25 Common Problems

for M&E Engineers

Armada Hotel , Petaling Jaya
26
th
May 2011
5 Common Contract
Management Problems
Ir. Looi Hip Peu
Hon Sec, ACEM (2010/11)
B.Eng (Hons) (Electrical)
P.Eng (5226), Jurutera Gas
hplooi@unifi.my
26
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May 2011 hplooi@unifi.my
CONTENT
2
Objectives of this Workshop
Mismatch in Main & Sub Contract
Confusion on BQ and Lump Sum
No Proper Work Acceptance Procedure
Acceptance of Products against System
PAM 1998 and PAM 2006 Contract Forms
What are the Objectives of this Workshop?
In the Malaysian context, M&E engineers are usually
responsible for managing the M&E portion of the
construction contract.
This responsibility frequently include:
1. Cost consulting
2. Contract drafting
3. Contract management
4. Works supervision and cost finalisation
The requires a basic understanding of (construction)
contracts and good understanding of cost
OBJECTIVES OF WORKSHOP
3
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This Workshop Module List 5 Common Problems !
1. Mismatch between Main Contract & Sub Contract
2. BQ contract and Lump Sum Contract
3. Failure in Contract Management
4. Shorting Comings in Work Acceptance
5. Interim Payment and Final Payment
OBJECTIVES OF WORKSHOP
4
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The M&E Engi neer s Rol e i n
Cont ract draf t i ng.
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MAIN & SUB CONTRACTS MISMATCH
6
1. The QS is responsible for drafting Main
Builders Contract.
2. The M&E Engineer is responsible for
drafting M&E Sub Contracts.
Common procedure i n Cont ract Draf t i ng.
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MAIN & SUB CONTRACTS MISMATCH
7
QS decide
Contract Form
M&E checks with
QS on
Contract Form
M&E Draft M&E
Sub Contract
based on Form
PAM 1998
PAM 2006
JKR 203
PAM 2006 NSC
JKR 203N
PAM 1998 NSC
Sel ect i ng t he Cont ract For m.
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MAIN & SUB CONTRACTS MISMATCH
8
Private
or
Public ?
JKR Contract
Form
PAM Form
Sector
?
FIDIC,
Other Forms
Government
Private
Building
Industry
Type?
PAM 1998
PAM 2006
Sel ect i ng t he Cont ract For m.
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MAIN & SUB CONTRACTS MISMATCH
9
Contract
Based on BQ
Large / Complex
BQ or
Lump
Sum?
PAM/JKR
Form
Selected.
Simple / Well Defined
Contract
Based on
Drawings
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MAIN & SUB CONTRACTS MISMATCH
10
However t he probl em i s not mi smatch i n
Cont ract For m but i n draf t i ng Mai n and Sub
Cont ract wi t h compat i bl e t er ms!
QS decide
Contract Form
M&E checks with
QS on
Contract Form
M&E Draft M&E
Sub Contract
based on Form
M&E checks with
QS on Preliminary
Items in MC to
align in NSC
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MAIN & SUB CONTRACTS MISMATCH
11
What are Prel i mi nar y I tems
i n Mai n Cont ract ?
Nominated Sub Contract (PAM Form 2006):
This Sub Contract is made pursuant to the agreement
for <title of main contract works> (hereinafter referred to
as the Main Contract) made <date of main contract>
between the <name of client> of (or whose registered
office or business address is situate at) <address of
client> (hereinafter called the Employer) and the
Contractor.
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MAIN & SUB CONTRACTS MISMATCH
12
What are Prel i mi nar y I tems
i n Mai n Cont ract ?
Nominated Sub Contract (JKR 203N):
WHEREAS the Contractor has entered into a Contract
No: <ref no of main contract> made the <date of main
contract> (hereinafter referred to as The Main
Contract) between the Government of <Govt agency>
(hereinafter called The Government) of the one part
and the Contractor of the other part for the .
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MAIN & SUB CONTRACTS MISMATCH
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Prel i mi nar y I t ems?
