Wiki Tan: 2011

Saturday, December 31, 2011

Loss of Profits which contractor would have earned

Loss of profit which the contractor would otherwise have earned but for the delay or disrupion .
This is based on the argument that a contractor has lost the opportunity to earn addtional profit as a result of being delayed on another project . Perhaps he had to turn down a lucrative contract because this project continued to absorb 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 CLAIMS

Delay in receipt of iunstructions , drawings details or levels from Architect .
Opening for inspection and testing where materials are found to be in accordance with contract
Delay in appointment of Architect or Quantity Surveyor .
Discrepancy or divergence in conditions , drawings specfications or bills .
Delay arising from nomination of Subcontractors
Delay in receiving possession or access
Contractor suspending work in accordance with provisions of contract .
Not all ground sentitling contractor to entension of time lead to automatic recovery of loss and expense .

Natural of loss and expense

Actual losses of money ( which ought to have been received ) as a result of the circumstance sgiving rise to entitlement
Actual expenditure of money which ought not to have been made occasioned as a direct result of the same circumstance . " The primary meaning of the word expense is actual disbursemnents '.
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 some days , he ( the contractor ) would not be entitled simply to accept the situation , but would be bouind to make reasonable endeavours to use the plant productively elsewhere or to persuade the plant owner to accept an early return .

loss and expense

DEfinition

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 ordinary course of occurrence of events .

Loss and expense

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

- That he has suffered loss or incurred additional costs caused by occurrence of events specified in the provisions of Contract .

Demoinstrate that the loss or expenses or additional costs are sufficiently linked to the events set out in the contract .

- The loss or expenses or costs must be actual financial and not merelyu national loss . THe contractor must prove his case " on the 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 .

Interim Valuations For Private Client

Valuation and checking of COntractors Interim Progress Applications For payment
Payment Recommendation
Identification and Pricing of COntract Variations and
General Procedure
Prior to issuing interim certificate , a QS must prepare interim valuation .
Main items to be considered
i) Measured work , including preliminaries
ii) Value of variations and extras
iii) Value of nominated sub-con and suppliers work
iv) Fluctations
v) Unfixed materials on site
vi) Retention monies
Vii ) Previous payments

Valuation - as accurtate as possible
Contractor is entitled to toal value of work properly executed less a specified % of retention .
Improperly retained sum could strain contractor - pa his debts
Emplpyer must be protected agains over payment , if insolvencies of contractor occuyrs ,e xtra payment cannot be recovered . Liable to extra cost of selecting another contractor .
Amount of measurement to be depends on nature and complexity of wortks and the stage they have reached .
Common practice = contreactor and QS meet regularl for the purpose of measuring works .

Purpose of Interim Valuation

Interim Valuation for Main Contractors and Sub-COntractor

The submission of Interim Valuations and following up in order to agree payment '
Valuing and negotiating Contract Variations in Accordance with the Terms of the COntract
Re-measuring work on-site .

Payment

Variation

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

A) The additional , omission or substitution of any works
B) The alteration of the kind or standard of any materials and goods to be in the work
C) The removal from Site of any work executed , or materials and good brought thereon by the COntractor for the purposes of the Works other than work , materials and good which are not in accordance with the Contract , and
D) ANy changes to the provisions in the COntract with regards
- Ay limitation of working hours
- Working space
- Access to or utilisation of any specification part of the Site .
- The execution and completion of the 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 entirely at his own cost .

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

The total value of omissions and the total value of additions are computed to arrive at a et balance which is added to or deducted from the interim valuation .

Nominated subcontractor and suppliers accounts are also included in interim valuations as and when the works has been executred on-site or materials supplied .

