SENIOR OFFICER CONFERENCE (SOC)

PUBLIC WORK DEPARTMENT (PWD) MALAYSIA 2015

08-10 June 2015
Persada Johor, Johor Bahru, Johor, Malaysia

‘Membudayakan Kecemerlangan Dalam Penyampaian Perkhidmatan’

BEST PRACTICES OF CONTRACT

MANAGEMENT APPROACH TOWARDS
EXCELLENT SERVICE CULTURE IN
CONSTRUCTION PROJECT

Ir. Dr. Zarabizan Zakaria

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Construction Project Development Phases

Tender or
Preliminary Procurement Direct
planning and Negotiation
feasibility
studies

Detailed Operation &

Preliminary Engineering Construction Maintenance
engineering design
and design

Source: Anderson, J., Huhn, M., Rivera, D. M. & Susong, M. (2006). The Construction Project: Phases, People,
Terms, Paperwork, Processes . USA: ABA Publishing

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Scope of Presentation

Construction
Project

Contract
• Government Management

Authority
• Construction Excellent
Service
player Culture

Organization
Goals

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Problem Statement
• Project cannot deliver within budget
allocation, cost and time schedule
• Work/culture environment factor
• Lack of commitment to project
• Lack of contract management
techniques
• Inadequately defined tasks
• Mis-used management techniques
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Introduction
• The Effective contract management is an
important aspect of the excellent
governance of public sector organizations.
• Through efficient contract management,
organization is also able to maintain
excellent quality of service to
stakeholders.

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Introduction
• A contract is a formalized means of
communication between two parties.
• This facility is used very commonly by the
project manager and owner to control the
delivery of their projects.
• A contract has the added advantage of
forcing owners to define their requirements,
organize and arrange their thinking, and
make a commitment to their project.

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What is a Contract?

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• A contract is be defined as a voluntary agreement

enforceable at law, made between two or more parties,
whereby rights are acquired by one party to act or
forbearances by the other (Veld and Peeters,1989)
• According to the Construction Specification Institute
(CSI, 2008) Manual of Practice, a contract is “a promise
or a set of promises for the breach of which the law gives
a remedy of the performance of which the law
recognizes a duty”
• The contract should be used as a managerial tool to
accomplish the project tasks, not as an abstract legal
document that comes into play during conflicts
(Puddicombe 2005, 2009)
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Construction Contract
The word contract is derived from Latin
word ‘CONTRACTUM’ which means
drawn together
• A contract under which one party promises to furnish service &
materials to build a structure for another party who promises to
pay for the work performed. There are two basic types of
construction contracts
 Fixed price (or lump sum)
 Cost type

Source: Uher, T. E. & Davenport, P. (2009). Fundamentals of Building Contract Management .

Autralia: University of New Saouth Wales Press Ltd.

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Contractual Method
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Design & Build

Procurement
Method

Traditional
Procurement
Method

Source: (Rashid et al., 2007)

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Construction Contract
• The success of a project is often judged on the
construction performance because this activity is
highly visible. The success of a project is also
influenced by;
 The accuracy and details of its documentation
 The understanding between parties and
acceptance of their particular responsibilities
 How professionally and accurately the day to day
administration is handled
 How conflict or contractual problems are
resolved
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Types of Contract

Forms of Contracts (FOC) Application

Public Works Department For government projects
(PWD) (Building and civil engineering works)
203A (Rev.10/83) Bills of Quantities form part of the contract
203 (Rev.10/83) Without Bills of Quantities
PAM 2006 For private building works
Originated from JCT 63, UK
FIDIC For international projects
CIDB 2000 For building works for both government and
private
IEM.CE 2011 For private building works

Source: Zakaria et al. (2012); Kwang and Ting (2009)

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Contract Management
 The central aim of contract management is to obtain
the product as agreed in the contract and achieve
value for money
 Good contract management goes much further than
ensuring that the agreed terms of the contract are
being met
 Contract management is about resolving or reducing
such friction and achieving the completion of the
project as envisaged
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The contractor is likely to neglect the

quality, resulting in substandard Decisions are not taken at the right
product that is not durable and time – or not taken at all
structurally unsafe

Failure in Well
Managing the Contract

Leads to delays in payment, Time and cost overrun

approvals - leading to claims

Sources:
Abidali, A.F. and Harris, F. (1995). A methodology for predicting company failure in the construction industry.
Construction Management and Economics, 13: 189–196
Kangari, R. (1988). Business failure in constructions industry. Journal of Construction Engineering and
Management , 114(2): 172–190
Sanvido, V., Grobler, F., Parfitt, K., Guvenis, M. and Coyle, M. (1992). Critical success factors for construction
projects. Journal of Construction Engineering and Management, 114(1): 94–111
Enshassi, A., Al-Hallaq, K., and Mohamed, S. (2006). Causes of Contractor's Business Failure in Developing
Countries: The Case of Palestine . Journal of Construction in Developing Countries, 11(2): 1–14
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Excellent Service
Culture

