleaded , but the manner in which it is to be proved need not be disclosed until the reference . The term discovery means the disclosure of all documents which are in the control of each party and which are in an way relevant to the issues of arbitration . Each party must allow thge other to inspect and to take copies of all or an of the documents in their list , unless they can argue on the grounds that it is privileged . The most important of these types of document are the communications between a part and their solicitors for the purpose of obtaining legal advice . A party who refuses to allow inspection may be orderted to do so by the arbitrator . In a fixing the date and place of the hearing , arbitrators have the sole discretion , subject to any laid down in the arbitration agreement . THey must , however , be seen to act in a reasonable manner . A refusal to attend the hearing by either party , after reasonable notice has been given , may empower the arbitrator to proceed without that party , ie. ex parte .

The pleadings

Pleadings are the formal documents which may be prepared by counsel or a solicitor . The arbitrator will first require the claimant to set out the basis of the case . This will be included in a documentrs , termed the points of claim , which will then be served upon the respondent . The respondent then submits a reply in answer to the points of claim , termed the points of defence . The respondent may also sybmit points of counterclaim , which will be served on the claimant at the same time  This may raise relevant matters that were not referred to in the points of claim . The claimant , in reply to the matters raised in the counterclaim , will submit points of reply and defence to counterclaim .
  The purpose of the above documents is very important , since they will make clear to the arbitrator the matters that are in dispute . Furthermore , the parties involved cannot stray beyong the scope of the pleadings without leave from the arbitrator .

Summary

• Economics is a study of how people use their limited resources to satisfy their unlimited needs and desires . 
• A positive statement is to deal with the question of what is and no indication of approval or disapproval . 
• A normative statement is to deal with the question of what ought to be 
• Microeconomics analyzes the specific economic units in details such as households , firms and government . 
• Macroeconomics analyzes the aggregates behaviour of the entire economy such as inflation , unemployment and national income . 
• Scarcity can be defined as human wants are always greater than the available resources . 
• Factoes of production are the basic resources used in production process in order to produce economic goods and services . 
• Opportunity cost is defined as second best alternative that has to forgo for another choice which gives more satisfaction . 
• Production possibilities curve ( PPC ) shows the various possible combinations of goods and services produced within a specified time period with given technmology and resources . 
• Points lying inside the PPC indicate inefficiency and waste of resources . 
• Points which lie outside the PPC are unattainable and shows the concept of scarcity . 
• Points along the PPC are maximum amounts of output attainable and efficient which indicate choices . 
• Movements from one point to another point illustrates the concept of opportunity cost . 
• Shifts of the PPC happen when there are improvements in technologies , increase in resources and growth in economy . 
• The question of what to produce depeneds on the types of goods and services to produce and the quantities . 
• The question of how to produce goods and services depends on the cheapest method of production . 
• The question of for whom to produce depends on the distribution of income . 
• Economic system is a way in which an economy is organized to answer basic economic questions . 
• A market economy or capitalism is an economic system where individuals without government intervention take all the main economics decisions . 
• Planned economy or socialism is an economic systemw where all the economic decisions are made by the government or central authority . 
• Mixed economy is an economic system which has a mixture of capitalism and socialism systems to solve basic economic problems . 

summary of Economic System

Merits


Capitalism 

• Production according to the needs of consumers
• Economics freedom 
• Efficient utilization of resources 
• Greater variety of consumer goods 
• Enchanced trade , business , and research and development ( R & D )
• Automatic incentives 
• Flexibility 

Socialism 

• Production according to basic needs 
• Equitable distribution of income and wealth 
• Better allocation of resources 
• No series unemployment or recession ./inflation 
• Rapid economic development 
• Social welfare 

Demerits

Capitalism

• Inequality of distribution of wealth and income 
• Inflation and high unemployment rate 
• Lack of social welfare 
• Unnecessary variety and wasteful competition 
• Misallocation of resources 
• Social costs . 

Demerits

• Lack of incentives and initiative by individuals 
• Loss of economic freedom and consumer sovereighty 
• Absence of competition 
• Waste of economic resources . 

Mixed Economy

1. Public and private ownership of resources 
2. Price mechanism and economic plans used to make economic decisions 
3. Governmenet helps to control income disparity 
4. Goverment intervention in the economy 
5. Large cooperation between the government , public and business sectors 
6. Government control of monopolies . 

Socialism

1. Public owenership of resources 
2. Central Planning Authority 
3. Price mechanism of less importance . 
4. Central control and owenership

Capitalism

1. Private ownership of resources 
2. Freedom of enterprise and choice 
3. Consumers sovereighnty 
4. Competition 
5. Minimum government intervention 
6. Price system . 

For whom to produce

The distribution of goods and services is also decided by the public and private sectors . The price mechanism does not fully function in mixed economies . In many mixed economies , the government intervenes directly through price controls and indirectly through the imposition of indirect taxes and subsidies .

How to produce

The public and private sectors will decide on the techniques of production to be used in the production of the different goods and services .

What to produce

In mixed economies , the question of what to produce is decided by both the public and private sectors . The goods produced and the services provided depend on the consideration of social welfate and economic growth .

Givernment control of monopolies

Monopolists are single players in an industry . They have complete , sole control over the price of goods or services . In order to avoid customers being exploited by monopolists , the government will regulate the power of monopolists .

Co-operation berween the government ,public and business sectors

In mixed economies  , there is singnificant co-operation between the public and private sectors leading to economic development .

Government intervention in the economy

The governement will not intervene in the economy except for particular industires . In mixed economy , the governement uses legislation for unsafe goods cateforized as illegal products such as military items . The government also uses direct provision , for example , education , defense and health to increase the standard of living . The government will carry out certain projects or produce certain goods that the private sector considers unprofitable . For example , low cost housing projects in Malaysia are administered by the government and cater to the lower income group . This project is not a profitable venture for private enterprise .

Government helps to control income disparity

In most mixed economies , the goverment controls income disparity through income taxes and welfare payments . The government also has direct control over profits , wages and rents . THus , the government helps to narrow the income gap between the rich and the poor .

Price mechanism and economic plans in making economic decisions

The price mechanism is used to price both goods and services . However , commodities such as sugar , oil and rice are decared as controlled items in Malaysia and the government fixed their prices . Most of the mixed economies accept economic planning as an instrument economic growth and social justice .

Public and private ownership of resources

The private and public sectors play important roles in a mixed economy . Private enterprises conduct business freely and the government encourages the private sector by providing conduct business freely and the government encourgaes the private sector by providing them with infrastructure and facilities .

Mixed Economy

This is an economic system which combines both capitalism and socialism to solve basic economic problems .  A mixed economy is an economy in which both the public and private sectors play a role in the economy .
   In the real world , most countries practise mixed economy .

For whom to produce

The distribution of the national product is decided by the Central Planning Authority . The distribution of various commodities among citizens is done through a set of administered fixed processes . Necessity goods ae fixed at lower prices , and luxury goods at higher prices . The prupose of these fixed prices is to reduce inequalities in the distribution of income .

How to produce

The central Planning Authority also decides on the techniques to be used in the production of different goods and services . THe choice is between traditional and modern technique of production . For example , the planning authority has a choice of producing computer using more labour or more machinery .

What to produce In socialism , planning authorities

decide what to produce . The central planning Authority will collect detailed statistics on the resource availability in the country and link it with national priorities . If the planning authority feels that the nation needs more computer for current and future consumption , more resources will be allocated for the production of computers over other products .

