Professional Documents
Culture Documents
Chapter 1 Constructionindustryandcontractmanagement
Chapter 1 Constructionindustryandcontractmanagement
• The policy aimed to forge national unity by reducing economic, social and geographic disparity among the races.
• This initiative directly increased the demand in construction due to development of infrastructure related to
• the 20-year period (1970 to 1990), the policy had spurred the construction sector, which grew at an average of
4% with construction output increased from RM800 million in 1965 to RM980 million in 1970, mainly
Construction
• ‘Construction’ refers to the processes of building physical
structures and related activities.
• The end products are site-specific and for each product the
processes involve elaborate commissioning, design,
management and assembly of resources – human, finance and
materials – over a period of time.
11
Introduction to Construction Industry
Construction
• The Malaysian Industrial Classification (M.I.C) refers to
construction as:
“… new construction, alteration, repair and demolition.
Installation of any machinery or equipment which is built-in at
the time of the original construction is included, as well as
installation of machinery or equipment after the original
construction but which requires structural alteration in order to
install.”
Construction
13 Category of
Construction
CIVIL
BUILDING
ENGINEERING
CONSTRUCTION
CONSTRUCTION
• Industrial
• Agricultural Dam
• Community Port
• Residential Airport
• Educational Highway
Sub-marine pipeline
• Recreational
& medical social.
Introduction to Construction Industry
The Environment
• A manufacturing process.
14
Introduction to Construction Industry
The Characteristics
15
Introduction to Construction Industry
The Characteristics
• The products are heterogeneous
• The products are different in terms of design, size, location
and in terms of end-use.
• The products differ widely in terms of the materials and
techniques used in production.
• The final process is in-situ
• The finished products are generally permanent in the
particular location where the construction takes place.
Consequently, the final process of construction must be in-
situ, although some sections of the completed products may
be produced elsewhere.
16
Introduction to Construction Industry
The Characteristics
• The final process is in-situ (cont’d)
• There is a limit on the potential for prefabrication. Prefabrication
refers to using component parts or sections of a structure
produced elsewhere, perhaps on the basis of economies of scale.
• There must always be a balance between the savings that may be
gained from prefabrication and the ensuing costs of transportation
of components parts or sections of a structure to the construction
site.
• Since the products of construction are site-specific, generally they
cannot be produced in advance of demand but rather have to be
sold before they are produced. Construction therefore, follows a
sequential process of planning, ordering and the final production
on the particular location where they are required.
17
Introduction to Construction Industry
The Characteristics
• The output consists of capital goods
• Capital or investment goods refer to products required for
the production of other goods or services in an economy.
• The products of construction including roads, railways, air
and sea ports, telecommunication, electricity generation and
transmission, water supply, buildings for factories, offices,
hospitals, schools, houses, etc. are all regarded as capital or
investment goods.
• This makes the construction sector highly susceptible to
variations in the level of activity in the economy.
18
Introduction to Construction Industry
The Characteristics
• Separation of design and construction responsibilities
• The general trend in the construction sector is that the party that
designs the project is normally different from the party that
constructs the project.
• This approach referred to as the traditional system of construction
procurement follows a pattern of activities that is sequential in
nature: a client engages a team of designers to produce design –
tender documents are prepared and tenders are invited from
contracting firms – award the project to successful contracting
firm.
• However, there are alternative approaches (such as design-build or
turnkey system and management-oriented systems) were developed
in response to problems that may arise from the separation of the
responsibility for the design from the responsibility for
construction.
19
Introduction to Construction Industry
The Characteristics
• The setting up of ad-hoc team
• A construction project requires the setting up of an ad-hoc
team consisting of persons and firms, each specialising in a
particular area of expertise, to work together to complete the
project.
• Since a construction project is one of its kind it is unlikely
for the same team to work together again and if they do so it
would be for a different project and in a different location.
20
Introduction to Construction Industry
The Characteristics
• Methods of price determination
• The common methods used for determining price: measurement-
based method and cost reimbursement-based method.
• Measurement-based method – the contractor is paid for the work
based upon the actual quantities of work that formed the
finished project multiplied by the respective unit rates. The
quantities of work is measured prior to commencement or
alternatively after the work is completed. The contractor is also
paid for costs of plant hire, temporary materials, contractor’s
overheads and profits, etc.
• Reimbursement of costs method – the contractor is paid for the
actual costs of materials that have been used, the time spent on
the project by the operatives and an agreed amount for the
contractor’s profit and overheads.
21
Introduction to Construction Industry
The Characteristics
• Risks
• Construction work involves risks, the level of risk is considered much
higher than in other types of economic activities.
• A construction entrepreneur moves from one location to another,
organise the logistics required to complete each project, and follows a
bespoke design for each project.
• Most contracts are awarded through some forms of competitive tenders
– contractors have to estimate the cost based on assumptions about
many factors including weather, site conditions, availability and
productivity of labours, availability and timely supplies of materials and
plant, time constraint, interest rates, political and social scenarios, etc.