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 Excellence service culture is a system of values and beliefs in an

organization that reinforces the idea that providing the customer with
quality service is the principal concern of the business.
 Any policy, procedure, action or inaction on the part of an
organization and its employees contribute to service culture.
 Excellence service culture can be built in an organization only by a
sustained and consistent effort over and extended period. It cannot
be introduced by top management only. Furthermore, service culture
requires sustained attention to:
 Hiring right people (competent)
 Retaining the best people (ethics)
 Developing the people to deliver service quality (training)
 Providing needed support system to people (technology)
Reference:
Ziethalm,V.A. and Bitner J.L. 2003, Services Marketing, Third Edition, Tata McGraw-Hill, New Delhi
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Manage Contracts
Based on Strategic
Goals of the Develop
Apply Organization Standards,
Value and Procedures and
Ethics Guidelines

Implement Risk Implement

Management Standards and
Benchmarking

Excellent
Service
Key
Culture Improve
Training
Performance Contract
Indicators Management
(KPI)

Address Apply
Misconduct Potential of
and Fraud Technology

Zero Financial
Mismanagement

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Manage Contracts Based Develop Standards,

on Strategic Goals of the
Organization
• identify the vision,
mission and objectives of
the organization
• based on the policies and
strategies
• avoid wasting time and
plan projects effectively
• value for money
Procedures and Guidelines
• laws and regulations
based on the policies and
strategies
• documented, reviewed and
updated systematically
• task force
• Internal Audit Unit (UAD)

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Implement Standards and Improve Training Contract

Benchmarking Management

• organizations should • training program

seek recognition through • transparency and
certification accountability
• introduce award and
recognition

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Apply Potential of Zero Financial

Technology Mismanagement (ZFM)

• development of • enhance the effectiveness

information and and quality of service
communication • monitoring
technology (ICT)

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Address Misconduct and Key Performance Indicators

Fraud (KPI)

• awareness programs • determine the main areas

• identify weaknesses and of achievement
areas of the organization • strengthen or review the
• action against the culprits strategic KPIs
of corruption and fraud • measure the achievement
• Management Integrity of strategic KPI
Committee

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Implement Risk Management Apply Value and Ethics

• risk assessment • create an environment

• analyze which can produce
excellent work culture
• appropriate action
• awareness and training
• review programs
• Hiring right people
• Retaining the best people

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Case Study
This research was conducted by distributing a set of the
questionnaire to the persons in the construction industry at
Centre Region, including:
 Government agencies
 Consultant
 Academician
 Contractor class A companies are registered with Pusat
Khidmat Kontraktor (PKK), Grade 7 contactors which
registered with construction industry development board
(CIDB)

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Analysis
Relative Importance Index (RII)
Relative Importance Index (RII) method to
determine the relative importance of best
practices of contract management
approach towards excellent service
culture in construction project
Relative Importance Index (RII) = W
(A * N)

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Analysis
Average Index (AI)
In average index analysis, the results further
summarized to obtain the level of problem. The
questionnaires are based on five-point scale starting
with 5 for strongly agree to 1 for not agree. The average
index analysis for each variable can calculate by using
formula by (AlHammad,A.Mohsen and Assaf S, 1996)
as below:
Average index (A.I) = ∑aixi
∑xi
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Problem in General Aspect

Categories 1: Problem in General Aspect

No. Problems 1 2 3 4 5 Average Rank

Index
1 Conflicts between contractor and other parties 5 34 73 145 44 3.63 1
(consultant and client)
2 Problems communication and coordination by 0 39 97 131 34 3.53 2
contractor with other parties
3 Inadequate experience of consultant 29 53 82 106 29 3.18 5

4 Lack of staff and labors 19 53 92 92 44 3.29 4

5 Changed conditions/differing site conditions 5 39 116 106 34 3.42 3

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Problem in Quality Aspect

Categories 2: Problem in Quality Aspect

No. Problems 1 2 3 4 5 Average Rank

Index
1 Project done not follow owner’s specification 24 73 92 92 19 3.03 5

2 Contractor disregards quality of material in the 15 39 106 126 15 3.29 2

way to get profit
3 Ineffective planning and scheduling of project 24 34 92 140 10 3.26 3
by contractor
4 Change materials order by owner during 10 44 111 102 34 3.35 1
construction
5 Low productivity level of labors 15 58 116 92 19 3.15 4

