CURRENT PRACTICE OF
PROCUREMENT SYSTEM
IN MALAYSIAN CONSTRUCTION
INDUSTRY DURING PANDEMIC
BQS559
PROFESSIONAL PRACTICE I
PROGRAM OF QUANTITY SURVEYING
UNIVERSITI TEKNOLOGI MARA
SERI ISKANDAR, PERAK
GROUP MEMBERS
ABDUL RAHIM BIN MUZAIRI
2021110695
MUHAMMAD AFIF HAFIZI
BIN MARDHANAY
2021393701
MOHAMAD NOR AFIF
BIN MOHD RAMLI
2021333141
NUR MUHAMMAD HAZIQ
BIN SHAMSUL ANWAR
2021118299
GROUP
AAP2244A
TABLE OF CONTENTS
Chapter 1 – Introduction ………………………………..….… 1
Chapter 2 – Literature Review ……………………………....... 2
• Types of procurement systems …………………........…. 3-17
• Method of selection contractor ……………………….. 18-21
• Tendering procedure ………………………………….. 22-25
• Form of contract ………………………………..……….. 26-29
• Contract price strategy ………………………………… 30-35
Chapter 3 – Research Methodology …………………….…. 36
Chapter 4 – Data Analysis (Case Study) …………………. 37-38
• Types of procurement systems ………………………... 39-41
• Method of selection contractor ……………………….. 42-44
• Tendering procedure …………………………………... 45-50
• Form of contract ……………………………………..….. 51-56
• Contract price strategy ………………………………… 27-63
Chapter 5 – Conclusion and Recommendation ……...… 64-66
References
Appendices
CHAPTER 1 1
The construction industry is one of It is essential not only to choose the best
contractor for the project, but also to
Malaysia's most important industries, verify that the contract papers and
contract form are appropriate for the
and it contributes significantly to the project. Ramanathan and Narayanan,
(2016), stated that because procurement
success of other industries. Aside from is such an important aspect in overall
client satisfaction and project success,
that, it is generally seen as an economic the client and other members involved
must choose the most appropriate
growth engine, particularly in developing procurement technique. Traditional
contracting, package deal type,
economies. This is because the building management type, and private-public
partnership are some of the procurement
business assists other industries in methods applied in Malaysia's
construction industry (PPP).
obtaining their products. Despite its
Clients are the person that responsible in
small contribution to the Malaysian deciding which procurement method is
best for their construction projects.
economy when compared to other Procurement selection criteria can help a
client choose the best procurement
industries such as manufacturing and method from a variety of options. Bhutto
et al., (2019). This is due to the fact that
agriculture, this sector has risen to each client's wants, and expectations are
different. Time, project complexity,
become one of the most important. quality, pricing certainty, responsibility
division, risk distribution, flexibility for
Khan et al., (2014). The construction adjustments and variations were
highlighted as factors impacting
industry focuses on the construction of procurement method selection in the
Malaysian construction industry. Yap et
buildings and infrastructure, as well as al., (2019).
demolition, renovation, and
maintenance. However, obtaining a
construction project requires going
through a procedure.
The phrase procurement is used for
binding contract in the construction
industry. Project procurement clearly
highlights the methods, procedures, and
systematic methodology required to
obtain a construction project. Yap et al.,
(2019). Procurement method, according
to Alencastro et al., (2017), is a planned
approach aimed at selecting the most
effective way to fulfil the goal of this
project. In every construction project, it
is critical to choose the finest approach
for obtaining construction work.
CHAPTER 2 2
A literature review is a written The literature review should include the
summary of important works and following:
other materials on a certain
issue. Scientific journal articles, • Objective of the literature review.
books, government papers, Web • Overview of the subject under
sites, and other sources may be
used in the review. Each source is consideration.
described, summarised, and • Clear categorization of sources
evaluated in writing the literature
review. It is typically included as a selected into those in support of the
separate portion of a graduate study.
thesis or dissertation. The most • particular position, those opposed,
acquired data for this research is and those offering completely
from the journals and articles different arguments.
where it is based on the current • Discussion of both the
study from the other distinctiveness of each source and its
researchers. similarities with the others.