Friday, December 30, 2011

n0346 巨乳可爱公主連続膣射精_小倉優

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what is difference between cement and concrete

Althought the terms cement and concrete often are used interchangeably , cement is actually an ingredient of concrete . Concrete is basically a mixture of aggregates and paste . The aggregates are sand and gravel or crushed stone , the paste is water and portland cement . Concrete gets stronger as it get older . Portland cement is not a brand name , but the generic terms for the type of cement used in virtually all concrete , just as stainless is a type of steel . Cement comprises from 10 to 15 percent of concrte

Thursday, December 29, 2011

n0342 木崎纱耶

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n0322 肉便器大量精液子宮直撃一之瀬美久

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n0311 3穴彎曲男根汁腸汁荒療治吉村真弓

Tuesday, December 27, 2011

n0307 巨乳秘書機密漏洩汁制裁田宮梨香

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n0306 炉雌狐血祭懺悔無視輪姦芹澤あかね

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n0302 中出顔面射精漂亮女秘書森高七海

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Tokyo Hot n0300 美丽空姐直入22発膣崩壊戸田さおり

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Tokyo Hot n0018 Hikaru Saeki

http://uploading.com/files/m7991b32/n0018_hikaru_saeki_rq_n.wmv.007/,n0018_hikaru_saeki_rq_n.wmv.007,168.5 MB,,Dec 27, 2011,
http://uploading.com/files/1c4efe63/n0018_hikaru_saeki_rq_n.wmv.006/,n0018_hikaru_saeki_rq_n.wmv.006,200.0 MB,,Dec 27, 2011,
http://uploading.com/files/28a3e723/n0018_hikaru_saeki_rq_n.wmv.005/,n0018_hikaru_saeki_rq_n.wmv.005,200.0 MB,,Dec 27, 2011,
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Tokyo Hot Japanese 4 stewards creampie gangbang and behind the scenes

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what is workability

The ease with which a concrete mix can be handled from mixer to its compacted shape

The amo unt of mechanical work , or energy , required to produce full compaction of concrete without segregation
3main characteristic

- Consistency
- Mobility
- Compactability

Consistency
- Describe the state of fresh concrete
- Measure of wetness or fluidity
Wet concrete are more workable than dry concrete

Mobility
- The ease which the mix can flow into and completely fill the formwork or mould

Compactability
- The ease with which a given mix can be fully compacted , all ( most of ) the trapped air being removed

Tuesday, November 1, 2011

Environmental Impact Assessment ( EIA )

Purpose

A planning tool for preventing environmental problems due to an activity
Systematically identify , assess and mitigate negative environmental impacts of major development
In Malaysia , EIA is required under section 34A , Environmentgal QUality Act , 1974 , which specifies the legal requirements in respect of EIA for Prescribed Activities .
It empowers the MInister of Natural Resources and Environment after due consultation , to prescribe any activity which may have significant environmental impact as a Prescribed Activity . which may have significant environmental impact as a Prescribed Activity .
The section further requires the Project Proponent of a Prescribed Activity to submit a report ( the EIA ) to the Director General of Environmental Quality before approval for the proposed activity is granted by the relevant approving authority ( Department of Environment )

Enviroment issue 2

For list of catchment areas sewer disposal applies , see Environmental Quality ( Sewage and Industrial Effluents Regulations 1978 .

For manufacturing and production Activities see EQ ( clean air ) 1978 , which includes control of open burning and industrial discharge within residential areas .
For control of Vehicle Noise ( motor vehicle noise ) 1987 .
Also applies to equipment like generator sets or pilling equipmnent .
For Environmental Impact Assessment and the list of prescribed activities see pages 158 - 162 of EQ ( prescribed Activities ) 1987 .
For Scheduled Wastes see relevant section
For control of usage of Halons ( alkaline and halogen ) see EQ ( Prohibition on Use of Chlorofluorocarbons etc . )Eg air con .
For control of emissions of Petrol and Diesel Engines see particular EQ sections .

