THE PROCUREMENT SYSTEM PRACTISE IN THE MALAYSIAN CONSTRUCTION INDUSTRY DURING PANDEMIC

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PRACTISE I

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SIR ABDUL 'IZZ BIN MOHAMAD KAMIL

UiTM Shah Alam

GROUP MEMBERSAP2244B

2021112529 2021124453

NURSOFIAH BINTI NUR FATIN THARWATI
MOHAMAD NIZAL HUDA BT MOHAMMAD

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EIAN FARAHIN NUR ATIQAH SYUHADA
BT JA'AFAR BINTI ABD SALAM

ALYA NASRIN
BINTI HUSSIN

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1.0 4.0

Introduction Data

Analysis

2.0 5.0

Literature Conclusion

Review

3.0 6.0

Research References

Methodology

1.0 INTRODUCTION
The selection of the most appropriate procurement method is important
for both the client and other project participants since it is an important
factor that contributes to overall client satisfaction and project success. This
decision will be influenced by several aspects including cost, time, and
quality, which are typically considered as the most important criteria for
clients seeking to achieve their final result (Ramanathan & Narayanan,
2016). The selection on the procurement method to use to carry out a
construction project is important. Though it may not always result in a
successful project, additional aspects that are taken into account might
impact the project's success.

When it comes to construction projects, the procurement method has a
significant impact on the completion of the project. Furthermore, the
procurement process employed had a significant impact on cost and time
overruns. Additionally, inadequate procurement method selection was a
major contributor to the construction industry's bad performance. This
brings about the effect on project delivery when selecting a particular
procurement method type for a project. The client's selection of the
appropriate procurement method for a particular project has a great
influence on the project's success (Zhi Shan et al., 2019).

Following that, the World Health Organization's (WHO) Emergency
Committee announced the ongoing COVID-19 outbreak on January 30, 2020.
Covid-19 is a pandemic that is causing massive worldwide disruption forcing
lockdowns in several countries including Malaysia in a further effort to
prevent the virus from spreading. The Malaysian government has proposed
the Movement Control Order (MCO) as one of the lockdown alternatives
that starts on March 18, 2020. As a result, the MCO has had a great
influence on Malaysia's sectors especially the construction industry (Esa et
al., 2020).

Many companies in a variety of industries were forced to close down as a
result of this pandemic. The construction industry has also been completely
shut down despite being a huge growth driver in the economy. Until further
notice, all developments and projects have been postponed (Gamil &
Alhagar, 2020). As an outcome, this case study was conducted to investigate
current procurement practises in the Malaysian construction sector during
the pandemic. The elements then will also be analysed and compared with
the previous procedures that were used before the pandemic along with the
requirements and characteristics of the procurement system.

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2.0 LITERATURE REVIEW

2.1 PROJECT PROCUREMENT

The selection of an appropriate procurement method is becoming a
more critical issue as clients face difficult decision-making early in the
project's lifecycle. Procurement techniques in the construction industry
can be defined as the organisational structure established by customers
for the management of a building project's design and construction
(J.W.E. Masterman, 2002). Contract strategy is critical in assisting the
client in achieving their objective. Numerous things must be considered
while selecting a procurement path. Different procurement methods are
used for different types of construction projects, and making the right
option can help avoid difficulties and be critical to the project's success.
Clients and contractors are both parties to the procurement process. The
procurement system selection process becomes critical for clients who
are responsible for selecting the most appropriate procurement method
for their construction projects.

Numerous factors influence the procurement procedures used in
construction. The selection criteria for a project's procurement will
impact the procurement system that should be employed. Different clients
have varying wants and objectives, and as a result, building projects vary
significantly in every way, making no single method of procurement ideal
for every project (Nabil I. El Sawalhi & Osama El Agha, 2016). Each
procurement system is chosen for a specific project based on a set of
criteria, which include the following:

complexity of project, time management
time taken to complete the whole project
the quality assurance for the project outcome

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2.0 LITERATURE REVIEW

TRADITIONAL METHOD

It is a conventional method where a client will appoint a
consultant to produce drawings with a complete specification, bills
of quantities and help to appoint and select the contractor to
construct the building.

Clients will take a higher risk because the design will be
produced by the client and the contractor has a low risk because
their only responsibility is to construct the project. Accountability
due to a competitive selection. Competitive equity. Price certainty
at the award of the contract. Variations (changes) to the contract
are relatively easy to arrange and manage; and A tried and test
method of procurement which most of the construction industry
already familiar with the concept (Nabil I. El Sawalhi & Osama El
Agha, 2016)

However the client will have a higher certainty regarding the
final product price, and they have flexibility in choosing the
preferable design. A programme allows sufficient time. Consultant
design is warranted. A client wishes to appoint designers and
contractors separately. Price certainty is wanted before the start of
construction. Product quality is required and A balance of risk is to
be placed between the client and constructor.

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DESIGN AND BUILD CONTRACT

The client benefits from dealing with a single organisation that is
accountable for all parts of the project because the contract
between the client and the contractor has a single point of contact.
As a result, there is a significant reduction in the time and resources
required to contract with designers and contractors separately. It is
possible to attain certainty of ultimate project costs provided the
client's requirements are precisely described, and this cost is usually
lower than when utilising other forms of procurement processes
(Natasa Turina, 2008). Clients must commit to a concept design
early on, frequently before the detailed ideas are done, or else they
may have difficulty producing an effective and comprehensive
brief. Building is simple rather than complex, it does not require
technical innovation suitable to use the design and build method.
Overlap of design and construction activities can reduce project
time; and Improved constructability due to contractor’s input into
the design.

MANAGEMENT BASED

Management Contracting (MC) - a hybrid form being a fusion
between traditional method and construction management. It is
also known as “fast-tracking” procurement approach. Contractor
responsible to manage the other contractor and it is suitable for
mega project.

Construction Management (CM) - The contractor only manages the
project and does not involve in constructing the project. The
contractor acts as a consultant, and even though they manage the
construction works undertaken by subcontractors, they are not
directly responsible for subcontractors.