3
TYPES OF PROCUREMENT
Procurement is crucial in the The procurement types, according to
construction industry since it construction companies, must be evaluated
determines how a project will be run in order to select the best one based on
from beginning until completion. critical characteristics such as topography,
Supplier commitment, purchase logistics, weather, available technology,
management, effective material finance, labour availability, and services.
delivery management, and efficient Spend Edge, (2018). As a result, achieving
bill of quantity are also thought to be complete project success in the project
characteristics of the procurement requires making the essential appropriate
process. Waris et al, (2019). Overall, it choice of a procurement system that is
gives a way to bring together different satisfactory to all parties. To tackle the
service providers in a construction appropriate procurement, the construction
project. Ismail et al, (2018). As a firm must take a careful and thorough
result, procurement must be planning strategy, which involves taking into
approached as strategically as account the client's long-term business plan,
practicable in order to enhance budget, and project quality. Experts have
project efficiency. The selection is been attempting and experimenting for a
difficult since numerous factors long time to build various models to aid in
influence the project procurement decision-making and selection of acceptable
technique. procurement systems. Ismail et al., (2018),
went so far as to do research on Transaction
Cost Theory as one of the applications for
procurement selection.
4
TYPES OF PROCUREMENT
As Malaysia plans to increase the PROCUREMENT METHOD
number of construction projects it
undertakes to meet its infrastructure DESIGN AND BUILD
demands, it is essential for the sector TRADITIONAL PROCUREMENT
to understand and practice
appropriate procurement as the MANAGEMENT BASED
client's activities to complete the FAST TRACKING CONSTRUCTION
project are merged. Procurement,
according to Davis et al., (2008), is a PARTNERING PROCUREMENT
global system that gives specific roles CONCESSION CONTRACTING
and authorities to persons and
organizations while also identifying OTHER ARRANGEMENTS
various parts in the project's
construction. This comprehensive Figure 1:Method of Procurement.
process, which included designers,
contractors, and consultants, provides
design and construction services in
order to provide a finished product to
the owner. Suratkon et al., (2020). In
the construction industry, various
procurement procedures are used,
each with a different success rate.
There are also other types of
procurement that must be
acknowledged in a highly complicated
construction project since they have
distinct qualities and advantages that
could benefit the client and make a
future project more efficient.
5
TYPES OF PROCUREMENT
DESIGN AND BUILD PROCUREMENT
The Design and Build method first The single point of accountability for
implemented by Malaysia's Prime design and construction is one of the
Minister at the Public Works most fundamental distinguishing
Department in 1983. The first project elements of the Design and Build
was the Kuala Terengganu Hospital, procurement approach. The design
which was finished in 1985. Watson, and build contractor had a single point
(2009), stated that the initial purpose of accountability for cost, schedule,
of design and construct was to quality, and risk in order to meet the
maximize the ability to meet the client's needs. The degree of risk faced
client's needs. Fundamentally, there is by the heavy contractor-marketed is
an original "Master Builder" who acts unavoidable since they quickly accept
as the focal point of the Design and the works; as a result, the contractor
Build method from start to finish. It is must supply all services and execute
the most important figure in the the jobs according to the contract until
organization, and it is solely they are completed. Seng and Yusof,
responsible to the owner for any (2006). Most of the time, the chosen
errors, delays, or losses. contractor will be someone who has
experience and is knowledgeable with
Because its special qualities of design and build projects. As a result,
combining design and construction the client gains assurance and the
have successfully solved the challenges ability to acquire early and firm
inherent in the traditional design-bid- commitments for the whole project
build system, the Design and Build cost, allowing for more effective
method is gaining favor around the project delivery.
world. Lee et al, (2020). In recent
years, as projects have become more Figure 2: Management structure for
complicated, requiring a larger Design and Build contract. Roshana,
emphasis on management approaches
and engineering expertise, the old (1999).
procurement method has been shown
to be insufficient to meet
contemporary needs. Without a doubt,
the Design and Build procurement
process has become a popular
alternative to the traditional method in
Malaysia, particularly in the public
sector. Saaidin et al., (2016), It is
because this benefits all stakeholders.