Contract Management Issues:
1. Defects Liability Period
2. Date of Commencement
3. Liquidated & Ascertained Damages (LAD)
4. Completion & Sectional Completion (if applicable)
5. Period of Interim Certificate
6. Percentage of certified value retained
7. Limit of retention sum
8. Period of Final Measurements.
9. Insurances
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MAIN & SUB CONTRACTS MISMATCH
14
Ot her Prel i mi nar y I t ems.
Main contractors specific responsibilities defined:
1. Ascertaining from NSC coordination information;
2. Providing coordination information; setting out ,
dimensions etc.
3. Making good and touching up damages due to NSC
works (this may sometimes be loaded under NSC).
4. Providing space ONLY for storage & accommodation.
5. Water supply, electricity supply (including charges).
6. Protection, covering, watching, security of NSC fittings
7. Removing rubbish off site.
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MAIN & SUB CONTRACTS MISMATCH
15
Ot her Prel i mi nar y I t ems.
Nom sub contractors specific responsibilities:
1. Insurances (where his responsibility ends);
2. Providing coordination information; setting out
dimensions to main contractor etc.
3. Making good and touching of damages due to NSC
works (caveat; NSC is not qualified to rectify builders
works.
4. Consumption charges for water supply, electricity
supply.
5. Provision of water, energy, electricity for
commissioning.
6. Keeping site clean in coordination with MC.
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MAIN & SUB CONTRACTS MISMATCH
16
Common mi smatch i n Prel i mi nar y
Contract Management Issues:
1. Defects Liability Period cited is different in MC & NSC
2. LAD not cited in NSC
3. Responsibility for provision of water, electricity and
energy for construction and commissioning not
clearly cited or is different between MC & NSC.
4. Overlapping provision of insurance
5. Completion or Sectional completion not clearly stated.
6. Periods for interim & final certifications mismatch
In PAM 2006, some Preliminary Items are standardised.
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MAIN & SUB CONTRACTS MISMATCH
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CONCLUSI ON
QS decide
Contract Form
M&E checks with
QS on
Contract Form
M&E Draft M&E
Sub Contract
based on Form
M&E checks with
QS on Preliminary
Items in MC to align
in NSC
Modification to
Main Contract
terms must be
reflected in NSC
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MAIN & SUB CONTRACTS MISMATCH
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LAST RESORT
The t enderer i s supposed t o check at t ender
J KR 203 & PAM:
WHEREAS t he Nomi nat ed Sub Cont rac t or has had
r eas onabl e oppor t uni t y t o exami ne and have f ul l
knowl edge of al l pr ovi s i ons of t he Mai n Cont r ac t
( exc ept t he det ai l s of t he pr i c es i nc l uded t her ei n)
The above does not det r ac t f r om t he r es pons i bi l i t y
of t he pr of essi onal M&E engi neer t o dr af t a
pr oper l y c oor di nat ed t ender doc ument .
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BQ AND LUMP SUM CONTRACT
20
M&E Consul tant s are responsi bl e
for draf t i ng descri pt i on of i tems
t o be t endered.
Descri pt i on of works or Bi l l of Quant i t i es
are i mport ant document s whi ch wi l l
determi ned how cont ract are pri ced,
var i at i on cost deter mi ned and f i nal
account s or measurement s f i xed.
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BQ AND LUMP SUM CONTRACT
21
Contract
Based on BQ
Large / Complex
BQ or
Lump
Sum?
PAM/JKR
Form
Selected.
Simple / Well Defined
Contract
Based on
Drawings
C o nt r a c t
wi t h
Qu a nt i t i e s
C o nt r a c t
wi t h o u t
Qu a nt i t i e s
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BQ AND LUMP SUM CONTRACT
22
M&E Consul t ant s ar e r esponsi bl e f or
dr af t i ng des cr i pt i on of i t ems t o be
t ender ed.
Bill of Quantities (BQ) is a document detailing the qualitative
and quantitative aspects of every constituent parts of a
proposed construction project.