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2.2 SELECTION OF THE CONTRACTOR

The good performance of every construction project is start with a good
selection of a capable contractor and it is essential since the contractor
is the one is responsible to carry out the activities during the construction
period. According with (Aroujo M.C.B., 2015), the most critical challenge
for any construction company is selecting the right contractor for a
project. This is because, before selecting the contractor there is several
factors to be considered including the sector of application it means is
the contractor’s capability suits for the project, number of decision
makers, selection criteria and what selection methods that is suitable.
Therefore, in order to achieve the goals of the company, it is essential to
employing the right contractor according to the criteria that suits with
the real needs of the company. The most important element that need to
be consider for every contractor is procuring better quality services at a
cost-effective price and on time according to construction planning
because if there is an issue such as delays, it also can lead to several
problems during the construction project. To selecting the contractor,
there are three ways of selecting the contractor which are open tender,
selective tender and negotiated tender.

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2.0 LITERATURE REVIEW

OPEN TENDER

The first one is open tender or can be known as competitive bidding which
means anyone or any construction companies have the opportunities to
bidding. All contractor that wants to involve in this bidding will have a specific
time that have been provided by the client or their consultant team and the
contractor need to pricing the Bills of Quantities according to their own supplier
and gets the best price for the client. For this type of selection of the contractor,
the bidders should be qualified and knows their own capability either they can
carry out the project or not and the contractor should be interested to the
project to avoid delays and circumstances during the process of bidding.
However, it is not suitable for complex project or the mega project because it
requires skills and experience from the contractor to make sure there is no issue
throughout the construction process and the contractor can handle it well when
facing the problem. Furthermore, due to this type is known as general bidding it
requires a clear objective and qualification criteria such as the grade of
contractor suitable for the project and it is to avoid any discrimination in this
industry.

There is a lot of benefits when using open tendering as the way to select
the contractor which are no discrimination and favoritism because everyone is
allow for the tender through the platform that have been decided. Second is,
this way is more competitive from other ways. Usually, the client will spread the
news through online platform which is the most effective way to recognize by
lots of contractor. Therefore, the client can rest because the contractor would
only want to get the best services at a reasonable price. Third is, open tendering
allows the new firms or companies to also trying to bidding of their first time
and entering the market and make a new record for themselves. However, open
tendering also has the bad side of it and one of it is time consuming. It takes
time because it involved a lot of organization to bidding and gets the best price.
The procedure of open tendering is quite strict because whoever that want to
join the bidding especially the serious contractor, they need to follow some
instructions such as pay some amount of money and if they lose, the money will
give it to back to them.

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SELECTIVE TENDER

The second way is selective tender and the contractors are invited through
an announcement in the platform that have been prepared to them but usually it
is through public media and the contractors have been selected into a short list
by the client or their consultant and it is usually based on their qualification and
experience. In other word is, only qualified contractors are allowed to join the
bidding. This type of selecting the contractor is usually used for the important
project that involve a huge amount of money and mega project. For example,
project that involve the Government’s project such as railways, highways,
hospitals or schools. The contractor needs to have experience to construct this
type of project because they knew to handle the situation when problem arise.
The quality of the contractor’s work is guaranteed before the bidding process
start and through prequalification. In this way, there are two types of procedures
to handling this selective tender which are single-stage selective tendering where
this is the most traditional way of the selective tendering procedure. The second
type is two-stage selective tendering, it used when the client needs additional
support at the design stage and usually the contractor only required to get the
best pricing.

The benefits that contractor gets when using this way is, it does not require and
consume a lot of time during the tendering process because the contractors has
been in a short list by the client. The capability of the contractor has been
recognized during the tendering process by the client it is to make sure they can
carry out or construct the project within the client’s wants. Not only that, if during
the tendering process the time can be cut off therefore, the construction stage
can start quickly. The second benefit is, can select a reliable and experienced
contractor for a reasonable price. The prequalification is very important in this
type because the client need to identify who is the most suitable criteria of
contractor. Through this way, it is much easier for the client to evaluate the
contractors because of list of contractors have been in a short-list. Besides that,
this type is also had a disadvantage and one of it is the client can be biased and
the favoritism can happen. This might happen during the prequalification stage
where it is unfair to other companies which maybe they are good and qualified
enough to construct the project.

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NEGOTIATED TENDER

Lastly is, negotiated tender. For this type it is involves reaching out to a
single contractor that is highly suited to a specialist of criteria that the client
wants. This types of selecting the contractor are prevalent within the construction
industry. Usually, the client only invited a trusted contractors to bid in their
project through email or direct contact or maybe the contractor that have
experienced to work together with the client before and they collaboration again
to make it easy because the contractor already gained their trust to the client. If
the client has more than one contractor therefore, the selection will be through
interviewed. It is to determine their possible contribution to the team or their
keenness and the quantity surveyor will help the client during the selection of the
contractor because the quantity surveyor will analyze their final costing of labor,
materials and profits for the whole construction project. At some cases, another
contractor will be selected if the negotiations over prices break down at the early
stage of tendering process. Therefore, it is much easier for the client to select the
best contractor for them.

The benefits of negotiated tendering is the contractor will work as the team with
the client and consultant during the detailed design stage and they might
influence the knowledge and help the consultant team during that stage. Next is,
the contractor usually already has lots of connection of the subcontractor so the
contractor may also introduce some specialist subcontractor to get the best price
as a supplier and so on. The specialists also can help with an idea and give advice
to help the consultant team to produce a good result during the design stage.
Besides that, disadvantage of negotiated tendering is more towards the
contractor’s side which is it reduces the amount of work available to the
contractor. Last but not least, the cost of work is likely to be higher than the cost
of an open tender.

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2.3 TENDERING PROCEDURE

According to Finch (2011), tendering is the process by which bids are invited
from interested contractors to carry out specific packages of construction work.
The term tendering is used to describe all the actions performed by the
awarding authority to produce, publish and manage tendering documents,
while bidding incorporates the effort of interested organizations to win
contracts by responding to tenders (Patil et al., 2016). Tendering is basically an
invitation from the client to the contractors to complete the project at the
allocated cost and within a specified time frame. The major purpose of
tendering process in construction industry is to eliminate bias and fraud in the
awarding of construction contracts (Civil. D, 2021)

After the design stage is finished, clients will need to hire contractors to
build the project. The contractors then need to reply to the client’s request and
from that, clients will choose contractors that offer the best value for money and
fulfils their needs. Client will be able to compare different rates quoted by
multiple contractors for the project. However, the client is not obligated to
accept the cheapest among all tenders or any tender submitted. According to
(Supardi et al., 2021), he can invite tenders from any number of parties he chose
to, and he does not commit himself to continue carry out the project. When
deciding to choose which tender is suitable for his project, he does not need to
accept the highest tender, or any tender and he doesn’t have to provide as to
why he rejects or accept the tender.