6
TYPES OF PROCUREMENT
DESIGN AND BUILD PROCUREMENT
The second difference is that Aside from that, design and
build has the advantage of
Design and Build uses a single allowing major equipment
purchase and construction to
contract between the owner begin before the actual design
layout is completed. It is
and the design-builder possible to secure a faster start
on site using a design and
contractor, whereas the construct process, and the close
integration of design and
traditional method approach construction can result in more
effective programming. As a
comprises two contracts and result, the client's consultants
will require some time to
other parties to design and establish a sufficient set of
requirements, analyses, and
construct the project. The evaluate competing tenderers'
plans. Any adjustments made
owner will not have to spend by the client after the contract
has been signed can be
time and effort coordinating costly. Indeed, the client must
review the design and request
and arbitrating between that the contractor make any
necessary changes based on
separate design and their concerns. Finally, the costs
will be agreed upon for the
construction contracts after the project's building and
execution.
Design and Build contract is
awarded, according to Seng and
Yusof, (2006). The owner then
has a greater number of design
possibilities to pick from among
the various design-builders who
enter the tender with the
expected competitive price that
was proposed based on the
client's specifications.
7
TYPES OF PROCUREMENT
TRADITIONAL PROCUREMENT
Traditional procurement is the most The client will appoint independent
typical procurement method employed client consultants to the firm who will
in the construction industry, and it has provide professional services for the
historically dominated for several proposed project. This demonstrates that
decades around the world. Another the client has influence over the design
name for this method is Design-Bid- process through his consultants, as well
Build, which describes its qualities of as the bespoke quality that is required.
involving multiple partners to complete Morledge and Smith, (2013). The client
each task for the client. Those parties then hires an architect to finish the
have a direct contractual relationship design and create the construction
with the client, which makes it more specifications. The Architect has a lot of
complicated than other procurement and flexibility in terms of conceiving and
gives the client more control over the developing the design without being
project. The design work is separate from constrained by time or money, as long as
the construction work under the the budget isn't overrun, and the client's
traditional procurement approach, requirements are met. A consultant team
although the design team and the known as a Quantity Surveyor is also
construction team co-exist under one being engaged to take control of design
project. However, because the client is and cost by taking measurements of the
responsible for the design and design drawing and bill of quantities at an early
team's performance, this may introduce stage in order to attain sufficient cost
a new risk because the client must deal certainty. The length of time it takes to
with multiple points of responsibility. complete the project is determined by its
Morledge and Smith, (2013). difficulty. In most circumstances, this
prohibits the contractor's design skills
from being included into the design. The
client will then tender the document in
order to choose the best contractor to
complete the construction work.
8
TYPES OF PROCUREMENT
TRADITIONAL PROCUREMENT
The contractor creates their tender price As a result, for projects where time is not
based on the specifications and drawings a key component, the traditional method
in the tender documents after the is generally recommended after
drawing is completed. Rasid et al, (2006). examining all of the scope and short
They are expected to compute a tender processes. Suratkon, (2020). It is
price for each item based on the client's unquestionably appropriate for owners
designs, specifications, and bills of who want to keep track of the entire
quantities. When compiling their bid time for construction projects. According
price during tendering, the contractors to Rasid et al., (2006), this system
will be able to show their competitive provides clear accountability and better
advantage resulting from the design and construction control by the
construction process. Suratkon, (2020). owner.
To ensure that each contractor is on an
equal footing, the client would demand Figure 3: Traditional Method of
that this information be shared, allowing Procurement Contractual Link.
the owner to obtain firmer, fairer, and
more competitive prices from the
contractor's bid, resulting in a lower
project cost. As a result, the contract is
usually awarded to the lowest-priced
tender, with the quantity surveyor's
closest cost serving as the benchmark for
selecting the contractor who will be
responsible for all of the work and
materials. This includes appointing a sub-
contractor for the specialist works under
the main contractor.