Waste of economic resources

The goverment may be induced to produce goods and services that are not require by the people such as military equipment . This will lead to an oeverproduction of certain goods and an underproduction of others .

Absence of competition

Since there are limited private enterprises , less research and development ( R&D) activities are carried out . THis results in low quality products since there is no competition .

Loss of economic freedom and consumer sovereignty

Under a socialist economy , the central planning authority or the govermenet directs all economic activity . There is no choice given to the consumer and they accept whatever public enterprises produce . There is little variety in the goods and services produced and available is restricted . Limited private organizations exist in a socialist economy .

Lack of incentives and initiative by individuals

Individuals have no profit motive . This will lead to economic inefficiency since jobs are provided by the goverment and individuals are not motivated to work harder .

Social welfare

The goverment will provide all citizens of the country with full social security benefits such as pensions , accident benefits and others . Since the govermenet is concerned , labour dispute and wastage of resources do not exist in a socialism system .

Rapid economic development

In a socialism system , the economy grows faster  . The main factors responsible for the rapid economic growth are the full utilization of resources , planning and quick decisions .

Rapid economic development

In a socialism system , the economy grows faster . The main factors responsible for the rapid economic growth are the full utilization of resources , planning and quick decisions .

No serious unemployment or recessioon / inflation

The unemployment rate and inflation are usually taken care by the goverment  to ensure the economic stability in the country .

Better allocation of resources

Under the socialist system , the planning authority will allocate resources between current consumption and future investment .

Equal distribution of income and wealth

There is no difference between rich and the poor . This system provides equal opportunity for all citizens in earning an income . Wealth is also equally distributed since private enterprise is limited .

Production according to basic needs

Production in a socialist economy is mainly directed at producing the basic needs of the people such as food , clothing and building matterials . It is not determined by the purchasing power of the rich in society . The phenomenon of the rich getting richer and the poor getting poorer does not exist in the socialist economy . 

Central control and owenership

A socialist economy is a fully planned economy where the goverment intervenes in all aspects of economic activity . The goverment controls production , consumption , and the distribution of goods and services .

Price mechanism of lesser importance

Socialism gives less importance to market forces . Prices are fixed by the goverment and not determined by demand . Private profits are not allowed and public interest is emphasized in the command economy .

Evolution of management

Planning

• Is to process of setting objective , determining what action shuld be taken to accmplish them and resourcs to be use .

Organizing

• Suxxess begins with organizing , the process of assigning talk , alocating resources and coordinating the activities of individuals and groups to implement plans .
• Through organizing , manager turn plan into actions by defining job , assigning personnel and supporting them with technology and other resources .

Leading

• Is a process o arousing people enthusiasm to work hard and inspriing their efforts to fulfill plans and accomplish objectives .
• Managers build commitment to a common vision , encourage activities and support goals and influences other to do their best work in the organization behalf .

Controlling

•  Is a process of measuring work performances , comparing results to objectives and taking correctiv action as needed .
• Manager maintain active contract with peole in the course to their work  gather and interpret reports on performance and use this information to plan constructive action and change .

$ fucntion of management

Planning - Setting performances objectives and deciding how to achieve them .
-Leading - Inspiring people to work hard to achieve high performance
- Organizing - Arranging task , people and other resources to accomlish the work - performance -attain goal - product - sercices - efficinecy - effectiveness

- controling - measuring performances and talking action to ensure desire result - resource - human - financial raw - material - technology - information . 

Function of Management

• Managers must capable to :

- recogniz the performance problems and opportunity
-make good decision
- take appropriate action

- these can be done through planning , organizing , leading and controlling the use of resources to accomplish performance goal .

Organisational Performance

• Organisation - a social entity that is goal directed and deliberately structured .
• Effectiveness - the degree to which the organisation achieves a stated goal . ( Do the right things ) .
• Efficiency - the use of minimal resources - raw materials , money , and people - to produce a desired volume of output .

The Management Process

• Bottom line in every manager's job- to succeed in helping an organization achieved high performance by best utilizing its human and materials resources .
• Managers are responsible for :

- Organization achievement if the measure of organization sucess in the productivity in the form of high level performance .
- Moblilizing technology and talent by creating environment within which people work hard and perform to their best ability .

Adjudication

The dispute resolution techniques that are described in JCT 98 include adjudication , arbitration and litigation . The courts may also need to bne called upon to enforce settlements that are reached by other methods . The parties may also decide to agree amongst themselves to use other alternative methods to settle their differences , such as alternative dispute resolution . This is considered towards the end of this chapter . It is claimed to be a non-adversarial technique , although its rise in popularity in the construction industry appears now to have waned in favour of more established techniques .

  Adjudication was first introduced into the UK in the mid 1970s . its application was restricted to disputes that occurred between the main contractor and the directly employed or domestic subcontractors . The process involved using an independent third party , an adjudicator , to help resolve a dispute that had arisen . The adjudicator could be appointed as part of the subcontract conditions , but invariably was only appointed after the dispute had occurred . The main advantage of using an adjudicator  was tghe rapid respone of the decision . The decision was binding , although as in all disagreements the parties had the right to take the dispute to a higher authority . Adjudication was subsequently introduced into the JCT form with contractor's design and more recently into JCT 98 /. This followed one of the principles of better practice recommended by the Latham Report .

  Adjudication is described in claused 41A of JCT 98 and this clause is discussed in Chapter 29 . The referral of sa dispute to an adjudicator must be made within 7 days ( caluse 41A2 ) and a decision must be given to the parties concertned , in writing , within 28 days ( clause 41A5 ) . The period for the decision can be extended for a further 14 days if the parties to the dispute agree . The adjudicator , like anyone in hearing disputes , must act impartially to determine the facts and law that are applicable to the dispute .
 The appendix to the form of contract seeks to identify who should nominate the adjudicator .
  Unless the parties agree to the contrary . this shall be the president or vice-president of the Royal Institutte of British Architects . As an alternative the adjudicator may be a president or vice-president of the RICS , the Construction Condeferation or the national Specialist Contractors Council . The adjudicator can be named in the contract in order to save time should a dispute occur . Whilst this is useful , the appointed adjudicator might not be suitable to review all disputes . The JCT adjudication agreement is a standard form that has been produced by JCT .

  Within seven days of the notice to refer a matter to adjudication , a referral document should be rpovided that incluides tha particulars of the disputes , a summary of the issues involved and the remedy and relief that the adjudicator should consider . The powers of the adjudicator are described in claused 41A5.5 as follows .

• Using the adjudicator's own knowledge and expertise
• opening up , reviewing and revising certificates , opinions , decisions or notices
• Requiring the parties to provide additional information
• Requiring the parties to carry out tests or open up work
• Visiting the site and workshops .
• Obtaining information from the employees of the parties concerned
• Obtaining information from other third parties .
• Determining the payment of any interest within the terms of the contract .

 The parties are normnally responsible for their own costs , but the adjudicator may direct that , in fairness , the unsucessful party can recover their costs from the successful party . There are , several identified advantages of using adjudication in prederence to other method of settling disuputes

• It seeks to eliminate conflicts as quickly as possible by resolving disputes as theyh arise .
• It is recognised that the adjudicator's decision will be provided in the fastest possible way .
• It is intended to be the least expensive process for settling disuputes , by reducing lawyers 's charges .
• It can act as a referral system , preceding arbitration : or litigation where the dispute is not resolved at this stage .
• it is anticipated that many disputes will be resolved and terminated at this stage , rather than proceeding towards more litigious action .

