IEM TRAINING CENTRE SDN. BHD.

TWO DAY INTENSIVE COURSE ON

CONTRACT ADMINISTRATION FOR

CONSTRUCTION & ENGINEERING
CONTRACTS

Presented by:

IR. HARBANS SINGH K.S.

B.E. (Mech) SPORE, LLB (Hons) London
CLP, DipICArb, C. Eng, PE.

ABOUT THE COURSE PRESENTER

Ir. Harbans Singh K.S.
B.E. (Mech) Spore, LLB (Hons) London,
CLP, DipICArb, P.E.,
C. Eng., MIEM, MIMechE,
MIHEEM, MASHRAE, MCIArb, MMIArb.

Ir. Harbans Singh K.S. is a Professional and Chartered Engineer, Arbitrator,

Adjudicator, Mediator, Advocate & Solicitor (non-practising). He commenced his
career in Malaysia before working in Germany and then locally in various professional
capacities. He is presently domiciled in Malaysia where he is active in construction
law and dispute resolution. Ir. Harbans is the recipient of IEMs Tan Sri Hj. Yusoff
Prize (2001), the Cedric Barclay and the Chartered Institute of Arbitrators Awards for
the Diploma in International Commercial Arbitration Examination (Oxford 2003). He
is also the author of a series of four books entitled Engineering & Construction
Contracts Management, coauthor of the book The PAM 2006 Standard Form of
Building Contract, contributor to the Malaysian Standard Forms & Precedents:
Construction & Engineering Contracts, The Ingenieur and the Malayan Law
Journal.

HSKS

CONTRACT ADMINISTRATION FOR

CONSTRUCTION/ ENGINEERING CONTRACTS
DAY 1 - PROGRAMME
8.30 a.m.

9.00 a.m.

Registration

9.00 a.m.

10.30 a.m.

Session 1

10.30a.m.

10.45a.m.

Tea/Coffee Break

10.45 a.m.

12.30 noon

Session 2

12.30 noon

1.00 p.m.

Q & A Session

1.00 p.m.

2.00 p.m.

Lunch Break

2.00 p.m.

3.15 p.m.

Session 3

3.15 p.m.

3.30 p.m.

Tea/Coffee Break

3.30 p.m.

4.45 p.m.

Session 4

4.45 p.m.

5.00 p.m.

Q & A Session

End of Day 1

5.00 p.m.

HSKS

CONTRACT ADMINISTRATION FOR

CONSTRUCTION/ ENGINEERING CONTRACTS
DAY 2 - PROGRAMME
9.00 a.m.

10.30 a.m.

Session 1

10.30a.m.

10.45a.m.

Tea/Coffee Break

10.45 a.m.

12.30 noon

Session 2

12.30 noon

1.00 p.m.

Q & A Session

1.00 p.m.

2.00 p.m.

Lunch Break

2.00 p.m.

3.15 p.m.

Session 3

3.15 p.m.

3.30 p.m.

Tea/Coffee Break

3.30 p.m.

4.45 p.m.

Session 4

4.45 p.m.

5.00 p.m.

Q & A Session

End of Course

5.00 p.m.

HSKS

CONTENTS
1.0

CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION

2.0

COMMENCEMENT OF CONTRACT AT SITE

3.0

MONITORING OF WORK PROGRESS

4.0

SUPERVISION OF WORKS/CONTRACT ADMINISTRATION

5.0

PAYMENTS/COMMERCIAL MATTERS

6.0

VARIATIONS/CHANGES

7.0

DELAY AND EXTENSION OF TIME

8.0

NON-COMPLETION AND DAMAGES

9.0

COMPLETION AND HANDING OVER

10.0

DEFECTS

11.0

POST COMPLETION AND FINAL ACCOUNT

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CONSTRUCTION/
ENGINEERING CONTRACTS:
INTRODUCTION

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1.0

CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION

TYPES OF CONTRACTS
1.

GENERAL CONTRACTS

2.

ENGINEERING/CONSTRUCTION CONTRACTS

TYPES OF BUILDING CONTRACTS

COMMON CONTRACT PROCUREMENT METHODS

1.

TRADITIONAL GENERAL CONTRACTS

2.

MANAGEMENT TYPES

3.

PACKAGE DEAL TYPES

4.

MISCELLANEOUS METHODS

HSKS

BASIC CONTRACT PRINCIPLES

1.

CONTRACT DEFINITIONS

2.

ELEMENTS OF CONTRACT

3.

STANDARD FORMS OF CONTRACT

4.

BREACH OF CONTRACT: REMEDIES

MISCELLANEOUS ISSUES

HSKS

SIMPLE
CONTRACTS
SPECIALITY
CONTRACTS
(DEED)

COLLATERAL
CONTRACTS
MATERIAL
& LABOUR
CONTRACTS

ORAL
CONTRACTS

LABOUR
CONTRACT

EXPRESS
CONTRACTS

GENERAL
CONTRACTS:
TYPES

MATERIAL SUPPLY
CONTRACT

MAIN CONTRACTS

INDEPENDENT
CONTRACTS

SUB-CONTRACTS
EMPLOYMENT
CONTRACTS

SUB-SUB
CONTRACTS

FIG. 1-1: GENERAL CONTRACTS - TYPES

HSKS

ENGINEERING/
CONSTRUCTION
CONTRACTS:
TYPES

FIG. 1-2 : ENGINEERING/CONSTRUCTION CONTRACTS - TYPES

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TYPE OF CONTRACT

MESUREMENT
CONTRACTS

LUMP SUM
CONTRACTS

LUMP SUM WITH

PLAN AND
SPECIFICATION

LUMP SUM WITH

BILLS
OF QUANTITIES

BASED ON
APPROXIMATE
QUANTITIES

COST PLUS
FIXED FEE

COST
REIMBURSEMENT
CONTRACTS

COST PLUS
PERCENTAGE

BASED ON A
SCHEDULE

COST PLUS
FLUCTUATING FEE

TARGET COST

VALUE COST

FIG. 1-3 : TYPES OF CONTRACTS BASED ON PRICING MECHANISM

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COMMON CONTRACT PROCUREMENT METHODS

TRADITIONAL
GENERAL
CONTRACTTING

PACKAGE
DEAL TYPE

MANAGEMENT
TYPE

MANAGEMENT
CONTRACTING

DESIGN & BUILD/

DESIGN & CONSTRUCT

CONSTRUCTION
MANAGEMENT

BUILD, OPERATE
& TRANSFER

ENGINEERING, PROCUREMENT,
CONSTRUCTION & COMMISSIONING

MISCELLANEOUS
METHODS

FAST
TRACKING

PARTNERING

TURNKEY
TURNKEY

FIG. 1-4 : COMMON CONTRACT PROCUREMENT METHODS IN USE

HSKS

FIG. 1-5 : COMPARISON OF COMMON CONTRACT PROCUREMENT METHODS

1985

1990

1995

2000

1.0 TRADITIONAL GENERAL

CONTRACTING

95%

76%

31%

20%

2.0 MANAGEMENT
CONTRACTING

2%

3%

2%

1%

3.0 CONSTRUCTION
MANAGEMENT

1%

3%

9%

10%

4.0 PACKAGE DEAL TYPE

2%

15%

52%

60%

5.0 BUILD, OPERATE AND

TRANSFER

2%

5%

8%

6.0 OTHER
MISCELLANEOUS

1%

1%

1%

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FIG. 1-6: TRADITIONAL GENERAL CONTRACTING (TGC) CONTRACTUAL RELATIONSHIPS

EMPLOYER

PROFESSIONAL
TEAM - DESIGN AND
CONTRACT ADMINISTRATION

1.
2.
3.
4.

Architect
Engineers - C&S, M&E
Quantity Surveyor
Other Specialist

MAIN CONTRACTOR
(MC)

DOMESTIC SUPPLIER
(DS)

SUBSUB-SUB
CONTRACTORS
Key
_______
_____

:
:

SUB--SUB SUPPLIERS
SUB

NOMINATED SUPLLIER
(NS)

SUBSUB-SUB
CONTRACTORS

SUBSUB-SUB SUPPLIERS

Contractual Link
Responsibility

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FIG. 1-7: TURNKEY CONTRACTS/DESIGN & CONSTRUCT (D&C) - CONTRACTUAL

RELATIONSHIPS

EMPLOYER

PROFESSIONAL
ADVISORS

1.
2.
3.
4.

Architect
Engineers - C&S, M&E
Quantity Surveyor
Other Specialist

1. Setting up Employers
Requirements
2. Auditing role during
construction

D & C CONTRACTOR

1.
2.
3.
4.

Architect
Engineers - C&S, M&E
Quantity Surveyor
Other Specialist

PROFESSIONAL
TEAM

:
:

SUBSUBSUPPLIER

1. Detailed Design
2. Construction supervision

SUBSUB-SUB
CONTRACTORS

Key
_______
_____

SUBSUBCONTRACTOR

SUBSUB-SUB SUPPLIERS

SUBSUB-SUB
CONTRACTORS

SUB--SUB SUPPLIERS
SUB

Contractual Link
Responsibility

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FIG. 1-8: MANAGEMENT CONTRACTING (MC) - CONTRACTUAL RELATIONSHIPS

EMPLOYER

PROFESSIONAL TEAM
1.
2.
3.
4.

MANAGEMENT
CONTRACTOR
(MC)

Architect
Engineers - C&S, M&E
Quantity Surveyor
Other Specialist

TRADE
CONTRACTOR

TRADE
CONTRACTOR

TRADE
CONTRACTOR

Key

_______ : Contractual Link

_____

Responsibility

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FIG. 1-9: CONSTRUCTION MANAGEMENT (CM) - CONTRACTUAL RELATIONSHIPS

EMPLOYER

PROFESSIONAL
TEAM
1.
2.
3.
4.

CONSTRUCTION
MANAGER (CM)

Architect
Engineers - C&S, M&E
Quantity Surveyor
Other Specialist

Key

_______

: Contractual Link

_____

: Responsibility

TRADE
CONTRACTORS

TRADE
CONTRACTORS

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*
1.0

DEFINATIONS

PER ANSON
*
*
*
*

2.0

CONTRACT -

Legally binding agreement

Between two or more parties
By which rights are acquired by one or more
To acts or forbearances on the part of the other or others

PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974)

* An agreement
* Enforceable by Law
**

CLEAR +
OFFER

CONTRACT - BASIC ELEMENTS

UNQUALIFIED
ACCEPTANCE

+ CONSIDERATION =

CONTRACT
CONTRACT
(LEGAL
AGREEMENT)

FIG. 1-10: CONTRACT DEFINITIONS

HSKS

FIRM OFFER/
PROPOSAL

+
UNQUALIFIED
ACCEPTANCE

+
CONSIDERATION

INTENTION TO CREATE
LEGAL RELATIONS

FREE CONSENT

CERTAINTY OF TERMS

LAWFUL OBJECT AND

CONSIDERATION

LEGAL CAPACITY TO
CONTRACT

PHYSICAL/LEGAL
POSSIBILITY

FIG. 1-11: ELEMENTS OF A VALID/ENFORCEABLE AGREEMENT

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DEFINITION/
MEANING

CHARACTERISTICS

MAIN TYPES

DISADVANTAGES

ADVANTAGES

FIG. 1-12 :

STANDARD
FORMS OF
CONTRACT

TYPES

PURPOSE

STANDARD FORMS OF CONTRACT (PART I)

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STANDARD FORMS OF CONTRACT

GOVERNMENT/
PUBLIC SECTOR

INTERNATIONAL
CONTRACTS

PRIVATE SECTOR

1. FIDIC Conditions
2. ICE Conditions

JKR / PWD

MISCELLANEOUS

203 (Rev. 1/2010) - without

quantities

203A (Rev. 1/2010) - with

quantities

203N (Rev. 1/2010) - For NSC

203P (Rev. 1/2010) - For

Nominated Suppliers

PWD Form DB (2007 Edn.)

For Design & Build Contracts

3. IEEE Conditions

CIDB Form for:

4. IMechE Conditions

Building Contracts 2000 Edn.

Form CIDB.B (NSC/2002)

5. JCT Conditions

Modified JKR/PWD Forms e.g.

LPK, MHA, etc.

CIVIL ENGINEERING
WORKS

BUILDING WORKS

PAM Contract 2006

(with quantities)

PAM Contract 2006

(without quantities)

M & E WORKS

IEM Conditions

IEM Conditions

- IEM.CE 2011
- IEM.CES 1/90

IEM.ME 1/94

TNB Conditions, etc.

PAM Sub-Contract 2006

FIG. 1-13: STANDARD FORMS OF CONTRACT (PART II)

HSKS

COMMENCEMENT OF
CONTRACT AT SITE

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2.0

APPROACHES IN:
1.
2.

COMMENCEMENT OF CONTRACT AT SITE

TRADITIONAL GENERAL CONTRACTS

DESIGN & BUILD / TURNKEY CONTRACTS

FORMALITIES:
1.
2.

CONDITIONS PRECEDENT
INSURANCES, PERFORMANCE BONDS, ETC.

SITE POSSESSION : MEANING AND EFFECT

SUBMITTALS :
1.
2.
3.
4.
5.
6.

CONSTRUCTION DRAWINGS
SHOP DRAWINGS
SAMPLES
QA AND QC DOCUMENTS
HEALTH AND SAFETY DOCUMENTS
METHOD STATEMENTS

TEMPORARY WORKS

ISSUES FOR ATTENDANCE OF NOMINATED SUBSUB-CONTRACTORS

MISCELLANEOUS ISSUES
HSKS

RELEVANT CASES
1. THE RADIO & GENERAL TRADING CO. SDN. BHD. V WYASS & FREYTAG (M)
SDN. BHD. [1998] 1 MLJ 346
2. LEC CONTRACTORS (M) SDN. BHD. V CASTLE INN SDN. BHD. & ANOR [2000]
3 MLJ 339
3. KLEINWORT BENSON LTD. V MALAYSIA MINING CORP. BHD [1989] 1 WLR 379
4. NANYANG INSURANCE CO. LTD. V SALBIAH & ANOR [1967] 1 MLJ 94
5. SURREY HEALTH
[1988] 42 BLR 25

BOROUGH

COUNCIL

LOVELL

CONSTRUCTION

6. FREEMAN V HENSLER [1981] 20 BLR 78

7. TAN HOCK CHAN V KHO TECK SENG [1980] 1 MLJ 308
8. PUTRA PERDANA CONSTRUCTION SDN. BHD. V AMI INSURANCE
& ORS [2005] 2 MLJ 123 HC

BHD

9. YIP SHOU SHAN V SIN HEAP LEE MARUBENI SDN. BHD. [2002] 5
43, HC`

MLJ

HSKS

TAKING OVER OF
THE SITE

SITE POSSESSION

COMMENCEMENT
OF CONTRACT

COMMENCEMENT:
COMMON LABELS

COMMENCEMENT
OF OPERATIONS
ON SITE

COMMENCEMENT
OF CONTRACT
PERIOD

COMMENCEMENT
OF WORKS

FIG. 2-1 : COMMENCEMENT - COMMON LABELS

HSKS

PARENT COMPANY
GUARANTEE

INSURANCE

PERFORMANCE BOND

PROTECTION AGAINST
CONTRACTORS FAILURES:
COMMON MECHANISMS

LETTER OF COMFORT

STANDBY LETTER
OF CREDIT
LETTER OF AWARENESS

FIG. 2-2: PROTECTION AGAINST CONTRACTORS FAILURES COMMON MECHANISMS

HSKS

PROTECTION AGAINST CONTRACTORS FAILURES: AN OVERVIEW (PART I)

COMMON MECHANISMS/
INSTRUMENTS: TYPES

PURPOSE

Risk transferring contracts

Parent Company Guarantees

Enable recovery of compensation

upon contractors default/failure
under the contract

Performance Bonds

Miscellaneous Types:
1.
2.
3.

Letters of Comfort
Standby Letters of Credit
Insurances

NATURE

Contractual performance of
Company within a corporate
group is underwritten by other
members of group
E.g. Subsidiary and Holding
Company

PARENT COMPANY
GUARANTEES

PROCEDURAL
REQUIREMENTS

USE

For commercial and

administrative convenience

Owing to requirements of
applicable law e.g. company
law, etc.

Preliminary review

Check for legal compliance

Check for compliance with

formalities

Contd.

FIG. 2-3 : PROTECTION AGAINST CONTRACTORS FAILURES AN OVERVIEW (PART I)

HSKS

Contn.

PROTECTION AGAINST CONTRACTORS FAILURES: AN OVERVIEW (PART II)

MISCELLANEOUS MECHANISMS/
INSTRUMENTS

PERFORMANCE BONDS

Reasons for
Typical contents
Legal effect of letter

DEFINITION
DEFINITION

See Robinson and

Lavers definition

Means of
guaranteeing to
the employer:
1. The
contractors
financial
viability and
2. Contractors
ability to
perform
obligations
under the
contract

Two main types:

1. Conditional/
Default Bond
2. Unconditional/
On-Demand
Bond

Features of
local practice
Rules of
construction
and
enforcement

Reasons for
Comparison with letters of
comfort
Typical contents
Legal effect of letter

DURATION
DURATION OF
OF
LIABILITY
LIABILITY

TYPES
TYPES

STANDBY LETTER
OF CREDIT

LETTER OF AWARENESS

LETTER OF COMFORT

Normally stipulated in
bond. Types include:
1. Entire duration of
contract
2 Up to CPC Construction
Bond
3 CPC to Final
Certificate
Maintenance
Bond

Reasons for
Comparison with
Unconditional/On-Demand Bond
Obligations under
Legal effect of letter

PROCEDURAL
PROCEDURAL
REQUIREMENTS

FINANCIAL LIMITS
OF LIABILITY

Normally
stipulated in
Bond itself.