9
TYPES OF PROCUREMENT
MANAGEMENT-BASED PROCUREMENT
Management-based is merely a term MANAGEMENT
used to describe management-based
contracting; nonetheless, it does not CONTRACTING
receive nearly as much attention as
other procurement methods. This All independent professional design,
procurement mostly involves the client consultant, and management contractors
directly contracting with the have direct contractual relationships with
management contractor. Because they the client. Because designs and details can
are the client's agent, the management be updated and completed as the work
contractor should put the client's progresses, flexibility contracting allows
interests first throughout the project. the client to change the design during
Davis et al., (2008). In addition, the construction. Davis et al, (2008). However,
management contractor's role is to there is no contract privity between the
oversee the project rather than to client and the trade contractor, who is
participate in the construction intended to be managed by the
process. This kind of procurement management contractor. After interviews
necessitates a high level of trust and with the clients and the design team, the
confidence. Before work begins on-site, management contractor will usually submit
there is no fixed contract price, thus the a written proposal that includes a
choice to proceed is usually based on an recommended management cost. The
estimate. Because there are several charge will cover the whole management
types of management procurement service, which includes paying the trade
forms, Malaysian construction only contractor via management, expressed as a
knows about management contracting percentage of the total project cost, as well
and construction management. As a as a service to cover preconstruction stages
result, there are some minor variations if the project does not go to site. As per
between these procurement methods. Suratkon et al., (2020), using this sort of
contract, it is possible to get started on-site
early and finish early.
Figure 4: Management Contracting Flow Chart.
10
TYPES OF PROCUREMENT
MANAGEMENT-BASED PROCUREMENT
CONSTRUCTION MANAGEMENT
The Construction Management Association of America (CMAA)
describes construction management as a project delivery system
comprised of a plan of management services applied to a
construction project from conception to completion, according to
Suratkon et al., (2020). This procurement can help to keep
project costs and time under control while still maintaining
project quality. All independent professional design, consultants,
and construction managers, as well as trade contractors, have
direct contractual relationships with the client. As a result, the
construction manager is protected from bankruptcy and can be
fired without affecting the rest of the construction crew. A
contractor is paid a fee to professionally manage, develop a
programme, coordinate design and construction operations, and
enable collaboration to improve the project's constructability,
according to Davis et al., (2008). It's ideal for applications that
demand a high level of expertise. Hashim, et al., (2006). However,
using this system, price certainty is not achieved until the last
trade packages have been done. Morledge and Smith, (2013).
Figure 5: Construction Management Flow Chart.
11
TYPES OF PROCUREMENT
FAST-TRACKING CONSTRUCTION
The Design and Build construction method has been a part of the
construction business for a long time. In today's industry, the
procedure is rapidly evolving. Design and Build has evolved into a
variety of hybrids as its popularity has grown. The design and build
process is also known as the fast-tracking method of procurement
Thomas et al., (2005). The client may place a higher value on time
than money, requiring the work to be completed as fast as
possible. Consider adopting a contract model that allows work to
start before the design is finished, rather than using a conventional
construction contract where the contractor builds the works from
a 100 percent complete design. Aside from that, fast-track
construction is a scheduling approach that involves overlapping
jobs to minimize the overall duration of projects.
Because project delivery mechanisms are integrated between
design and construction activity, design and build procurement is
considered a fast-tracking technique. According to Ling, (2017),
the close integration and overlap of both tasks ensures a faster
project implementation. On the other hand, this approach is most
usually connected with management contracting and construction
management kinds of contacting and is best suited to regular
building types with repeating features and uncomplicated
construction processes. It necessitates adaptability, coordination,
and collaboration. The client must designate a project team that is
knowledgeable about the approach and can see how the project
will progress and anticipate risks.
12
TYPES OF PROCUREMENT
PARTNERING PROCUREMENT
According to Choquette, (1994), partnering is a project method
that allows for the design and construction process to be carried
out in an atmosphere of mutual trust, shared goals, and open
communication. The voluntary decision and desire to complete the
project, which all team members committed to at the start of the
project, is the usage of a partnering strategy. The following are
possible steps for partnering implementation: A good working
connection between the client, architect, engineer, construction
manager, general contractor, and subcontractors is also vital since
it is viewed as the establishment of long-term agreements
between the parties involved with competent employees
executing one team.
Partnering establishes a working relationship between all team
members based on a mutually agreed-upon cooperative and
collaboration plan. Athmer et al., 2005). As a result, the owner's
plan to use the concept should be stated in the bid proposal and
specifications, as well as a presentation on partnering at any pre-
bid meeting. Due to the massive amount of litigation that has
happened in the construction sector in recent years, the concept
of partnering has gotten a lot of attention. Without a doubt,
procurement, like partnership, necessitates a significant amount of
time, effort, and dedication at all stages of a project. Nystrom,
(2005). As a result, proper can achieve a substantially higher
degree of quality on a project and can significantly boost the
likelihood of completing it on schedule and on budget. Using this
buying method can also successfully limit the risk of claims and
litigation.
