Suggested Practices for Projects at PIK2 (Preliminary List)

Description Current Provision / Practice Suggestion

1. One works contract is split Most works contracts are awarded with To consider monthly progress payment based
into numerous SPKs stage payments. on percentage of work done instead of stage
payment.
1 works contract is split into numerous SPKs
to ease the Contractor’s (WCon) cashflow. 1 SPK for 1 works contract - this saves the
paper works and administration of many works
Increased workloads – too many payments contracts.
to deal (e.g. 1 works contract is split into 10
SPKs, each with 10 stage payments), Works contract to provide for phase
administration of contract deliverables. completions in order to deal with partial take
over, release of retention and commencement
of DLP for units handed over ahead of others.

2. Material Hedging Long list of materials procured under this This extensive list of hedging materials exists
arrangement. for a reason, hence unable to reduce.

The procurement process of these suppliers Direct payment to suppliers in numerous

can be very taxing viz. comparison of quotes, occasions is necessary to ensure no supply
negotiation of terms and preparation of disruption which would result in project
MOUs; and some involve direct payment to slippage.
suppliers and subsequent deduction from
WCon – risk of making mistakes in payment The procurement role of these hedging
and deductions. material, as well as materials SBO, can be
taken over by an independent department
(e.g. a centralised purchasing department)
which supports all projects.

We might be able to negotiate for:-

 better rates (than the existing) with the

combined volume that is huge and
attractive to the suppliers; and

 financial security (e.g. bond) or material

vesting certificate from the suppliers for
any advance payment made.

A disclaimer clause shall be introduced to the

works contract to expressly exclude the
Employer from any liability for late or non-
delivery of materials by the MOU suppliers.

3. Bills of Quantities Quantities are provided in the tender Pricing Section is breakdown into detailed
documents for “Drawings and Spec” building elements without quantities provided.
Contract.
Tenderers to provide detailed breakdown of
The preparation of BOQ (min 1 week), quantities as part of their tender submissions.
discussion and agreement of the quantities Verify and compare quantities of works items
with tenderer (1 week) can be very time that are priced extremely high or low at the
consuming. tender evaluation stage.

This practice is very common in Singapore for

projects up to S$ 350mil in value.

4. Identities of tenderers All invited tenderers attended the aanwijzing Tenderers get to know their direct competitors
at the same time. – risk of collude (alliance) tender.

A Berita Acara (BA) Aanwijzing (with the Tender briefing and site show round should be
attendance list) was issued to all tenderers conducted with one tenderer at each time.
for records after the briefing.
To shorten the amount of time spent on tender
briefing and site show round:-

 Issue contract particular and conditions of

tenderer to tenderers in advance (and not
to brief them at the Aanwijzing);

 1 team can be assigned in the office and

another at site for the purposes of tender
briefing and site show round respectively.
 Description Current Provision / Practice Suggestion
5. Contractor’s All Risk No CAR and 3rd Party Liability insurance The main purpose of CAR is to cover the
(CAR) Insurance policies are required owing to the nature of Works itself as well as any injury to the 3rd
the project e.g. low rise, low risk. party.

Potential risks include:-

 Damages or injury to 3rd party e.g.

construction of subsequent phase / batch
adjacent to the existing (completed) unit;

 Damages to the partially completed works

during cessation of work (e.g. cessation
arising from the termination of WCon).

Low risk does not mean zero risk.

Majority of the WCons are small timers, hence

might not be able to shoulder the financial
consequences (e.g. cost to re-build,
compensation to 3rd party) in the event of
accident.

It increases the project cost but insignificant

(e.g. 0.1% of Total Sum Insured), hence worth
the cost. Employer-procured CAR policy (e.g.
blanket policy) can be an option (in lieu of
being procured by each and every single
WCon) to minimise cost.

6. Minimum number of No requirement on the minimum number of The number of tenderers to be invited shall
tenderer tenderers under the company policy. correspond with the estimated value of the
proposed Works. This is to anticipate for
In actual practice, a minimum of 3 tenderers tender withdrawal and to ensure a good range
(regardless of the value of proposed Works) of tender offers is received.
are invited for participation in the tender.
For example,

 Min 3 tenderers for estimated contract

value below IDR 7 billion;

 Min 6 tenderers for estimated contract

value between IDR 7 billion and IDR 70
billion; etc

 Min 8 tenderers for estimated contract

value above IDR 70 billion.

There is also a necessity to explore and pre-

qualify new contractors of various size and
expertise to cater for future expansion and to
test their price range.

7. Defects Liability Period 100 calendar days is stipulated in the Berita The DLP under the construction contract shall
(DLP) Acara Aanjiwzing and BA Negosiasi Harga be at least 30 days longer than the same
Penawaran. provided under the Sale and Purchase
Agreement (SPA).

Also, albeit that our SPA does not spell out any
timeline for ASG to act on the defects notified,
it is wise to:-

 define a timeline for the WCon to act on the

defect list; and

 provide the rights in the works contract for

the Employer to appoint other contractor to
make good should the WCon fails to act
diligently.
 Description Current Provision / Practice Suggestion
8. Discrepancy between A clause is provided in the Berita Acara For the avoidance of future dispute, it is
documents Aanwijzing to address any discrepancy or suggested to insert the following paragraphs to
inconsistency between documents as the existing provision (e.g. before and after the
follows:- current provision):-

“Jika terjadi perbedaan spesifikasi, “The WCon shall examine and forthwith
ukuran, jenis bahan antara gambar, notify the Employer of any discrepancy
RKS dan spesifikasi, maka ditentukan or inconsistency in or between any of
pada spesifikasi yang tertinggi” the documents”.

and

“The cost of complying with the higher

specification shall deem to be included
in the tender offer. In the event that the
Employer decides to proceed with
specification of a lower grade, the cost
saving arising from such decision shall
be adjusted in the final account”.

9. Grounds for Extension of BA Aanwijzing and SPK are silent on the Introduce grounds (in broad description) which
Time (EOT) EOT grounds. entitle the WCon for EOT in the BA Aanwijzing
e.g. delay caused by the Employer, neutral
EOT is granted via the issuance of an delay.
addendum to SPK e.g. changes to the
principal contract which shall be carefully WCon is usually entitled to loss and expense
drafted in a proper legal form. for delay caused by the Employer.

Such addendum is silent on the loss and Addendum to SPK, and/or notice to request for
expense which the WCon might be entitled. EOT shall expressly deal with WCon’s zero
entitlement to loss and expense.

10. Conditions of Tender, No CoC (e.g. FIDIC Minor Works, In-House The conditions of tender and contract
Contract Particulars, Conditions of Contract, etc) is used. particulars which are pretty standard for
Conditions of Contract projects of the same nature shall be issued
(CoC) Conditions dealing with payment terms, earlier together with the tender drawings.
hierarchy of documents, tender submission,
etc are issued as a part of the BA Aanwijzing This allows the tenderers to study the
after the tender briefing and site show round. conditions prior to the tender briefing, and
shorten the time of tender briefing (e.g. less
items to brief). It is also a good practice to see
these information as early as possible.

Use of short form of CoC for projects with

estimated contract sum below IDR 7 billion to
address items such as scope of work, WCon’s
obligations, insurance, bond, variations,
extension of time, shop drawings, defects
liability period, terms of payment, LD, non-
assignment of works, termination, governing
law, priority of documents, dispute resolution,
etc.