Normally 5-10%

Sometimes
higher

See use of
Indexed
Performance
Bonds

INSURANCE

Reasons for:
Legal effect of Insurance
Comparison with the other
mechanisms/instruments

NONPROVISION OF
OF
NON--PROVISION
BOND/GUARANTEE

RELEASE OF BOND
/GUARANTEE

Preliminary
review

Timing for
submission

Seven main
circumstances

Checks for
authenticity

Consequences of
failure to submit:

Check for
compliance with
formalities

Effect of
breaches of
terms and
conditions

1. Contract
provisions
2. Common law
rules

4 Up to date of
release stipulated
by guarantor

FIG. 2-4 : PROTECTION AGAINST CONTRACTORS FAILURES AN OVERVIEW (PART II)

HSKS

FIG. 2-5 : CONTRACTORS INSURANCE POLICIES COMMON TYPES

HSKS

INSURANCES: AN OVERVIEW (PART I)

Risk allocation mechanisms

Per Robinson and Lavers

Means of seeking compensation

following default/failure

Voluntary assumption of
specified risk in return for an
agreed payment

CATEGORY I

CATEGORISATION

Two Main Categorization:

1.
2.

TYPES

DEFINITION

PURPOSES

Liability based
Loss based

Difference: basis of
compensation

CATEGORY II

PRINICPAL TYPES

Liability based

Loss based

Contractor: Common Types

Indemnification of insured
against damages payable to
3rd party

Compensate insured for

loss/damage directly
incurred by insured

Employer: Common Types

Occupier: Common Types

Examples:

Examples:

Management Corporation:
Common Types

1.
2.
3.

3rd Party Liability

Insurance
Workmens
Compensation
Professional Indemnity
Insurance

1.
2.

Contractors All Risk

Policy
Erection All Risk
Policy

FIG. 2-6 : INSURANCES AN OVERVIEW (PART I)

HSKS

Contd.

INSURANCES: AN OVERVIEW (PART II)

FEATURES AND
CONDITIONS

PROCEDURAL
REQUIREMENTS

FAILURE TO INSURE

Necessity for checking authenticity

of: 1. Cover notes 2. Policy
Necessity to check for compliance
with: 1. Contract requirements
2. Formalities

FAILURE TO INSURE

TIMING FOR SUBMISSION

Normally stipulated in contract

2 Common alternatives:

Effects dictated by:

1. Governing contractual
provisions
2. Common law rules

1. Before commencement of
work/contract; or

Possible options: Employer insures

and charges premiums to contractor

2. Within stipulated period of

award of contract

IMPORTANT
IMPORTANT
STANDARD
STANDARD
CONDITIONS
CONDITIONS

BASIS
BASIS OF
OF
CONTRACTING
CONTRACTING
Submission of
proposal

Issue of policy

Effect of :
1. Contracts of
uberrimae
fidei
2. Cover notes,
etc.

PARTIES
PARTIES
EFFECTING POLICY
POLICY

Six main ones i.e.

4. Following a loss
event
5. As to subrogation
6. On contribution

Various possibilities:

Typical parties:
1.
2.
3.
4.

3. As to risk

Employer
Contractor
Sub-contractors
Selected 3rd parties

Effect of cross
liability provisions

DURATION
DURATION
OF
OF POLICY
POLICY

COMMENCEMENT
COMMENCEMENT
OF
OF POLICY
POLICY

1. Named party
2. With insurable
interest

1. Condition precedent
to liability
2. During
work/construction

General rule:

Different formulae:

1. Date of
commencement of
contract; or

1. Up to issue of CPC

2. Date of
commencement of
work on site; or

3. Up to issue of Final
Certificate

3. Date of delivery of
material, etc.

Function of the nature

of contract works

Apparently not a serious ground to

effect determination

2. Up to issue of CMGD

FINANCIAL
FINANCIAL LIMITS
LIMITS
OF
OF LIABILITY
LIABILITY

Guidelines for
estimating limits.

General rule on
deductibles/excess
clauses

4. Up to Final Certificate
plus fixed period

Normally stipulated
by employer in
tender/contract

Requirements
pertaining to extension
of period

TERMINATION
TERMINATION
OF
OF POLICY
POLICY
Three main methods:
1. Satisfaction of
conditions
precedent in
contract e.g. issue
of CPC, etc.
2. Termination of
policy by
breach/mutual
agreement
3. Lapse of insurance
period and/or
extension

FIG. 2-7 : INSURANCES AN OVERVIEW (PART II)

HSKS

SITE POSSESSION: AN OVERVIEW

PROVISIONS
FOR

MEANING

EXPRESS

Licence revocable by
Employer at any time

Licence to be free from

any encumbrances

If not expressed, by

Or in Contract

Contractor entitled to
Sole/exclusive
possession

GENERAL
LEGAL POSITION

IMPLIED

No

Freeman & Son v

Hensler

EXCEPTIONS
TO GENERAL
PRINCIPLE

Express Stipulations

Case Law

POSSESSION
ON PIECEMEAL
BASIS?

LATEST LEGAL
POSITION

Sufficient degree
of possession/
access

To execute work
unimpeded

To be able to
perform work

FAILURE TO GIVE
POSSESSION

EXCEPTIONS

Law

GENERAL
PRINCIPLE

In Letter of
Acceptance

POSTPONEMENT

DEGREE

Express contract
stipulations permitting
postponement

GENERAL
LEGAL POSITION

EFFECT

General Position: No

Breach of Contract

Exceptions:

Entitles Contractor to
rescind Contract.

Contractor entitled to
loss occasioned

Contractor entitled to
EOT if expressly
permitted
contractually

Otherwise, LAD
cannot be imposed

a) Express
stipulations to
contrary
b) Where Common
Law applies

FIG. 2-8 : SITE POSSESSION AN OVERVIEW

HSKS

SITE POSSESSION MEETINGS

TIMING

On Date of Commencement
of Contract /

Date of Site Possession

MATTERS
DEALT

PURPOS E

1. All Project Team

Member

To officially handover
Possession of Site to
the Contractor

WHO
PREPARES ?

EXPLANATION
OF CONTRACT
REQUIREMENTS

LETTER OF
DELEGATION
OF POWERS

PARTICIPANTS

MINUTES

INTRODUCTION
OF PROJECT
MEMBERS

COPY OF
CONTRACT
DOCUMENTS

PRICED COPY
OF B.Q.

Contract Administrator

DISTRIBUTION/
CIRCULATION

To all parties

HANDOVER
OF VARIOUS
DOCUMENTS

SET OF
CONSTRUCTION
DRAWINGS

SET OUT
PROCEDURES
COVERING

Document Submittals and

Approvals

Sample Submittals and

Approvals

Inspection of Work
Interim Valuations

Claim Procedures

FIG. 2-9 : SITE POSSESSION MEETINGS

HSKS

WORK PROGRAMME
MISCELLANOUES
REPORTS
AND DOCUMENTS

DESIGN AND CALCULATIONS

FOR WORKS UNDER P.C.
SUM, PACKAGE DEAL TYPE
CONTRACTS, ETC.

METHOD STATEMENTS

WORKS UNDER CONTRACT:

TYPICAL SUBMITTALS BY
CONTRACTOR

DESIGN AND
CALCULATIONS FOR
TEMPORARY WORKS

DRAWINGS I.E. SHOP,

FABRICATION, SETTING
OUT, ETC.

QA/QC DOCUMENTS

HEALTH AND SAFETY

DOCUMENTS

FIG. 2-10: WORKS UNDER CONTRACT TYPICAL SUBMITTALS BY CONTRACTOR

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MONITORING OF
WORK PROGRESS

HSKS

3.0

MONITORING OF WORK PROGRESS

PROGRAMMING OF WORKS

PARTIES RESPONSIBLE:
1.
2.
3.

EMPLOYER
MAIN CONTRACTOR
CONTRACT ADMINISTRATOR

PROGRESS REPORTS

SITE RECORDS

MEETINGS:
1.
2.
3.
4.

SITE POSSESSION
PROGRESS/SITE
NSC COORDINATION
AD-HOC

MISCELLANEOUS ISSUES

HSKS

RELEVANT CASES
1.

GLENLION CONSTRUCTION LTD. V THE GUINESS TRUST [1987] 39 BLR 89

2.

YORKSHIRE WATER AUTHORITY

V
(NORTHERN) LTD. [1986] 32 BLR 114

3.

GREATER LONDON COUNCIL V CLEVELAND BRIDGE & ENGINEERING CO.

LTD. [1986] 8 Con LR 30

4.

KITSONS SHEET METAL LTD.

V
MATTHEW HALL MECHANICAL &
ELECTRICAL ENGINEERS LTD. [1989] 47 BLR 82

5.

WEST FAULKNER ASSOCIATES V LONDON BOROUGH OF NEWHAM [1994]

SIR ALFRED MCALPINE & SON

71 BLR 1

6.

EQUITABLE DEBENTURES ASSETS CORP. LTD.

ROBERTS & ORS [1984] 2-CLD-10-01

MORGAN BRANCH

HSKS

FIG. 3-1 : WORK PROGRAMME - TYPICAL FORMS

HSKS

PRINCIPAL ACTIVITIES
IMPORTANT
MILESTONES FOR
EMPLOYER TO MEET

SEQUENCE OF
ACTIVITIES

WORK PROGRAMME:
PRINCIPAL CONTENTS

IMPORTANT
MILESTONES FOR
CONTRACTOR TO MEET

TIMING OF ACTIVITIES
IDENTIFICATION OF
CRITICAL ACTIVITIES
AND CRITICAL PATH

FIG. 3-2 : WORK PROGRAMME PRINCIPAL CONTENTS

HSKS

WORK PROGRAMME: AN OVERVIEW

RESPONSIBILITY

Express Provisions

By Implication

METHOD OF
WORKING

BAR
CHARTS

FORM

MEANING

CONTENTS

Sequence and
Timing of Activities

Critical Milestones

FOR CONTRACT
ADMINISTRATOR

SEQUENCE OF
WORKING

CRITICAL PATH
ANALYSIS

PERT

PRIMIVERA/
MICROSOFT
PROJECT
PROJECT

PURPOSE

OPTIONS ON
SUBMISSION

PART OF
CONTRACT?

Approval
Rejection
Withholding of
Approval

ALTERATION/
REVISION

General
Policies

Mode of
Alternatives /
Revision

Effect of
Alternatives/
Revision

FOR
CONTRACTOR

MISCELLANEOUS

PART OF TENDER
SUBMISSION?

SUBMITTED AFTER
TENDER AWARD

FIG. 3-3 : WORK PROGRAMME AN OVERVIEW

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TO LEVY CONTROL OVER

PROGRESS OF THE WORKS
TO ENSURE CONTRACT
IS COMPLETED
ACCORDING TO
SCHEDULE

MISCELLANEOUS
PURPOSES

PROGRESS MONITORING:
EMPLOYERS PURPOSES

TO PLAN AND
STREAMLINE FINANCIAL
ARRANGEMENTS
TO OBVIATE DEFAULT

TO TAKE NECESSARY
REMEDIAL MEASURES IF
DELAY OCCURS OR IF
EMPLOYER IS AT FAULT

TO WARN CONTRACTOR
TO TAKE REMEDIAL
MEASURES IN CASE
DELAY OCCURS

FIG. 3-4 : PROGRESS MONITORING EMPLOYERS PURPOSES

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PROGRESS MONITORING: AN OVERVIEW

PURPOSE

DURATION

From Site
Possession

To Issue of Final
Certificate

Normally up to
Practical Completion
only

SITE
POSSESSION
MEETINGS

Primary Purposes

Secondary Purposes

METHODS

Use of Contractors
Work Programme

SITE PROGRESS
MEETINGS

SUBSUBCONTRACTORS
MEETING

Employer/ contract
administrator
Contractor

COORDINATION/
PROJECT
MANAGEMENT
MEETINGS

On regular basis

Normally monthly

Maybe
i. Weekly
ii. Fortnightly
iii. Quarterly, etc.

SITE
RECORDS

PROGRESS
MEETINGS

FREQUENCY/
NATURE OF
CHECKS

PARTIES
RESPONSIBLE

BASIS

ADAD-HOC
HOC
MEETINGS

DURATION

PURPOSE

OFFICIAL WORK
RECORDS

METHODS

OFFICIAL
PROGRESS
REPORTS

EVIDENTIAL VALUE

SITE
DIARY

FIG. 3-5 : PROGRESS MONITORING AN OVERVIEW

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SITE POSSESSION
MEETINGS

MISCELLANEOUS
MEETINGS

POST CONTRACT
AWARD STAGE:
PRINCIPAL TYPES
OF MEETINGS

AD-HOC
MEETINGS

SUB-CONTRACTORS
MEETINGS

SITE PROGRESS
MEETINGS

COORDINATION/
PROJECT
MANAGEMENT
MEETINGS

FIG. 3-6 : POST CONTRACT AWARD STAGE PRINCIPAL TYPES OF MEETINGS

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SITE PROGRESS MEETINGS: AN OVERVIEW

ENABLE
CONTRACTOR TO

PERMIT WORK
PROGRESS TO

Officially present
progress report

Be reviewed on
regular basis

Present problems
encountered

Identify areas and

causes of delay

Enable Employer/ C.A. to

redress delay caused by
him/them

Keep track of financial

progress/allocation

FINANCIAL ISSUES

3RD PARTY
ISSUES AFFECTING
CONTRACT

CONTRACT
ADMINISTRATOR

Chairs Meeting

Main participant

S.O./ Contract
Administrator

Main participant

DISTRIBUTION/
CIRCULATION
To all parties/
attendees

MISCELLANEOUS
ISSUES

MAIN
CONTRACTOR

PARTICIPANTS

MINUTES

WHO
PREPARES?

MISCELLANEOUS

ONLY SITE ISSUES

ISSUES/
MATTERS DEALT

PURPOSE

TIMING

NSCs

CONSULTANTS

Observers Only

Participants if contract
administrator's assistants/
representatives

By invitation only

EMPLOYER

Observer only

FIG. 3-7 : SITE PROGRESS MEETINGS AN OVERVIEW

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SUB-CONTRACTORS MEETINGS: AN OVERVIEW

ISSUES/
MATTERS DEALT

PURPOSE

TIMING

Usually monthly prior

to site meetings

If necessary more
frequently
TO ENABLE SUBSUBCONTRACTOR TO

TO PERMIT
CONTRACTOR TO

Officially present
progress report to
Contractor

Review NSCs progress,

areas of delay, etc.

Present problems
encountered

PARTICIPANTS

MINUTES

WHO
PREPARES?
Main
Contractor

DISTRIBUTION/
CIRCULATION
To all parties/
attendees

Identify and sort

coordination problems
CONTRACTOR
(MAIN)

NOMINATED
SUBSUBCONTRACTORS

DOMESTIC
SUBSUBCONTRACTORS

Chairs Meeting

OTHERS
(BY
INVITATION)
Employer
Third Parties

COORDINATION
MATTERS

SITE PROBLEMS

FINANCIAL ISSUES

3RD PARTY ISSUES

Design

Possession

Payments

Authorities

Site Work

Access

V.O.s

Utilities Providers

Security

Claims

Others

MISCELLANEOUS
ISSUES

Contract
Administrator

FIG. 3-8 : SUB-CONTRACTORS MEETINGS AN OVERVIEW

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AD-HOC MEETINGS: AN OVERVIEW

CONVENORS
(AS APPLICABLE)

TIMING

AS AND WHEN
NECESSARY FROM
TIME TO TIME

The Employer

The Contract Administrator

The Contractor

The Sub-Contractors

PURPOSE

USUALLY
DICTATED BY
CIRCUMSTANCES

EMERGENCY
ISSUES

TO DISCUSS
SPECIFIC ISSUES /
MATTERS

ADMINISTRATIVE
MATTERS

TECHNICAL
ISSUES

FINANCIAL
ISSUES

Site Issues

Payments

Design

Training

Design/ Work Issues

V.O.s

Construction/Installation

Maintenance

3rd

Claims

Testing and
Commissioning

As-Built Records

Defects

Party Issues

MISCELLANEOUS
ISSUES

FIG. 3-9 : AD-HOC MEETINGS AN OVERVIEW

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SITE RECORDS: AN OVERVIEW

PURPOSE

DURATION

From Date of Commencement /

Site Possession to

Completion of works

Normally up to Practical
Completion only
PROVIDE NECESSARY
INFORMATION/ EVIDENCE
TO

EVALUATE
CONTRACTORS
CONTRACTOR
CLAIMS TO

REVIEW WORK
PROGRESS

Contractors Scope

Extension of Time

NSCs/DSCs Scope

Additional Work

Direct loss and/or

expense

Miscellaneous matters

EVIDENTIAL VALUE

METHODS

OFFICIAL
PROGRESS
REPORT

OFFICIAL WORK
RECORDS

PERMIT
DECISION MAKING

SITE DIARY

DULY SIGNED/
ENDORSED RECORDS

Best evidential value

ACKNOWLEDGEMENT
OF RECEIPT RECORDS

Some evidential value

FIG. 3-10 : SITE RECORDS AN OVERVIEW

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OFFICIAL WORK RECORDS: AN OVERVIEW

TIMING OF
SUBMISSION

DAILY

WEEKLY

PURPOSE

PROCEDURAL
MATTERS

CONTENTS

USE OF
DESIGNATED
STAFF FOR

FORTNIGHTLY

Preparing
Maintaining
Submitting
RECORD OF
SITE INFORMATION

SITE WORK/
ACTIVITIES

FOR CONTRACT
ADMINISTRATION

RECORD
OF WORKERS

Planned

Skilled

Undertaken

Unskilled

SIGNING OR
ENDORSEMENT
By authorized
Person(s)

TIME OF
ENTRY

S.O/ Contract
Administrator

Daily

FOR BASIS
OF OFFICIAL
PROGRESS REPORT

RECORD OF
PLANT/MACHINER
Y
On site

WEATHER
CONDITIONS

SAFE
KEEPING
By S.O./Contract
administrator
Up to lapse of
period of
limitation

PROBLEMS
ENCOUNTERED

INSTRUCTIONS

Affecting work

Design

Received

Delaying site
operations

Site

Carried Out

Coordination

Outstanding

MISCELLANEOUS

Site/ Factory
Visits
Inspections

Due to 3rd Parties

FIG. 3-11 : OFFICIAL WORK RECORDS AN OVERVIEW

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SITE DIARY: AN OVERVIEW

NATURE

DURATION

Preferably kept by
each and every site
personnel

From commencement of
work on site until
completion

Personal record of site

activities

If necessary until the end

of the contract

Otherwise by
designated site
supervision team
member

Undertaken

ENTRIES ON
DAILY BASIS

SITE WORK/
ACTIVITIES

PROCEDURAL
MATTERS

CONTENTS

By designated
person

PROBLEMS
ENCOUNTERED

INSTRUCTIONS

As to Site Work

Issued to Contractors

Coordination

Carried out by
Contractor

PRESENTATION
ON REQUEST/
DEMAND

CHECKING /
ENDORSEMENT

By Employers
Representative/
Designated
person

Accuracy of
entries

RECORD OF
Contractors
defaults
/omissions

By Employer/
S.O./ any
interested party

MISCELLANEOUS
Site/ factory visits
Weather conditions
Disruption to site
activities

SAFE KEEPING/
CUSTODY

By S.O./ contract
administrator

Up to lapse of
period of
limitation

ATTACHMENTS
As-Built sketches,
drawings, diagrams,
etc.
As-erected/ AsInstalled Work/ plant,
etc.