22
Introduction to Construction Industry
The Characteristics
UNIQUE
TIME CONSUMING
FRAGMENTED INDUSTRY
RELYING TO OTHER
INDUSTRIES CHARACTERISTCS JOB OPPORTUNITIES
OF
CONSTRUCTION
LACK OF INDUSTRY
COORPERATION RISKY INVESTMENT
SEPARATED PROCESSES
VAST WORK LOAD
COMPLEX
ORGANISATIONS
23
Project Mgmt, Construction Mgmt & Contract Mgmt
Project Management
Project: A temporary endeavour undertaken to create a unique
product through a set of inter-related tasks (Proj. Mgmt. Inst.).
In engineering/construction industry, e.g. a building project would
constitute a temporary endeavour where a myriad of skills and
materials are brought together to create a unique product (i.e.,
the building) through a set of inter-related tasks (i.e. the relevant
activities)
Construction Management
A term used to describes:
the particular type of contract procurement method or
the actual process of running of a construction project
Contract Management
Contract: A legally binding agreement between two or more
persons which creates mutual rights and duties, enforceable at law,
or
a legal device for conducting exchanges between parties/ binding
parties to future performance.
Construction Stakeholders
Public Private
Sector Sector
Architect
OWNER /
DEVELOPER
Planner
APPROVING Quantity
State CONSULTANTS
AUTHORITIES Surveyor
FINANCIER
Landscape Interior
Local
Architect Designer
Finance
Bank Land
Company
Surveyor
Other
Credit Leasing
Nominated MATERIAL & BUILDERS / Specialist
Corporation Company
Supplier EQUIPMENT SUPPLIER CONTRACTOR
Importer
MANPOWER
Distributer
29
Parties involved in construction project & contract mgmt
Employer
Also called the client/ purchaser/ authority
Normally the person or party who wishes to have development
project constructed on a piece of land
The employer is the most important party to a contract as he is in
reality the paymaster who initiates and ultimately uses the
tangible fruits of the contract.
The employer may be a public entity (government bodies) or
private entity (developers/ owners/ investors).
He will appoints consultants, employs contractors and supply the
necessary fund to implement the project
30
Parties involved in construction project & contract mgmt
Contractor
The contractor is the person or legal entity (partnership or
company) who under the contract is actually entrusted to carry
out construction works.
He is variously labeled as the contractor, the builder, the installer,
the erector, etc. depending on the nature of the contract involved.
Construction development can only remain at blue-print and
drawing board stage without contractor and builders to actually
translate the project into reality.
31
Parties involved in construction project & contract mgmt
Contractor
Owing to the complexities of the nature of the contracts entered
into between the employer and the contractor, the contractor may
be further described as a:
main or general contractor; or
turnkey contractor; or
design and build/design and construct contractor; or
management contractor; or
construction management contractor
32
Parties involved in construction project & contract mgmt
Sub-Contractor
A sub-contractor is a person or firm to whom part of the
main contract works are sub-let.
A sub-contract is a contract made between a main-
contractor and another contractor (sub-contractor) for
part of the work which the main contractor has already
contracted to carry out as part of his contract with the
employer.
33
Parties involved in construction project & contract mgmt
Sub-Contractor
Depending on the complexity of the works, the specialist skills
required, the extent of detailing or design work involved, the
method of contract procurement adopted, sub-contractors can be
further classified as:
domestic sub-contractors; or
nominated sub-contractors; or
selected sub-contractors; or
34
Parties involved in construction project & contract mgmt
Sub-Contractor
Nominated Sub-Contractor (NSC)
Specialist contractor nominated by owner/architect/ engineer,
who sign their respective sub-contract with the main contractor
and perform their respective duties and responsibilities under
sub-contracts.
In Malaysia, there is a prevalent practice of sub-contractors further
sub-letting portions of their work to an array of sub-sub-
contractors, i.e. labour, material supply, fabrication,
erection/installation, etc.
35
Parties involved in construction project & contract mgmt
Supplier
A person or firm undertaking the supply of goods or materials to a
contract. The supplier’s contract is with the main contractor
In essence, a supplier is a sub-contractor concerned solely with
supplying goods or materials as compared to undertaking services or
labour.
As for sub-contractors, a supplier may be a domestic/ nominated/
designated/ selected/ specified supplier.
In practice, the common types of suppliers encountered are of the
domestic, nominated or designated types.
36
Parties involved in construction project & contract mgmt
Professionals
The professionals are not parties to the various contracts
employed between employer and main contractor, main
contractor and subcontractor, and sub-contractor and his sub-
contractors/suppliers.
The professionals may have his own services agreement whereby
he may contract to undertake either all or some of the following
work depending on his term of employment:
design work; supervision work; contract administration;
37
Parties involved in construction project & contract mgmt
Professionals
Owing to the peculiarities of Malaysian law, in most instances only
the qualified person is entrusted with the design and supervision
of the works undertaken.
The definition of the qualified person encompasses mainly
architects and engineers.