Tendering procedure allows client to choose the suitable contractor for the
proposed project that offers the appropriate cost, finish time and experience.
This tender will serve as the basis for a contract between the client and the
contractor. Tendering may also occur between a contractor and a
subcontractor, a contractor and a supplier, a client and a consultant, and
etcetera. In construction industry, tendering should adopt and adhere to the
essential values of fairness, clarity, simplicity, and accountability, along with
emphasising the idea that allocating risk to the party best positioned to assess
and manage the contract is critical for project success (Civil. D, 2021). The
figure below shows the tendering procedure in construction industry.

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PREPARATION The first stage of tendering procedure is the
preparation for tender. In this stage, consultants will
prepare the final completion of drawings, specification, and
taking-off for the proposed project. The parties involved in
this stage are the clients, architects, engineers, quantity
surveyors, together with project manager. During this
stage, the chosen for the type of conditions of contract is
also takes place.

APPTREONVDAERL TO According to Services, P. W. a. (2010), taking part in the
tender process imposes legal duties on the government.
Contracts are made between the government and
tenderers after they are tendered; consequently, specific
approvals and documents must be utilised in the process.
During this stage, discussion and the decision on the
method of tender to be used will be going on. There are
three methods for the selection of tender to be used for a
project which is either by open tendering, selective
tendering or negotiation. The parties involved during this
stage is client, consultants and project manager.

ODOF CTUENMDEENRTATION After the approval to tender stage, preparation of
document will be taking place. According to Pengaruh PMA,
PMDN, TK, I. (2020) tender documents contain general and
specific terms and conditions, specifications, a copy of
agreement, price schedule, delivery period, objection
period and the scope of works expected. Basically, tender
documents outline all the conditions and requirements of
the client as well as the scope of work for the proposed
project. Content of tender documents would be different
for each project depending on the various factors like size
of project, project complexity and the delivery method. It is
important as it would define the bond between the client
and the successful contractor concerning the progress for
the proposed project during the construction later on.

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OD(COFOCTNUETNMDDE')ENRTATION Tender documents are prepared by the consultants and
would be sell out to the interested contractors for them to
price and must be submitted by the contractors within the
required time of the invitation to tender. The contents of
tender document must be adequately provided to
thoroughly stated the elements of the works of the
proposed project for the contractors to complete it with
the information required from them. This is because,
whatever information that is not provided inside the tender
document during the tendering or that was later changed
can be used by the contractor for claim, thus would cost
the clients.

INVITATION Invitation to tender or tender advertisement takes place after
the documentation stage is complete. According to A. Supardi
et al. (2021), invitation to tender means an invitation to a
party to submit a tender for a contract for a carrying out of
works or for the supply of goods. Invitation to tender is not
an offer that is made by the offeror/clients to the
offeree/contractor as it is actually an invitation to treat.
However, the tender or bid presented in response to such an
invitation will act as an offer. When the offeror/clients
accepted the tender by a certain offeree/contractor, a
contract is formed between both parties.

The invitation to tender is based on the selection of
tendering methods, which is either by open tendering,
selective tendering or negotiation. Open tendering is where
the clients advertise his offer for a project inviting as many
contractors as possible who are interested to submit their
tender. Next is selective tendering which means the clients
invite a short list of contractors to tender for a project where
the contractors are chosen through a pre-qualification
process in which each contractor is ranked according to their
delivery capabilities, resource worthiness, and track record
(Supardi et al., 2021) meanwhile negotiation tenders occur
when clients only invite a single contractor of his selection to
tender for a project.

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INVITATION According to Pengaruh PMA, PMDN, TK, I. (2020), all the
(CONT'D) local tenders are advertised in at least one Malay daily
PROCESSING newspaper while for the international tenders is at the
minimum of two local newspapers, which is one in Malay
and another one in English. A submission period of at least
21 days is given for the bidders/contractors to submit their
tender for local tenders while at least 56 days for
international tenders.

The clients and consultants will receive the completed
tender submitted by contractors on the stipulated closing
date and time of the tenders. Following the submission of
the tenders, a Tender Board or Tender Assessment Panel
will be created to conduct a tender evaluation process and
determine the best offers (Tender Reports in
Construction,2018). The opening and the processing of the
submitted tender documents will be conducted in an open
and transparent manner by the board on a predetermined
date and time.

The contractors must submit the tender before the tender
closing date and time specified in the Letter of Invitation to
Tender for them to be evaluated. If the tender is submitted
after that date, it will be considered as 'late tender’ which
will not be accepted or submitted and will not be opened
for further evaluation. The approval and acceptance of a
tender occurs within the tender's validity period, which is
typically 90 days as specified in the tender document.

Basically, there are two stages in the tender evaluation
process. The first is preliminary stage that consists of an
analysis of the tender's completeness, analysis of the
mandatory documents, and analysis of the minimum
capital required for the project (Tender Reports in
Construction,2018).

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PROCESSING During this stage, the tenderers who are eligible to
(CONT'D) proceed to the next stage evaluation based on the set
conditions will be decided. This stage is important as it
guarantees the tenderers under consideration are
reasonable in the matter of their tender price, completed
all the essential documentation, and have sufficient capital
to begin work.

The second stage of tender evaluation process is the
final stage where this stage is only qualified for the
tenderers that met all the conditions in the preliminary
stage (Tender Reports in Construction,2018). It consists of
an analysis of the tenderers' technical and financial
capabilities. During this final stage, the tenderer's first
technical capability such as their experience will be
evaluated based on the total cost of proposed projects of
the same type executed in the previous five years. This is
done to determine if the tenderer is competent or has
similar work experience for the proposed projects.