FIG. 3-12 : SITE DIARY AN OVERVIEW

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SUPERVISION OF WORKS/
CONTRACT ADMINISTRATION

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4.0
1.0

SUPERVISION OF WORKS/CONTRACT ADMINISTRATION

CONTRACT ADMINISTRATION

PURPOSE

DESIGNATION

ROLES

SOURCES OF DUTIES AND POWERS

REPRESENTATIVE/ASSISTANTS

PRINCIPAL DUTIES

LIABILITY

2.0

SUPERVISION

FORMS

DURATION

LEVEL

LIABILITIES

3.0

DISCUSSION OF CASE LAW

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ENSURE WORKS
SATISFACTORILY
COMPLETED WITHIN
ORIGINAL CONTRACT PERIOD
AND PRICE

ENSURE THAT CONTRACTOR

FULFILLS HIS OBLIGATIONS
UNDER THE CONTRACT
ENSURE THAT EMPLOYER
FULFILLS HIS OBLIGATIONS
UNDER THE CONTRACT

CONTRACT
ADMINISTRATION:
PRIMARY PURPOSES

ENSURE THAT NEEDS/

OBLIGATIONS OF CONTRACT
ADMINISTRATOR UNDER
CONTRACT/STATUTE
ADEQUATELY FULFILLED

ENSURE THAT EMPLOYERS

POSITION ADEQUATELY
PROTECTED AGAINST VARIOUS
CLAIMS

ENSURE THAT EMPLOYER

FULFILS HIS
STATUTORY/LOCAL
AUTHORITY REQUIREMENTS

FIG. 4-1 : CONTRACT ADMINISTRATION PRIMARY PURPOSES

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SUPERINTENDING
OFFICER/ S.O.

CONSTRUCTION
MANAGER

PROJECT DIRECTOR

EMPLOYERS
REPRESENTATIVE

CONTRACT
ADMINISTRATORS:
COMMON
DESIGNATIONS

ARCHITECT

ENGINEER

FIG. 4-2 : CONTRACT ADMINISTRATORS COMMON DESIGNATIONS

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AS TO
RIGHTS/ DUTIES UNDER
THE CONTRACT
WITH IMPLIED/
OSTENSIBLE
AUTHORITY

WITH EXPRESS
AUTHORITY

AS TO MATTERS
OF COST

AS AN AGENT
OF THE EMPLOYER

AS TO OTHER
MATTERS

AS AN ADVISOR
TO THE EMPLOYER

CONTRACT
ADMINISTRATOR:
RANGE OF ROLES
PERFORMED

AS AN INDEPENDENT/
IMPARTIAL
ADJUDICATOR

AS AN INDEPENDENT
CONTRACTOR

WHERE SUCH
WORK
IS REQUIRED
POSTCONTRACT

FOR MAINLY
DESIGN/
DETAILING
WORK

AS TO DISPUTE
RESOLUTION

AS TO
CERTIFICATION

FIG. 4-3 : CONTRACT ADMINISTRATOR RANGE OF ROLES PERFORMED

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TERMS OF
REFERENCE OF
APPOINTMENT

CONDITIONS
OF CONTRACT
BEING
ADMINISTERED

IN-HOUSE EMPLOYEE

CONDITIONS
OF
ENGAGEMENT/
SERVICES
AGREEMENT

CONDITIONS OF
CONTRACT
BEING
ADMINISTERED

EXTERNAL BODY/PERSON

CONTRACT ADMINISTRATOR: SOURCES OF DUTIES AND POWERS

FIG. 4-4 : CONTRACT ADMINISTRATOR SOURCES OF DUTIES AND POWERS

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ARCHITECT
SPECIALIST
CONSULTANT

PROJECT MANAGER

CIVIL ENGINEER

CONTRACT ADMINISTRATORS
REPRESENTATIVES/ ASSISTANTS:
TYPICAL EXAMPLES

QUANTITY SURVEYOR

STRUCTURAL ENGINEER

MECHANICAL ENGINEER

ELECTRICAL ENGINEER

FIG. 4-5 : CONTRACT ADMINISTRATORS REPRESENTATIVES/ASSISTANTS - TYPICAL

EXAMPLES
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OVERALL SUPERVISION

PROGRESS MONITORING

ADMINISTRATION OF PAYMENTS
ISSUING INFORMATION,
DRAWINGS, DETAILS, ETC.

ORDERING VARIATIONS
ISSUING RELEVANT INSTRUCTIONS

GRANTING APPROVALS, CONSENTS, ETC.

INSPECTIONS OF WORKS

NOMINATING SUB-CONTRACTORS, ETC.

ADVISING EMPLOYER

CONTRACT ADMINISTRATORS PRINCIPAL DUTIES FOR

TRADITIONAL GENERAL CONTRACTS

ISSUING NECESSARY REPORTS

OVERSEEING TRAINING OF EMPLOYERS
O & M PERSONNEL
OVERSEEING COMPLETION &
HANDING OVER OF WORKS
MONITORING
RECTIFICATION OF DEFECTS
PARTICIPATING IN PREPARATION OF MIGRATION/
FACILITIES MANAGEMENT PLANS

PARTICIPATING IN TESTING AND COMMISSIONING

MONITORING SERVICING AND MAINTENANCE

CHECKING AND APPROVING O & M MANUALS &
AS-BUILT DRAWINGS
PREPARING FINAL ACCOUNT

CLOSING-OFF CONTRACT

FIG. 4-6: CONTRACT ADMINISTRATORS PRINCIPAL DUTIES FOR TRADITIONAL GENERAL

CONTRACTS
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FULL-TIME SUPERVISION

NOMINAL SUPERVISION

STANDING
SUPERVISION

FORMS OF SUPERVISION:
COMMON LABELS

PERIODIC SUPERVISION

CONSTANT SUPERVISION

PART-TIME SUPERVISION

FIG. 4-7 : FORMS OF SUPERVISION COMMON LABELS

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SUPERVISION/INSPECTIONS: OVERVIEW (PART I)

TYPICAL
CLAUSES IN
AGREEMENTS

TYPICAL
PROVISIONS IN
BYBY-LAWS

Engineers Agreement:

1. Clause 8.1 and 8.7 BEM

Form (1999)

Building (Federal Territory of

Kuala Lumpur) By-Laws 1985:
1. By-Law 6: Supervision of
Works

NATURE
AND MEANING

Terms used synonymously

See Newey Js definition

Distinction: Inspection imposes a

lesser duty: William Tompkinson
v St. Michael in the Hamlet.

Architects Agreement
1. Clause 5(4)(iv) Part II:
Architects (Scale of
Minimum Fees)
(Amendment) Rules 1992
2. Clause 9 Conditions of
Engagement of Architect

2. By-Law 23(1): Certificate For

Occupation

By-Law 5(1) City of Kuala

Lumpur (Earthworks) By-Laws
1975

PURPOSES

See Keatings definition in

Building Contracts

Three fold purpose:

In absence of express provisions

to contrary courts imply a duty of
supervision: Alexander Corfield v
David Grant.
Malaysia: Statutory provisions
necessitate supervision

1. To ensure contractor
carries out work in
accordance with contract.
2. To enable contract
administrator to discharge
his obligations to employer.
3. To enable contract
administrator to meet his
statutory obligations

FIG. 4-8 : SUPERVISION/INSPECTIONS OVERVIEW (PART I)

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SUPERVISION/INSPECTIONS: OVERVIEW (PART II)

LEVEL OF
SUPERVISION
REQUIRED

DURATION

Determining factors:

1. Nature of works under

contract
Normal periods:

2. Applicable statutory
provisions e.g. By-Laws

1. Up to issue of Practical
Completion; or

2. Category II: PartTime/Periodic Supervision

3. Up to issue of Certificate of
Making Good Defects
Common practice is up to issue of
Certificate of Making Good
Defects

Necessity for Resident Site

Staff (RSS)

Typical examples:
1. Resident architect/engineer
2. Clerk-of-works.
3. Other relevant staff

Prevailing Forms:
1. Category I: Fulltime/Standing/ Constant
supervision

2. Up to application of certificate
for occupation; or

1. Conditions of engagement

2. Conditions of engagement

Determined by:

RESIDENT
SITE STAFF

2. Must be sufficient to check

the important elements

Primary responsibility for

supervision: contractors.
See East Ham Corp. v
Bernard Sunley.

Heads of liabilities of contract

administrator for defaults/
breaches:

Engagement:

Powers and duties determined

by engineering/construction
contract being administered
and/or letter of delegation of
power.

Responsibilities of:

Legal Position:
1. Must be reasonable for
works involved

1. Contractual
2. In tort
3. Statutory

1. By employer; or
2. By contract administrator

3. Category III: Nominal

Supervision

LIABILITIES

Position of contract
administrators who are
professional engineers,
architects, etc.

1. RSS
2. Contract Administrator

3. Adequate to meet statutory

requirements
4. Sufficient to meet
obligations of engagement

FIG. 4-9 : SUPERVISION/INSPECTIONS OVERVIEW (PART II)

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CONTRACT ADMINISTRATORS LIABILITIES: AN OVERVIEW (PART I)

CONTRACTUAL
LIABILITY

LEGAL KNOWLEDGE
AND PERSONAL DUTY

HEADS OF LIABILITIES
Three main categories:

1. Contractual
2. Tortious
3. Statutory

General position: Required to have

knowledge of all legal matters
relating to work being undertaken

Nature of matters.

Characteristics:

Consequences of failure

1. Not distinct/mutually exclusive

Duty is personal and non-delegable

DEFENCES

2. Concurrent/complementary

Prove no valid
express/implied contract
of engagement

If there is such valid

contract prove:

3. Choice of option on aggrieved part

STANDARD OF CARE

GENERAL POSITION

Action by employer under terms

of contract of engagement

If no express terms, implied by

law

Contract of engagement:
1. Standard forms, or
2. Bespoke Forms

Duty of care owed to employer

Usually to use reasonable skill

and care

Duty and standard of care either:

1. Expressed in contract of
engagement, or
2. Implied by law

EFFECT OF BREACH

Two options available to

employer:

1. Rescind contract and sue for

damages; or

1. Contract didnt impose

particular duty breach
of which claimed, or
2. Service actually
rendered was of the
standard reasonably
expected under the
circumstances

2. Affirm contract and sue for

damages

Right of election of option

belongs to employer

FIG. 4-10 : CONTRACT ADMINISTRATORS LIABILITIES AN OVERVIEW (PART I)

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CONTRACT ADMINISTRATORS LIABILITIES: AN OVERVIEW (PART II)

TORTIOUS LIABILITY

NEGLIGENCE

GENERAL POSITION

Duty of care in tort of negligence concurrent

with contractual duty: Brown v Boorman

Common Forms:
1. Acts/omissions
2. Mis-statements

BASIC
ELEMENTS

DEFINITION

Laid down in
Donoghue v
Stevenson
Neighbourhood
principle

D owed P duty of
care

Application of the
Bolam Test

D breached this duty

Consequence: P
suffered
loss/damage

Use of Reasonable
Man test

Use by Malaysian
Courts

Loss/damage
suffered not remote

Important elements:
1. Causation
2. Forseeability

STANDARD
OF CARE

Criterion: Objective

Less onerous

Proscribe use of
hindsight

See Eckersly v
Binnie & Partners

Per Hunter v
Henley

2. Fitness for
purpose

Need to satisfy all 3

element on balance
of probabilities

Only 3 types:

1. Deny existence of
duty of care

No liability to
contractor

Possible
exceptions:
See Para 5.9B5.

2. Prove claim made

not of type
currently
recognized

2. D did not adopt

the practice
3. Practice
adopted by D
would not be
adopted by
another
reasonable D

LIABILITY TO
3RD PARTIES

DEFENCES

1. There is a usual
and normal
practice

Use of standards
prevailing at time of
default

2 Categories:
1. Reasonable
skill & care

ESTABLISHING
LIABILITY

REASONABLE
SKILL & CARE

3. Show service
rendered meets
Bolam Test

No immunity to suit:
Sutcliffe v Thackrah

Situation per Pure

Economic Loss

FIG. 4-11 : CONTRACT ADMINISTRATORS LIABILITIES AN OVERVIEW (PART II)

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CONTRACT ADMINISTRATORS LIABILITIES: AN OVERVIEW (PART III)

STATUTORY LIABILITY

LIABILITIES UNDER
DELEGATED
LEGISLATION

DIRECT
STATUTORY LIABILITY

GENERAL POSITION

PROFESSIONAL
LIABILITY

In addition to Contractual and

Tortious Liability

Various Acts of Parliament

applicable

Liability under various ByLaws e.g. UBBL, etc.

For professional contract

administrator

Various sub-heads:

Penalties/sanctions stipulated
in the By-Laws

1. Direct statutory liability

2. Under delegated legislation
3. Professional liability

Principal example: S71 Street,

Drainage & Building Act 1974

Under specific Acts of

Parliament

Penalty for mis-supervision, etc.

Possible sanctions:
1. Fine
2. Suspension
3. Cancellation of
registration

FIG. 4-12 : CONTRACT ADMINISTRATORS LIABILITIES AN OVERVIEW (PART III)

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PAYMENTS/
COMMERCIAL MATTERS

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5.0

PAYMENTS/COMMERCIAL MATTERS

LEGAL OBLIGATION OF EMPLOYER

PAYMENT TO MAIN CONTRACTOR/TURNKEY CONTRACTOR

PAYMENT TO SUBSUB-CONTRACTORS

BACK TO BACK
BACK PAYMENTS

BREACHES IN PAYMENT OBLIGATIONS

RELEVANT CASES

SUTCLIFFE V THACKRAH [1974] 1 ALL ER 319

CROUDACE LTD. V THE LONDON BOROUGH OF LAMBETH [1986] 33 BLR 20

GUNUNG BAYU SDN. BHD. V SYARIKAT PEMBINAAN PERLIS SDN. BHD. [1987] 2 MLJ 332

HAJI ABU KASSIM V TEGAP CONSTRUCTION SDN. BHD. [1981] 2 MLJ 149

KAH SENG CONSTRUCTION SDN. BHD. V SELSIN DEVELOPMENT SDN. BHD. [1997] 1 CLJ
SUPP 448

YONG MOK HIN V UNITED MALAY STATES SUGAR INDUSTRIES LTD. [1966] 2 MLJ 286

JALLCON (M) SDN. BHD. V NIKKON METAL (M) SDN. BHD. (No. 2) [2001] 5 MLJ 716, HC.

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PROCEDURES AND CONDITIONS

PRECEDENT

QUANTUM/AMOUNT

SET-OFF/DEDUCTIONS

ENFORCEMENT/HONOURI
NG

TIMING

PAYMENT: ASPECTS OF CONTRACTORS

ENTITLEMENTS/EMPLOYERS OBLIGATIONS

FIG. 5-1: PAYMENTS ASPECTS OF CONTRACTORS ENTITLEMENT/EMPLOYERS OLIGATIONS

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TIMING OF PAYMENT TO CONTRACTOR: PRINCIPAL SCHEMES/SCHEDULES

PERIODIC SCHEDULE
DURING CURRENCY
OF THE CONTRACT

OF WHOLE
CONTRACT SUM

STAGES/MILESTONE
PAYMENT

PHYSICAL WORKS

PERIODIC SCHEDULE
AFTER COMPLETION/
END OF CONTRACT

ADVANCE PAYMENT

FINANCIAL

OF PART OF
CONTRACT SUM

AFTER ISSUE
OF CPC

AFTER COMPLETION/
END OF CONTRACT

AFTER
ISSUE OF CPC

AFTER ISSUE OF
FINAL CERTIFICATE

MISCELLANEOUS/
METHODS

AFTER ISSUE OF
FINAL CERTIFICATE

FIG. 5-2 : TIMING OF PAYMENT TO CONTRACTOR PRINCIPAL SCHEMES/SCHEDULES

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START

Contract administrator to
resolve all preliminary issues

Yes

Are the preliminary

matters expressly stipulated
in the contract?
No

Yes

Are they included

in the Project Procedures
Manual?
No
Have these been
sorted- out following award of
contract?

No

Yes
Have these
been formalized by all the
parties?

No

Contract administrator
to take necessary
action forthwith

Yes
Contract administrator to issue
formal record of issues agreed
upon by all relevant parties

All relevant parties

to take necessary steps to
implement issues

FIG. 5-3: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART I)

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Establish if the contractor

has fulfilled his first
pre -condition to payment

Has the contractor

commenced with the work
under the contract?

No

Yes
Has he
executed any physical
work?

No

Yes
Has he
delivered materials to
site?

No

Contractor not
entitled to any
payment

Yes
Prima facie, contractor
may be entitled to payment

Contract administrator
not obliged to initiate
the progress payment

Establish if it is necessary
for the contractor to apply for
the required payment

No

Does the contract

contain an express term
thereto?
Yes

FIG. 5-4: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART II)
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Contractor not
obliged to apply

No

Is it mandatory?
Yes

Contract administrator
obliged to initiate
process on his own
volition

Has
contractor complied with
requirements?

No

Contractor may
not be entitled to
payment until
he satisfies
pre -conditions

Yes
Contract administrator to proceed
with the next stage i.e. valuation

Has the
date of valuation been
reached?

No

Yes
Have the
relevant pre-conditions been
fulfilled?