Qualitative: Description of material, labour and
workmanship for the work
Quantitative: Quantity of material, labour and workshop
Hackett & Robinson (2003) and Chan (2002)
It is compiled together with the form of tender, specification,
preliminary bill and list of drawings to form a tender document.
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BQ AND LUMP SUM CONTRACT
23
Cont ract based on quant i t i es
1. Pri ce i s based on quanti ti es and i s subj ect to fi nal
re-measurements on compl eti on.
2. Vari ati ons means di fference due to desi gn
schemati cs, concepts or addi ti on i n scope (i . e.
addi ti onal system not i n drawi ngs).
3. Vari ati ons val i d onl y on Archi tect s i nstructi ons.
4. BQ form the basi s of Contract Works.
5. Speci fi cati ons determi nes the qual i tati ve aspect
of works.
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BQ AND LUMP SUM CONTRACT
24
Lump Sum Cont ract
1. Contract Price is firm and shall not be subject to revision.
2. Variations only on Architects instructions.
3. Drawings form the basis of Contract Works (determining
the contract drawings before contract binding is therefore
important).
4. Specifications determines the qualitative aspect of works.
5. BQ or price schedule augment drawings.
6. Variations and final account is determined by comparison
with Contract Drawings and final As-Built (however changes
from Contract Drawings can only claimed Variations based
on AI).
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BQ AND LUMP SUM CONTRACT
25
rates Total Cost Quantity
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BQ AND LUMP SUM CONTRACT
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BQ AND LUMP SUM CONTRACT
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Pr i c e Sc hedul e
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BQ AND LUMP SUM CONTRACT
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Lump Sum BQ
1 Consultants
Drawings
Must be detail. Detail schematics
sufficient.
2 Consultants BQ Simple 1 Lot Detail measurements
3 Consultants final
measurements
Just check for VO VO and comparison
between contract
drawings & as-built,
4 Contractors
approach after
award
Do as little as possible
within the interpretation
of the Contract.
Do as much as possible
within the interpretation
of the Contract.
5 Consultants
professional
liability
Drawings not detailed
enough attracts
negligence torts.
Quantities too much
different from actual
quantity attracts
negligence torts.
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BQ AND LUMP SUM CONTRACT
29
Common pr obl ems wi t h Lump Sum Cont r act
1. Tender/Contract drawi ngs not detai l enough to
determi ne scope and quanti ty.
2. Mi ssi ng detai l s attract cl ai ms of Vari ati ons.
3. Mi smatch i n BQ descri pti on and drawi ngs.
4. I temi sed Lump Sum :
I temi sed works must have drawi ngs wi th
suffi ci ent detai l s to show scope and extent of
works.
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BQ AND LUMP SUM CONTRACT
30
Common pr obl ems wi t h BQ Cont r act
1. M&E engi neer do not have suffi ci ent experi ence
to execute a BQ.
2. Mi smatch i n BQ descri pti on and drawi ngs.
3. I temi sed Lump Sum i n BQ:
I temi sed works must have drawi ngs wi th
suffi ci ent detai l s to show scope and extent of
works.
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PROPER WORK ACCEPTANCE
32
Wor k Acc ept anc e i s a f undament al
r es pons i bi l i t y of t he M&E Engi neer i n
s uper vi si on of wor ks .
1. I n many statutory decl arati ons, the engi neer i s
requi red to decl are that he has desi gn and
supervi se to a certai n techni cal standards.
2. Some desi gn standards are mandatory i n nature
and some are commerci al i n nature.
3. Mandatory:
Exampl e: MS wi ri ng codes, MS fi re standards.
4. Commerci al :
Qual i tati ve requi rements of the Cl i ent.
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PROPER WORK ACCEPTANCE
33
St at ut or y Dec l ar at i ons
Compl i anc e t o t echni cal
s t andar ds i s c er t i f i ed!
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PROPER WORK ACCEPTANCE
34
C.C.C.
Borang G
Statutory
Declarations
(1) Vendor acceptance
(2) Product acceptance
(3) System acceptance
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PROPER WORK ACCEPTANCE
35
What i s Wor k Ac c ept ance?