Next, analysis on the tenderer’s financial capability will
also be done based on the total annual value of the project
that is expected to be lay out by the tenderer's various
sources of finance. This is to show that the tenderer has
the financial resources to complete the project. Next, an
evaluation on the tenderer’s technical personnel is made.
According to Tender Reports in Construction (2018), in
order to show that the tenderers are qualified and have a
sufficient number of technical workers to carry out the
proposed project, they must provide their statement of
‘Kumpulan Wang Simpanan Pekerja (KWSP) as well as their
photocopies of Certificates of Personnel Qualification.

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PR(OCCOENSTS'DIN) G To add, the tenderer’s lists of plant and machinery,
COANWTARRADCT along with the supporting documentation, must also be
submitted. Not to forget, the tenderer’s recent work
performance will also be evaluated to verify that the
tenderer’s doesn’t have any projects that were progressing
too late behind the schedule of works.

Throughout the tender evaluation process, an
arithmetical check on the tender documents will be
perform by the quantity surveyor to correct errors for
future variation. After the completion of both tender
evaluation stages, the findings, reasoning,
recommendations, and all the tenderer’s relevant specific
information and facts will be arranged and combined to
produce a tender report and submitted to the client.

The final stage in tendering procedure is the awarding
of contract to the successful contractor. The evaluation
team will review each and every tender submitted then,
they will recommend the tender that offers the best value
for money. After that, they will produce the notification of
the tender results and address it to all the participating
contractors for the proposed project.

According to Pengaruh PMA, PMDN, TK, I. (2020), the
successful contractor would be selected by The Agency
Procurement Boards. All the tender submitted will be
chosen based on general procurement principles,
predetermined criteria, and final review which will be made
by the board. Even so, the tenders would be referred to the
Ministry of Finance for final approval with the suggestion of
the Agency Procurement Boards if the tender value
exceeds RM50 million for supplies and services and RM100
million for works.

The tender is binding on both the clients and contractors
as soon as the client accepts the tender. Thus, the
successful contractor for the proposed project must carry
out the works in the agreed upon manner (Civil. D, 2021).

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CONTRACT USED

A standard form is a printed document that is recognised by both parties
and is published by an authoritative body in the industry. The standard
form sets out the terms and conditions under which the parties’ contracts
will be carried out. These terms and conditions are deemed approved
and are not subject to further negotiation or revision, they are typically
applicable to a wide range of common projects or works.
In Malaysia, both the private and public sectors implement a variety of
standard contract forms. The Institution of Engineers Malaysia (IEM),
Pertubuhan Arkitek Malaysia (PAM), Construction Industry Development
Board (CIDB), and Jabatan Kerja Raya (JKR/PWD) are the four
institutions and organisations that produce standard forms of construction
contracts. These standard forms basically cover all types and natures of
construction work with the traditional general contracting method
typically being applied as the procurement route (Soewendo, 2011).

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IEM FORM

The IEM standard contract forms are mostly used for private civil,
mechanical, and electrical engineering projects. The IEM has
released three main forms, which are as follows:

IEM.CE 1/89: IEM Contract Conditions for Civil Engineering
Construction Works (Second Reprint September 1994).
IEM.CE 1/90: IEM Condition of Subcontract for Civil
Engineering Works to be used in combination with IEM
Condition of Contract for Civil Engineering Works (First Reprint
September 1994).
IEM.ME 1/94: IEM Contract Terms and Conditions for
Mechanical and Electrical Works (First Edition 1994).

PAM FORM

The PAM form is most commonly used for private construction
projects. Since the first PAM in 1969, which adopted the 1963 Joint
Contract Tribunal (JCT), followed by PAM in 1998, the PAM
standard has developed. The most recent PAM standard form is the
PAM 2018 form, which is available in two versions which are one
with quantities and one without the quantities. The PAM Sub-
Contract form, which is used for nominated sub-contracts where
the main contract is based on the PAM form.

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CIDB FORM

The CIDB Standard Form of Contract for Building Works (2000
Edition) and the CIDB Standard Form of Sub-Contract for
Nominated Sub Contractor are two standard forms that the CIDB
has published.

PWD FORM

The PWD contract forms are the standard construction contracts
used by the Malaysian government. In reality, the private sector has
been increasing its use of PWD forms with amendments in recent
years, particularly in civil engineering work (Fong, 2004). PWD 203
contract forms are designed to regulate the relationship between
the government as the employer and the contractor.

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CONTRACT PRICE

'Price,' according to Fong, C. K. (2006), is "a quantity of money or other
payment offered in exchange for work performed, items delivered, or
services rendered." A contract amount is the fee paid to a contractor to
accomplish the job specified in a building contract." Contract price
strategy also can be divided into two which are fixed price contract and
cost reimbursement contract. The details are as followed:

-F- ILMXUEEMADPSPUSRRUICEMMECCEONONTNTTCRROAANCCTTTRACT
(---CGCTGOMAOUSRSPATG)TRRECAPETONILMCNUTEOBSTERUSCDATROCSMCNTEOATMNRXEATIMNRCTAUTCMCTOPNRTIRCAECT

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FIXED PRICE CONTRACT

The term "fixed price contract" is defined by Fong, C. K. (2006) as "a
construction contract in which the contract total owed to the contractor
is fixed until more work or altered work is ordered." Firm-price or lump-
sum contracts are agreements in which the two parties specify the
products or services that one party will give and the price that the other
party will pay for those goods or services. Fixed-price contracts are best
suited for situations when the scope of a project can be clearly defined
ahead of time and the costs of materials and labour required to achieve
the contract's parameters can be calculated with reasonable certainty.

Even if additional supplies or time are necessary than originally
expected, the sum paid to the contractor will not change.
According to the website Netsuite (2021) the benefits of a fixed-price
contract are as follows:

Fixed-price contracts provide both parties a clear knowledge of the
price and the items or services that will be supplied. It is often easier to
administer than other forms of contracts, such as cost-plus, because it
requires less tracking of labour and other resources. Naturally, the firm
providing the product or service will want to keep track of the resources
it devotes to the project in order to determine its profit or loss. Fixed-
price contracts, on the other hand, incentivize the contractor or supplier
to tightly control costs and schedules in order to reduce the danger of
losing money on the project. Even if additional supplies or time are
necessary than originally expected, the sum paid to the contractor will
not change.