No

Prima facie, valuation

may not be initiated
until achievement
of necessary
requirements

Yes
No

Have the
parties involved been
identified?
Yes

Deficiencies/omissions
to be addressed
forthwith to enable
process to continue

No

Has the
method for valuation been
confirmed?
Yes

FIG. 5-5: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART III)
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Valuation of works to be carried

out jointly by the relevant parties

Valuers to prepare a valuation report

Yes

Does the
contractor agree with the valuation?
No

Yes

Does he
sign off the
valuation report?

No
Valuation deemed to have
been accepted by the
contractor

No

Does he officially
register his protest with
valuers?
Yes
Do the valuers
consider the objections
protest?
Yes
Do they
agree with the
objections?

No

No

Contractor may protest to

the certifier if necessary

Yes
Valuers may revise/amend
the valuation as necessary

Does the
Contractor
protest to the
certifier?

Valuers to endorse/sign off

the valuation report prepared

No

Yes

FIG. 5-6: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IV)
HSKS

Valuation report together with

all other necessary documents to
be submitted to the certifier
Certifier to clarify/
discuss deficiencies/
omissions with the
valuers

Certifier to carry out preliminary reviews

Is the valuation
report complete, sufficient and
accurate?

No

Deficiencies/
omissions may
compromise the
certification

Yes
Certifier to take
objections into
consideration before
undertaking certification

Yes

Has the
contractor any valid grounds
for objecting?
No
Certifier not to consider
objections any further

Certifier may exercise

No
his discretion in
undertaking certification

Is the date
for certification
imminent?
Yes

No

Should in
his discretion a
certificate be
issued?
Yes

Has the stipulated

minimum value of work been exceeded?

No

Certifier has no discretion to

carry out certification

Yes
Certifier to proceed with the
necessary certification procedures

FIG. 5-7: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS

(PART V)
HSKS

Is the 1st Interim Certificate due?

No

Yes
Have all
the stipulated pre-conditions been met?

No

Yes
Is the
subsequent Interim Certificate
due?

No

Yes
Have all
the relevant pre-conditions
been met?

No

Prima facie,
certificate cannot
be issued

Yes
Certifier to proceed with
preparation of Interim Certificate

Is there a
standard form of certificate prescribed?

Yes

Use the
standard form
as prescribed

No
Utilize the form
unless found
not suitable

Yes

Has a bespoke form been generated?

No
Certifier to develop an ad hoc form
meeting the necessary criteria/contents
requirements

FIG. 5-8: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VI)
HSKS

Certifier to fill in all details

completely, sufficiently and
correctly in certificate
Are there
any NSCs/Nominated
Suppliers?

Yes

No
Are
there any official
assignees?

Yes

Amount certified
for such parties
to be indicated
separately in certificate

No
No

Are
all procedural requirements met?
Yes

No

Are
all formal requirements
met?
Yes

Certificate may be
challenged as invalid and
unenforceable, if and
when issued

No

Is the signatory an
authorized person under the
contract?
Yes
Have all the
relevant checks for errors,
etc. been undertaken?

No

Deficiencies/ errors may

compromise validity of
certificate

Yes
U

FIG. 5-9: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VII)
HSKS

CA to rectify
deficiencies/errors
as soon as possible

Contract administrator to
issue relevant certificate

Is there a
certification period stipulated
in the contract?

No

Certificate to be issued
within a reasonable time
of application/ valuation

No

Default in service may

constitute a breach of
contract on employers part.
To be corrected/ rectified
forthwith

Yes
Prima facie, employer may
be in breach of contract.
Contractor may take
appropriate action for
employers breach

No

Is certificate
issued within the said
period?
Yes

Contractor to
be furnished with
original copy

No

Is the recipient
of the original copy
stipulated?
Yes
Is the certificate
issued to the stipulated
person?
Yes
Are copies
issued to the relevant
parties?

No

Relevant parties have a

right to demand the
necessary copies from
contract administrator

Yes
No

Is the service
of certificate formally
evidenced?
Yes

AA

AB

FIG. 5-10: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VIII)
HSKS

AA

AB

Establish the specific post-certification requirements

Do the
recipients formally
acknowledge receipt of
document?

No

Omission to
acknowledge may
lead to future evidential
problems

Yes
No

Contractor
may present
certificate within
a reasonable
period of receipt

Contract administrator
to procure said
acknowledgements as
soon as possible

Is presentation
of certificate stipulated in the
contract?
Yes

No

Is there a
period stipulated for the
presentation?
Yes
Is presentation
formally effected within this
period?

No

Delay may postpone

employers obligation to
honour certificate

Yes
Does employer
formally acknowledges receipt
of the certificate from
contractor?

No

Omission to acknowledge may

lead to future evidential
problems and may affect the
honouring of certificate

Yes
Employer to review
certificate for validity

AC

AD

AE

Contractor to procure
said acknowledgement
as soon as possible

AF

FIG. 5-11: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IX)
HSKS

AC

AD

AE

Are
there grounds for
challenging validity of
certificate?

AF

Yes

Employer may challenge

certificate and refuse to
honour it citing the
relevant grounds

No
Employer to proceed with honouring
certificate issued/ presented (as
applicable)

No

Are there any

set-offs/deductions
to be
made?
Yes

Employer must
pay amount
as certified
to the contractor

No

Are these
expressly permitted by the
contract?
Yes
Has the
amount certified less the setoffs/ deduction been
established?
Yes
Has the final
sum due been paid to the
contractor?

No

Employer to determine amount

due before the stipulated
honouring period lapses

No

Yes
Has this been done in the
stipulated honouring
period?

No

Employer culpable
of breach of contract.
Contractor to take
appropriate action.

Yes

STOP

FIG. 5-12: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART X)

HSKS

RECOVERY OF THE UNPAID

AMOUNT
MISCELLANEOUS
REMEDIES

INTEREST ON THE
UNPAID AMOUNT

DEFAULT IN PAYMENT:
TYPICAL CONTRACTUAL
REMEDIES

RIGHT TO DETERMINE
EMPLOYMENT UNDER
CONTRACT

RIGHT TO REDUCE RATE

OF EXECUTING WORK
RIGHT TO SUSPEND WORK

FIG. 5-13 : DEFAULT IN PAYMENT - TYPICAL CONTRACTUAL REMEDIES

HSKS

CERTIFICATE WRONG ON ITS FACE

CERTIFICATE FUNDAMENTALLY INACCURATE

CERTIFICATE NOT IN CORRECT FORM

CERTIFICATE ISSUED BY UNAUTHORISED PERSON

CERTIFICATE ISSUED IN UNAUTHORISED MANNER

INTERIM CERTIFICATES:
TYPICAL CHALLENGES

CERTIFICATE ISSUED OUT OF TIME

CERTIFIER ACTING ULTRA VIRES
CERTIFIER IMPROPERLY PRESSURIZED/INFLUENCED
CERTIFICATE SUBJECT TO FRAUD/COLLUSION
FRAUD, DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR
MISCELLANEOUS CHALLENGES

FIG. 5-14: INTERIM CERTIFICATES TYPICAL CHALLENGES

HSKS

DIRECT PAYMENT BY THE

EMPLOYER

PAYMENT UPON CERTIFICATION

CONTINGENT PAYMENT

PAYMENT TO SUB-CONTRACTORS:
PRINCIPAL METHODS

FIG. 5-15 : PAYMENT TO SUB-CONTRACTORS PRINICPAL METHODS

HSKS

START
Sub-Contractor
(SC) forwards details of amount
claimed to Main Contractor (MC) officially

SC to make fresh submission in the

next application
No

Is it within
the prescribed time
limits?
Yes

No

Does the
MC accept the
submission?
Yes

MC to include
SCs details in his claim

MC to submit consolidated claim

to the Contract Administrator (CA)

CA to carry out the necessary valuation

CA to issue interim
payment certificate to MC

Employer to pay certified amount to

MC within the Honouring Period

Establish if there is a
Contingent Payment Type II
clause in the sub-contract

FIG. 5-16: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II CONTINGENT PAYMENT (PART I)
HSKS

A
Is there
such a clause in the
contract?

No

Yes
Is the
period for payment
stated?

No

MC may pay SC within

a reasonable time of receipt of
monies from the Employer

Yes
Yes

Does the MC
pay the SC within the
said period?
No
SC to pursue the remedies
available under the contract

Are there
any contractual remedies
available?

Yes

SC to initiate the contractual

remedies as applicable

Yes

SC to initiate the Arbitration

process if necessary

No
Is there
an arbitration
agreement?
No
SC to pursue his common
law remedies if necessary

STOP

FIG. 5-17: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II CONTINGENT PAYMENTS

(PART II)
HSKS

PAYMENT IN PACKAGE DEAL TYPES OF CONTRACTS: AN OVERVIEW

CONTRACT SUM
ANALYSIS

PURPOSE

DRAFTING

For Tender Analysis

For Interim Payment
Valuation of
Changes/
Provisional Sums

Normally by
Contractor
Samples may be
given by Employer
in Employers
Requirements

For any Price

Adjustment

GENERAL
POSITION

MEASUREMENT

QUANTITIES

STRUCTURE
Given in some Forms
e.g. JCT 98, PWD
Form DB/T, etc.
Required for:
1. Overall Works
2. Sections or
Phases

EXPRESS
PROVISIONS

Whenever used, effect

not similar to TGC

Included in most
Standard Forms

Are deemed to be only

estimates

E.g. Clause 55(1) ICE,

Clause 13.1(d) FIDIC, etc.

GENERAL
POSITION
As based on
Lump Sum and
due to nature of
contract

SITUATIONS
WHERE USED
Changes/V.O.s
Unforeseen
Conditions

No requirement
for measurement

ERRORS/
OMISSIONS

ACCURACY
Effect of
measurement
expressly
stipulated in
some forms
Mostly deals with
patent errors

PREPARATION

Risk on Contractor

Contractor responsible

E.g. Clause 55(2) ICE

Form

If Employer prepares,
risk for errors/omissions
normally passed on to
Contractor

FIG. 5-18 : PAYMENT IN PACKAGE DEAL TYPES OF CONTRACTS: AN OVERVIEW

HSKS

FINAL AMOUNT TO WHICH

CONTRACTOR ENTITLED TO UNDER
THE CONTRACT

FINAL ADJUSTMENTS TO
THE CONTRACT SUM

FINAL AMOUNT (SET OFFS/

DEDUCTIONS) TO WHICH
EMPLOYER ENTITLED TO UNDER
THE CONTRACT

FINAL ACCOUNT: PRINCIPAL CONTENTS

FIG. 5-19 : FINAL ACCOUNT PRINCIPAL CONTENTS

HSKS

APPROVED VARIATIONS
TO THE CONTRACT
MISCELLANEOUS
ADJUSTMENTS

ADJUSTMENT FOR PRICE

FLUCTUATION, ETC.

APPROVED
CONTRACTORS CLAIMS

ADJUSTMENT TO THE
CONTRACT SUM: TYPICAL
HEADS/ITEMS

ADJUSTMENT FOR P.C.

SUMS/ PROVISIONAL
SUMS

PERMITTED COSTS FOR

TESTING, OPENING UP OF
WORK, ETC.

FEES AND CHARGES FOR

PERMANENT
CONNECTIONS
REMEASUREMENT OF
PROVISIONAL
ITEMS/WORK

FIG. 5-20 : ADJUSTMENT TO THE CONTRACT SUM TYPICAL HEADS/ITEMS

HSKS

VARIATIONS/CHANGES

HSKS

6.0

VARIATIONS/CHANGES

WHAT CONSTITUTES VARIATIONS/CHANGES

VARIATIONS/CHANGES

ISSUES AS TO VALIDITY

PROBLEMS WITH VARIATIONS

INVALID VARIATION ORDERS AND EFFECTS

LIMITATIONS OF VARIATIONS

RELEVANT CASES
*

SHARPE V SAN PAULO RAILWAY [1873] L.R. 8 CH. APP. 597

RE CHITTICK & TAYLOR [1954] 12 WWR 653

MITSUI CONSTRUCTION CO. LTD. V A.G. OF HONG KONG [1986] 33 BLR 1

CARR V JA BERRIMAN PTY LTD. [1953] 27 A.L.J.R. 273

COMMISSIONER FOR MAIN ROADS V REED & STUART PTY LTD. & ANOR [1974] A.L.J.R.
461

SIR LINDSAY PARKINSON & CO. LTD. V COMMISSIONERS OF

AND PUBLIC BUILDINGS [1950] 1 ALL ER 2008

HIS MAJESTYS WORKS

ANTARA ELEKTRIK SDN. BHD. V BELL & ORDER BHD [2002] 3 MLJ 321, HC.
HSKS

VARIATIONS

FACTORS DETERMINING
A VALID V.O.

TYPES

ADDITION

OMISSION

HYBRID

LEGAL NATURE OF
PROPOSED CHANGE

FORMALITIES

ISSUE BY
DESIGNATED
OFFICER

PROCEDURAL
REQUIREMENTS

EXPRESS CONTRACT
CONDITIONS
APPLICABLE

APPLICABLE
COMMON
LAW RULES

FIG. 6-1: VARIATIONS: OVERVIEW

HSKS

CHANGE TO BE IN RELATION
TO SCOPE OF THE WORK

A CHANGE BEING EFFECTED

SCOPE OF WORK BEING

CHANGED MUST BE AS
EXPRESSLY OR IMPLIEDLY
CONTAINED IN CONTRACT
DOCUMENTS

CHANGES/VARIATIONS: BASIC ELEMENTS

FIG. 6-2 : CHANGES/VARIATIONS BASIC ELEMENTS

HSKS

INCREASE/
DECREASE
QUANTITY OF
WORK

OMIT
WORK

EXECUTE
ADDITIONAL WORK
OF ANY KIND

CHANGE
CHARACTER OF
WORK

VARIATIONS:
TYPICAL
EXAMPLES

CHANGE
SEQUENCE OF
WORK

CHANGE QUALITY
OF WORK

CHANGE TIMING
OF WORK
ACTIVITIES

CHANGE
KIND OF WORK

CHANGE
DIMENSIONS OF
WORK

CHANGE LEVELS
OF WORK
CHANGE POSITION
OF WORK

FIG. 6-3: VARIATIONS - TYPICAL EXAMPLES

HSKS

OMISSIONS

ADDITIONS

HYBRID

ACCORDING TO NATURE
OF THE CHANGE

NSC

CONTRACTOR

TIME IMPLICATIONS
CONTRACT
ADMINISTRATOR

EMPLOYER

ACCORDING TO IDENTIT Y
OF INITIATOR OF CHANGE

COMBINATION
OF BOTH

FINANCIAL
CONSIDERATIONS

ACCORDING TO
CONSEQUENCES/EFFECT
OF THE CHANGE

TYPES OF VARIATIONS:
MAIN METHODS OF CLASSIFICATION

FIG. 6-4: TYPES OF VARIATIONS MAIN METHODS OF CLASSIFICATION

HSKS

CHANGES IN
EMPLOYERS
REQUIREMENTS

INTEFERENCE
BY EMPLOYER

MALADMINISTRATION
OF CONTRACT

DEFECTIVE
DRAWINGS

DEFECTIVE
SPECIFICATIONS

DEFECTIVE
CONTRACT
DOCUMENTS

ITEMS
CONSTITUTING
VARIATIONS

WRONG/
NEGLIGENT ADVICE
FROM CONTRACT
ADMINISTRATOR

DIFFERENCES
BETWEEN BILLED
AND ACTUAL
QUANTITIES
CHANGES DUE
TO STATUTORY/
LEGISLATIVE
CHANGES

FIG. 6-5: ITEMS CONSTITUTING VARIATIONS

HSKS

WHAT CONSTITUTES VARIATION WORKS

LEGAL POSITION

1. Test: What is the intention of

the parties at time of
contracting
2. Extras: Work not
contemplated by parties when
contracting and not provided
in Contract.
3. Works which are
indispensably necessary to
give effect to parties
intentions: Not extra

CONTRACTS
BASED ON
BILL OF QUANTITIES
1. Rule: All items intended to be
executed by Contractor must
be provided for in the
Contract.
2. All items not provided for in
Contract are extras.
3. Literal interpretation/ strict
construction.

CONTRACTS BASED ON
DRAWINGS
AND SPECIFICATIONS
1. Rule: Contract requires:
a) Not only work set out in
drawings and/or
specifications
b) But also all work incidental or
necessarily required whether
set out in the drawings and/or
described in specifications or
not

VARIATION TEST
PER RE:

CHITTICK & TAYLOR

1. Item specifically provided for
in Contract: Not Extra
2. If Contractor varies, contract
without an instruction:
Cannot Claim for Extra
3. If Contractor instructed by
C.A. to change contract: has
basis for claim for Extra

2. Effect: Difficult to claim extra

work [Re: Sharpe v Sao Paulo
Railway]

FIG. 6-6 : WHAT CONSTITUTES VARIATION WORKS

HSKS

WORKS CHANGED MUST BE

DEFINED IN CONTRACT
DOCUMENTS

THERE MUST BE AN
INSTRUCTION

VALID VARIATION ORDER: PRINCIPAL ELEMENTS

INSTRUCTION MUST EFFECT A

CHANGE TO THE WORKS

INSTRUCTION TO BE ISSUED BY
CONTRACT ADMINISTRATOR OR
BY AUTHORISED PERSON

FIG. 6-7 : VALID VARIATION ORDER PRINCIPAL ELEMENTS

HSKS

COMPLIANCE WITH THE

RELEVANT EXPRESS CONTRACT
PROCEDURES

EXISTENCE OF EXPRESS
CONTRACTUAL PROVISION
PERMITING VARIATION OF WORK
UNDER THE CONTRACT

VALIDITY OF VARIATION ORDERS:

PRINCIPAL FACTORS DETERMINING

ISSUE OF VARIATION ORDER BY

DESIGNATED PERSON

COMPLIANCE WITH THE

APPLICABLE COMMON LAW
RULES IN RELATION TO
VARIATIONS WORKS

FIG. 6-8 : VALIDITY OF VARIATION ORDERS PRINCIPAL FACTORS DETERMINING

HSKS

LIMITATIONS TO VARIATIONS

LEGAL POSITION

EXERCISE OF POWER
BY CONTRACT
ADMINISTRATOR
1.

Power to vary work

confined to genuine
omissions

2.

If effect of omission is
to give omitted work to
3rd Parties: Invalid
Omission

CARDINAL CHANGES

SCOPE OF WORK
1.

