Comparison Between PWD Form 203A and PWD Form Design and Built

Abstract

All standard forms of construction contract contain clauses for determination of contracts. For example, PWD 203A forms, PWD Design and Built, PAM 2006 form and etc. It is the same with the PWD 203A form where the PWD 203A (Rev. 10/83) has been replaced by the PWD 203A (Rev. 2007). These are the traditional forms of contract based on drawings and specification (203) or bills of quantities (203A) produced for use in public sector or government projects in both building and civil engineering contracts. Generally it can be said that a majority of the risks have been transferred to the contractor under these standard forms of contract and this remains true with the 2007 version. The standard form is generally used in conjunction with the accompanying standard administrative forms which have been produced specifically for use with the contract forms and in many instances enhance the obligations contained within the conditions of contract. However, based on a preliminary study that had been conducted for the research, it has been found out that both of the employers and contractors may not actually realize their rights, procedures and effects in determining the contractor’s employment under the new forms. Hence, this study will focus on comparison between PWD 203a and PWD Design and Built, procedures and effects as a result of determination of the contractor’s employment under the forms.

1.1 Introduction

A contract is a legally binding agreement between the parties identified in the agreement to fulfill all the terms and conditions outlined in the agreement. A prerequisite requirement for the execution of a contract, amongst other things, is the condition that all the parties to the contract accept the terms of the claimed contract. Construction contracts are basically different from major service contracts. There are various types of construction contract. The choice of contract depends on the basis of pricing and the contract strategy that best meets the project objectives. The various types offer different ways of handling pricing, risk transfer, responsibility for performance, cost certainty, and complexity. The purpose of standard forms of contract is to facilitate the contractual arrangements between actors in a project. Standard forms of contract are readymade terms and conditions when making a contract (Kwakye 1997). The standards vary from country to country and from one type of project to another. These standards are generally used and accepted by different contracting parties. It would be practically impossible to devise a standard form of contract that would take account of all eventualities that might occur in a construction project (Andersson and Gunnarsson, 2002). Standard forms of contracts are often criticized as being a compromise containing some defective aspects. However, the advantage of their adoptions is that with the passage of time, persons using them become familiar withtheir overall content as well as their particular strengths and weaknesses (Kwakye 1997).

1.2 Comparison between PWD (203a) and PWD (D & B)

There are different specialists or parties during the process of building procurement. It leads to the fragmentation process in construction industry (Murdoch and Hughes, 2000). Each project participant has particular aims and objectives and it is rare to find contract structures that encourage harmony among these aims. According to the scale and requirement of the project the parties may differ in types of contract. Figure 2 provides parties’ organization in PWD DB form of contract and figure 3 shows parties relation in PWD 203A form of contract.

Client

Project Director

Turnkey Contractor

Architect

(project management consultant) Joint Venture Contractor

Architect

Project Engineer

Design and Implementation Project Manager

C&S Builders

Validation Team

M&E Engineer

Accreditation Team

Figure 1: Organization chart of PWD DB form of contract

C&S eer

Client

Superintending Officer

Contractor (director)

C&S Engineer

Quantity Surveyor

Assistant of Quantity Surveyor

Architect

Safety Officer

Executive

Nominated Sub-Contractor

Director

M & E Services

Site Supervisor

M&E Engineer

Assistant of Site Supervisor

Figure 2: Organization chart of PWD 203A form of contract

MAIN PARTY Client

ROLES

PWD D & B

PWD 203A

Design Leadership

Project director Advisory group, feasibility consultant End-user, general public, tenant -

Management

-

Design

-

Administration

-

Superintending Officer Advisory group, feasibility consultant End-user, general public, tenant Architect(management function) Consultant team manager Architect(design function) Architect, contract administrator, supervising officer, project administration

Site inspector Overall responsibility

Consultant(architect), main contractor, joint venture contractor, design and build project manager Contract manager, project engineer, supervision team, builders Architect, C & S sub-contractor, M & E sub-contractor, supplier