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FIXED PRICE CONTRACT

However, there are certain disadvantages to it. Fixed-price contracts
may be easier to handle, but they are not without risk. Most importantly,
the contractor or supplier assumes the risk that unanticipated barriers will
occur, necessitating additional time and/or resources than originally
anticipated in the contract conditions. Even if doing so cuts into planned
earnings, the contractor or supplier must nevertheless follow the
contract's conditions. As a result, many contractors and suppliers charge
a greater price than they would under a the contract.

After all, fixed-price contracts are one of the most basic types of
construction contracts. They provide contractors more latitude and
flexibility, as well as some assurance to owners. The contractor estimates
the project's cost, accounts for profit and contingencies, and adheres to
the contract's terms. The owner is aware that the project will not cost
more than a specified amount.

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LUMP SUM CONTRACT

According to Scalisi (2019), a lump sum contract, sometimes
known as a "stipulated amount contract," is a construction
contract in which the contractor commits to perform the project
for a fixed fee. Instead of bidding on each individual component,
the contractor offers a complete project price under a lump sum
agreement. This does not, however, imply that the full amount be
paid in one go at the end of the contract. A lump sum contract
can specify a project's ultimate cost, but it still requires progress
payments to be provided over time as the task progresses. A lump
sum, also known as a specified sum, is a one-time payment for
fulfilling the whole scope of work indicated in a building contract.
The cost of the work, any general condition charges, and the
contractor's fee are all included in this figure.

PROCUREMENT SYSTEM DURING PANDEMIC

2.0 LITERATURE REVIEW

LUMP SUM CONTRACT

PROS

- SIMPLICITY - PROFIBILITY
The most basic type of construction When a contractor employs a lump
contract is the lump sum contract. sum contract at the start of a
They're simple to create and project, they include in certain
comprehend. The contract insurance costs. This insurance
agreements specify the work to be shields them from foreseeable but
done as well as the amount of money unforeseeable events. If the
the contractor expects to be paid at contractor can keep their overhead
the end of the project. Lump payment expenses under control and the
contracts appeal to contractors concerns that arise are modest, the
because they provide them some built-in insurance money is theirs to
control and flexibility in completing retain. This extra revenue is a
the project. Lump sum contracts bonus, given that profit is already a
appeal to owners since they know part of the entire price.
exactly how much the project will cost
in the end. They don't have to be - EASIER FINANCING
concerned about excessively high In general, owners with a lump sum
man-hours or material markups. The contract have an easier difficulty
cost is what it is. obtaining finance. Lender’s value
knowing how much a project will
cost when finished. They are more
ready to support these projects
because the full scope is covered by
a single contract with a fixed price.

PROCUREMENT SYSTEM DURING PANDEMIC

2.0 LITERATURE REVIEW

LUMP SUM CONTRACT

CONS

- HIGH CONTRACTOR RISK - POTENTIALLY MORE EXPENSIVE
When a lump-sum project goes over When quoting a lump sum contract,
budget, the contractor is responsible it's common practise for
for any additional costs. If material contractors to inflate the cost.
prices rise, the owner does not have Owners understand that the
to pay more. The pricing does not contractor is taking on the project's
change if an issue arises that risk, so they're ready to pay a little
necessitates more materials or more for peace of mind. As a result,
labour. The contractor is responsible lump sum contracts are more costly
for all of these additional charges. than other contract types. However,
the owner does not always get their
- PROJECTS CANNOT BE FLUID money's value. Because the
As previously stated, both parties to a contractor has a lot of freedom
lump sum contract must agree on the under this contract, they may (and
scope of work. The contractor will should) search around for the best
only be able to submit an accurate materials prices. In order to
quotation and perform the job increase their earnings on the
according to the agreed-upon project, dishonest contractors may
requirements if this is done. This also try to substitute inferior materials.
means that these agreements can't be
flexible. Changes in the middle of a
project may be time-consuming and
paperwork intensive. For any changes
to the scope of work, a contractor
must get a change order from the
owner. The only way to keep the
scope from crawling out of control
and altering the contractor's bottom
line is to use change orders.

PROCUREMENT SYSTEM DURING PANDEMIC

2.0 LITERATURE REVIEW

MEASUREMENT CONTRACT

According to the website Designing Buildings Wiki (2020), measurement
contracts (also known as 're-measurement' or 'measure and value' contracts)
are used when the design or kind of work can be defined in sufficient detail but
the quantity cannot. Measurement contracts allow for an early start on site
before the design is complete, and they allow for relatively easy adjustments to
the works.

However, because the cost of the service is unknown, there is always some
risk for the customer. In essence, the customer assumes the risk of any
'unknowns,' and while this can lead to contractors offering reasonable costs,
the amount of uncertainty for the client means that measurement contracts are
uncommon outside of civil engineering projects. Completed work for re-
measurement contracts (re-measurable contracts) will be based on default unit
rates. After measuring the whole job, the contractors will get all compensation
based on their actual work. As a result, the project's final cost will be
determined by unit costs and quantity. The contractor's fees will be determined
by the BOQ provided by the customer.

Furthermore, as discussed in the lump sum contracts, the procurement
procedure to do the job is mostly dependent on the client's requirements,
therefore the contract is useful for a variety of activities where numbers cannot
be determined from the outset. Budget, quality, and timeliness are examples of
such criteria. Below is where measurable contract is necessary:

The client isn't on a shoestring budget.
Later on, the client wishes to improve and modify the design and
finishing.
The client also wants to begin work right away at reasonable unit
rates.

The benefits of a remeasurement contract are as follows (unit price contracts):

After the original design and BOQ have been finalized, construction
may begin.
Can save money on design.
The unit rates (prices) will be competitive.
The risk to the contractor is rather modest.



PROCUREMENT SYSTEM DURING PANDEMIC

2.0 LITERATURE REVIEW

COST RCEOIMNTBRUARCSTEMENT

However, there are certain disadvantages to it. Fixed-price contracts
may be easier to handle, but they are not without risk. Most importantly,
the contractor or supplier assumes the risk that unanticipated barriers will
occur, necessitating additional time and/or resources than originally
anticipated in the contract conditions. Even if doing so cuts into planned
earnings, the contractor or supplier must nevertheless follow the
contract's conditions. As a result, many contractors and suppliers charge
a greater price than they would under a the contract.