2.

2.

TESTS

Power to vary confined

to scope of works
contemplated by parties
at time of contracting.

1. Was it in the reasonable

contemplation of the
parties when
contracting?

If effect of variation is to
substantially change
scope of work (Cardinal
Change): Invalid
Variation

2. Although not included,

can it be considered an
indispensable part of
the Contract?

DEFINITION
1.

NATURE

Changes which render the

works substantially different
from that contracted for by
the parties

3. Functionally is it similar
to the intended work or
some other work
required by the
Contract?

EFFECTS
1. General Rule:
Invalid
2. Contractor cannot
be compelled to
carry it out
3. If compelled,
breach of contract
4. If Contractor
carries out work,
Contract rates not
applicable

FORM

TYPES
1.

Physical work changes

1.

A Single change

2.

Financial Changes

2.

A large number of
otherwise small permissible
changes.

Constitutes a fundamental
change in the scope of the
Contract

FIG. 6-9 : LIMITATIONS TO VARIATIONS

HSKS

PAYMENT FOR VARIED WORK:

GENERAL PRINCIPLES/METHODS

VARIED WORK OUTSIDE CONTRACT

VARIED WORK WITHIN CONTRACT

FORMULA VALID
AND APPLICABLE

A CARDINAL
CARDINAL CHANGE
i.e. FUNDAMENTALLY
ALTERS CONTRACT

ABSENCE OF EXPRESS
FORMULA IN CONTRACT

EXISTENCE OF EXPRESS
FORMULA IN CONTRACT

Mutually agree upon a formula/rate;

or

Any contractual formula rendered

invalid /inapplicable

Be paid a reasonable sum i.e. on a

quantum meruit basis, etc.

Whole works to be paid on

measure and value basis and on
altered or adjusted rates

NOT A CARDINAL
CARDINAL CHANGE i.e.
DOES NOT FUNDAMENTALLY
ALTER CONTRACT

Portion of works within scope of

contract to be paid according to
the contract formula (if
applicable)

Remaining works falling outside

scope of contract to be paid at a
reasonable rate

FORMULA INVALID AND/OR

INAPPLICABLE

Use the formula for valuation

and payment

Mutually agree upon a formula/rate;

or

No right of election

Be paid a reasonable sum i.e. on

quantum meruit basis, etc.

FIG. 6-10 : PAYMENT FOR VARIED WORK GENERAL PRINCIPLES/METHODS

HSKS

COST OF DELAY AND

DISRUPTION
COST OF VARIED WORK
e.g.

Additions

Omissions

Direct loss and/or

expense
Extended
Preliminaries

FINANCIAL EFFECTS

DELAY AND DISRUPTION

TO CONTRACT

Extension of time to
Contract Period, etc.

TIME EFFECTS

PRINCIPAL CONTRACTUAL CONSEQUENCES

OF VARIATION OF WORK UNDER CONTRACT

FIG. 6-11 : PRINCIPAL CONTRACTUAL CONSEQUENCES OF VARIATION OF WORK

UNDER THE CONTRACT
HSKS

VALUATION OF VARIATIONS:
COMMON COMPUTATIONAL METHODS

WHERE THERE ARE

RATES/ PRICES IN THE
CONTRACT

WHERE WORK CANNOT

BE MEASURED

Use of B.Q. rates

Use of Daywork Rates in Contract

Use of Schedule of Unit Rates

On a cost-reimbursible basis

Use of Adjusted Contract Rates

Use of Contract Prices in:

a) Contract Bills; or
b) Summary of Prices; or
c) Contract Sum Analysis

MISCELLANEOUS
METHODS

WHERE NO RATES/
PRICES IN CONTRACT

Use of Fair Valuation principles

Use of Quotation Method

Use of Negotiated/Agreed
Rates

Use of Negotiated/Agreed
Rates

Use of Quotation Method

Payment on quantum meruit

basis or a reasonable sum

Payment of a reasonable sum

FIG. 6-12 : VALUATION OF VARIATIONS COMMON COMPUTATIONAL METHODS

HSKS

START
Establish if the conditions
precedent have been satisfied

Has measurement
stage been satisfactorily
completed?

No

Yes
Has the valuation
stage been satisfactorily
completed?

Prima facie, premature

to prepare and issue
certificate concerned

No

Yes
Contract administrator to prepare
certificate of variation of works

No

Is there a
contract provision prescribing
the same?
Yes

Yes

Are its
requirements clear and
complete?
No
Have the
requirements been agreed to by
the parties?

No

Yes

FIG. 6-13: FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF

VALUATION (PART I)
HSKS

Have the
requirements been complied
with?

No

Yes
Have the
particulars been completely and
properly filled in?

No

Yes
Is the
V.O./instruction
attached?

No

Yes
Are the
measurement and valuation
details endorsed?

No

Omissions/deficiencies
may render certificate
invalid

No

Contract administrator
to address omissions
/deficiencies forthwith

Yes
Has the certificate
been checked for sufficiency and
accuracy?
Yes
No

Has it been
signed by the authorized
person?
Yes

FIG. 6-14:

FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF

VALUATION (PART II)
HSKS

No

Has it been
prepared within a
reasonable/ prescribed period of
completion of measurement
and valuation?
Yes
Contract administrator to
issue certificate to the contractor

Contractor to check and

undertake necessary action

No

Is the
certificate sufficient and
accurate?
Yes

No

Has it been
signed by the authorized
person?
Yes

Prima facie,
certificate is invalid

No

Does it
comply with any prescribed
requirements?
Yes

FIG. 6-15: FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF

VALUATION (PART III)
HSKS

Does the
contractor agree with the
content?

Yes

Contractor
to formally signify
acceptance

No
Does he notify
the contract administrator officially
of his dissent?

No

Yes
Are the
full particulars/details
given?

No

Yes
Contractor obliged
to give notice
within reasonable
period only

No

Is there a
period stipulated for the giving of
the notice?
Yes
Has the
contractor met the time
requirements?

No

Contractor deemed
to have accepted
the measurement
and valuation

Yes
Contract administrator
to review contractors notice
and make decision

FIG. 6-16:

FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF

VALUATION (PART IV)
HSKS

Yes

Is the
notice sufficient and
accurate?
No

No

Has the contractor

been asked to furnish further
details?
Yes
Has he complied with the request?

No

Yes
Is the contractors stand
reasonable?

Yes

No
Is there any
reason not to reject the contractors
application?

Yes

Contract
administrator to
undertake necessary
amendments/
revisions

No

Reject the contractors application/notice

Communicate decision to the contractor

Does the
contractor wish to proceed with
dispute resolution?

Yes

Contractor to give
necessary notice. Contract
administrator to use valuation
set out in the interim period

No

STOP

FIG. 6-17: FLOWCHART ON THE GENERAL PROCEDURE FOR CERTIFICATION OF VALUATION (PART V)
HSKS

VARIATIONS: PRINCIPAL REQUIREMENTS FOR PACKAGE DEAL

TYPE OF CONTRACTS

EXPRESS
STIPULATIONS

EMPLOYER
EMPLOYERS
RIGHT TO VARY

CONTRACTOR
CONTRACTORS
RIGHT TO VARY

In most Standard
Forms

Stipulate Extent,
Procedure, etc.

EXPRESS
EXPRESS
PROVISIONS
PROVISIONS
Enshrined in
all Standard
Forms

NEED
NEED FOR
FOR
CONSULTATION

CONTRACTOR
CONTRACTORS
S
RESPONSIBILITY

Prior to ordering
V.O.
Get Contractors
view on effect of
V.O. on
programme

Be pro-active

Most Standard Forms have

express clauses
Issued by E.R./ P.D.

Permitted expressly
in most Standard
Forms
Due to:
1. Value
engineering
2. Buidability
3. Safety
4. Legal/Physical
impossibility

VARIATIONS
IN WRITING

EFFECT OF
PROCEDURE
Formal V.O.
Instruction from
E.R./P.D. condition
precedent to recovery
of payment

Permissible if only
expressly allowed
by contract
Some Standard
Forms do allow e.g.
ICE, FIDIC, etc.
Others are silent
e.g. JKR, etc.

Failure of Contractor
to observe procedure/
formalities may
compromise recovery

Not to unreasonably
withhold consent, etc.

NECESSITY
NECESSITY FOR
FOR
WRITTEN
WRITTEN
INSTRUCTIONS
INSTRUCTIONS

CONTRACT
CONTRACT
PROVISIONS
PROVISIONS

VARIATIONS
IN DLP/DCP

Requirement for Writing

Includes:
1. Letters
2. Minutes of Meetings
3. Drawings

RECOVERY
RECOVERY WITHOUT
WITHOUT
INSTRUCTIONS
INSTRUCTIONS

ORAL INSTRUCTIONS

Only if contract expressly

allows
Need for written confirmation
Duty of confirmation either on:
1. Contractor or
2. Employer

Generally no
Situations where permitted:
1. If contract expressly allows
2. Under Waiver/Estoppel
3. Under concept of
Constructive Change

FIG. 6-18: VARIATIONS PRINCIPAL REQUIREMENTS FOR PACKAGE DEAL TYPE OF CONTRACT
HSKS

DELAY AND
EXTENSION OF TIME

HSKS

7.0

DELAY AND EXTENSION OF TIME

OPTIONS AVAILABLE TO EMPLOYER

EXTENSION OF TIME ISSUES

ACCELERATION OF WORKS

DRAFTING OF DELAY AND DISRUPTION CLAIMS

MISCELLANEOUS ISSUES

RELEVANT CASES
*

PEAK CONSTRUCTION (LIVERPOOL) LTD. V MCKINNEY FOUNDATION LTD. [1970] 1 BLR 114

MILLER V L.C.C. [1934] 50 T.L.R. 479, 482

MERTON LONDON BOROUGH V STANLEY HUGH LEACH [1985] 32 BLR 55

WESTMINSTER CITY COUNCIL V JARVIS & SONS LTD. [1970] 7 BLR 64

SYARIKAT TAN KIM BENG DAN RAKAN-RAKAN V PULAI JAYA SDN. BHD. [1992] 1 MLJ 42

HSKS

CONSEQUENCES OF DELAY: AN OVERVIEW

BY EMPLOYER
(ACTS OF PREVENTION)

BY CONTRACTOR

INSTRUCT CONTRACTOR
TO ACCELERATE WORKS

GRANT OF
EXTENSION OF TIME
Only if contract expressly permits

Only if contract expressly permits

Contractor may be entitled to:

To meet original contract deadline

Contractor to be compensated for

reasonable expenses incurred

1.

Extended Preliminaries

2.

Direct Loss and/or Expense

DUE TO
NEUTRAL EVENTS

Contractor entitled to E.O.T. but

not to extended preliminaries or
other claims
If asked to accelerate works,
entitled to reasonable expenses
incurred therefrom

DUE TO CONTRACTOR
CONTRACTORS
OWN ACTS AND/OR OR
OMISSIONS
Contractor culpable

DUE TO CONTRACTOR
CONTRACTORS
SUBSUB-CONTRACTORS/
SUPPLIERS

Contractor vicariously liable to

Employer

May seek indemnity from the

culpable party e.g. Subcontractor, Supplier, etc.

May be liable for:

1. Liquidated Damages, or
2. Unliquidated Damages
caused to Employer

FIG. 7-1 : CONSEQUENCES OF DELAY AN OVERVIEW

HSKS

FORCE MAJEURE
EXCEPTIONALLY INCLEMENT WEATHER
CIVIL COMMOTION, STRIKES, LOCK-OUT, ETC.
LOSS OR DAMAGE TO THE WORKS OCCASIONED BY SPECIFIED PERILS
CONTRACTORS INABILITY TO SECURE LABOUR, GOODS, MATERIALS, ETC.
CARRYING OUT OF WORK BY STATUTORY UNDERTAKERS
EXERCISE BY GOVERNMENT OF ANY POWER WHICH DIRECTLY AFFECTS THE WORKS

EXTENSION OF TIME: COMMON

RELEVANT EVENTS
FAILURE OF EMPLOYER TO GIVE POSSESSION/ACCESS IN TIME
DELAY IN THE SUPPLY OF INFORMATION/INSTRUCTIONS
VARIATIONS AND EXTRA WORKS
COMPLIANCE WITH CONTRACT ADMINISTRATORS INSTRUCTIONS
DELAY ON PART OF NOMINATED SUB-CONTRACTORS/SUPPLIERS
EXECUTION OF WORK NOT FORMING PART OF THE CONTRACT
LATE SUPPLY OF MATERIALS BY THE EMPLOYER
OTHER SPECIAL CIRCUMSTANCES

FIG. 7-2 : EXTENSION OF TIME COMMON RELEVANT EVENTS

HSKS

DEFERMENT/POSTPONEMENT
IN GIVING SITE POSSESSION
OTHER ACTS OF PREVENTION
EXPRESSLY PERMITTED BY
THE CONDITIONS OF
CONTRACT

LATE SUPPLY OF
INFORMATION, DRAWINGS,
INSTRUCTIONS, ETC.

ACTS OF PREVENTION:
TYPICAL EXAMPLES

LATE SUPPLY OF MATERIALS

BY THE EMPLOYER

EXECUTION OF WORK NOT

FORMING PART OF THE
CONTRACT

COMPLIANCE WITH
CONTRACT
ADMINISTRATORS
INSTRUCTIONS, DIRECTIONS,
ETC.

FIG. 7-3 : ACTS OF PREVENTION TYPICAL EXAMPLES

HSKS

FORCE MAJEURE
DELAYS BY NOMINATED SUBCONTRACTORS/SUPPLIERS
FOR THE SAID NEUTRAL
EVENTS

EXCEPTIONALLY INCLEMENT/
ADVERSE WEATHER

NEUTRAL EVENTS:
TYPICAL EXAMPLES

CIVIL COMMOTION, STRIKES,

LOCK OUTS INDUSTRIAL
ACTION, EMBARGOES, ETC.

CONTRACTORS IN ABILITY
TO SECURE LABOUR, GOOD,
MATERIALS AND/OR OTHER
RESOURCES
LOSS/DAMAGE TO THE WORKS
OCCASIONED BY SPECIFIED
PERILS
OR CONTINGENCIES

FIG. 7-4 : NEUTRAL EVENTS TYPICAL EXAMPLES

HSKS

CAUSE OF THE DELAY

ALL OTHER SUPPORTING

RECORDS, DETAILS, ETC.

APPROPRIATE
CONTRACT
REFERENCES TO SUCH
EVENT OF DELAY

SCHEDULING
DOCUMENTATION

DETAILS OF EFFECT OF
DELAY ON WORK
PROGRAMME

APPLICATION FOR
EXTENSION OF TIME:
TYPICAL CONTENTS

ESTIMATE OF THE
EXTENSION OF TIME
REQUIRED

ESTIMATED LENGTH
OF THE DELAY
STEPS TAKEN/PROPOSED
TO MINIMIZE/AVOID DELAY

FIG. 7-5 : APPLICATION FOR EXTENSION OF TIME TYPICAL CONTENTS

HSKS

OFFICIAL WORK RECORDS

OFFICIAL PROGRESS REPORTS
SITE DIARIES
LETTERS, INSTRUCTIONS, ETC.
MEMORANDA
FACSIMILE TRANSMISSIONS, ETC.
DRAWINGS, ETC.

EXTENSION OF TIME
APPLICATION: TYPICAL
SOURCES OF INFORMATION

OFFICIAL MINUTES OF MEETING

WORK PROGRAMMES, ETC.
RECORDS/REPORTS FROM AUTHORITIES/INDEPENDENT BODIES, ETC.
SHIPPING/AIRFREIGHT RECORDS, ETC.
PROCUREMENT RECORDS, INVOICES, ETC.
DELIVERY ORDERS
OTHER MISCELLANEOUS RECORDS, DOCUMENTS, ETC.

FIG. 7-6 : EXTENSION OF TIME APPLICATION TYPICAL SOURCES OF INFORMATION

HSKS

START

Is progress
delayed or is likely to be
delayed?

No

Yes
Does the
delaying event constitute
one of the relevant events /grounds
under the provisions of the
contract?

No

Yes
Initiate notification
of the delay procedure

Is the
notice given in writing?

No

Yes
Is the notice
given within the period expressly
stipulated?

No

Yes

No

Yes
Proceed with the
application of the extension
of time process

Is the
notice a condition
precedent?

Yes

Has an
extension been
granted by the contract
administrator?

No

FIG. 7-7: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART I)
HSKS

Is the
application given in
writing?

No

Yes
Is the
application made within
the period expressly
stipulated?

No

Yes
Contract Administrator to
check application made

Is the application
complete/sufficient and
accurate?

Is the
application a condition
precedent?

Yes

No
Yes

No

Yes

Has an
extension been
granted by the contract
administrator?

No

Is the
requirement as to
sufficiency, etc. a condition
precedent?

Yes

No

Establish whether contractor

has done all that is reasonably
required of him

No

Has the contractor

used his best endeavours to
minimize the delay?

No

Has the
contract administrator
requested for information,
details, etc.?

Yes

Prima facie no
extension of time
can be granted

Yes
Contract Administrator to
proceed with further assessment
for the possible grant of
extension of time

Return to contractor
for resubmission
or reject application
as appropriate

STOP

FIG. 7-8: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART II)
HSKS

PROCEDURES FOR CLAIMING EXTENSION OF TIME: AN OVERVIEW (PART I)

NATURE OF
APPLICATION

EXPRESS CONTRACT
PROVISIONS

Included in most standard

forms of contract

REQUIREMENT
REQUIREMENT

TIMING OF
NOTIFICATION

Expressly stipulated
in conditions of
contract of contract;
or

Implied by law

Various formulae used e.g.:

2 broad steps:

VARIATIONS
VARIATIONS

Usually stipulated in the

conditions of contract.