However , in practice the complexity that sometimes occurs with construction disputes cannot be dealt with effectively , and more rigorous methods of settlement may need to be employed .  Sometimes adjudication may simply be considered as a temporary solution to a problem . .

Example

The construction of a major new factory on a greenfield site required a large earthmoving contract . The quantities of excavation and its subsequent disposal have ben included in the contract bills and priced by the contractor . i is found that the quantities of materials to be taken to tips has increased by 25 per cent by volume . This is due to variations to the contract and the unforeseen nature of some of the ground conditions of the construction site .

  The contractor's pre-tender report indicates that a variety of tips at different distances from the site will be used for the disposal of the excavated materials . The contractor's tendering notes indicated that the tips nearer the site would be filled first . In this case they result in lower haulage costs , but in this case are also shown to have lowwer tipping charges . The disposal of the excavated mateial therefore includes two separate elements :

- The haul charges to the tip
- The costs of the tip

In the contract bills , the rate used by the contractor for disposal of excavated materials represents an average rate . This is based upon calculated average haul distances and average rate for the disposal of the excavated materials can be calculated similarly for the actial quantities of excavated materials that are involved . The data is shown in Box 5.1

  To simply continue to aply the contract bill rates in similar situatins to that shown in Box 5.1 is erroneous .The rates no longer reflect the work to be carried out and the contractor's method of working , which have been changed by the variation to the contract . Other factors that might also need to be considered are the excavation of different types of construction materials that have been encountered , whether they bulk at different rates or whether they are more difficult to handle .

  The increase in the amount of excavated materials , on this scale , may also have other repercussions such as an extension of time which might also need to be considered . The method of carrying out the works might also now be different from considered . The method of carrying out the works might also now be different  from that originally envisaged by the contractor . Different types of mechanical excavations may be required or the plant originaly selected to do the work might no longer be the most appropriate . This is especially so where cut and fill excavations are considered . The contractor may also be involved in hiring additional plant at higher charges and employing workpeople at overtime rates , in order to keep the project on schedule .

  The contractor must , as a matter of good practice , always put in writing :

• Applications for instructions , drawings , etc .
• Application for the nomination of subcontactor
• Progess of the work and any delay
• Notification of any claims under the contract in respect of

1. variations
2. Extensions of time
3. Loss and expense .

• Confirmation of any oral instructions from the architect .

The contractor should also ensure that any certificates that are required under the terms of the contract are issued at the appropriate time . These may have some effect upon the vadility or otherwise of a contractor's claim at a later stage .

Contractors

Many contractprs have well-organised systems for dealing with claims no construction projects and the recovery of monies that are rightly due under the terms of the contract . They are likely to maintain good record of most events , but particularly those where difficulties have occurred in the execution of the work . However , some of the difficulties may be due to the manner in which the contractor has sought to carry out the works and thus remain the entire responsibility of the contractor .

   CLaims that are notified or submitted late will inevitably create problems in their approval . In these circumstances the architect might not have the oppportunity to check the details of the contractor's submission . Such occurrences will not be favourably looked upon by the architect or the employer .

  The contractor must prepare a report on why a particular aspect of the work has cost more than expected , substantiate this with appropriate calculations and support it with reference to architect's instructions , drwaings , details , specifications , letters , etc . The contrator must also be able to show that as an experienced contractor they could not have foreseen the difficulties that occurred . They will also need to show that the work has carried ot in an efficient , effective and economic manner .

  Claims are for additional payments that cannot be recouped in the normal way simply through measurement and valuation . They are based on the assumption that the works constructed differed considerably from the works for which the contractor orginally submitted a tender . The differences may have changed the contractpreferred method of working and this in turn may have altered or influenced the costs involved . The rates inserted by the contractor in the contract bills are not now a true reflection of the work that has been executed .

JCT 98

The standard form of building contract ( JCT 98 ) seeks to clarify the contractual relationship between the employer and the contractor . As far as possible , ambiguities have been removed , but some nevertheless remain . if  such forms or conditions of contract were not availale , then the uncertainty between the two parties would be even greater . This could have the likely effect of increasing tendertotals . Under the present conditions of contract , the contractual risks involved aree shared between the employer and the contractor . Claims may arise most commonly under clause 26 , and these known as loss and expense claims . They may also arise due to a breach of contract . The contractor must make a wirtten application to the architect , in the first place , sating that a direct loss and expense has occurred or is likely to occur in the exrcution of the project . The contractor must further state that any reimburtsement under terms of the contract is unlikely to be sufficient ( clause 26.1 ) . This information should be given to the architect promptly in order to allow as much time as possible to plan for other contingencies .

  As soon as reasonably possible , the contractor should provie the architect with a written interim account providing full details of the paricular claims and the basis upon which it is made . This should be amended and updated when necessary or when required . If the contractor fails to comply with this procedure  this might prejudice the investigation of the claim by the architect and any subsequent payments by the employer to the contractor .


   The contractor is entitled to have such amounts included in the payment of interim certificates under clause 30.2.2 . However , in practice a large majority of claims are not agreed until the completion of the contract . in these curcumstances the contractor is entitled to receive part of the claim included in an interim certificate where this can be substantiated .

Ex gratia payments

Ex gratia payments are not based upon the terms or conditions of contract . However , the carrying out of the works has nevertheless resulted in some loss and expnse to the contractor .  The contractor has completed the project on time , to the required standrards and conditions adn at the price agreed . erhaps , due to a variety of different reasons , and at no fault of the contractor , a loss has been sustained that cannot be related to the contractual conditions . On rare occasions a sympathetic employer may be prepared to make a discretionary payment to the contractor . Such payments are made out of grace and kindness . They may be made because of a long-standing relationship and trust between employer and contractor , or because of outstanding service and satisfaction provided by the contractor . Nevertheless , they are rare occasions .

Contractual claims

Contractual claims have a direct reference to conditions of contract .When the contract is signed by the two parties , the contractor and the employer , there is a formal agreement to carry out and complete the orks in accordance with the information supplied through the drawings , specificationa dn contract bills . Where the works constructed are of a different character or executed under different conditions then it is obvious that different costs will be invoklved . Some of these additional costs may be reoupled under the terms of the contract , theougfh , for examle , remeasurement and revaluation of the works , using the appropriate rules from the contract . Other additional costs that an experienced contractor had not allowed for within the tender may need to be recovered in a different way . This is usually under the heading of a contractual claim .

Issues for resolution of disputes

The following matters need to be resolved in order to reduce the possibiility of future disputes occuring :

• Clarification of responsibilities
• Need of single-point responsibility contracts
• Allocation of risk to the parties who are best able to control it
• Further investigation of insurance-based alternatives
• Need to develop and extend nonadversarial methods of disuputes resolution .
• Partnership sourcing ( contractors and consultants working in a consortium )
• Quality manageent and quality assurance .

Claims

It is evident from society in general that as individuals we are becoming more claims conscious  . Firms of lawyers are now touting their services , often on a no-win no-fee basis . Everyone wants their pound of flesh ans what they rightfully believe belongs to them . Claims are seen by many to be a last resort issue . Even in the construction industyr this is true , although some would want to argue that some contractors prepare their claims  alongside their tender submissions .