After all, fixed-price contracts are one of the most basic types of
construction contracts. They provide contractors more latitude and
flexibility, as well as some assurance to owners. The contractor estimates
the project's cost, accounts for profit and contingencies, and adheres to
the contract's terms. The owner is aware that the project will not cost
more than a specified amount.

PROCUREMENT SYSTEM DURING PANDEMIC

2.0 LITERATURE REVIEW

TARGET COST CONTRACT

A target cost contract is a sort of cost reimbursable contract in which
the contractor gets paid the 'actual cost' (typically indicated in the
contract) it incurs in completing the job, but only up to a target cost
that the parties agree on at the start of the project. The target cost is
the total cost to the contractor of completing the project, which
includes the base cost of the physical works (based on the sum of
prices in a bill of quantities, schedule of rates, or activity schedule), the
cost of temporary works, subcontractor costs and preliminary costs,
overheads and profit, and a contingency for the contractor's contract
risks.

GUARANTEED MAXIMUM PRICE (GMP) CONTRACT

A Guaranteed Maximum Price (GMP) Contract is the highest amount
he or she may charge a customer for a project. These agreements,
sometimes known as "not-to-exceed price" contracts, compel
customers to reimburse contractors for direct costs as well as a
predetermined charge for overhead and profit, but only up to a
specified amount. Once the project reaches this level, the contractor is
responsible for any excess expenditures. If the project's scope
changes, the maximum price can be adjusted via a change order, but
not for estimating errors or cost overruns. The advantage of GMP is
that projects are simple. The contractor and client have most likely
ironed out the problems and completed project plans and designs by
the time the contract is signed, making it easier for them to plan
resources, time, and money throughout the project. It also reduces
accounting issues since modifications are kept to a minimum.

PROCUREMENT SYSTEM DURING PANDEMIC

2.0 LITERATURE REVIEW

COST PLUS CONTRACT

According to Viator (2018), a cost plus contract is a contract in which
the contractor is reimbursed for all construction-related expenditures.
In addition, the contractor receives a predetermined profit payment.
Three costs are taken into account. These are the real costs that go
into the project at hand, and they are referred to as direct costs. All of
the business-related charges necessary to properly perform a work
are classified as indirect costs. Profit is a pre-determined sum based
on a proportion of a job's direct expenses. The benefit of cost-plus
contracts it may save a contractor a lot of money. When the expense
isn't deducted from the contractor's payment, decisions like whether or
not to utilise the best materials become easier. Furthermore, if putting
up a work estimate proves difficult, a cost-plus contract might assist.
Because expenses are compensated as the project progresses, a
contractor does not have to be concerned about an erroneous or
defective estimate destroying their job margin because it is already
factored in.

PROCUREMENT SYSTEM DURING PANDEMIC

3.0 RESEARCH METHODOLOGY

3.1 Introduction

The processes or strategies used to find, select, process, and analyze information
on a topic are referred to as research methodology. The methodology chapter of a
research article helps the reader to critically examine the study's overall validity and
dependability.

The case study method will be used which will need an in-depth analysis of
specific cases within the research topic and will involve the interviews and
observations analysis covering topics. As for our case study, the qualitative approach
will be used in order to obtain data.

This chapter also demonstrates how primary and secondary data, as well as
research methods, are applied to collect data and information for the purpose of
achieving research objectives. Data collecting methods are used, data is analysed,
and eventually conclusions and recommendations are produced. Lastly, it should
briefly explain the methodology used in evaluating the data in order to achieve the
study's goals and objectives.

3.2 Research Question

1.What is the pandemic current situation based on the case study?
2.What is the type of procurement that is suitable for the pandemic condition?
3.What are the advantages and disadvantages of adopted procurement for the

pandemic situation?

3.3 Sampling and Case Study

In this chapter it will explore and briefly explain about the case study that has
been chosen. It also will describe the information related to the case study such as
the brief explanation of the project, the type of the procurement, and the parties
involved. The selected case study is being held before the pandemic situation. By
selecting an open tender case study procurement, it will help our group to
understand more about the standard procurement before pandemic and able to
acknowledge the suitable procurement trend during pandemic nowadays. This is
related to the following objectives of the study:

1.To identify the pandemic situation based on the case study
2.To explore the suitable type of procurement for pandemic condition
3.To discuss the advantages and disadvantages of adopted procurement for the

pandemic situation

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3.0 RESEARCH METHODOLOGY

3.4 Data Collection

3.4.1 Primary Data

Semi Structured Interview
According to Doyle (2020), a semi-structured interview is one in which the

interviewer does not strictly adhere to a pre-determined set of questions. Instead of
a straight question and response approach, they will offer more open-ended
questions, allowing for a debate with the interviewee. The interviewer may prepare a
list of questions but will not necessarily ask all of them or discuss them in any
specific sequence, instead utilizing them to lead the conversation. In other
circumstances, the interviewer will just have a list of broad questions to ask.

Name: Muhd Ridhwan Bin Dahrawi,
Position: Quantity Surveyor of HMN Nadhir Sdn Bhd
Address: 295, 1st Floor, Jalan Matang, Sarawak, 93050 Kuching

Case Study
According to Roberto Heale & Alison Twycross (2018), a case study is a type of
research approach that is most commonly used in the social and life sciences. Case
study research does not have a single definition. Simply said, a case study is "an
exhaustive study on a person, a group of individuals, or a unit, with the goal of
generalising over numerous units." An extensive, systematic analysis of a single
individual, group, community, or other unit in which the researcher investigates in-
depth data pertaining to multiple factors is also known as a case study.

As a reference for this paper, the following projects were chosen:

Open Tender:
Cadangan Pembangunan Semula Sekolah Daif Di Negeri
Sarawak Menggunakan Peruntukan RM1 Bilion (Fasa 1)
Di SMK Balai Ringin, Serian

PROCUREMENT SYSTEM DURING PANDEMIC

3.0 RESEARCH METHODOLOGY

3.4 Data Collection (cont'd)

3.4.2 Secondary Data

Literature Review Approach
Literature review was conducted by reading and researching newspapers, journals,
articles, and government official websites in order to obtain more information and
gain a complete understanding of the common practice used for procurement
systems in our country. The literature was searched using the online or university
sources and other search engines such as Google, Google Scholar and every
research website.