2. Stipulation of express time

periods

Important to comply with the

express requirements

Legal effect of provisions on time:

As a minimum must inform

the contract administrator of
the occurrence of the delay
which is likely to affect the
progress or has delayed
progress

Otherwise must include:

1. Whether notification/application
is a condition precedent to
entitlement

Either a:

1. Notification of
the delay; and

1. Single exercise,
or

2. Making the
application

2. Two separate
processes

Depends upon
express/ implied
requirements

CONTENTS OF
THE NOTICE

1. Use of specific phrases

CATEGORIZATION
CATEGORIZATION

FORM OF
THE NOTICE

2. If affirmative, the effect of the

breach of the condition
precedent

1. Occurrence of the delay

3. Application to acts of
prevention/neutral events

2. Cause of the delay

Review of applicable case-law

3. Relevant events causing

the delay; and
4. Contractors intention to
make a claim

EXPRESS
EXPRESS REQUIREMENTS
REQUIREMENTS

TYPES
TYPES OF
OF WRITTEN
WRITTEN NOTICES
NOTICES
/NOTICES
/NOTICES IN
IN WRITING
WRITING

Included in most standard forms

Correspondence

Usually stipulated as:

Facsimile transmissions

Entries in official records

1. Written notice or
2. Notice in writing

Entries in site diaries

Official Progress reports

EVIDENTIAL VALUE
EVIDENTIAL

GENERAL RULE

Where the form is expressly

stipulated, it must be complied with

A written notice/notice in writing is

of immense evidential value

Where not expressly stipulated, may

be implied

Therefore, even if not expressly

required, must try to give written
notice

FIG. 7-9 : PROCEDURES FOR CLAIMING EXTENSION OF TIME AN OVERVIEW (PART I)

HSKS

PROCEDURES FOR CLAIMING EXTENSION OF TIME:

AN OVERVIEW (PART II)

FORM OF
THE APPLICATION

TIMING OF
THE APPLICATION

EXPRESS
REQUIREMENT

Included in most standard

forms

Formulae include:
1. Specific time
periods
2. Within a reasonable
period

Similar to Form of the Notice

Preferably to be in writing

Compliance to any express

requirements

GENERAL RULE

Where specific time periods have

been specified these should be
adhered to
If not practicable, requirement for
express consent for deferment
Otherwise within a reasonable
period of notification/delay

CONTENTS OF
THE APPLICATION
Dictated by express stipulations in
contract
Otherwise by necessary implication.
Typical list includes:
1.

Cause of delay

2.

Appropriate contract
reference

3.

Details of effect of delay on

programme/progress

4.

Estimated length of delay

5.

Steps taken to
mitigate/prevent delay

6.

Scheduling documentation

7.

Miscellaneous details,
records, documents, etc.

FIG. 7-10 : PROCEDURES FOR CLAIMING EXTENSION OF TIME AN OVERVIEW (PART II)
HSKS

PROCEDURES FOR CLAIMING EXTENSION OF TIME:

AN OVERVIEW (PART III)

NATURE OF INFORMATION REQUIRED

ADEQUACY OF INFORMATION SUPPLIED

DETERMINING
DETERMINING FACTORS
FACTORS

Contractor must furnish

enough information to
enable contract
administrator to undertake
assessment satisfactorily
Information to be:
1. Sufficient/ complete
2. Accurate
3. Relevant

Breach of condition may be

fatal to claim depending on
its nature and seriousness

Type of relevant event

Nature of relevant event

Particular requirements of applicable

express provisions

Evidential value of information

CONSEQUENCES
CONSEQUENCES WHERE
WHERE
PROVISION
PROVISION IS
IS NOT
NOT A
A
CONDITION
CONDITION PRECEDENT
PRECEDENT

CONSEQUENCES
CONSEQUENCES WHERE
WHERE
PROVISION IS
IS A
A CONDITION
CONDITION
PRECEDENT
PRECEDENT

BASIS
BASIS OF
OF
REQUIREMENT
REQUIREMENT

Contract administrator can:

1. Request for further
information
2. Set a new deadline for
contractor to respond

FAILURE
FAILURE TO
TO RESPOND
RESPOND
AFTER
AFTER EXTENSION
EXTENSION

Should contractor fail to

respond by:
1. Deadline set, or
2. Within reasonable period
of request

PRINCIPAL
PRINCIPAL SOURCES
SOURCES

Official work records

Official progress reports
Site diaries
Correspondence
Instructions
Drawings, etc.
Official minutes of meetings,
discussions, etc.
Work programmes
3rd party reports/records
Procurement records, etc.
Delivery orders
Shipping/airfreight records
Miscellaneous
records/documents

Contract administrator may not

proceed further with
assessment

FIG. 7-11 : PROCEDURES FOR CLAIMING EXTENSION OF TIME AN OVERVIEW (PART III)
HSKS

ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART I)

EXPRESS
CONTRACT
PROVISIONS

GENERAL

Included in most standard

forms of conditions of contract

TO WHOM
OWED

THE CONTRACT
ADMINISTRATORS DUTY
ADMINISTRATOR
OF CARE

DERELICTION
DERELICTION
OF
OF DUTY:
DUTY:
CONSEQUENCES
CONSEQUENCES

DUTY
DUTY TO
TO
EMPLOYER

To Employer
To Contractor
To Nominated Subcontractors/Suppliers

PRELIMINARY
PROCEDURES

Positive duty vis--vis

acts of prevention
Satisfaction of:
1. Reasonableness
Test and
2. Fairness Test
Help employer:
1. Preserve right to LAD
2. Stave off claims from
contractor

May compromise
employers position

Contract administrator
liable to actions in:

Upon occurrence of delaying

event, independently
undertake own assessment
especially for acts of
prevention
Must take an active role
Issue an interim extension to
contractor if one due on facts
Contractor can later apply for
reassessment based on
additional information

1. Breach of contract
2. Tort of negligence

PRELIMINARY
PRELIMINARY CHECKS
CHECKS
TO ESTABLISH
MATTERS
SUCH
MATTERS SUCH AS
AS

WHO UNDERTAKES
WHO

Delegated by the employer

to authorized person
Usually it is the contract
administrator

ADDITIONAL
ADDITIONAL DUTY
DUTY

NATURE
NATURE OF
OF ROLE
ROLE

As an independent adjudicator
Decision making function
Must act fairly, reasonably and
impartially

Per John Baker Construction v

London Protman Hotel Ltd.
Must adhere to governing
express contractual
procedures in addition

POST APPLICATION
PROCEDURES

Verification of occurrence
of delay
Sufficiency, accuracy,
relevancy, etc.
Compliance with preconditions, procedural
requirements, etc.
Assessment of evidential
value
Assessment whether delay
in principle entitles
contractor to extension

INSUFFICIENT
INSUFFICIENT
INFORMATION: OPTIONS
AVAILABLE
AVAILABLE TO
TO CONTRACT
CONTRACT
ADMINISTRATOR
ADMINISTRATOR

Request contractor to
submit more details, etc. or
If delaying event of a
continuing nature:
1. Proceed with interim
assessment
2. Grant an interim
extension

FIG. 7-12: ASSESSMENT OF THE APPLICATION AN OVERVIEW (PART I)

HSKS

ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART II)

THE ASSESSMENT
PROCESS

BASIS OF ASSESSMENT

Basic principles

Overriding requirements:
Satisfaction of:
1. Reasonableness Test
2. Fairness Test
3. Procedural requirements

MISCELLANEOUS
ISSUES

Factors to be taken into

consideration:

Multiple extensions

Review of prior decisions/ certificates

1. Previous extensions granted

2. Effect of omissions
3. Effect of concurrent delays

Concurrent delay: effects

Extensions during culpable delay

Extension of time and omissions

Acceleration in lieu of extension

Extension of time and claims

Sources and types of information

used

Concluding decision:

Important exceptions
1. Contractor not to be culpable
2. Contractor to mitigate/prevent
delay

TIMING FOR
GRANTING EXTENSION

1. Rejection of claim; or
2. Grant of extension of time

Definition of best endeavours

PRINCIPAL ISSUES
PRINCIPAL

Factors dictating the timing

of the grant

Express stipulations as to
time period for granting

Prospective/Retrospective
granting of extension

TIME
TIME PERIOD
PERIOD

FACTORS
FACTORS DICTATING
DICTATING

The need to preserve the LAD

provisions for the benefit of
the employer
To allow contractor
opportunity to reprogramme
his works

PROSPECTIVE/
PROSPECTIVE/
RETROSPECTIVE GRANTING
GRANTING
OF
OF EXTENSION
EXTENSION

Various formulae:

Where expressly permitted

1. Use of specific time

period stipulations

Where implied

Courts approach:

2. Within reasonable time

Effect of failure to comply

Situation of continuing delay

1. Previous strict interpretation

2. Current liberal approach

Circumstances where
retrospective granting permitted

FIG. 7-13: ASSESSMENT OF THE APPLICATION AN OVERVIEW (PART II)

HSKS

CERTIFICATE NOT GIVEN

ON TIME

OTHER MATERIAL
BREACHES

CERTIFICATE NOT IN
CORRECT FORM

CONTRACTUAL
PROCEDURES NOT
FOLLOWED

CERTIFICATE GIVEN
BY UNAUTHORIZED
PERSON

CHALLENGING CERTIFICATE
OF EXTENSION OF TIME:
COMMON GROUNDS

CERTIFICATE NOT
GIVEN FAIRLY

NO NAMED
CERTIFIER

DECISIONS IMPROPERLY
DELEGATED

FIG. 7-14: CHALLENGING CERTIFICATE OF EXTENSION OF TIME COMMON GROUNDS

(PER EGGLESTON)
HSKS

DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS:

AN OVERVIEW

EXPRESS
CONTRACTUAL
PROVISIONS

GENERAL
REQUIREMENTS

The principles and general requirements

similar to that of Main Contract

Principal difference only in some

procedural requirements

Applicable only to:

1. Nominated Sub-Contractors and

2. Nominated Suppliers

Does not encompass:

1. Domestic Sub-Contractors and

2. Domestic Suppliers

PAM
PAM 1998
1998
SUB
SUB---CONTRACT
CONTRACT
FORM
FORM

JKR 203N FORM

JKR
(REV. 10/83)

Clause 26: Delay and

Extension of Time

(a): Notice of delay

(b): Extension of time
(c): Dispute on failure of S.O. to
grant extension of time

Clause 8.0: Extension of Time

8.1:Notifying of events causing

delay
8.2:Relevant events causing
delay for which extension of
time may be given
8.3:A Fair and Reasonable
extension of time

GENERAL
PROCEDURAL
REQUIREMENTS

GENERAL
CONTRACTUAL
POSITION
Extension of time under contract can
only be validly granted if:

Main steps involved are:

1. Occurrence of delaying event

1. Delaying event is one of the

relevant events/grounds under
the conditions of sub-contract

2. Notification of the delay

2. The express formalities or

procedures are strictly complied
with

4. Contractor forwards application

to contract administrator

3. Review by the contractor

5. Contract administrator assesses

application

The general contractual position

similar to Main Contract

PUTRAJAYA
PUTRAJAYA
CONDITIONS OF
OF
NOMINATED
SUB-NOMINATED SUBCONTRACT
CONTRACT

IEM.CES.1/90 FORM
IEM.CES.1/90

Clause 26: Delay and

Extension of Time

Clause 24: Delay and

Extension of Time

6. Contract administrator
communicates decision to
contractor
7. Contractor informs subcontractor
8. Receipt and acknowledgement

The rules in the preparation and

issuance of the certificate of
extension of time similar to that of
Main Contract

(a): Notice of delays

(b): Extension of time
(c): Dispute on failure of
Engineer to grant extension
of time

8.4:Failure of architect to give

written consent for extension
of time

FIG. 7-15: DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS

AN OVERVIEW
HSKS

NON-COMPLETION
AND DAMAGES

HSKS

8.0

NON COMPLETION AND DAMAGES

COMMON LAW POSITION

CONTRACTUAL FORMULAE

RIGHTS TO IMPOSE

CHALLENGES

MALAYSIAN POSITION

RELEVANT CASES
*

DUNLOP PNEUMATIC TYRE CO. LTD. V NEW GARAGE & MOTOR COMPANY LTD. [1915]
AC 79

TEMLOC LTD. V ERRIL PROPERTIES LTD.

GILBERT-ASH (NORTHERN) LTD. V MODERN ENGINEERING (BRISTOL) LTD. [1974] AC

689

SIM CHIO HUAT V WENG TED FUI [1983] 1 MLJ 151

LION ENGINEERING SDN. BHD. V PAUCHUAN DEVELOPMENT SDN. BHD. [1997] 4 AMR
3315

HSKS

MANIAM V STATE OF PERAK [1957] MLJ 75

WEARNE BROTHERS (M) LTD. V JACKSON [1966] 2 MLJ 155

SELVA KUMAR A/L MURUGIAH V THIAGARAJAH A/L RETNASAMY [1995] 1 MLJ 817

REALVEST PROPERTIES SDN. BHD. V THE COOPERATIVE CENTRAL BANK LTD. (Under
Receivership) [1996] 2 AMR 2292, FC.

SAKINAS SDN. BHD. V SIEW YIK HAU & ANOR [2002] 5 MLJ 497, HC.

ARAB MALAYSIAN CORP. BUILDERS SDN. BHD. & ANOR V ASM DEVELOPMENT SDN. BHD.
[1998] 6 MLJ 136, HC.

HSKS

RECOVERY/PAYMENT
TRIGGERED BY OCCURRENCE
OF SPECIFIED DEFAULT/BREACH

SUM OF MONEY AGRRED

BY THE PARTIES

LIQUIDATED DAMAGES:
PRINCIPAL CHARACTERISTICS

SUM STIPULATED IN THE

CONTRACT

GENUINE PRE-ESTIMATE OF THE

LOSS

FIG. 8-1 : LIQUIDATED DAMAGES PRINCIPAL CHARACTERISTICS

HSKS

LIQUIDATED DAMAGES: AN OVERVIEW

BASIC
CHARACTERISTICS

DEFINITION

Prof. Vincent PowellSmiths definition

Per Eggleston

Per Robinson and Lavers

1.

2.

3.
4.

GENERAL

Common view

Common view

Sum of money
agreed/fixed in
advance by parties

Reiteration in Philips
Hong Kong Ltd. v AG
of Hong Kong.

Disadvantages to:

Sum is a genuine
pre-estimate of
likely loss

Distinct difference

Position in Malaysia post

Selvakumar v Thiagarajah

1. Employer
2. Contractor

Advantages to:

3. Sub-contractor

1. Employer
2. Contractor

Sum is stipulated in
the contract

3. Sub-contractor

Recovery of sum is
triggered by
contractors breach
e.g. non-completion

DISTINGUISHING
BETWEEN THE
TWO TERMS

PENALTY: DEFINITION

Use of terms
interchangeably

DISADVANTAGES

ADVANTAGES

Four basic characteristics:

LIQUIDATED
DAMAGES AND
PENALTIES
DISTINGUISHED

Per Prof. Vincent PowellSmith

Per Lord Dunedin in
Dunlop Pneumatic Tyre
Co. Ltd. v New Garage &
Motor Co. Ltd.

Mere labeling is inclusive

Depends on construction
afforded to term by the
courts

EXAMPLES OF
PENALTY CLAUSES

Elicited from the

relevant case-law

Lord Dunedins proposed

tests.

LEGAL EFFECTS
OF PENALTIES

Penalty: Invalid and

unenforceable

Legal effect per Watts,

Watts & Co. Ltd. v Mitsui
& Co. Ltd.

See Keatings view

FIG. 8-2 : LIQUIDATED DAMAGES AN OVERVIEW

HSKS

INCLUSION OF EXPRESS PROVISION IN

CONTRACT PERMITTING DEDUCTION
OF THE LIQUIDATED DAMAGES
EMPLOYER HAS NOT
WAIVED HIS RIGHT TO
DEDUCT LIQUIDATED
DAMAGES

THE EXPRESS
LIQUIDATED DAMAGES
CLAUSE IS VALID AND
ENFORCEABLE

IMPOSITION OF
LIQUIDATED DAMAGES:
TYPICAL PRE-CONDITIONS

SPECIFIED
CONTRACTUAL
PROCEDURES HAVE
BEEN STRICTLY
COMPLIED WITH

DETAILS ON LIQUIDATED
DAMAGES CLEARLY AND
PROPERLY FILLED IN
DEFINITE DATE FIXED
CONTRACTUALLY FROM WHICH
DAMAGES CAN RUN

FIG. 8-3 : IMPOSITION OF LIQUIDATED DAMAGES TYPICAL PRE-CONDITIONS

HSKS

CONTRACTOR SHALL FAIL

TO COMPLETE ON TIME

MISCELLANEOUS
PRE-CONDITIONS

THE CONTRACT
ADMINISTRATOR SHALL
DETERMINE AND ISSUE
ANY EXTENSIONS OF
TIME DUE TO
CONTRACT

DEDUCTION OF
LIQUIDATED DAMAGES:
COMMON CONDITIONS
PRECEDENTS USED

THE EMPLOYER SHALL

GIVE WRITTEN NOTICE
TO THE CONTRACTOR
OF HIS INTENTION TO
DEDUCT LAD

FIG. 8-4 :

THE CONTRACT ADMINISTRATOR

SHALL ISSUE A CERTIFICATE OF
NON-COMPLETION

THE CONTRACT
ADMINISTRATOR SHALL
CERTIFY THAT NO
FURTHER EXTENSIONS
OF TIME ARE DUE TO
CONTRACTOR

DEDUCTION OF LIQUIDATED DAMAGES COMMON CONDITIONS PRECEDENTS

USED
HSKS

PROCEDURAL REQUIREMENTS FOR RECOVERY OF LIQUIDATED DAMAGES:

AN OVERVIEW

GENERAL RULE FOR

IMPOSITION OF LIQUIDATED DAMAGES

DEFINITION

Recovery of LAD must be in accordance with the

contract

Procedural requirements/conditions precedent

must be strictly followed

Effect of the application of the contra proferantum

rule

Need to satisfy general rule

Six principal pre-conditions:

GENERAL PROCEDURE

1. Existence of express contractual provision on

LAD
2. LAD Clause must be valid
3. LAD details must be clearly filled in
4. Contractual provisions must be strictly complied
with
5. Definite date from which LAD can run
6. Non-waiver by employer of his rights to the LAD

BASIC STEPS

Five basic steps

See Figures 6-11

to 6-13 on the
flowcharts

FIG. 8-5 :

Triggering event:
failure of
contractor to
complete on time

Crucial to
enforceability
of provision
and recovery of
LAD

DETERMINE
IF RELEVANT
CERTIFICATES/
NOTICES HAVE
BEEN ISSUED

DETERMINE IF
EMPLOYER HAS
WAIVED HIS
RIGHTS TO LAD

ESTABLISH
EXISTENCE AND
VALIDITY OF
LAD CLAUSE

ESTABLISH
DEFAULT OF
CONTRACTOR

2 forms of waiver:
1. Express
2. Implied

Was there
consideration in
return?