  Contractual claims arise where contractors assess that they are entitled to additional payment over and above that paid within the general terms and conditions of the contract .  For example , the contractors may seek reimbursement for some alleged loss that has been suffered for reasons beyond their control . On may occassions the costs incurred lie where they fall and contractors will have recourse to revocer them . Thus losses and delays arising from the intervention fall with the contractor . The fact that a loss has been sustained , without fault on the part of the loser , may merit sympathy , but does not in itself demand compensation . here a standard form of contract is used , many attempts may be made by contractors to invoke some of the compensatory provisions of the contract in order to secure further payment to cover the losses involved .

   The details of such claims will be investigated by the quantity surveyors and a report made to the architect , engineer or other lead consultant . The report should summarise the arguments involved and set out the possible financial effect of each claims . Quantity surveyors frequently end up negotiating with contractors over such issues in an attempt to solve the financial problems and to arrive at an amicable solution , whereever this is possible . This is preferable to a lengthy legal dispute .

  As with many issues in life , contractual claims are rarely the fault of one side only . If the claim cannot be resolved in this way then some form of legal proceedings may be initiated . Particular care therefore need sto be properly exercised in the conduct of the negotiations since they may have an effect upon the outcome of any subsequent legal proceedings . Claims may be classified in several different ways . THey usually reflect a loss and expense to  a contractor .

The reason why disputes arise

The construction industry is a risky business . it generally does not build many prototypes , with each different project being individual in many respects . Even identical buildings that have been constructed on different sites create their own special circumstance , are subject to the vagaries of different sites create their own special circumstances , are subject to the vagaties of different site and weather conditions and use labour that may have different trade practices even from one site to another . Even the identical building constructed on an adjacent site by a differtent contractor will have different costs and different problems associated with its construction . The introduction of new building materials and design , changes to the procurement and organisation of the project and thew poor margins of profitability provide a good platform for disuputes . Disuputes are therefore likely to arise under the b est circumstance , even where every possibility has been potentially eliminated . Disuputes between parties , it should be remembered , are really in no one's best interests . Here are some of the main areas where disputes might occur :

General
- Adversarial nature of construction contracts .
-Poor communication between the parties concerned .
- Fragmentation in the industry
-Tendering policies and procedures .


Clients
- Poor briefing
-Changes and variation requirements .
- Changes to standard conditions of contract .
- Interference in the contractual duties of the contract administrator ,.
- Late payments .

Consultants .
- Design inadequacies
- Lack of appropriate competence and experience .
- Late and imcomplete information
- Lack of coordination
- Unclear delegation of responsibilities .

Contractor
- Inadequate site management
-Poor planning and programming
- Poor standad of work
-Disuputes with subcontractors
Coordination of subcontractor


Subcontractors
- Mismatch of subcontract conditions with main contract
- Failure to follow and adopt agreed procedures .
-Poor standards of work .

Manufacture and suppliers .
- Failure to define performance or purpose
-Failure of performance .

Population

A population increase can also lead to the PPC shifting outwards , A larger population will result in an increae in producion , as shown in Figure 1.6 (a) . On the other hand , if worjers migrate to other countries , there will be a reduction in population . For example , Malaysians migrating to Singapore to work because of more atractive salaries or incentives , will result in the PPC shifting inwards as an be seen in Figure 1.6(b) .

Improvements in technology

Technological advances will also increase the production capability of a country .  Possible reasons for an increase in output are new innovations , applications of new and efficient techniques of production , or the development of a better way of producing goods and services .

  For example , the country JAYA in the previous example was producing both sewing machines and butter . Through innovations in the production of sewing machines , JAYA can produce more sewing machines within the same period . This will shift the production of sewing machines to the right as shown in Figure 1.5(A) .

  If JAYA has discovered new and more efficient techniques of producing butter with a higher yield , then the production of butter will shift to the right as shown in Figure 1.5(b) .

Factors that influence the shift of PPC

Factors of production such as land , labour , capital and enterprenuership ae the available resources in any economy . ThePPC depends on the availability of these resources and technology . echnological improvement , an increase in resources and a growth in the economy will result in the PPC shifting outwards as shown in Figure 1.3 . In the event of any natural disaster or a decrease in resources , the PPC will sift inwards as shown in Figure 1.3 . 
The PPC shifts when there is :

1. Economic Growth
- When the country enjoys economic growth , the PPC bounds outwards . With economic growth , the production capability of a country increases as there is an expansion of resources such as land , labour , capital and entrepreneurship . The increase in output is due to the avaialblility of new resources , machinery and an increae in productivity . This will shift the PPC to the right as shown in Figure 1.4 (a) .

  When a country is struck by a natural disaster such as a tsunami , a hurricane or an earthquake , natural resources are either exhausted or reduced . Thus , economic growth wil decline and there will be a decrease in outputs . This will shift the PC to the left as shown in Figure 1.4(b) .

ProductionPossibilities Curve ( PPC)

 The production possibilities curve ( PPC ) is used to explain the basic economic concepts of scarcity , choices and opportunity cost .
  The PPC shows the various possible combinations of goods and services produced within a specified tie with all its resources ( labour , land and capital ) fully and efficienclty employed . Let us make the following three specific asumptions to illustrate the PPC .

1. The economy is operating in full employment and full production capactiy ( full efficiency ) .
2. The amount of resources available is fixed .
3. The state of technology does not change throughout production .  Let us assume that a country named JAYA produces two products - butter and sewing machines . Butter is symbolic of consumer goods and sewing machines are symbolic of capital goods . The PPC can be illustrated by use of a table or graph . 

The explanation for Figure 1.1 is as follows :

• The line connecting points A to F is JAYA'S Production Possibilities Curve (PPC) . It separates the attainable from the unattainable . Points A to F are the best possible combinations of resources to enable full tilizationa dn to ensure that the country is at full employment . If all the factors of production are used in the production of butter only , JAYA's economy can produce 5,000 kg of butter . On the other hand , if the resources are used in the production of sewing machines only , then , 15,000 units of sewing machines can be produced . Besides these two extremes , the other combinations also show different possibilities . For example , Point C shows JAYA producing 2,000 kg of butter and 12,000 units of sewing machines while Point D shows 3,000 kg of butter and 9,000 units of sewing machines being produced .
• Any point inside the PPC ( such as Point Y ) - These combinations of production are attainable , that is , it is possible to produce butter and sewing machines of this quantity . But it shows waste of resources and inefficiency since the production has not reached its maximum level. For example , at point Y , only 12,000 units of sewing machines and 1,000 kg of butter are produced . Given the available resources , JAYA can produce 12,000 units of sewing machines and 2,000 kg of butter . THis shows under production of 1,000 kg of butter if the combination of production was at point Y . This also leaxs to unemployment .
• Any point outside the PPC ( such as Point Z ) - This demonstrates the main basic economic concept : scarcity .   ( At this point due to limited resources and technology , JAYA is unable to meet production . Points outside the PPC are unattainable . For example , at Point ZJaya wants to produce 16,000 units of sewing machines and 5,000 kg of butter , but due to limited resources and a limited state of technology , this cannot be achieved . When JAYA's wants exceed output , there is scarcity .
• Any point along the PPC ( such as point A , B , C , D , E and F )  - It shows the second concept : choices .  - JAYA will have to make its choices from various possible combinations of sewing machines and butter , which will maximize its satisfaction . SInce JAYA cannot produce at point Z , it will choose any point along the PPC which is both attainable and efficient .
• Movement from one point to another ( such as point C to D ) - It shows the third concept : opportunity cost  JAYA must gorgo sewing machines if it wants an additional 1,000 kg of butter . For example , JAYA needs more butter  , so the production will move from point C to point D . In order to obtain additional 1,000 kg of butter , JAYA has to forgo 3,000 units of sewing machines  . The opportunity cost of producing an additional 1 kg of butter is 3 units of sewing machines .

