Chapter 5
Chapter 5
• Tendering process
• Tender and Contract Documents
• Insurances and bond
• Progress payment
• Variati on order
• Extension of ti me
CONTRACTOR REGISTRATION
to a contractor to undertake the production.
Tender process
1. Appropriate contract 6. Receipt and opening tenders
procurement method selection 7. Evaluation of tenders
method 8. Tender acceptance
2. Tender lists development
3. Tender document preparation
4. Calling of tenders
5. Preparation and submission of
tenders
Types of tender
Open tendering
- The main tendering procedure employed by both government and private
sector.
- The procedures of inviting offers from registered contracting firms
through tender advertisement normally in the general press.
- A tender advertisement provides information such as outline details of
the work, its scale and programme, tendering period, class or grade of
registration of contracting firms eligible to tender, etc.
- All eligible contractors have the opportunity to tender and maximum
competition may be achieved.
Types of tender
● Normally before calling for tender, a Table Tender Document (TTD) will be
Form of Tender
A form used by tenderer to participate in the tender by filling up important
information including the tender price and time completion.
Letter of Acceptance
● A letter by client to state his acceptance towards the tender offered by a
Articles of Agreements
It describes in general terms the parties, the contract works and the price,
and evidences the intention of the parties to be bound.
● Brief description of Project
● Location of Site
● Commencement Date
● Name of the parties
● Obligation of parties
● Price to be paid
● Name of consultants
● Time for Completion
● List of contract documents
Why use Standard Form of Contracts?
● Compromise solution
● Risks are allocated relatively fairly
● Time-tested
● Certainty in meaning
● Saves time and costs
Conditions of Contract
● Certain design and build contracts replace the documents listed above
with three alternative documents comprising the 'Employer's
Requirements’ issued by the employer and the 'Contractor's Proposals'
and the ‘Contract Sum Analysis’ submitted by the contractor.
TENDER & CONTRACT DOCUMENTS
Obligations of Parties
Key Dates in a Construction Contracts & Obligations of Parties
PERFORMANCE BOND
r r e v o c a b l e banker’s guarantee
● Parent company guarantee or insurance guarantee may be an acceptable
alternative in some instances
● The value of performance security typically required by employers in
Malaysia is 5% to 10% of the contract price
● Employer may require design bond as additional security against any
defect in the design.
What is Performance Security/Bond?
PERFORMANCE BOND
liability and enforceable by the employer in the event of the
contractor’s default, repudiation or insolvency.
● In essence, a performance bond is a mean of guaranteeing to the
employer the financial viability of the contractor’s ability to perform
his obligations under the engineering and construction contract.
● PWD 203A : Clause 13
The contractor shall provide a Performance Bond/Performance
Guarantee Sum (on the date of Site Possession).
● The amount is equivalent to 5 % of the total Contract Sum.
● Duration of liability: the date of Site Possession until 12 months after
the expiry of the Defect Liability Period or the issuance of the
Certificate of Completion of Making Good Defects, whichever is the
later.
Insurance
INSURANCE
Category 1: Liability based
Category 2: Loss based
● Insurance Category 1: Liability based insurance
The insurer essentially agrees to indemnify the insured against damages
which becomes payable by the insured to a third party.
Usually the insured is indemnified for all damages payable to the third
party as well as the legal costs involved.
Examples: Third Party Liability Insurance, Workmen Compensation
Insurance, Professional Indemnity Insurance, etc.
Insurance
INSURANCE
Examples: Contractor’s All Risk (CAR) Policy, Erection All Risk Policy, etc. that are
normally taken out in the joint names of the employer, contractor (and sub-
contractors in some cases).
Provisions in PWD 203A:
Clause 14, 15, 16, 17 & 18.
Insurance
INSURANCE
Clause 16 : Indemnities to government in respect of claims by
workmen
Clause 17 : Employees’ Social Security Act, 1969
Clause 18 : Insurance of Works
ADVANCED PAYMENT
= [Contract Sum – (Prime cost sums +
Provisional sums)] x 25 %
Interim Payment
PROGRESS PAYMENT
conducted on a monthly basis.
● Stage payments are fixed installment sums payable to the contractor
upon the achievement of certain prescribed milestones.
● General view is that stage payments offer the benefit of certainty in the
sums payable to the contractor and savings in professional fees and time.
NB: Stage payments may not be appropriate for contractors with poor cash
flow.
PS & PCS
VARIATION ORDER
Design changes due to the request of the client
● Omission of work
Compliance to the rules, regulation or law
Compliance to the client’s instruction
VARIATION ORDER
Due to failure in acquiring permission to carry out soil investigation, the scope
of work stated in the contract different with the actual soil condition
Disturbance exists during excavation work such as boulders that could not be
identified earlier.
● The employer may take over the works when the works have been
completed in accordance with the contract and the relevant certificate has
TERMINATION
(b) Events of default entitling the party to terminate (distinguish
defaults capable of being remedied and non remediable defaults)
(c) Remedies available to the non-defaulting party in the event of
termination
Termination
TERMINATION
(b) The employer is entitled by himself or employ others to complete
the outstanding works
(c) The contractor is entitled to be paid the amount representing the
value of the works done to-date and loss and expense suffered by
the contractor resulting from the termination
(d) The contractor is entitled to be returned any performance security
furnished to the employer