13
TYPES OF PROCUREMENT
CONCESSION CONTRACTING
Ramrao, (2008), noted that ownership of DESIGN, BUILT AND
public assets is a delicate subject for all
governments. Budgetary constraints, as OPERATE
well as governments' recurrent failure to
maintain these assets around the world, The public sector owns and finances the
have caused them to rethink their minds construction of new assets in a Design-
about private ownership of such assets. Build-Operate (DBO) Project. The private
As a result, the government has sector designs, builds, and operates assets
established a number of strategies for to ensure that agreed-upon results are met
enlisting the private sector to maintain Ramrao, (2008). Design-Build–Operate
and operate public assets. As a result, (DBO) contracts are long-term, contractual,
concession contracts are established in performance-based agreements between
which public authorities retain an Employer and a Contractor in which the
ownership rights while private players Contractor is responsible for designing,
receive operating rights and associated building, operating, and maintaining a
returns. A concession contract grants the facility, meeting performance standards,
private partner exclusive rights to run, replacing assets over its life cycle, or the
maintain, and sometimes even invest in a majority of it, and returning the facility to
public utility for a set length of time in the Employer at the end of the contract.
exchange for a combo of the two to the Projects with DBO arrangements do not
government for exclusive rights over a require the Contractor to fund the project
facility. A concession entrusts private or share its commercial risk. Because the
actors with not only the administration employer is responsible for financing,
and maintenance of the assets, but also contractual agreements are shorter, and
the financing and management of all documentation is easier. DBO is commonly
necessary investments. PPLCR, (2020). A utilised in infrastructure projects such as
concession is usually granted for a term road and treatment plant construction.
of 25 to 30 years, which is long enough
to fully amortise substantial upfront
investments.
14
TYPES OF PROCUREMENT
CONCESSION CONTRACTING
BUILD, OWN AND BUILD, OPERATE AND
OPERATE TRANSFER
The private sector builds, owns, and BOT stands for Build-Operate-Transfer,
operates a facility, then sells the product or which is the most popular concession
service to the beneficiaries in the Build- contracting method. Shrestha, (2011). A
Own-Operate (BOO) model. ESCAP, (2008). BOT project is normally used to construct a
In many nations, this is the most popular single asset rather than an entire network,
form of private engagement in the and it is usually brand new or greenfield,
electricity sector. Furthermore, the but refurbishment may be required. In a
government or a power distribution firm BOT project, the project firm or operator
may or may not have a long-term power often earns money by charging a fee to the
purchase agreement, also known as an off- government rather than charging tariffs to
take agreement, with the project operator customers. As a result, the BOT is the most
at an agreed price for a BOO power common project financing structure. The
project. A project delivery method in which operator finances, owns, and builds the
a government agency sells the right to facility or system, then operates it
build and operate a project according to commercially for the duration of the
agreed-upon design standards to a private- project before handing it over to the
sector party for a set period of time. authority. Noor and Yunus, (2015). In
According to a TechTarget Contributor, addition, the operator is barred from
(2008), the private sector party controls engaging in any other activity. As a result,
the project and is not required to hand it the operator is usually a special purpose
over to the government at the end of the vehicle. The project firm arranges project
term. finance, commissions the design and
construction of the works, and manages
Figure 6: Flow chart of Build-Operate- the facility during the concession period.
Transfer. The operator is barred from engaging in
any other activity. As a result, the operator
is usually a special purpose vehicle. The
project firm arranges project finance,
commissions the design and construction
of the works, and manages the facility
during the concession period. Without a
doubt, BOT is a new option that could be
an efficient strategy to increase and boost
construction of public-private partnership
projects. Yunus and Noor, (2015).
15
TYPES OF PROCUREMENT
CONCESSION CONTRACTING
BUILD, LEASE AND TRANSFER
Build lease and transfer is a non-traditional procurement method of project
financing, according to Shukla et al., (2014), in which a commercial or
public sector client grants a concession to a private organisation. BLT
(Build-Lease-Transfer) is a procurement method in which a private
contractor constructs and funds a project on behalf of the client. This
procurement approach has various advantages as a project finance system.