PPC enables us to calculate the opportunity cost as shown in Figure 1.2 (a) and (b) .


The movement down from point A to point F on the PPC is the opportunity cost of butter . The opportunuty cost increase with the quantity of production .

The movement from point F to Point A on the PPC , is the opportunity cost of sewing machines . The opportunity cost increases with the quantity of production .

Basic Economic Problems

These can also be referred to as basic economic questions . Sinece there are limited resources , a nation or society has to decide how to allocate its limited resources eddicientlty to produce the goods and services to satisfy the needs of the people . To do this , three fundamental conomic questions need to be answered .

What to Produce
- The economy of every nation has to take fundamental decision of what to produce because of the limited economic resources . Every society must choose the type and the quantity of goods and services tht it will produce . Should more computes be produced than radios ? Should more clinics be built than schools ? How many cars should be produced ? The problem of what to produce is solved in different wats in different economic systems . In a captitalist economy , this problem is solved through the price mechanism , which reflecs consumers; taste and preferences . In a socialist system , it is solved by the Central Planning Authority .

How to Produce
- This refers to the cheapest method of production . There are alternative techniques of producing goods and services . Should farmers use traditional ways to harvest ?Should factories use more human power or robotics to produce goods ? Should cars be produced by automatic machines or assembly line workers ?

For WHom to Produce
- This referes to distribution . Distribution of economic benefits depends on the distribution of income . How is the national income distributed ? Who will drive the latest model of an imported car ? How much will pensioners receive ?
  These three basic economic problems are solved differently in different economic systems . See economic systems .

Opportunity cost

Oportunity cost is the cost of one choice in terms of the best forgone alternative  . If you cannot obtain what you need , then you have to choose among the alternative . The next alternative that you choose not to do is the cost of the thing that you  choose to do .

Definitions of opportunity cost -  opportunity cost is defined as the second best altertnative that has to be forgone for another choice which gives more satisfaction .

Example - Dina has Rm 5 and she would like to buy two things : a book and a pen which cost Rm 5 each ( unlimited wants but limited resources ) . Dina has to choose either to purchase a book or a pen which would satisfy her needs ( choices ) . If Dina chooses the book , then the pen is the opportunity cost because it is the second best alternative which she has to forgo .

Opportunity cost - Second best alternative that has to be forgone for another choice which gives more satisfaction .

Choice

When there is scarcity , choices have to be made . Everyone cannot have what he or she wants , so they have to choose from the available alternatives . Individuals , firms and government make decisions to choose from many alternatives .

Scarcity

One of the most important concepts in economics is scarcity . Scarcity can be explained as want are always exceeding limited resources to satisf them . Scarcity is a universal problem faced by both poor and rich nations in order to fulfill their needs . if these is no scarcity , there will be no economics . The needs or wants are unlimited but the world has only a limited amount of resources of factors of production . Factors of production are the basic resources used in the production process in order to produce economic goods and services . Economics hjave classified the factors of production into four group namely :

1. Labour - The services controibuted by people in the produ tion process that invole both mental and physical effort . Exmaples are lecturers , construction workers and others . For more details please see chapter 5 .
2. Capital - Huiman made resources which are used in the production process to produce other goods and services . Examples are machinery , raw materials , building , tools and others .
3. land - All natural resources such as land , air , water , forest , and others .
4. Entrepreneur - Human ability and capability to combine land , labour and capital to develop production of goods and services .

Recall the definition by Robbins , " Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses'. When we observe this , we shall find some important concepts which comprise the main structure if Economic Science .
  The meaning of the three important fundamentals are as follows :

• ends refers to unlimited human wants . From our own experience , we want many things in life and if one want has been satisfied , it would create another need . For example , if we desire to buy a kancil car and we manage to purchase one , later we would want a bigger , imported car and these wants will continue without an end . So , when there is unlimited wants , we would need to choose between the most urgent need and the less urgent want .
• Scare refers to the wants which are unlimited although the means to satisfy these wants are limited . In other words , these are limited resources . Almost all things that men desire or want are scare .
• Alternatives refers to choices which may be made and involves opportunity cost . Scarce resources can be put to various uses . if we are not able to buy an imported car , then are other alternative cars that we can purchase with our limited income .

Positive Versus Normative Analysis

First of all , let use define what positive and normative analyses mean . A positive analysis is to deal with the question of "what is " and no indication of approval or disapproval .Basically , the positive analysis focuses on facts and cause-and-effect relationships . A positive analysis will predict the changes in economic phenomena such as production , consumption , and consumer's income due to changes in government policy . For example, suppose that the Malaysian government removes its subsidies for petrol and diesel . What is the impact on the consumers and automobile industry ? Will consumeers prefer bigger or smaller cars ? What is the impact on the transportation industry as well as tourism industry ? Will this subsidy removal increase the price of other related goods ? All these are called positive analysis because we need to analyze the cause-and-effect relationship .

  On the other hand , a normative analysis is to deal with the question of "What ought to be " . The normative analysis incorpporates value judments about what the economy should be or what policy should be  used to achieve economic goals . Pertaining to the same situation , question such as " should the car manufacture produce a more fuel efficient car ? " or should the goverment impose lower corporate tax  on oil producing companies ?" will arise . All these are statements in normative analysis .

Differences between Microeconomics and Macroeconomics

After the great depresion of the 1930s , the discipline of economics split into two , namely , microeconomics and macroeconomics . Ragnar Frish , a Norwegian economist and jan Tinbergen , a Dutch economist were the first to introduce the words micro-dynamics and macro-dynamics in 1933 and these were later known as microeconomics and macroeconomics .

  The terms " Microeconomis" and " Macroeconomics " are derived from the Greek words "micro" and "macro" , where "micro" means small and "macro" mean large .

Mircoeconomics

- Microeconomics studies individual economic unit s in detail such as a household , a firm and a goverment . As the word " micro" means looking closer into small units , microeconomics provides an outline for choices and decision making of an individual , a business and the public at large .
  Microeconomic concepts can be applied to our daily lives . individuals face questions like : What do I want for breakfast ? Shall I buy a DVD player or a computer ? where should I go for holidays ? Firms face questions like : Shall we produce rice or compact discs ? How many labourers should we employ ? Shall we use more machines or labour ? A government faces questions like : Shall we allocate a budget for schools or clinics ?

Macroeconomics

- Macroeconomics studies the aggregate behaviour of the entire economy . We study the gorss domestic product , the national income , inflation , feflation , unemployment , public finance , the trade cycle , international trade and others .

  Some examples are : What is the unemployment rate in Malaysia ? What cause a high inflation ? Why did Bank Negara Malaysia cut interest rates by 2 percent ?

Microeconomics
- The study of individuals parts of the economy such as public choices , business choices and personal choices .

Macroeconomic
- The study of the economic system as a whole such as the national income , the trade cycle , the unemployment rate , inflation and general price levels .

Definition of economics

Basically , there are wide definitions of economics as a social science . below are some such definitions .
  Economics is a science that studies human behavior as a relationship between ends and scarce means which have alternative uses , according to L.Robbins .

K.E. Case and R.C. Fair are of the view that economics is a study of how people use their limited resources to try to fulfil unlimited wants and involves alternatives or choices .

  David N. Hyman defined economics as a study of how scarce resources are allocated among alternative uses .