Environmental quality act

An act relating to the prevention , abatement , control of pollution and enchancement of the environment
The Environmental Quality Act and Regulations covers activities such as :

Sewerage Treatment Standards ,
Controlling discharge of Manufacturing waste / Poison , Air Quality / Pollution .
Noise of Motor Vehicles
Environmental Impact Assessment of Land Development Projects ,
Monitoring Scheduled Wastes from Manufacturing ,
Control of use of Chlorofluorocarbons ,
Controlling Marine Pollution
Emission of lead from Diesel / Petrol engines , Control of Open Burning , etc , -refer to General Act and Detailed Acts .
Empowers Deparment of Environment to control pollution to air , noise levels , pollution to soil and inland waters , discharge of oil in Malaysian seas , no open burning , control use of dangerous substances , prohibition on disposal of schedules waste .
Operators of plant and equipment must obtain a license from DOE to operate eg. quarries , concrete batching plants , piling equipment etc .

sample case 2

In another case Dugdale v Lovering ,

The plaintiff possessed some trucks which were claimed by both the defendant and K.P. Co . the defendant demanded delivery and the plaintiff asked for an indemnity bond , but rexeived no reply . Even then the trucks were delivered to the defendant . K.P.Co sued the plaintiff for conversion of property . The plaintiff were held entitled to rexover indemnity from the defendanton an implied promise as evidence by the fact that by demanding an indemnity , they made it clear that hey have no intention to deliver except on indemnity .

Sample case 1

The concept of indemnity can be found in the fact of that case Adamson v Jarvis ,

The plaintiff who is an auctioneer sold certain cattle on the instruction of the defendant . It turned out later that the livestock did not beong to the defendant but it belonged to another person , who made the auctioneer liable and the auctioneer sued the defendant for indemnity for the loss he had thus suffered by acting on the defendant 's directions . The court held that the plaintiff having acted on the request of the defendant was entitled to assume that if what he did turned out to be wrongful , he would be indemnified by the defendant .

Concept of indemnity

An agreement by one person ( x) to pay to another ( y) sums that are owed , or may become owed , to him by a third person ( z ) .
It is not conditional on the third person dafaulting on the payment , i.e can sue x without first demanding payment from Z . If it is conditional on the third person's default ( i.e. if Z remains the principal debtor and must be sued for the money first ) it is not an indemnity but a guarantee .
Unlike a guarantee , an indemnity need not be evidenced in writting .
Indemnity shifts liability from the legally responsible person to another person .
Indemnity is a claim for reimbursement by a party who has paid or may pay money for a loss or liability against a party who should reimburse the pay or because of an agreement , relationship , or duty .
Indemnity 's roots are grounded in principles of equity .
Indemnity , a form of restitution , is founded on equitable principles ; it is allowed where one person has discharged an obligation that another person should bear ; it places the final responsibility where equity whould lay the ultimate burden .

Definition of indemnity

Indemnifier - the person who promises to indemnify and the person in whose favor such a promise is made is known as indemnified or indemnity holder .

To indemnify someone means to cover them for their loss in a certain circumstance . Most forms of insurance - except life insurance - are based on the indemnity principle . THis means you can only recover the replacement value of your loss .

Under English law the word indemnity carries a wider meaning . It includes a contract to save the promise from the loss whether it is caused by human agency or by natural calamity like accident or fire .

Contract of insurance except life insurance is a contract of indemnity .

Asa legal concept , it has a more specific meaning , to compensate another party to a contract for an loss that such other party may suffer during the performance of the contract .
Indemnity is a duty to make good any loss , damage or liability incurred by another . It is the right of an injured party to claim reimbursement for any loss , damage , or liability from an person who had such a duty .

Monday, October 31, 2011

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 .

Sunday, October 30, 2011

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 .

Tuesday, October 25, 2011

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 .

Monday, October 24, 2011

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

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

Socialism

Public owenership of resources
Central Planning Authority
Price mechanism of less importance .
Central control and owenership

Capitalism

Private ownership of resources
Freedom of enterprise and choice
Consumers sovereighnty
Competition
Minimum government intervention
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 .

Sunday, October 23, 2011

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 .

Wednesday, October 19, 2011

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 .

Friday, October 14, 2011

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

variations
Extensions of time
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 .

Monday, October 10, 2011

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 .

The economy is operating in full employment and full production capactiy ( full efficiency ) .
The amount of resources available is fixed .
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 .