Representative Advisor Stakeholder

Consultant

Contractor

Constructor’s staff

Partial responsibility

Clerk of work Builder, main contractor, principal contractor, executive director Project manager, site supervisor, builders

C&S sub-contractor, M&E sub-contractor, quantity surveyor, supplier

Table 1: Comparison of PWD DB and PWD 203A form of contract parties

According to table 1; PWD DB. form, there is no consultant party which directly would be employed by the client. In fact, the client employs the contractor to design and build which means the consultant is included in the package of the contractor. Therefore the design leadership, design management, administration team and site inspector roles are under contractor’s responsibilities. The contract management is the method in use in PWD DB. The contract manager controls, monitors and maintains the project since the earliest stage of a project.

One of the benefits for the client is that the client does not have to be so active during the project, because most of the responsibility of the project is allocated to the contractor (Söderberg 1993). Architect (management function), consultant team manager, design manager, architect (design function), engineer, consultant, contract administrator, supervising officer, planning supervisor, project administration, clerk of work are the roles involved in consultant which are the subordinates of contract manager. In PWD DB the contractor is compensated for all costs incurred. Also failing such deductions will be recovered from the performance bond or as a debt from contractor. Identifying and controlling (by avoiding or minimizing) the risks to a project is a vital part of managing it. This includes those risks that have been transferred to the contractor under PWD DB contract. The reason of popularity for using this type of contract is that the client does not take the risk as much as the contractor has.

Hence the contractor consists of a contract manager to control over the cost and time. However in PWD 203A the client employs consultant separately which is directly linked. In this type of contract there is a separation of construction and design. There is a designing team, which is contracted by the client, and they shall provide the contractor with a complete design (Ashworth 1991). The contractor subordinates include executive director who is the person in charge at site for complementation. Any problem happens during project development or any difference between designed and built documents in details, the executive director informs the superior and handles all.

The executive director includes site supervisor, quantity surveyor and safety officer who occupy positions at the site of construction. The quantity surveyor monitors all required materials’ quantities, proper cost and suggests to the client. The site supervisor manages all works, workers, daily reports (site dairy) and the quality of work. Arranging the masonries, material maintenance and all machines’ installation are the site supervisor’s responsibilities. In occurrence of a problem, they refer to the project manager for handling. The different method of organizing and maintaining the project is used in PWD 203A which is project management. The project manager controls and monitors the work through schedule of planning during constructing. The important aspect in PWD 203A is bills of quantities. Therefore the contractor has the responsibility to complete the work according to the requested quantities referred to the contract documents. In PWD 203A the government is entitled to deduct such costs, expenses and on-cost charges or any part from any monies due to the contractor or to recover it from performance bond as debt due from the contractor. That is the reason of being popular for this type of contract for government sector in Malaysia.

1.3 Categories of Comparison

In this report, the comparison will be carried out based on these categories: 1. Parties who involves in payment 2. Type of payment 3. Interim payment stages statement 4. Advance payment 5. Procedure of Interim Payment 6. Schedule of issuing interim certificates 7. Requirement upon issuing interim certificates 8. Contractor’s obligation in applying payment 9. Procedure of payment upon completion 10. Wages of workmen affects the final payment 11. Retention fund/performance bond 12. Payment for liquidated damages 13. Payments upon termination 14. Performance bond 15. Direct payment to the third party 16. Late payment by government/employer

1.4 Comparison between PWD Form 203A and PWD Form Design and Built No

Item

PWD 203A

PWD DB

1

Parties who involves

parties involves

parties involves:

in payment

1. Contractor

1. Contractor

obligation:

2. Superintending Officer(SO),

2. Project Director (PD)

or SO’s representatives

3. Employer

3. Employer 2

Type of payments

Stages

Advance payment and stages

3

Interim payment

Stated in appendix

Stated in appendix

No advance payment

25% of the value of the contract

stages statement 4

Advance payment

sum 5

Procedure of interim

Procedure:

Procedure:

payment

1. Contractor shall complete the

1. Contractor shall submit

work as in Appendix 2. Regarding to the complete work, SO shall make valuation of the complete work in 14 days

interim payment application 2. PD consider and ascertain the amount in 28 days 3. PD issuing the interim payment certificates

3. SO issuing interim certificates 4. Government pays the 4. Government pays the contractor base on interim

contractor base on interim certificates

certificates

6

Schedule of issuing

14 days

28 days

Schedule of interim

Stated in appendix, if it not stated

Stated in appendix, if it not

certificates payment

= 30 days

stated = 30 days

interim certificates 7

8

Contractor’s

To make a works is done and SP

obligation in applying can make a valuation payment

1. The value of works done and properly executed 2. The amount on any valuation of variations or the instructions by the PD (clause 24 3. The amount in regard to the expenditure of provisional sums executed or expended (clause 25) 4. The value of any goods or unfixed materials delivered to or adjacent to the site intended for use or to be incorporated into the works 5. The upervision reports as required by the PD under clause 13.1

9

Procedure of payment 1. Within 3 month after the upon completion

1. Within 3 month after

issuance of the certificate of

issuance of the certificate of

practical completion, the

completion of making good

contractor shall submit

defects or the certificate of

application to enable the final

completion of maintenance

account prepared by the SO.

(if any), Contractor shall

If contractor failed, SO shall

submit to PD a statement of

forthwith make the

the final account showing in

assessment based on available

detail the value

document for the final account

2. Within 3 months after the

2. PD proceed to verify the final

expiry of the defects liability

account based on the

period for the whole of the

document which is given by

works or 3 month after the

contractor

issue of the certificate of

3. If final account is verified,

completion of making good

PD shall issues Final

defects under clause 48

certificate which consists of

hereof, SO shall issue the

balance sum

final certificate that consists

4. Final payment is paid by the

of supported documents, full

government to the contractor.

particulars complete with

Final payment will not be

receipt, vouchers, final

paid unless the contractor

valuation, any amount

satisfied the SO in his

determined in clause 31.1

obligation due to the

3. Final payment is paid by the

workmen

government to the contractor. Final payment will not be paid unless the contractor satisfied the SO in his obligation due to the workmen

10

Wages of workmen

Wages of all the workmen has to

Wages of all the workmen has to

affects the final

be paid and all contributions

be paid and all contributions

payment

under the Employment Act 1955,

under the Employment Act

The Employee;s Social Security

1955, The Employee;s Social

act 1969, The Employee’s

Security act 1969, The

provident Fund Act 1991 and any

Employee’s provident Fund Act

other laws relevant to the

1991 and any other laws relevant

employment of workmen have

to the employment of workmen

been paid.

have been paid.

11

12

Retention fund

No retention fund is applied in

No retention fund is applied in

government standard form.

government standard form.

Payment for

If the contractor fails to complete

If the contractor fails to complete

liquidated damages

the works by the date for

the works by the date for

completion or within any

completion or within any

extended time granted pursuant to extended time granted pursuant clause 43, the SO shall issues a

to clause 49, the PD shall issues

certificate of non completion to

a certificate of non completion to

the contractor and notice the

the contractor and notice the

intention of the Government to

intention of the Government to

impose liquidated and ascertained impose liquidated and damages that stated in appendix.

ascertained damages that stated in appendix.