Certificate of NonCompletion (CNC)

Notice of Intention to
deduct LAD

EMPLOYER
RECOVERS THE
LIQUIDATED
DAMAGES

Conditions precedent

Decision as to recovery

Timing

POST LAD
DEDUCTION
PROCEDURES

Effect of further
E.O.T.

See Fig. 6-14 & 615 for flowchart

PROCEDURAL REQUIREMENTS FOR RECOVERY OF LIQUIDATED DAMAGES AN

OVERVIEW
HSKS

NON-COMPLETION AND DAMAGES IN NOMINATED

SUB-CONTRACTS: AN OVERVIEW

EXPRESS CONTRACTUAL
PROVISIONS

GENERAL POSITION

NSCS LIABILITY FOR DAMAGES

Legal principles similar to Main Contractor

Clause 7.0: PAM 98 Sub-Contract Form

Liability for 2 types of damages:

Clause 27: JKR 203N (Rev. 10/83)

1.
2.

Clause 27: IEM.CES 1/90 Form

Clause 25: Putrajaya Conditions of Nominated Sub-Contract

Liquidated damages, or
Unliquidated/general damages

EFFECT OF
NSCS DEFAULT

Effect of default in completing

works in time: breach of contract

Consequences of the said breach

- Employer entitled to damages
i.e., either:
1.
2.

LAD as stipulated in the subcontract, or

General damages
enforceable through
arbitration/court action

DAMAGES FOR
BREACH OF CONTRACT

EXPRESS
CONTRACTUAL FORMULA

Governing Provision: S 74
Contracts Act 1950 (Rev. 1974) Compensation for loss or damage
caused by breach of contract

Called the Financial Contractual

Remedy

Usually an LAD clause

Three main heads of damage per

Eggleston:

Express stipulations as to:

1.
2.
3.
4.

1. Main Contractors liability to

pay LAD to employer of NSCs
default
2. Main Contractors own loss
consequent to NSCs default

Rate
Scope of coverage
Maximum limit
Pre-conditions, etc.

Issues pertaining to the

stepping down of the Main
Contractors LAD clauses

GENERAL
OBSERVATIONS

Necessity for parties to agree

upon and arrive at a genuine preestimate

Need to clearly stipulate

conditions precedent to recovery

Prudent to cap maximum limit

If LAD clause stepped down into

sub-contract, sub-contractor
bound irrespective of value of the
sub-contract

3. Third party claims due to NSCs

default

FIG. 8-6: NON-COMPLETION AND DAMAGES IN NOMINATED SUB-CONTRACTS AN OVERVIEW

HSKS

CONTRACTUAL PROVISION IS A PENALTY CLAUSE

CONTRACTUAL PROVISION IS UNCERTAIN/INCONSISTENT
NO CONTRACTUAL PROVISION TO EXTEND TIME FOR ACT OF PROVISION IN QUESTION
NO DATE STIPULATED FOR THE COMMENCEMENT OF THE CONTRACT
CONTRACT IS AT LARGE
CONDITIONS PRECEDENT NOT OBSERVED

LIQUIDATED DAMAGES:
TYPICAL GROUNDS FOR
CHALLENGING

EMPLOYER HAS WAIVED LIQUIDATED DAMAGES

CERTIFICATES OF EXTENSION OF TIME
AND/OR PRACTICAL COMPLETION NOT VALID
EXTENSIONS OF TIME GRANTED INSUFFICIENT
PRACTICAL COMPLETION ACHIEVED EARLIER THAN CERTIFIED
MISCELLANEOUS CHALLENGES/DEFENCES

FIG. 8-7: LIQUIDATED DAMAGES TYPICAL GROUNDS FOR CHALLENGING

HSKS

LAD: MALAYSIAN LEGAL POSITION AN OVERVIEW

EFFECT OF S75 CONTRACTS

ACT 1950 (REV. 1974)
1. No difference between penalty and liquidated
damages clauses.
2. All liquidated damages clauses to be treated
as penalty clauses under English law.

EFFECT OF SELVAKUMAR V
THIAGARAJAH [1995]

CIRCUMVENTING SELVAKUMAR
V THIAGARAJAH

1. Employer cannot recover simpliciter sum fixed

in contract, whether as a penalty or liquidated
damages.
2. Must prove actual damages/reasonable
compensation per Hadley v Baxendale.
3. Figure stipulated in Contract is the ceiling
amount recoverable.

UNDER DOCTRINE
OF FREEDOM TO
CONTRACT
1. Parties of equal bargaining strength.
2. Free to agree on any terms between
themselves.
3. Philips HK Ltd. v AG of Hong Kong.

MUTUAL
AGREEMENT

CLAUSE 22.2:
PAM CONTRACT 2006

1. By parties on circumventing decision

in Selvakumar v Thiagarajah.

1. Contractor confirms that by

entering into the Contract

2. Can draft appropriate clause

2. He agrees to pay such sums

3. Which become due
4. Without Employer having to
prove his actual loss/damage

FIG. 8-8 : LAD MALAYSIAN LEGAL POSITION AN OVERVIEW

HSKS

START

Is the
contractor liable to pay
LAD?

No

Yes
Have all
the conditions precedents
been fulfilled?

No

Prima facie, employer

cannot recover liquidated
damages (LAD)

Yes
Employer can proceed to
recover simpliciter the sum
fixed in the contract as LAD

Does the
contractor challenge the
employers deduction of the
LAD?

No

Yes
Is there an
express clause circumventing
rule in Selvakumar
Thiagarajah?

Yes

Prima facie, employer

can deduct the stipulated
LAD amount

No
Matter to be resolved
through arbitration/litigation

FIG. 8-9: FLOWCHART ON THE RECOVERY OF LIQUIDATED DAMAGES - THE MALAYSIAN

POSITION POST SELVAKUMAR V THIAGARAJAH (PART I)
HSKS

Employer must prove the actual damages or

reasonable compensation per rule in Hadley v
Baxendale / S74 Contracts Act

Is
employer able to
prove damages as
required?

No

Employer may not be

able to recover any damages at all

Yes

Are the
damages more than the sum stipulated in the
contract
as LAD?

Yes

Prima facie, employer

can deduct the stipulated
LAD amount

No

Employer can recover only his actual damages or

reasonable compensation as decided by the arbitral
forum or the court

STOP

FIG. 8-10: FLOWCHART ON THE RECOVERY OF LIQUIDATED DAMAGES - THE MALAYSIAN

POSITION POST SELVAKUMAR V THIAGARAJAH (PART II)
HSKS

COMPLETION AND
HANDING-OVER

HSKS

9.0

COMPLETION AND HANDING-OVER

PROBLEMS WITH DEFINITIONS AND TERMINOLOGY

CONDITIONS PRECEDENT

NONNON-ISSUE BY CONTRACT ADMINISTRATOR

CHALLENGES TO CPC

PROBLEMS ARISING FROM CPC ISSUES

SECTIONAL COMPLETION, PARTIAL POSSESSION AND CONDITIONAL CPC

RELEVANT CASES

WESTMINSTER CITY COUNCIL V JARVIS & SONS LTD. [1970] 7 BLR 64

H.W. NEVILL (SUNBLEST) LTD. V WILLIAM PRESS & SONS LTD. [1981] 20 BLR 78

P & M KAYE LTD. V HOSIER DICKINSON LTD. [1972] 1 WLR 64

EMSON EASTERN (IN RECEIVERSHIP) V EME DEVELOPMENTS LTD. [1991] 55 BLR 114

BRUNO ZORNOW (BUILDERS LTD.) V BEECHCROFT DEVELOPMENTS LTD. [1990] 51 BLR 16

HSKS

CONTRACT ADMINISTRATOR
HAS DISCRETION TO ISSUE
C.P.C. WHERE MINOR WORKS
ARE LEFT TO BE DONE ON A DE
MINIMIS BASIS

C.P.C. CAN BE ISSUED

NOTWITHSTANDING PRESENCE
OF LATENT DEFECTS

GUIDELINES TO DETERMINE PRACTICAL

COMPLETION PER KEATING

PRACTICAL COMPLETION MEANS

COMPLETION OF ALL WORK THAT
HAS TO BE DONE

C.P.C. CANNOT BE ISSUED IF

THERE ARE PRESENT PATENT
DEFECTS

FIG. 9-1 : GUIDELINES TO DETERMINE PRACTICAL COMPLETION PER KEATING

HSKS

FUNCTIONAL TEST

MISCELLANEOUS TESTS

COMPLETENESS TEST

ESTABLISHING PRACTICAL
COMPLETION:
PRINICPAL TESTS

AUTHORITIES TEST

SAFETY TEST

INCONVENIENCE TEST

FIG. 9-2 : ESTABLISHING PRACTICAL COMPLETION PRINICPAL TESTS

HSKS

MARKS END OF CONSTRUCTION PERIOD

CONTRACTORS RIGHT TO POSSESSION OF SITE CEASES
CONTRACTORS LIABILITY FOR CARE, SECURITY, ETC., ENDS
CERTIFICATION OF INTERIM PAYMENT ENDS
EMPLOYER TO RELEASE ONE MOIETY OF RETENTION SUM
DEFECT LIABILITY PERIOD COMMENCES

ISSUE OF THE CERTIFICATE

OF PRACTICAL COMPLETION:
PRINCIPAL EFFECTS
FREE SERVICE AND MAINTENANCE PERIOD STARTS
TRIGGERS COMMENCEMENT OF PERIOD OF FINAL MEASUREMENT
AND VALUATION OF THE WORKS
CONTRACTORS LIABILITY TO INSURE WORKS ENDS
CONTRACTORS LIABILITY FOR FURTHER LAD ENDS
CONTRACT ADMINISTRATORS POWER TO ORDER VARIATIONS CEASES
ENDS RESTRICTION ON OPENING OF ARBITRATION

FIG. 9-3 : ISSUE OF THE CERTIFICATE OF PRACTICAL COMPLETION PRINCIPAL EFFECTS

HSKS

OBLIGATION TO INSURE
FOR EACH SECTION
ENDS WITH CPC
(DEPENDING ON
CONTRACT PROVISION)

CERTIFICATE OF PRACTICAL
COMPLETION FOR EACH SECTION
SEPARATE EXTENSION
OF TIME CERTIFICATION
FOR EACH SECTION

SECTIONAL COMPLETION:
PRINICPAL ISSUES/EFFECTS

RELEASE OF ONE
MOIETY OF RETENTION
SUM FOR EACH SECTION

SEPARATE LIQUIDATED
AND ASCERTAINED
DAMAGES FOR EACH
SECTION
SEPARATE DEFECT LIABILITY
PERIOD FOR EACH SECTION

FIG. 9-4 : SECTIONAL COMPLETION PRINCIPAL ISSUES/EFFECTS

HSKS

RELEASE OF
PERFORMANCE BOND
AND FINAL PAYMENT
UNAFFECTED

ISSUE OF CERTIFICATE OF
PARTIAL OCCUPATION OF
RELEVANT PART WITHIN
STIPULATED PERIOD

COMMENCEMENT OF
DEFECT LIABILITY
PERIOD FOR RELEVANT
PART ON DATE OF
POSSESSION/
OCCUPATION

PARTIAL POSSESION/
OCCUPATION:
PRINICPAL ISSUES/EFFECTS

CESSATION/REDUCTION
OF INSURANCES
CORRESPONDINGLY (IF
EXPRESSLY PERMITTED)

PROPORTIONING DOWN
OF LIQUIDATED AND
ASCERTAINED DAMAGES
RELEASE OF A PROPORTION OF
FIRST HALF OF RETENTION SUM IN
RESPECT OF RELEVANT PART
WITHIN STIPULATED PERIOD

FIG. 9-5 : PARTIAL POSSESSION/OCCUPATION PRINCIPAL ISSUES/EFFECTS

HSKS

COMPLETION OF WORKS UNDER THE CONTRACT

LITERAL MEANING/
INTERPRETATION

SECTIONAL
COMPLETION

PRACTICAL
COMPLETION

Strict View

Also termed Substantial

Completion in some cases

Envisages completion in
sections/ stages/phases

Absence of any patent

defects; and

Adopts an expedient view

Connotates a state of
readiness for use or
occupation by Employer

Intention must be
agreed/expressed at time of
contracting.

Absence of any outstanding

works however trifling

Rarely used in practice

Has been abandoned in

favour of a more expedient
approach

Contract Documents must

identify/ define:

Formalized by issue of
Certificate of Practical
Completion (CPC) or Taking
Over Certificate (TOC)

More common in practice

Provided for expressly in

many Standard Forms

a) Each Section
b) The Completion dates
c) The Corresponding LAD

Each section has separate:

a) Certificate of Practical
Completion (CPC)/TOC
or Defect Notification
Period (DNP)

PARTIAL
POSSESSION
Situation where Employer takes
over/resumes possession of:
a)Whole works, or
b)
Part of works
before Contract Completion Date
Pre-Conditions:
a)With consent of Contractor
b)
Consent not to be
unreasonably withheld
Procedural aspects:
a)Issue of Certificate of Partial
Occupation (CPO) within 7
days of possession.
b)

Certificate to identify:
i) Relevant part possessed
ii) Its estimated value

b) Defects Liability Period

(DLP)

c)DLP/DNP starts on date of

possession

c) Liquidated and
Ascertained Damages
(LAD)

d)
LAD rate reduced prorata for unoccupied
part/portion

FIG. 9-6 : COMPLETION OF WORKS UNDER THE CONTRACT AN OVERVIEW

HSKS

TEST ON COMPLETION: AN OVERVIEW

TYPES

PURPOSE

PRELIMINARY

Normally undertaken
by Contractor on his
own.

Prior to Final Tests on

Completion.

Is a necessary prelude
to the Final Tests

FINAL

Normally undertaken by
either:

To show compliance with the

Performance Specification/
Contract Requirements

To meet applicable statutory

requirements.

As a pre-condition to issue of
CPC

As a pre-condition to
certification by Independent 3rd
Party Specialist.

FAILURES

RESPONSIBILITY

a) Contractor in the
presence of
Contract
Administrator (or)
b) Independent 3rd
Party Specialists

Is usually a precondition to issue of

CPC.

CONTRACT
ADMINISTRATOR

CONTRACTOR

Contractually, responsible for:

a) Preliminary and Final
Testing and
Commissioning.
b) Satisfactory Completion

INDEPENDANT TESTER

Active participant and

certifier of Final Testing and
Commissioning.

Scope as expressly stipulated

in Contract.

Default/negligence in
certification does not relieve
Contractors obligations.\

Eg. SIRIM, DNV, Lloyds, TV,

Statutory authorities, etc.

May also be required under

statute.

FIG. 9-7 : TEST ON COMPLETION AN OVERVIEW

HSKS

OPERATION AND MAINTENANCE MANUALS: AN OVERVIEW

GENERAL
GENERAL
POSITION

Must follow express

Contract stipulations as
to:
a)
b)
c)
d)

TIMING
TIMING FOR
FOR
SUBMISSION

Type/Nature
Contents
Quantity
Timing for
Submission

Must comply with express

Contract stipulations.

Normal practice is:

b)Errors/
inaccuracies

Professionals to update

on safety issues and

errors detected.

OPERATION &
MAINTENANCE MANUALS/
MANUALS/
MAINTENANCE
HANDBOOKS

Permanent record of works

Suitably detailed for future

reference.

To enable Works to be operated and

maintained efficiently and safely.

Contents, etc. to express contract

stipulations/industry practice.

Contents, etc. to express

contract stipulations/industry
practice.

a) O & M manuals due

to product
improvement.

Usual requirements include

draft copies for approval
prior to finalization.

ASAS--BUILT/
BUILT/
ASAS--CONSTRUCTED/
CONSTRUCTED/
ASAS-INSTALLED DRAWINGS

ACCURACY
ACCURACY

Contractors
responsibility at least
during Limitation Period
for:

a) Before TOC
b) After TOC
c) Before Performance
Certificate

Most Contracts have

incorporated such
stipulations

UPDATING

TYPES/
TYPES/ NATURE
NATURE

In Contract and Tort

In Tort, on joint and

several basis

Primary responsibility
for errors, omissions,
etc.

Especially so for
signing-off/
endorsing Qualified
Person.

MISCELLANEOUS
RECORDS/ DOCUMENTS
RECORDS/

RECORDS
RECORDS OF
OF FINAL
FINAL
MEASUREMENT
MEASUREMENT

Undertaken by Contract
Administrator jointly with
Contractor.

To facilitate preparation of Final

Account.

PROFESSIONAL
PROFESSIONALS
S
RESPONSBILITY
RESPONSBILITY

CONTRACTOR
CONTRACTOR S
S
RESPONSBILITY
RESPONSBILITY

Final testing and commissioning

records

Servicing and Maintenance

records

O & M Training records, etc.

FIG. 9-8 : OPERATION AND MAINTENANCE MANUALS AN OVERVIEW

HSKS

IDENTIFICATION OF PATENT
DEFECTS
& OUTSTANDING WORKS

ISSUE OF RELEVANT
COMPLETION CERTIFICATE

HANDOVER OF APPROVALS/
CLEARANCES FROM
STATUTORY AUTHORITIES

HANDOVER OF ALL
NECESSARY SPARES

COMPLETION
OF TESTING &
COMMISSIONING

TAKING OVER:
TYPICAL PRECONDITIONS

TRAINING OF
EMPLOYERS OPERATION
& MAINTENANCE PERSONNEL

HANDOVER OF
ALL AS-BUILT DOCUMENTS/
RECORDS

HANDOVER OF
ALL NECESSARY TOOLS

HANDOVER OF ALL
KEYS

FIG. 9-9: TAKING OVER OF COMPLETED WORKS BY EMPLOYER TYPICAL PRE-CONDITIONS

HSKS

IDENTIFICATION OF THE TYPES AND

DETAILS OF NECESSARY INSPECTIONS
IDENTIFICATION OF THE
MODE OF FORMALIZING
THE TAKING OVER

IDENTIFICATION OF
THE SEQUENCE OF
TAKING-OVER

TAKING OVER OF
COMPLETED WORKS:
PROCEDURAL ISSUES

SETTING UP OF THE
PROCEDURES FOR
RECORDING

ESTABLISHMENT OF
TAKING-OVER
PROGRAMME
ESTABLISHMENT OF THE
RELEVANT DELIVERABLES

FIG. 9-10 : TAKING OVER OF COMPLETED WORKS PROCEDURAL ISSUES

HSKS

DEFECTS

HSKS

10.0

DEFECTS

PROBLEMS WITH DEFINITIONS AND TERMINOLOGY

DEFECTS FOR WHICH CONTRACTOR RESPONSIBLE

PROBLEMS WITH DEFECT RECTIFICATION

CERTIFICATION DELAY, NON-ISSUE, ETC.