Introduction of economic

Economics is one of the oldest disciplines among the humanities and is categorized as a social science . Economics examines and analyses the economic activity of people in order to satisfy their needs and desires . Human wants are the starting point of economic activity and provide the basis for economics . An economic activity refers to an activity that helps the people to achieve economic gains , which is value in terms of money . Human beings have certain basic needs , for example , food , the need for shelter and clothing . But a human being is never satisfied and there will no end to his wants . Do you have everthing you want ? Probably not , because one want will lead to another want and so on . So , economic deals with the economic probem of individuals , firms , societies and countries .

Microeconomics

settlement of disputes

and God said unto Noah , the Ark shall be finished within seven days . And Noah saith , it shall be so ,. But it was not so . And the Lord saith , what seemeth to be the trouble .
This time ? and Noah saith , mine subcontractor hath bone bankrupth . THe pitch which thou commandest me to use has not arrived . The plumber hath gone on strike . And the glazier on holiday tpo Majorca , even tho I did ogffer him double time .

Construction contracts in the distant past consisted of a document of about five pages long . They generally concluded with a handskae , but underlying such aggreme were an essential set of values of competence , fairness and honesty . Today things are different . We have developed a complex and onerous set of conditions that attempt to cover every eventuality and in so doing create loopholes that the legal professions can feast upon . It has iften been suggested that the only individuals to make any money in the construction industry are the lawyers .  Precious time and resources are thus drawn away from the main purpose of the industry . Getting the project built on time , to the right design and use of construction technology at an agreed price and quality .
  Everyone in the industry aggreed that construction contracts need to become less adversariel and more simply constructed  , emphasizing the positive needs of the project . Consultants and contractors should be allowed and encouraged to use their best endeavours and to work rtogether as a team rather than watching their individuals back all of the time . When a project ends up in a protracted disuputes , the project will fail to meet its original goals and expetations . In addition , clients will sufer from high legal fees , delayed completion and occupation and general dissatisfaction . The contractor;s profits will diminish and to these will be added additional legal fees . There are no winners under these circumstances .

  The british construction industry offers its customers great flexibility . It is envided in many parts of the world . But , due to the pressures involved in getting a project completed as quickly as possible , may construction projects are inadequately or not fully deisnged before the construction work start on site . Changes to the design are therefore both inevitable and welcome in achieving satisdactory solutions to meet the needs of clients . But such changes have the result of changes to the contract programme and this in turn affects the price originally quoted by the contractor to complete the project works . Disuputes between the various parties that are involved are an ordinaryh and everday occurrence .

Thankfully  most of thse differences of opinion or interpretation are resolved in an amicable and agreeble way / However ,  if the disputes is not managed efficienctly it leads onwards to conflict and the project begins to suffer in terms of time , cost and quality . This chapter considers the potential for escalation and the alternative ways in which different  of opinion  or judgement  can be resolved .

Players

• Promoter
• Goverment project user
• Contractor
• Investor
• Lenders
• Operator

Built , operate , Transfer

B.O.T has been widely practised especially in many developd countries such as United States , UK , Switzerland .
Uk - EUROTUNNEL (British and French promoter ) .
Australia - Sydney Harbour Tunnel

Benefit

• Relieving financial burden and public sector borrowing .
• Economically viable project  are undertaken in the private sector .
• An exceptional opportunity for the country to recover and explore unused productivity source .
• Accelerating growth .
• Obtaining efficiency as private sector will apply commercial discipline in the execution of project budget and timetables .
• Market competition and commercial management is introduced .
• Ensure long term investment by investor .
• Reducing the size of the public sector .

• As one method of privatisation in our country
• As one method of privatisation in our country. 
• Privitasation policy started in 1983 . 
• Only in 1985 - seriously effort pursued by govenment . 
• Malaysian Government defines privatization as the transfer of the government's obligation in providing goods and services that are traditionally within its domain to the private sector . 
• In the process the government transfer its ownership of assets or rights to use to the private sector together with its other commitment , rights , 'liabilities '. 
• Can take the form of : B.O.T ( Built , Operate , Transfer . Eg : PLUS , B.O.O.L ( built , operate , Own , Licence . - TV3 , ) T.O.O ( Transfer , Operate , Own , - TELEKOM ) 
• B.O.T. is a concept of development where private sector is given a concession of sponsoring and subsequently operate a certain project ( usually infrasructure projects ) which traditionally is the doamin of the goverment with their own cost . 
• The project is then transferred back to the government after the concession period . 
• The government then may decide wherther to further extend the concession to the original promoter with some return or may decide to operate on its own . 

B.O.T

• As one method of privatisation in our country. 
• Privitasation policy started in 1983 . 
• Only in 1985 - seriously effort pursued by govenment . 
• Malaysian Government defines privatization as the transfer of the government's obligation in providing goods and services that are traditionally within its domain to the private sector . 
• In the process the government transfer its ownership of assets or rights to use to the private sector together with its other commitment , rights , 'liabilities '. 
• Can take the form of : B.O.T ( Built , Operate , Transfer . Eg : PLUS , B.O.O.L ( built , operate , Own , Licence . - TV3 , ) T.O.O ( Transfer , Operate , Own , - TELEKOM ) 
• B.O.T. is a concept of development where private sector is given a concession of sponsoring and subsequently operate a certain project ( usually infrasructure projects ) which traditionally is the doamin of the goverment with their own cost . 
• The project is then transferred back to the government after the concession period . 
• The government then may decide wherther to further extend the concession to the original promoter with some return or may decide to operate on its own . 

Quantity Surveyor

• His service is engaged directly by the client . The form of aggreement use for the appointment is published by the Board of Quantity Surveyors Malaysia ( BQSM ) with scale of fees which is mandatory to follow .
• He is often being referred to as building cost consultant . His duties range from cost advices from inception stage until completion of the project .
• Responsible for tendering and contractual advices to client and architect .
• Under the standard form of building contract , QS is assisting the architect in preparing valuation certificate on contractor;s agreement and to be submitted to architect for approval and issue of final certificate for client to make payment to contractor .

Engineers

• C & S engineer engaged by client for the civil and structural design of the building and owe a duty of care to the client .
• M and E engineer engaged by the client for the mechanical and electrical services design of the building and owe a duty of care to client .
• No doubt all engineers are engaged directly by the client but their design must follow architect's instructions and coordination .
• All engineer's instruction must channel through architect before issue to the contractor .

Architect

All other consultants should channel their instructions through him so that he may co-ordinate the design and to avoid contract administration confusion .

Architect

• Traditionally appointed by the client first but there are occasions when the initial approach may be to the Quantity Surveyor .
• Main function is to interpret the clients brief and translate it into a viable building within the stated constraints
• Also responsible for obtaining the necessary approvals for planning and compliance with  regulations and for periodical supervising the construction of the building . To see that the quality of work and workmanship can be accepted as satisfactory to the client .
• Together with these , architect also responsible for the overall cost control ( normally done by Qs ) and suitability of design ( by Engineers ) even though the client may has appointed them .
• Power of the architect is limited by the conditions of the building contract and provided he does not exceed his authority , the client is bound by his acts . THe contractor has to fulfill and to comply with instructions issue by him .
• Like any other professional person , he is liable to his client if he carries out his duties in a negligent way i.e fails to use proper skills and care .
• Acting as a quasi-arbitrator in contract , he is required to act impartially between the client and contractor even though he is engaged by the client .
• He is not empowered to direct the contractor over his site organization and methods in construction .