6 Lack of construction materials and 15 82 126 73 5 2.90 6

machineries

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Problem in Design Aspect

Categories 3: Problem in Design Aspect

No. Problems 1 2 3 4 5 Average Rank

Index
1 Contractor takes control of design compare to 10 53 131 77 29 3.21 3
consultant
2 Consultant submits construction drawing late. 15 44 116 87 39 3.31 2

3 Contractors always do an additional works 19 44 140 73 24 3.13 4

compare with consultant
4 Mistakes and discrepancies in design 10 34 121 111 24 3.35 1
documents
5 Owner less involve in controlling design 29 73 87 82 29 3.03 6

6 Insufficient instruction and information in the 29 29 135 87 19 3.13 5

contract specification, drawing and design

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Problem in Financial Aspect

Categories 4: Problem in Financial Aspect

No. Problems 1 2 3 4 5 Average Rank

Index
1 Contractor does not having good cash flow or 19 24 106 126 24 3.37 2
good financial planning
2 Contractor’s submit claims for items not 10 53 116 92 29 3.26 4
clearly stated in the contract documents
3 Quantity Surveyor/ Consultant does not 10 53 165 68 5 3.02 6
estimate work done and material on site
correctly
4 Sometimes progress payment for contractor 10 48 102 121 19 3.31 3
not in time
5 Actual price for project higher than owner’s 5 39 121 97 39 3.42 1
target price
6 Delay in progress payment by owner to the 5 53 131 87 24 3.24 5
contractors

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Problem in Time Aspect

Categories 5: Problem in Time Aspect

No. Problems 1 2 3 4 5 Average Rank

Index
1 Insufficient time to prepare tender documents 29 68 111 87 5 2.90 3

2 Insufficient time to evaluate tenders 34 73 106 82 5 2.84 4

3 Time is limited to establish if using design and 19 92 140 29 19 2.79 5

build contract
4 Project finish not in time as agreement 24 53 116 82 24 3.10 2

5 Delays in commencing work because under- 15 53 116 87 29 3.21 1

estimated time needed to obtain statutory
approvals.

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Analysis of Rank the Problems
Percentage of “rank the problems”

No. Problems Frequency Percentage

1 Problem In General Aspect 30 48

2 Problem In Quality Aspect 6 10

3 Problem In Design Aspect 16 26

4 Problem In Financial Aspect 8 13

5 Problem In Time Aspect 2 2

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Action Plan
RII
Frequency
Priority Item (%)

SDA DA N AG SAG
Address Misconduct, Discrepancy
1 and Fraud 18 38 76 160 8 76.53

Improve Training Contract

2 Management 18 38 78 158 8 74.80

3 Key Performance Indicators (KPI) 12 72 114 102 - 72.93

4 Apply Value and Ethics 20 52 106 118 4 66.80

5 Implement Risk Management 8 96 70 126 - 66.67

Implement Standards and

6 Benchmarking - 30 46 224 - 62.27

Manage Contracts Based on Strategic

7 Goals of the Organization - 34 16 218 32 60.93

Develop Standards, Procedures and

8 Guidelines - 42 20 212 26 60.40

9 Apply Potential of Technology - 42 20 212 26 60.40

Zero Financial Mismanagement
10 - 42 20 212 26 60.40
(ZFM)

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Conclusion
Contract management in the public sector is a critical aspect
to be seriously considered in achieving the objectives of a
project. All tasks must be carried out with integrity and
accountability, and required knowledge, skills and
compliance with laws and regulations. Therefore, each
person needs to understand the commitment and sustained
strategies that have been designed and implemented by
governments and organizations to improve the effectiveness
in terms of contract management and quality of service. The
organization also needs to maintain excellence contract
management and quality of service through excellent service
culture in organization.

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Contract Management for Construction Project via Excellent Service Culture

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THANK YOU

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References
 Fundamentals of Building Contract Management By Thomas E. Uher, Philip
Davenport (2009)
 Practical Contract Management By Ray Carter, Steve Kirby and Alan
Oxenbury (2012)
 Contract Management 43 Success Secrets - 43 Most Asked Questions On
Contract Management By Linda Taylor
 International construction contract management By D. Bryan Morgan (2005)
 Modern Construction Management By Frank Harris, Ronald McCaffer, Francis
Edum-Fotwe (2006)
 Civil Engineering Construction Contracts By Michael O'Reilly (1999)
 Lean Culture for the Construction Industry: Building Responsible and
Committed Projects Teams By Gary Santorella (2010)
 Organizational Behaviour: Managing People and Organizations By Ricky
Griffin, Gregory Moorhead (2014)
 The Six Principles of Service Excellence By Theo Gilbert-Jamison (2005)
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