13

Payment upon

Base on reasonable valuation. If

Base on reasonable valuation. If

termination

contract is terminated under

contract is terminated under

clause 50 and 52, the amount to

clause 50 and 52, the amount to

be paid (in so far as such amounts be paid (in so far as such or items have not already been

amounts or items have not

covered by payments on account

already been covered by

made to the contractor) shall be

payments on account made to the

the following:

contractor) shall be the

a. The value of all work carried

following:

out up to the date of termination

a. The value of all work carried out up to the date of termination

b. The amounts payable in

b. The amounts payable in

respect of any preliminary

respect of any preliminary

items so far as the work of

items so far as the work of

service comprised therein has

service comprised therein

been carried out or performed

has been carried out or

and a proper proportion of

performed and a proper

any such items which have

proportion of any such items

been partially carried out or

which have been partially

performed

carried out or performed

c. The cost of materials or goods

c. The cost of materials or

reasonably ordered for the

goods reasonably ordered for

works which have been

the works which have been

delivered to the contractor or

delivered to the contractor or

of which the contractor is

of which the contractor is

legally liable to accept

legally liable to accept

delivery

delivery

d. A sum being the amount of

d. A sum being the amount of

any expenditure reasonably

any expenditure reasonably

incurred by the contractor in

incurred by the contractor in

the expectation of completing

the expectation of

the whole of the works in so

completing the whole of the

far such expenditure has not

works in so far such

been recovered by any other

expenditure has not been

payments

recovered by any other

e. The reasonable cost of any protection works and removal

payments e. The reasonable cost of any

of equipment and site

protection works and

facilities pursuant to

removal of equipment and

termination as provided under

site facilities pursuant to

the contract.

termination as provided under the contract.

14

Performance bond

If the contractor fails to performs

If the contractor fails to performs

any of his obligations under the

any of his obligations under the

contract and such failure is non

contract and such failure is non

remedied in accordance with this

remedied in accordance with this

contract, the government shall be

contract, the government shall be

entitled to call upon the

entitled to call upon the

performance bond, wholly or

performance bond, wholly or

partially.

partially.

The performance bond may be

The performance bond may be

released or refunded to the

released or refunded to the

contractor upon the completion of contractor upon the completion

15

works.

of works.

Direct Payment to the

Government shall paid the

Applied in direct payment to the

third party

nominated sub

contractor’s consultants. For the

contractor/suppliers according to

purpose of payment to the

interim certificates/final

consultant, the contractor and the

certificates

consultant shall enter an irrevocable Deed of Assignment for the assignment of any money due to the consultant to be paid directly by the government.

16

Late payment by employer/government

No provision

No provision

Conclusion

In conclusion, the main differences in construction contract are the extent to which the client is responsible for the management of the project, risk allocation and the internal responsibilities of the project members. According to the comparison which is given above, the roles link are depended on the type of contract and it would lead the liabilities and risk to the parties. In PWD DB, contractor’s responsibilities vary from PWD 203A. The contractor’s responsibilities in PWD DB are the design leadership, design management, administration team and site inspection roles. The traditional contractual arrangement sets out the legal relationship the parties wish to establish and the rights, obligations and procedures for resolving contractual disputes .There are several factors that affect what type of contract is suitable for a certain project such as the amount of involvement from the client, the location of the project, technical complexity. The project manager controls and monitors the work through schedule of planning during constructing.

The trend of the faster development of the construction industry in Malaysia make Design & Build contract more familiar and efficient because it may avoid the delay in completing the project. The increasingly of complex projects, and the search for quicker and cheaper solutions and achievement of value for money will influence the need for new organisational and management methods. This will have a positive influence in terms of the integration of main project stakeholders and phases, as well as the ultimate success of the entire construction project.

In an initial stage of the design phase, the client has to adopt a suitable contractual arrangement for the project and a corresponding standard form of contract in order to attain the proper management and organization in project.

References Malaysian Construction and Contract Law, Retrieved from http://simplymalaysia.wordpress.com/standard-forms-of-contract/domestic-standard-contractforms/p-w-d-form-of-contract-203-2007/

Determination Of Contractor’s Employment Under PWD 203a (Rev. 2007) And PAM2006 Standard Forms Of Contract Retrieved from http://fab.utm.my/files/2012/07/ThesisUGBQS2010ChenKianMun.pdf