3.5 Conclusion and Recommendation

A summary of the data collected is created in this part. Suggestions were offered
for resolving issues that arose throughout the case study. Finally, the dissertation
report will include conclusions.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.1 Type of Procurement System

Traditional method is the procurement system that has been implemented
in the case study project which is SMK Balai Ringin.

Each side can develop a method that is suited for their particular
circumstances. The nature and scope of the planned project must be
considered in order to ensure its success. Due to the fact that appropriate
time was allotted for the project's construction, the traditional technique is an
excellent alternative for the project. When fully completed design
documentation is provided during the tender stage, it is easy to estimate the
cost and time of the project quite accurately. The consultant teams' drawings
and bills of quantities will serve as a single basis for tendering and evaluation,
resulting in improved contract administration for all parties. Future design
changes are unlikely in this project due to the ample time allocated for design
and the elimination of any unneeded adjustments.

During traditional procurement procedures, there are a few parties that
engage with the client, including the contractor, who assists in constructing the
building according to the drawing specifications, and the consultant team,
which assists in consulting on design and managing the client's budget.

The conclusion that can be drawn from the traditional technique is that the
clients will select the design that best suits their needs and the contractor who
will construct the structure.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.2 Selection of the Contractor

For the project of Cadangan Pembangunan Semula Sekolah Daif di Negeri
Sarawak Menggunakan Peruntukan RM 1Billion (Fasa 1) di SMK Balai Ringin, Serian,
the contractor that have been selected is HMN Nadhir Sdn. Bhd. The client has been
decided to use an open tender as the way to select the contractor for the project.
One of the reasons of why open tender is have been chosen is because the project
suitable for every contractor. In other words, the project is only required a
redevelopment work or rebuild the school. Therefore, all contractor is allowed the
join the bidding process because it is not a complicated project. Besides that, by
using this type of way it is easier for the client to choose the good price in terms of
the materials, labors and machineries that are required with a good quality of the
material. This method is also can give the opportunity to the contractor to gain their
experience by handling this work especially during the COVID-19 pandemic because
this is the hardest time for the whole industry.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.3 Tendering Procedure

According to the interviewed person, Encik Muhd Ridhwan Bin Dahrawi,
this case study which is Cadangan Pembangunan Semula Sekolah Daif Di
Negeri Sarawak Menggunakan Peruntukan RM1 Bilion (Fasa 1) Di SMK Balai
Ringin, Serian, the clients and consultants are all from Jabatan Kerja Raya
Sarawak (JKR) while the contractor is HMN Nadhir Sdn Bhd. As the client and
consultant for this case study, Jabatan Kerja Raya Sarawak prepared the final
completion of drawings, specification, and taking-off related to the case study.
They then decide to use Public Works Department 203A (PWD 203A) as the
type of condition of contract for this proposed project.

After deciding on the type of condition of contract to be used, Jabatan
Kerja Raya Sarawak chose to use open tendering as the method of tendering
which determined on how they select their contractors for the proposed
project. As the consultants for the proposed project, Jabatan Kerja Raya
Sarawak prepared tender documents to be sell out to all the interested
contractors later on. After the completion of tender documents, Jabatan Kerja
Raya Sarawak invited all the interested and eligible contractors to tender for
the proposed project. Because the selection of tendering methods for this
project used open tendering, there is no limitation on the numbers of the
tender received. An advertisement is made by Jabatan Kerja Raya Sarawak
through local newspaper and the online website of Jabatan Kerja Raya
Sarawak.

All the interested contractors were given a period to price their tender
and then submit it before due date and time. The evaluation for the tender
submitted is only carried out on the tender that submitted before the due
date. Before the contract award, the tender submitted is reviewed and the one
that offers the best value for money was chosen. According to the interviewed
person, Encik Muhd Ridhwan Bin Dahrawi, the award of contract for this
project is given to HMN Nadhir Sdn. Bhd.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.3 Tendering Procedure (Cont'd)

However, due to the rise of pandemic covid-19 cases which existed at
the end of December 2019, the tendering procedure for this case study is also
affected. To prevent the widely spread of the virus, the government has
implemented the Restriction of Movement Order across Malaysia which began
on 18th March till 31st March 2020. During this time, all business premises
except stores that sold essential goods must be closed. All the workers were
needed to work from home (WFH) including those who work in the
construction industry in order to minimize the virus transmission. Following
this matter, Jabatan Kerja Raya Sarawak postponed the tender submission
date until 28th April 2020 because the government delayed all the
construction progress during the MCO which was extended for three phases
with each phase allocated 14 days.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

Jabatan Kerja Raya Decided on the type of
Sarawak prepared the condition of contract to be
used which Public Works
final completion of
drawings, specification, Department 203A (PWD
and taking-off related to 203A).

the case study.

Preparation of tender Chose to use open
documents. tendering as the method

of tendering.

Invited all the interested Interested contractors
contractors to tender were given a period to
price their tender submit
through advertisement on it on the allocated date
local newspaper and
online website. and time.



Tender submitted is Due to MCO, tender
reviewed by the submission was delayed

evaluation team to choose till 28th April 2020.
the one that offers the

best value for money.

Award contract to HMN
Nadhir Sdn. Bhd.

Figure 4.3.1 Tendering Procedure for the case study



PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.4 CONTRACT USED

According to the quantity surveyor interviewed for this case study, this
project applies the PWD203A contract forms as its standard form of
contract. The Public Works Department of Malaysia (PWD) is the
government department responsible for the PWD203A contract forms.
These are the traditional forms of contract based on bills of quantities
(203A) produced for use in both building and civil engineering contracts in
the public sector or government projects. A lump sum contract is included
with either bills of quantities or schedules of rates whereas PWD contract
forms are home-based forms where risks are known to the local industry
(PWD 203A, 2007). There is a separation of construction and design in this
form of contract where the client hires the design team and they must
provide the contractor with a complete design. In general, the majority of
the risks have been transferred to the contractor under these standard
forms of contract and this remains true with the latest 2007 version.