Client or Employer 1

D) Has an in-house project team responsible for smooth implementation from pre contract to post contract stage , ensure the project is within time and cost at the same time ensure a quality project at completion .
E) Has direct contractual relationship not only with the contractor but also with the various consultants in the project team e.g. Architect , Engineers , Quantity Surveyor etc.
F) Contractually the client is the pay master for works completed by the contractor and professional services provided by the team of project consultants .
G) Enter into a standard building contract agreement with the contractor , client does not involve the in contract administration but is handled by the Architect / Superintending Officer ( SO ).

The building process and parties involved

The building process involves several parties as follows

• Client or Employer - a building owner or developer
• Project management team ( acting for Client on implementation and coordination of project ) - Project Manager .
• Consultants - Architect , Engineers ( Civil and Structural , Electrical and mechanical ) , Quantity Surveyor , Town Planner , Landscape Architect and Specialist Consultants .
• Contractor - selected and awarded to carry out the construction of the project .
• Subcontractors - domestic and nominated subcontractors .
• Suppliers - domestic and nominated supplier

Roles and contractual obligations of the contracting parties .

A) the client of Employer may be individual or a company
B) He is the owner of the land ( or land title charged to financial institution /bank for loan ) .
C) He operates under the preview of current law as a developer e.g. paid-up capital , company registration , necessary valid permits . The developments may be for own premises or build for sales to public ( e.g. houses / condominium ) .

Release of Retention

Contractor is entitled to the release of part of the retention monies when the following event occur :

- Sectional completion
-Final payment of a nominated sub-con before practical completion
- Practical completion .

Retention

• Generally expressed as a % agreed between the parties .
• The purpose - to provide security for the employer against default by contractor .
• 5% is common unless a lower rate is agrred . The agreed % is only appliacable until practical completion of the project .
• After practical completion , employer may retain half of the % /.

Unfixed materials

• The value of certain off-site materials may be claimed provided they fullfill below :

1. They are intended for the inclusion in the works
2. They are complete and satisfactoiry and adequately insured
3. Clearly and visibly marked and referenced to identify where they are stored .
4. if materials are ordered from the suplier or sub-con , the subcontract expressly provides that the materials shall pass unconditionally to the contractor.

liquidated ascertained damages (LAD)

This payment is amde for the delay in completion beyong the completion date inserted in the contract or a substituted date following the grant of Extension of TIme (EOT) .

The sum of LAD - must be a geneuine pre-estimate of damages .

Interim certificate

Monthly valuations of work-in-progress are carried out in order to make stage payments to the contractor .
This includes the physical meaasurement of the work on the site and materials delivered.
The valuation for interim certificates should be made as accurately as is reasonalby possible , and the contrctor is entitled under the terms of the contract to the full value of work executed on site , less a specified retention sum .

One of the main functions of the contractor's quantity surveyor is to ensure timely and full payment for work carried out on site .
For most contractors interim valuations and certificates form their only source of income , from which they fund the whole of their building operation .
In general , building contracts provide within their conditions regular and timely payments to the contractor .
Interim valuations are prepared by the Quantity Surveyor whenever the architect considers them to be necessary for the purpose of ascertaining the amount to be stated as due in an interim certificate .
The architect is contractually bound to issue interim certificates at the period stated within the conditions of contract.

Qs will assess the value of any variations and extras and these costs will be included in interim valuations

Good practice of Architect - keep QS informed-any defective or improperly executed work .

The certificate - is not a conclusive evidence that that any works , materials or goods included are in accordance with the contract . The elemtns to be included within an interim certificate can therefore be summarized as

- Preliminaries
-measured work
-valuation of architect instruction or variotion
-Re-measurement of provisional irtems , prime cost (PC) sums and provisional quantities .
-valuation of nominated subcontrators and supploiers materials off-site
- Fluctuations , where they are allowed within the contract provision .

Loss of Profits which contractor would have earned

Loss of profit which the contractor would otherwise have earned but for the delay or disruption
This is based on the argument that a contrator has lost the opportunity to earn additional profit as a result of being delayed on another project . Perhaps he had to turn down a lucrative contract because this project continued to absord his staff and labour .
If such losses have really been incurred , then very persuasive  evidence will be required before any judge or arbitrator will consider making an award .

Contractor's claim

• Delay in receipt of instructions , drawing details or levels from Architect . \
• Opening for inspection and testing where materials are found to be in accordance with contract .
• Delay in appointment of Artchitect or Quantity Surveyot
• Discrepancy or divergence in conditions , drawings specification or bills .
• Delays arising from nomination of Subcontractors .
• Delay in receiving possession or access
• Contractor suspending work in accordance with provisions of contract .
• Not all grounds entitilling Contractor to extension of time lead to automatic recovery of loss and expense .

Natural of loss and expense

• Actual losses of money ( which ought to been received ) as a result of circumstances giving rise to entitlement
• Actual expenditure of money which ought not to have been made occasioned as a direct result of the same circumstances . " The primary meaning of thje word expense is actual disbursements."
• Note that in all cases of loss and expense the contractor is under a duty in law to "mitigate his loss " so far as it may be reasonable for him to do so .
• For example if a contractor is issued with a variation order which necessitates plant lying idle for som days , he ( the contractor ) would not be entitled simply to accept the situation , but would be bound to make reasonable endeavours to use the plant productively elsewhere or to persuade the plant owner to accept an early return .

Loss and expense

Therefore a contractor who claims direct loss and / or expenses must establish by use of oral or documentary evidence the following :

• That he has suffered loss or incurred additional costs caused by occurrence of events specified in the provisions of Contract .
• Demonstrate that the loss or expenses or additional costs are sufficiently linked to the events set out oin the contract .
• The loss or expense or costs muist be actual financial and not merely notional loss . The contractor must prove his case " on balance of probabilities . "
• Must be able to prove the loss or expense or additional costs , reasonably to establish the probability that it has been incurred .

Loss and expense

• Loss and /or expenses caused by disturbance of regular progress of works
• This means that what is recoverable is the financial loss and expenses which directly and naturally results in the oridnary course of occurence event

Interim Valuation

• General Procedure
• Prior to issuing interim certificate , a QS must prepare interim valuation .
• Main items to be considered

1. Measured work , including preliminaries
2. Value ofvariations and extras .
3. Values of nominated sub-con and suppliers works
4. Fluctuations
5. Unfixed materials on site
6. Retention monies
7. Previous payments .
8. Valuation - as accurate as possible
9. Contractor is entitled to total values of work properly executed less a specified % of retention .
10. Improperly retained sum could strain contractor - pay his debts .
11. Employer must be protected against over payment , if insolvencies of contractor occurs , extra payments cannot be recovered . Liable to extra cost of selecting another contractor .
12. Amount of measurement to be depends on nature and complexity of works and the stage they have reached .
13. Common practice = contractor and QS meet regularly for the purpose of measuring works .

Interim Valuations For Private Client

• Valuation and checking of Contractors Interim Progress Applications for Payment
• Payment Recomendation
• Identification and Pricing of Contract Variations and Advising of Cost Implications .

Purpose

Interim Valuation for main contractors and sub-contractor

- The submission of Interim Valuatuins and following up in order to agree payments
- Valuing and negotiating Contract Variations in Accordance with the Temrs of the Contract .
-Re-measuring work on-site .

Variation

A) any changes to the provisions in the Contract with regards
- Any limitation of working hours
-Working space
- Access to or utilisation of any specific part of the site .
- The execution and completion of thje work in any specific order .