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PROPER WORK ACCEPTANCE
36
Vendor registrations
Product acceptance
Back up, spare parts etc
SIRIM Cert.
Conformance Cert.
3
rd
party Certification
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PROPER WORK ACCEPTANCE
37
Functional test
TAB (Test, Adjustment,
Balancing)
Visual Inspection
Covered works
Tests during construction
Visual inspection
Alternative construction method
Rectifying construction defects
Coordination of works e.g. conduit
run in r.c. slab
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No basic check of product acceptance.
In many case SIRIM certification are expired or
certificate submitted is for a product model different
from the actual model to be installed.
Covered works are not properly tested during
construction which will prejudice their final
acceptance.
Approval of material suitable for the applied
condition not complied with.
Common Fai l ur e i n Wor k Ac c ept ance.
PROPER WORK ACCEPTANCE
38
Final work acceptance require on going work
acceptance procedure from design stage!
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PRODUCT VS SYSTEM ACCEPTANCE
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Types of Standards
Basic
Standards
General Standards dealing with topics
used by other standards; e.g.
terminology, insulation coordination, IP,
testing techniques etc.
Product
Standards
Three Sub-Types:-
(a) Material (oil, winding wires).
(b) Component (capacitor, resistors)
(c) Assembly (switchgears, GIS, UPS)
Installation
Standards
Rules and information to connect
various types of equipment for a specific
application e.g. BS7671:2001
PRODUCT VS SYSTEM ACCEPTANCE
41
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ABS Piping Product:
Product specification for ABS pipe MS1419: Part 1
and Part 2.
Exampl es of Product s and Syst em
ABS Piping System:
Piping system means all pipes, fittings, water
seals, traps, expansion and pipe joints etc.
Generally acceptance concept require all
components of the system to be from one vendor.
PRODUCT VS SYSTEM ACCEPTANCE
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uPVC conduit; product only:
Product specification for conduit.
Exampl es of Product s and Syst em
Conduit System:
IEC 61386 Conduit system for cable
management
Piping system means all bends, cable pull box,
tees etc.
Generally acceptance concept require all
components of the system to be from one vendor.
PRODUCT VS SYSTEM ACCEPTANCE
43
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Products approved comply with the specifications, but
the system installed are sub standard !
Common practice in the industry; piping or conduit
supplied comply with specification even SIRIM
certification are complied with, HOWEVER
Common Fai l ure
Pipe joints not compatible with the pipe supplied (ABS
pipe system).
Pipe accessories e.g. bends, tees etc not of the same
standard (both ABS and conduit).
The wrong grade of piping use for the application e.g.
grade B or C for embedding in concrete or surface mount.
PRODUCT VS SYSTEM ACCEPTANCE
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Templ ate wor k acceptance for syst em
TENDER
SPECIFICATIONS
1. Specify system and product.
2. Specify that all components of system to
be from one vendor
3. Require vendor approval in work
acceptance
4. Vendor approved will be required to
submit letter of confirmation.
PRODUCT VS SYSTEM ACCEPTANCE
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Templ ate wor k acceptance for syst em
CONSTRUCTION
Vendor
Approval
Vendor To
submit Letter
of
Confirmation
Approve
Reject
Method
Statement
Pipe Jointing
Construction
Check List
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PAM 1998 AND 2006 CONTRACT FORM
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PAM Contract forms are popular contract forms for
private buildings in Malaysia.
M&E engineers who are responsible for drafting
sub contract forms and ultimately managing the
M&E portion of the sub contract should understand
major differences in contract management required
between the two forms.
PAM Contract Forms
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Sel ect i ng t he Cont ract For m.
Private
or
Public ?
JKR Contract
Form
PAM Form
Sector
?
FIDIC,
Other Forms
Government
Private
Building
Industry
Type?