Under PWD 203A, the employer is responsible for appointing the
Superintending Officer (SO). Then SO is responsible for the administration
of the contract. A contract involving an employer, a consultant, and a
contractor. The government and the contractor have a contract
agreement. However, direct communication between the government and
the contractor is prohibited. Communication is facilitated by the SO, who
has been appointed by the employer (Soewendo, 2011).

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.4 CONTRACT USED

The importance of bills of quantities in PWD 203A is that the project
manager controls and monitors the work through the planned schedule
throughout construction. As a result, the contractor is responsible for
completing the work in accordance with the contract agreements'
requested quantities. According to PWD 203A, the government has the
right to deduct such costs, expenses and on-cost charges or any part of
any money owed to the contractor or to recover it from the performance
bond as a debt due to the contractor. This leads to the popularity of
PWD203A procurement in the publics in Malaysia (Zakaria et al., 2013).

Figure 4.4.1: Contractual relationship in
PWD203A



Figure 4.4.1: Communication Relationship in
PWD 203A



PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.5 Contract Price Strategy

The contract price strategy method used for the case study is Lump Sum by
Bills of Quantities (BQ). According to G.W. Kodikara et. al. (2006), the Bill of
Quantities (BQ) is designed to allow all contractors bidding on a contract to
quote based on the same information. Following that, it's frequently utilized
for post-tender tasks including material scheduling, construction planning,
cost analysis, and cost planning. The 'extent of usage' of the BQ is crucial since
it involves rework in the post-tender use of the BQ. When a management
group uses data for a specific job, the term "re-work" refers to any effort such
as data alteration, grouping, or breaking apart. After removing the re-work
from the overall usage, the 'extent of use' is defined as the direct use.

A bill of quantities or sometimes known as a 'BoQ' or 'BQ' is a document
created by a cost consultant which usually a quantity surveyor that specifies
project-specific measured quantities of the items listed by drawings and
specifications in the tender documents for building activities. Tenderers are
given a bill of quantities to use in preparing a price for the project. The bill of
quantities enables tenderers in calculating construction costs for their tender,
and it also ensures a fair and accurate tendering procedure by requiring all
tendering contractors to price the same quantities rather than getting
quantities directly from the designs and specifications.

The reason of choosing this method because, it is a commonly used
method in traditional procurement to estimate costs as part of bidding and
contract document. Since the project are Redevelopment of Dilapidated
Schools in Sarawak Using RM1 Billion Allocation (Phase 1) at SMK Balai Ringin,
Serian which a huge project so it is conveniently use this method. The Bill of
Quantities may serve as a complete and coherent explanation of the work
needed, as well as a stable base for budgeting and cost reporting.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.6 Comparison of the procurement trend
with previous situation before and during
Covid-19

As we all know, the outbreak of Covid-19 virus created massive global
disruption, necessitating lockdowns in many nations worldwide including
Malaysia in an effort to stop the virus from spreading. The Malaysian
government has decided to implement the Movement Control Order (MCO) as
one of the lockdown possibilities beginning on March 18, 2020. As a result, the
MCO has had a significant impact on Malaysian businesses, especially the
construction industry. Time and money have become crucial components for
effectively delivering projects, and in this contemporary context, most on-
going projects delayed in completing the project due to the constraint on time
and budget.

According to Encik Muhd Ridhwan Bin Dahrawi, the different between
the procurement trend before and during Covid-19 pandemic for this case
study is only on the tendering procedure. From the interview, he stated that
the tendering procedure for this case study during that period was affected
with the increased on the procedure for covid-19 precaution. This is due to
MCO which was implemented by government to breaks the chain of covid-19.
Based on the Standard Operating Procedure (SOP) for Construction Industry
to Operate During MCO by The Ministry of International Trade and Industry
(MITI) and Construction Industry Development Board (CIDB), the limitation on
the movement of workers including those who works in construction site and
premises was set. The contractor must ensure that their workers’ movement
was only from home to the construction site or the company.

PROCUREMENT SYSTEM DURING PANDEMIC

4.0 DATA ANALYSIS

4.6 Comparison of the procurement trend
with previous situation before and during
Covid-19

According to Encik Muhd Ridhwan Bin Dahrawi who works as a QS at
contractor’s company, their movement was only limited from their home to
the company during the MCO. Due to this, the submission date for the tender
of this case study was postponed which also meant that the time given for the
contractors to complete their tender was also extended. This was one of the
impacts of MCO towards construction procurement trend. Once the tendering
procedure is affected, it will have an impact on the overall project.

As stated by Encik Muhd Ridhwan Bin Dahrawi, there are no changes
made for the other part, which is the type of procurement system used,
selection of contractors, the type of contract and also the contract price
strategy adopted. Other than the selection of contractors is not affected by
Covid-19 pandemic, thus it remains the same. However, the selection of
contractors is slightly affected because submission for the tender is being
delayed due to MCO but there are no changes made to it as it is still the same
with previous situation before the pandemic.

PROCUREMENT SYSTEM DURING PANDEMIC

5.0 CONCLUSION

Procurement is a system or a process of obtaining the company
goods and services. Procurement system is the key of success in the
construction industry because procurement in construction means
labor and material buying and every basic thing is start at this system.
Procurement system in construction is not an easy because it involved
with a lot of people, too much things to handle and working with a
complex supply chain. The contractor and the consultant team must
provide high-quality products and services within a set budget while
also adhering to regulatory guidelines. Accuracy, timeliness and
procurement quality are thus critical element in the construction
industry.

After the COVID-19 pandemic started, the procurement system in
Malaysian construction industry has changed. But it changed to a better
way where E-procurement is existed. According to (Masudin I., 2021), E-
procurement is electronic procurement whose implementation process
refers to an integrated communication system to perform procurement
functions including ordering the materials, purchasing, negotiating and
searching for the raw materials in the procurement process. E-
procurement is good to be maintain in this industry because E-
procurement can increase efficiency and effectiveness during the pre-
contract stage, data accuracy and useful application process while
indirect benefits can improve the services to the client. Besides that,
(Masudin I., 2021) said, prices for certain goods and services from
various providers can be provided using e-catalog and this would be an
effective way for parties to procure goods and materials according to
their needs. Therefore, this study shows that an E-procurement system
can be maintain in this industry because it has so much benefits that
can be useful and make everyone’s life easier.

PROCUREMENT SYSTEM DURING PANDEMIC

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