LIABILITY UNDER LIMITATION ACT

RECENT DEVELOPMENTS

RELEVANT CASES

HII SOO CHIONG V BOARD OF MANAGEMENT YEE TING PRIMARY SCHOOL [1973] 2 MLJ 204

LEO TENG CHOY V BEETILE CONSTRUCTION [1982] 2 MLJ 304

HSKS

DANCOM ENGINEERING PTE LTD. V TAKASAGO THERMAL ENGINEERING CO. LTD. [1989] BLD
[MAY] 606

PIRELLI GENERAL CABLE WORKS LTD. V OSCAR FABER & PARTNERS [1983] 2 AC 1

PEARCE & HIGH LTD. V JOHN BAXTER & MRS. A.S. BAXTER [1999] BLR 101

BAGOT V STEVEN SCANLON & CO. [1996] 1 QB 197

DUTTON V BOGNOR REGIS UNITED BUILDING CO. LTD. & ANOR [1972] 1 QB 373

STEVEN PHOA CHENG LOON & 72 ORS V HIGHLAND PROPERTIES SDN. BHD. & 9 ORS [2000]
3 AMR 3567

HSKS

STANDARD OF
WORKMANSHIP

PATENT DEFECT

LATENT DEFECT

TYPES

QUALITY OF
MATERIAL

STANDARD
OF DESIGN

NATURE

DEFECTS: PRINCIPAL TYPES AND NATURE

FIG. 10-1 : DEFECTS PRINCIPAL TYPES AND NATURE

HSKS

DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE

MANAGEMENT FEE
CONTRACTING

TRADITIONAL GENERAL
CONTRACTING

PACKAGE DEAL
DEAL TYPES
OF CONTRACTS
Quality of Materials

Standard of Workmanship
WHOLLY EMPLOYER
DESIGNED CONTRACT

PARTLY EMPLOYER
DESIGNED CONTRACT

Standard of Design

Quality of Materials

Quality of Materials

Standard of Workmanship

Standard of Workmanship

Standard of Design (For

elements of design in
contractors scope of work)

PARTLY EMPLOYER
DESIGNED CONTRACT

WHOLLY EMPLOYER
DESIGNED CONTRACT

Quality of Materials

Quality of Materials

Standard of Workmanship

Standard of Workmanship

Standard of Design (For elements of

design in contractors scope of work)

FIG. 10-2 : DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE

HSKS

ARISING FROM
FAIR WEAR AND TEAR
HAVING NUMBER OF
CAUSES, CONTRACTORS
PORTION BEING MINOR

ARISING FROM MISUSE/

ABUSE BY USERS /
EMPLOYER

DEFECTS FOR WHICH

CONTRACTOR IS GENERALLY
NOT RESPONSIBLE

WAIVED BY EMPLOYER

ARISING FROM WORK

WHICH IS NOT
CONTRACTORS
RESPONSIBILITY
OUT OF TIME OR STATUTE
BARRED

FIG. 10-3 : DEFECTS FOR WHICH CONTRACTOR IS GENERALLY NOT RESPONSIBLE

HSKS

POST-COMPLETION STAGE

PRE-COMPLETION STAGE

Or Post-Handing Over Stage

Or During Defects Liability Period, etc.

POST-CMGD STAGE

Or Pre-Handing Over Stage

Or During Currency of
Construction, Installation,
etc.

Or Post-Certification of
Completion of Making Good
Defects

Or During Limitation Period

CONTRACTORS LIABILITY FOR DEFECTS:

PRINCIPAL STAGES OF CONTRACT

FIG. 10-4 : CONTRACTORS LIABILITY FOR DEFECTS PRINCIPAL STAGES OF CONTRACT

HSKS

DETERMINATION OF
CONTRACTORS EMPLOYMENT
UNDER THE CONTRACT

THIRD PARTY ACTION TO MAKE

GOOD DEFECTS

EMPLOYERS PRINCIPAL REMEDIES FOR CONTRACTORS

DEFAULT IN RECTIFYING REPORTED DEFECTS AT PRECONTRACT COMPLETION STAGE

POSTPONEMENT/NONCERTIFICATION OF COMPLETION
OF WORKS

EMPLOYER MAY UNDERTAKE

RECTIFICATION WORKS HIMSELF

FIG. 10-5: EMPLOYERS PRINCIPAL REMEDIES FOR CONTRACTORS DEFAULT IN

RECTIFYING REPORTED DEFECTS AT PRE-CONTRACT COMPLETION STAGE
HSKS

MISCELLANEOUS ACTS
E.G. RAILWAYS ACT
1991 (SECTION 97) CIVIL
LAW ACT 1965 (SECTION
7(5), ETC.

LIMITATION ACT 1953 (REV.

1981) - WEST MALAYSIA
LIMITATION ORDINANCE
1959 (REPRINT 1965) SARAWAK

LIMITATION: RELEVANT
STATUTORY ENACTMENTS

PUBLIC AUTHORITIES
PROTECTION ACT 1948
(REV. 1978)

LIMITATION ORDINANCE
1952 (REPRINT 1966) SABAH
LIMITATION ACT (CAP 14)
REVISED EDN. 2000 BRUNEI

FIG. 10-6 : LIMITATION RELEVANT STATUTORY ENACTMENTS

HSKS

EXPIRY OF PERIOD FOR RECTIFYING DEFECTS:

OPTIONS AVAILABLE TO CONTRACT ADMINISTRATOR

DEFECTS REMAINING OUTSTANDING

AND/OR UNRECTIFIED

ALL DEFECTS SATISFACTORILY

MADE GOOD/RECTIFIED
Contract administrator to:
a) Prepare and
b) Issue
the Performance Certificate forthwith.

See express clauses under ICTAD/SBD/02

DEFECTS ARE EITHER:

DEFECTS ARE EITHER:

minor or not material

Serious and/or

Impracticable or inconvenient
for contractor to make good

Material

Contract administrator to:

Carry out diminution in value; and

Prepare and Issue Certificate of Making Good Defects

EMPLOYER TO UNDERTAKE
WORKS HIMSELF I.E.
DEPARTMENTALLY

RD PARTY ACTION
TAKE 3RD

Deduct costs involved from:

Deduct costs involved from:

a) money due to contractor and/or

a) money due to contractor and/or

b) Performance bond and/or

b) Performance bond and/or

c) as a liquidated demand

c) as a liquidated demand

FIG. 10-7 : EXPIRY OF PERIOD FOR RECTIFYING DEFECTS OPTIONS AVAILABLE TO

CONTRACT ADMINISTRATOR
HSKS

OFFICIALLY ENDS THE

DEFECT LIABILITY PERIOD
(DLP)

OBLIGATIONS UNDER THE

CONTRACT ARE NOT
RELIEVED

DISCHARGES
CONTRACTORS RIGHTS
UNDER CONTRACT TO
PHYSICALLY ATTEND TO
DEFECTS

CONTRACTORS LIABILITY
FOR LATENT AND PATENT
DEFECTS CONTINUES FOR
THE STATUTORY PERIOD OF
LIMITATION

MARKS THE BEGINING OF

THE CONTRACTUAL PERIOD
FOR PREPARATION OF FINAL
ACCOUNT

PARTIES OUTSTANDING

ISSUE OF CERTIFICATE
MAKING GOOD OF
DEFECTS: PRINCIPAL
EFFECTS ON PARTIES

DISCHARGES LIABILITY OF

GUARANTORS, INSURERS,
ETC. UNDER THE
CONTRACT

FIG. 10-8:

EMPLOYER HAS TO
RELEASE SECOND MOIETY
OF RETENTION SUM THAT
IS WITHHELD

MARKS THE
COMMENCEMENT OF THE
CONTRACTUAL PERIOD
FOR CONTRACT
ADMINISTRATOR TO ISSUE
FINAL CERTIFICATE

ISSUE OF CERTIFICATE OF MAKING GOOD OF DEFECTS PRINCIPAL EFFECTS

ON PARTIES
HSKS

POST-COMPLETION
AND
FINAL ACCOUNT

HSKS

11.0

POST COMPLETION AND FINAL ACCOUNT

LIABILITIES ARISING FROM DEFAULTS/OMISSIONS IN:

TRAINING

O & M MANUALS

AS-BUILT DRAWINGS

FINALISATION OF ACCOUNT ISSUES

FINAL CERTIFICATE ISSUES

POSTPOST-FINAL CERTIFICATE PROBLEMS

RELEVANT CASES

FAIRWEATHER LTD. V ASDEN SECURITIES LTD. [1979] 12 BLR 40

CHEW SIN LONG CONSTRUCTION CO. LTD. V COSY HOUSING DEVELOPMENT PTE LTD.
[1988] 1 MLJ 331

THAMESA DESIGNS SDN. BHD. & ORS V KUCHING HOTELS SDN. BHD. [1993] 3 MLJ 28

TOKEN CONSTRUCTION CO. LTD. V CHARLTON ESTATES LTD. [1973] 1 BLR 48

SHEN YUAN PAI V DATO WEE HOOD TECK & ORS [1976] 1 MLJ 16

HSKS

SERVICING & MAINTENANCE: AN OVERVIEW

GENERAL
POSITION

PURPOSE

Must follow express

Contract stipulations

Most Contracts e.g.

M&E have such
provisions in the
specifications.

EXTENT

FREQUENCY

To ensure Contractor
meets contractual
obligations

Per stipulations in:

Implied from:
a) Statutory
requirements

To minimize defects and

downtime and prolong
lifetime and efficiency.

Daily
Weekly
Monthly
Quarterly
Yearly

EXPRESS
EXPRESS
REQUIREMENTS

As stipulated:
a) In Contract
b) In Manufacturers
Warranties/
recommendations
c) In O & M Manuals

Generally, most contracts

require contractor to do
monthly/ quarterly
servicing.

To carry out and/or

erroneous/negligent
servicing.

P.C. may not be issued

Period may be extended

Use of 3rd Parties at

Contractors Cost

Warranties may be
compromised.

Possible action in contract,

tort, statute, etc.

b) Trade usage
c) Local practice

PREVALENT
PREVALENT
PRACTICE
PRACTICE

EFFECT OF
FAILURE

a) Contract and/or
b) O & M Manuals

Not to nullify equipment

warranties.

PROCEDURE
FOR
MONITORING

IMPLIED
REQUIREMENTS
REQUIREMENTS
In absence of express
stipulations implied
from:
a) Trade usage
b) Local practice
c) Statute
General implication is
that Employer will
undertake daily and
weekly servicing and
maintenance.

CONTRACT
ADMINISTRATOR
ADMINISTRATORS
RESPONSIBILITY

CONTRACTOR
CONTRACTORS
S
DUTY
DUTY

Proper and effective

record keeping of:
a) Compliances
b) Deviations
c) Unusual
observations

Timely recording and

signing-off.

Monitoring of
Contractors work

Signing-off the
records

Reporting to
Employer of unusual
observations

EMPLOYERS
EMPLOYERS
OBLIGATIONS

Undertaking of routine
servicing and
maintenance e.g. daily,
weekly, etc.

Affording Contractor
proper access to work
being serviced.

Attending to unusual
observations reported.

FIG. 11-1 : SERVICING AND MAINTENANCE AN OVERVIEW

HSKS

PLANS OF COMPLETED WORKS

AS-BUILT DRAWINGS

COMMON LABELS FOR RECORDS/

DRAWINGS OF COMPLETED WORKS

AS-INSTALLED DRAWINGS

AS-CONSTRUCTED DRAWINGS

FIG. 11-2 : COMMON LABELS FOR RECORDS/DRAWINGS OF COMPLETED WORKS

HSKS

AS-BUILT DRAWINGS: AN OVERVIEW

GENERAL
POSITION

Must follow express

Contract stipulations
as to:
a)
b)
c)
d)

Type/Nature
Contents
Quantity
Timing for
Submission

Most Contracts have

express provisions
incorporated.

TIMING FOR
SUBMISSION

TYPES/ NATURE

Must comply with express

contract stipulations.

Normal practice is:

a) Before CPC
b) After CPC
c) Before CMGD

Contractors
responsibility at least
during Limitation Period
for:
a) Revisions due to
product
improvement.

Usual requirements include

draft copies for approval
prior to finalization.

Professionals to update
on safety issues and
errors detected.

OPERATION &
MAINTENANCE SCHEMATICS
/DIAGRAMMES

In Contract and
Tort

In Tort, on joint
and several basis

Primary
responsibility for
errors,
omissions, etc.

Especially so for
signing-off/
endorsing
Qualified
Person.

RECORDS OF FINAL
MEASUREMENT

Permanent record of works

To supplement O&M Manuals

Undertaken by Contract Administrator

jointly with Contractor.

Suitably detailed for future

reference.

Contents, etc. to express

contract stipulations/industry
practice.

To facilitate preparation of Final

Account.

PROFESSIONALS
RESPONSBILITY

CONTRACTORS
RESPONSBILITY

b) Errors/ inaccuracies

AS-BUILT/
AS-CONSTRUCTED/
AS-INSTALLED DRAWINGS

ACCURACY

UPDATING

Contents, etc. to express

contract stipulations/industry
practice.

FIG. 11-3: AS-BUILT DRAWINGS AN OVERVIEW

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FINAL CERTIFICATE
MISCELLANEOUS
LABELS

FINAL ACCOUNT
CERTIFICATE

CERTIFICATION UPON EXPIRY

OF CONTRACT PERIOD:
COMMON LABELS

PERFORMANCE
CERTIFICATE

ULTIMATE CERTIFICATE

FINAL PAYMENT
CERTIFICATE

FIG. 11-4 : CERTIFICATION UPON EXPIRY OF CONTRACT PERIOD COMMON LABELS

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ISSUED UPON EXPIRY OF THE

CONTRACT PERIOD
ACTUAL EFFECT DICTATED
BY THE PRECISE TERMS OF
THE APPLICABLE
CONDITIONS OF CONTRACT

ISSUED BY THE CONTRACT

ADMINISTRATOR

FINALCERTIFICATE:
PRINCIPAL
CHARACTERISTICS

RENDERS THE CONTRACT

ADMINISTRATOR FUNCTUS
OFFICO

LAST OF THE VARIOUS

CERTIFICATES ISSUED
DURING CONTRACT PERIOD

PRIMA FACIE, SIGNIFIES

DISCHARGE OF THE CONTRACT
BY PERFORMANCE

FIG. 11-5 : FINAL CERTIFICATE PRINCIPAL CHARACTERISTICS

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ISSUE OF PERFORMANCE
CERTIFICATE (P.C.)

SATISFACTION OF ALL
OTHER OBLIGATIONS/DUTIES
UNDER CONTRACT

EXPIRY OF DEFECT
NOTIFICATION PERIOD (DNP)

TYPICAL PRE-CONDITIONS TO
THE ISSUE OF THE
FINAL CERTIFICATE

FORMAL APPLICATION FOR

THE FINAL PAYMENT
CERTIFICATE

CERTIFICATION OF
COMPLETION OF SERVICING
AND MAINTENANCE

PREPARATION AND
FINALIZATION OF THE FINAL
ACCOUNT

FIG. 11-6 : TYPICAL PRE-CONDITIONS TO THE ISSUE OF THE FINAL PAYMENT CERTIFICATE
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THAT ALL THE CONTRACTORS

FINANCIAL CLAIMS HAVE BEEN
PROPERLY ACCOUNTED FOR

SATISFACTION OF THE COMPLETION

CRITERIA AS SPELT OUT IN THE
CONTRACT AND WHERE IT IS
STIPULATED TO BE TO THE
REASONABLE SATISFACTION OF THE
CONTRACT ADMINISTRATOR

EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE

PRINCIPAL MATTERS FOR WHICH CERTIFICATE PROVIDES
CONCLUSIVE EVIDENCE

THAT ALL EXTENSIONS OF TIME

OFFICIALLY GRANTED ARE CORRECT

FIG. 11-7 :

THAT EXCEPT FOR ANY COMPUTING

ERRORS, ETC. ALL RELEVANT
ADJUSTMENTS (ADDITIONS/
DEDUCTIONS) HAVE BEEN MADE TO
THE CONTRACT SUM

EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE PRINCIPAL MATTERS FOR

WHICH CERTIFICATE PROVIDES CONCLUSIVE EVIDENCE
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FRAUD/DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR

UNDISCOVERED DEFECTS E.G. LATENT DEFECTS, ETC.
COMPUTATIONAL ERRORS, ACCIDENTAL INCLUSIONS/EXCLUSIONS, ETC.
CERTIFICATE NOT GIVEN IN CORRECT FORM
CERTIFICATE NOT GIVEN ON TIME
CERTIFICATE NOT GIVEN BY AUTHORIZED PERSON

FINAL CERTIFICATE:
TYPICAL CHALLENGES TO
CONCLUSIVENESS/FINALITY

CERTIFIER ACTING ULTRA VIRES

CERTIFIER IMPROPERLY PRESSURIZED/INFLUENCED
FRAUD/COLLUSION BETWEEN CERTIFIER AND OTHER PARTY
CERTIFICATE EMBODIES WRONG DECISION ON A POINT OF LAW
THE EFFECT OF THE PRESENCE OF AN ARBITRATION CLAUSE
MISCELLANEOUS CHALLENGES/GROUNDS FOR CHALLENGING

FIG. 11-8: FINAL PAYMENT CERTIFICATE TYPICAL CHALLENGES TO CONCLUSIVENESS/

FINALITY
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THANK YOU

HSKS