PAM 1998
PAM 2006
PAM 1998 AND 2006 CONTRACT FORM
48
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PAM 1998 AND 2006 CONTRACT FORM
49
The risk allocation for time, money matters, quality issues and dispute
resolution between the contractor, employer and consultant team has
been shifted significantly in the PAM 2006. Comparatively (1998/2006) the
risk for Contractors under 2006 has been shifted towards the Employer.
This reallocation of risks proportionately increases the employers
exposure and burden in terms of claims and payments while providing
more possible grounds for disputes between the contractor and employer.
PAM 2006 Forms are also more procedural requiring the contractor,
employer and consultants to strictly adhere to time provisions with the
attendant loss of rights or incurring of liabilities.
PAM 2006 imposes definite and at times, mandatory time periods on the
Architect/consultant team to carry out certain duties, for example,
certification and approvals within a specified time. The failure to do so may
open the consultant team to professional negligence claims.
PAM 1998 vs 2006 Contract Forms
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PAM 1998 AND 2006 CONTRACT FORM
50
PAM 2006 Forms are also more procedural requiring the contractor,
employer and consultants to strictly adhere to time provisions with the
attendant loss of rights or incurring of liabilities.
PAM 2006 For M&E Consul tants
Time provisions (work programme) forms part of the Contract.
Contractor
submits RFI
Section of works
scheduled for
completion based
on Contract
Consultant
replies with
Information
Contractor
proceeds
with Works
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PAM 1998 AND 2006 CONTRACT FORM
51
PAM 2006 For M&E Consul tants
Time provisions (work programme) forms part of the Contract.
Consultant must diligently reply to RFI and/or issue drawings
allowed within the schedule in the contract programme.
Information/drawings MUST be issued on time!
Any issues affecting work programme (e.g. contractors
delay, insufficient setting out information etc) must be
diligently recorded in case of future dispute.
To minimise RFI due to incomplete
information Consultant must ensure
drawings have sufficient information
for construction.
PAM 2006 is highly Procedural. No verbal instructions!
Emails are DO NOT constitute legal notice!
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PAM 1998 AND 2006 CONTRACT FORM
52
PAM 2006 For Contractors
Time provisions (work programme) forms part of the Contract.
At every section, issue written RFI to consultant.
Diligently record receipt of reply to RFI and scrutinse
completeness of information in Reply to RFI.
Diligently scrutinise each section of
the programme chart.
List information missing or
incomplete which is required for
completion of the section.
Any delay in information will open the contractor to claims
for EoT.
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PAM 1998 AND 2006 CONTRACT FORM
53
PAM 2006 imposes definite and at times, mandatory time periods
on the Architect/consultant team to carry out certain duties, for
example, certification and approvals within a specified time. The
failure to do so may open the consultant team to professional
negligence claims.
PAM 2006 for Consul tants - Certi fi cati on
Approvals for shop drawings, certification of
works etc. must be executed within a specified
time!
Payment certification must be issued within a
specified time.
Del ay opens t he cont ract to di spute and t he
consul tant subj ect t o negl i gence cl ai ms.
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PAM 1998 AND 2006 CONTRACT FORM
54
1. Incomplete drawings and constructional information.
Friendly contractor will cover. However not-do-friendly (or
business-only) contractor will record this in RFI.
2. Information and drawings NOT issued in time. This will affect
completion and allow EoT application by Contractor. The
consultant will also be opened to claims for negligence.
3. Approvals not issued in timely manner. This will affect
completion and allow EoT application by Contractor.
4. Payment certifications not issued in timely manner. Opens
the consultant to claims of negligence.
PAM 2006 Cont ract Common Fai l ures by
M&E Consul tant Engi neers
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PAM 1998 AND 2006 CONTRACT FORM
55
Perhaps M&E Engi neer shoul d attend CPD
courses on understandi ng const ruct i on
cont ract s and t he rol e of t he consul t ant
wi t hi n t he Cont ract ?
25 Common Problems
for M&E Engineers
Armada Hotel , Petaling Jaya
26
th
May 2011
5 Common Contract
Management Problems
Ir. Looi Hip Peu | hplooi@unifi.my