But shall exclude any changes intended to rectify any negligence , omission , default and / or breach of contract by the Contractor and such changes shall be executed by the Contractor entirely at his own cost .

Each variation is considered separately and their net values carried forward to a general summary

The total values of omissions and the total value of additions are computed to arrive at a net balance which is added tp pr dedicted from the interim valuation .

Payment

Variation

The term variation means the alteration or modification of thje design , quality or quantity of the Works including : 

1. The additional , omission or substitution of any Works .
2. The alteration of the kind or standard of any materials and goods to be in the works .
3. The removal from site of any works executed , or materials and goods brought thereon by the Contractor for the purposes of the Works other than work , materials and goods which are not in accordance with the Contract ; and

Extension of Time

• Force Majeure
• Severe weather
• Loss/damage
• civil commotion
• AI not received on time
• Employer delay in giving site possession
• Compliance to AI ( 1.4 - descrepancy , 11.2-variation , 21.4 - work postponement ) .

• Delays by NSC
• Re-nomination of NSC
• Delay by craftsmen , tradesmen etc
• Delay / failure in materials supply
• Delay in opening up works for inspection / testing
• Any acts in preventing the breach of contract
• War damage
• Discovery of antiquities
• Delaty in complying to changes to any law
• Delay causes by authorities / services provider
• Delay due to disputes with neighbouring properties
• Delay due to Provisional Quantitiy included in BQ
• Failure of Employer to give entry or exit from site
• Delay due to suspension of Contractor under 30.7 - non-payment and 30.8 compulsory suspension of work
• other reasons

Extension of Time

• Submission of notice and particulars for EOT

- If Contractor feels that work will be delayed , hea can apply for EOT .
- Contractor give wirtten notice ( intention for EOT + estimated duration + causes for delay ) to Architect within 28days from the date of AI .

• Delay by NSC

• - If Contractor's delay includes NSC's delay , then he should forward a copy to NSC

• Certificate of EOT

- Architect shall consider Contractor's submission and may reject it or issue Cert . of EOT within 6 weeks from the receipts of sufficient details .

• Contractor to prevent delay

- Contractor must prevent and reduce delay in progress of work .

• Notification to NSC

- Architect must notify all NSCs on later Completion Date.

Damages for Non-Completion

• LAD and CNC
• - If Contractor fails to complete work on completion date ., Architect can issue Certificate of Non-Completion . Contractor shall pay ( based on the sum in appendix ) to Employer as LAD from Completion Date to Date of Practical Completion .
• Agreed LAD amount

- LAD amount = pre-estimate of loss / damage sufered by Employer .

• CNC revoked by subsequent Cert of EOT
• - if Architect issued Certificate of Extension of Time , this cert will revoke ( cancel ) off CNC .

Commencement and completion

- Possession of site given to Contractor on date of commencement and works must be completed on / before completion date . If Employer delay in giving site ( does not exceed Period of delay in appendix , ) Archi can issue Extension of Time ( EOT) .

Sectional Completion Dates

- If there are different completion dates for the works , Architect issue Certificate of Sectional Completion when the works are practically completed .

Postponement and suspension of works
- Architect may issue AI for postponement or suspension of the works for a continuous period ( not exceeding period of delay in appendix ).

Date of Commencement , Postponement and Completion Date

• Commencement and completion

- Possession of site given to Contractor on date of commencement and works must be completed on / before completion date . if employer delay in giving site ( does not exceed Period of delay in appendix ) , Archi can issue Extension of Time (EOT) .

Injury to peson or loss and ( or damage of Property and Indemnity to Employer ) .

• Contractor shall indemnify Employer for damage , expense , liability , oss , claimor proceedings related to injury or death , negligence , omission , default or breach of contract .
• Ditto for property
• Ditto for claims by workmen

Partial Possession

• Posession of Occupied Part with Consent
• if employer wants to possess the work before practical completion
• Architect issue Cert of Partial Completion ( total value of occupied part ) within 14 days from the date Employer has taken possession .

Certificate of Making Good Defects

• Within 14days , Architect shall
• Issue certidicate of making Good Defects (CMGD ) if no defects or Contractor has made good the defects .
• Issue written notice ( with reasons of why CMGD not issued ) to Contractor with copies to NSC .

Schedule of Defects

• Any defects which happens within defects liability period ( DLP ) , Archi must write down on Schedule of Defects ( SoD) which must be given to Contractor within 14 days after DLP expires .
• Contractor must make good defects within 28 days after receiving SoD /
• If Contractor fails to do , Employer can appoint other Contractors . The cost set-off under Clause 30.4

Practical Completion and defect liability 2

• When works are practically completed , Contractor must give written notice to Architect . Within 14 days , Architect should do either ;
• If Archi thinks that works are not practically completed , Archi give notice ( with reasons ) to Contractor ( 1 copy to NSC ) .
• If Archi thinks that work is practically completed , he can issue CPC .
• Date of Practical Completion

- Date of receiving the make good works
- Date of written notice if there are no make good works .

• CPC issued to Contractor , copies given to employer and NSC . Contractor shall return site ossession to employer .

Practical Completion and defect liability

The works are praticallly completed when :
15.1 a) Employer can have fulkl use of the works in spite of minor defects whereby Contractor has given a written notice to make good and complete them .

15.1 b ) Other requirements in Contract document as a pre-requisite for CPC ( Certificate of Practical Completion ) .

Criteria of projects suitable for partnering

- The projects recommended to be suitable for partnering are :

1. Projects estimated to cost in excess of Rm 5 million each .
2. Projects of non-standardized in design or a substantial portion is not standardised . ( to motivate contractors to innovate and to incorporate the concepts of economy and buildability in design and construction ) .

Conclusion

• For partnering to be successful , it should be able to develop and improve with the progess of the project .
• Partnering is one tool that provides you with flexibility , broad application and value-added potential .

A Framework for implementing partnering

• The style of partnering to be implemented comprises three (30 basic elemtns : mutually objectives ; problem resolution and continuous improvement .
• The independent facilitator will guide for comments and criticism .
• Facilitator is very important person and the successful outcome of the workshop is very much dependent on him .
•  The use and selection of facilitator is a business decision which should be made by the client and contractor .
• it is crucial that the facilitator is involved throughout the duration of the project .

Partnering workshop

• Partnering workshop will normally be held for 1-4 days , depending on the size and complexity of the project .
• Venue should be at neutral place where it will not be influenced by any participant's culture .

strategic long-term

• Partners collaborate across organizations in ways that promote synergies from he intereaction of their complementary strength and weaknesses .
• Develop oranizational structures that promotes openness , honesty and commitment .
• As the relationship matures , trust is built and partners could explore new challenges in more open way .
• Clients usually initiate partnering but there must be commitment at all levels .
• Intention to partner should clearly be stated as early as possible in the tender document and intereste contractors allowed to make appropriate preparation .

Project Based Partnering

• Efforts are made to design for each project a problem - finding and problem solving mechanism comprising the members from the parties involved with the project thus , creating synergy for project success .
• In the public sector where the concepts of acountability and transparency are crucial it appears that post award project based partnering is more appropriate .
• This is because it allows open competition in the selection of contrctors to be adopted .
• Clients usually initiate partering but there must be commitment at all levels .

Advantage of partnering

• Fair profits with prompts payment
• Empowered people
• Consensus building leading to common goals and objectives .

Advantage of Partnering

• Fair profits with prompt payment
• Empowered people
• Consensus building leading to common goals and objectives .