38
Parties involved in construction project & contract mgmt
Architect
In most building projects, i.e. of the traditional general contracting type,
the professional team during the design and construction stage is
normally led by the architect.
Person who practises the profession of architecture and usually submits
the application on behalf of the owner to obtained development order
and designs and submit building plans for approval.
Building By-Laws defines architect as “any person who is registered as an
architect under any law relating to the registration of architects and who
under that law is allowed to practice or carry on business as an
architect”.
The Architects Act 1967 restricts the usage of the word to a person
registered as such by the Board of Architects, Malaysia for the practice of
architecture.
39
Parties involved in construction project & contract mgmt
Engineers
Person who practises the profession of either civil, structural,
mechanical or electrical engineering and usually designs and submits
plans for approval by the approving authorities.
In projects, i.e. of essentially engineering or infrastructure origin, the
engineers are expressly stipulated in the contract as the principal
designers and contract administrators.
In this country, the law restricts the label engineer to “any person
who is registered as a Professional Engineer under any law relating to
the registration of engineers and who under the law is allowed to
practice or carry on the business of a Professional Engineer.
40
Parties involved in construction project & contract mgmt
41
Parties involved in construction project & contract mgmt
Other professionals
Land Surveyor – person who carries out boundary and contour
surveys and other surveys on land, submits survey plans for
amalgamation and sub-division of land, applies on behalf of owner
for qualified titles and final titles from the land office.
Town Planner - person who practises the profession of town and
country planning covering land use, zoning, density, the type,
mode and form of development, traffic pattern, infra-structural
requirements, impact of development with other developments in
the vicinity etc.
42
Parties involved in construction project & contract mgmt
Other professionals
Interior Designer - person who practises the profession of interior
designing involving furnishing and finishing work usually for
prestigious buildings
Landscape Architect - person who practises the profession of
landscaping architecture involving beautification of the project
internally and or externally by using plants of all kinds, rocks etc.
43
Parties involved in construction project & contract mgmt
Other specialists
Project Management Consultant
Person/group of persons practising the profession of project
management function.
The works involved ranges from feasibility report, financial
projection, design of management system, evaluation designs
prepared by consultants, co-ordinating work of consultants etc.
These include traffic consultants, acoustical engineers, information
technology (IT) consultants and interior decoration (ID)
consultants.
44
Parties involved in construction project & contract mgmt
Authorities/Regulators
Federal and State Authorities
Usually interested in matters regarding land, town and
country planning, drainage and irrigation, supply of
public utilities, fire requirements etc.
Local Authorities
Normally the building authorities and is therefore
entrusted with the power to approve layout plans,
building plans and services plans etc.
45
Parties involved in construction project & contract mgmt
Other stakeholders
Finance
Invariably the owner requires to borrow funds from
banks and other financial institutions to finance or
provide adequate funding to their project
46
Parties involved in construction project & contract mgmt
Manpower
Craftsmen
Represent the skilled workers of the industry especially in new
construction method it is necessary for them to appreciate not only the
how but also the why the work they do.
Semi-Skilled Worker
Those who possess skill of one or more construction trades but have
not attained the requisite level of skilfulness to be paid as skilled
workers.
Unskilled Worker
Those who do not possess skill in any building trades but are working
on construction sites performing such basic functions as carrying
materials etc.
47
Parties involved in construction project & contract mgmt
Manpower
Technicians
Persons who qualified by specialised technical education and training to
work under the general directions of technologists.
Technologists
Person who have a qualification and experience required for corporate
membership of professional institutions.
48
Parties involved in construction project & contract mgmt
Different Perspectives
49
Parties involved in construction project & contract mgmt
Different Perspectives
50
Parties involved in construction project & contract mgmt
Different Perspectives
51
Parties involved in construction project & contract mgmt
Different Perspectives
52
Stages and processes of construction project
Stages of a project
• The principal phases of a typical engineering and construction
contract:
• Pre-contract award phase: involves all activities or processes involved
from the inception of the project up to the award and/or signing the
engineering and construction contract pertaining to the project.
• Post-contract award phase: involves the activities or processes arising
after the award and/or signing of the contract up to the issue of the final
certificate.
53
Stages and processes of construction project
54
Feasibility Study (Tan, 2004)
“A through an comprehensive feasibility study is a proposal to determine
whether a project is viable or feasible from an economic (business) and
technical point of view.
It enhances project success and avoid project failures altogether and
minimises mistakes due to short sightedness, lack of market research,
study, analysis and marketing aspects of the project.”
Stages and processes of construction project
56
Stages and processes of construction project
57
Stages and processes of construction project
58
Stages and processes of construction project
59
Stages and processes of construction project
60
RIBA Plan of Work 2020
RIBA Plan of Work 2020
Stages and processes of construction project
63
Stages and processes of construction project
64
Stages and processes of
construction project
65
Stages and processes of construction project
66
Stages and processes of construction project
67
Stages and processes of construction project
68
Stages and processes of construction project
69
Stages and processes of
construction project
70
Stages and processes of
construction project
71