The most important is that the client has contracted a private firm, usually
known as a developer, to raise project money during the development
phase. This places the burden of generating funds for the project directly
on the private organization, rather than the government. As a result, the
BLT developer assumes all risk, including the risk of raising project funding
and the risk of construction. Because a private entity will not accept such a
risk for free, all costs will be passed on to the client. Because the facility is
owned by the private business until the lease period ends, the private
entity is responsible for its operation and maintenance.
During the lease period, the client, who effectively becomes the facility's
tenant, will pay the private company a monthly or annual lease for the use
of the facility at a predefined amount for a set length of time. The lease
payment serves as a means of returning the investment and, in turn,
rewarding the owners of the private organization. Ownership and
responsibility for the facility are transferred to the client from the private
company at the end of the lease period for a previously agreed sum.
Figure 7: Flow chart of Build-Lease-Transfer.
16
TYPES OF PROCUREMENT
CONCESSION CONTRACTING
PRIVATE FINANCING INITIATIVE (PFI)
The Public Finance Initiative and private-public partnerships enlist private companies
to provide public services in exchange for long-term concessions. Ismail and Rashid,
(2007). The relationships between the principal parties, known as Special Purpose
Vehicles (SPV), and constituent members, as well as the SPV's relationship with the
client, are managed in these projects. A Special Purpose Vehicle (SPV) is a legal entity
created for the purpose of carrying out a project. All contracts between the various
parties are negotiated between the parties and the SPV. The goals are to figure out
how relationships are handled between private sector organizations within the
concession, as well as between private sector firms and public sector clients. The
concepts of relational contracting and relationship management are used to
investigate relationship management. The relationship between relationship
management and project management is also investigated.
Furthermore, trust and confidence are employed as indicators of relationship health,
with thirty relationship management aspects linked to them. According to Khaderi
and Aziz., (2010), a review of relationship management for PF and PPP projects is
conducted, with the key result being that proactive relationship management
receives more strategic and tactical attention. Adoption will encourage collaborative
working that goes beyond reactive behavioral adjustments to new procurement
conditions, implying a conceptual move away from relational contracting and toward
proactive relationship management concepts. As a result, the government has
adopted PFI as one of the strategies for procuring construction and infrastructure
development projects.
Figure 8: Flow chart of Private Financing Initiative.
17
TYPES OF PROCUREMENT
OTHER ARRANGEMENTS
PRIVATISATION JOINT VENTURE
Government ownership is inefficient in A joint venture is a strategic contractual
various ways. Inefficient State relationship or partnership between two or
Own Enterprises (SOEs) are blamed for more parties in which the parties agree to
causing additional issues in the economy, share their skills, experience, and resources
such as the misuse of public funds through in order to achieve a single corporate
subsidies and non-competitive objective, project, or activity. Thomaszios &
industries. The presentation of agency Wong, (2020). Joint ventures are typically
theory in subsequent work explains better formed when a company's resources,
private ownership. To begin with, officials finances, or skills are insufficient to enter a
in the government sector lacked incentives certain market or industry. In addition, the
to meet targets because the monitoring joint venture agreement must be well-
process was weakened. Vickers and Yarrow, written and spell out all of the parties'
(1991). As a result, governments take a responsibilities. The system that
privatisation stance to reduce their burden determines how earnings and liabilities will
in terms of resource underutilization, be allocated between the joint venture
redundant employment, fiscal burden, partners is an important feature of joint
financial crises, large losses, and subsidies venture agreements. In order to reduce the
to improve and strengthen competition, potential of conflicts arising out of or in
public finances, infrastructure funding, and connection with the joint venture
service quality and quantity in terms of agreement, the agreement should be
management. Kauser et al., (2011). structured precisely to reflect the parties'
Though privatisation is increasing the intentions. Before getting into a joint
private sector's responsibility in economic venture, there are a number of
operations and allowing it to participate considerations to consider. There are many
more fully in market systems and factors for parties to consider before
mechanisms. According to Kauser et al., entering a joint venture. Such factors to be
(2011), it is still a comprehensive taken into consideration should encompass
socioeconomic and political philosophy. a balance of due diligence and business
Privatisation implies the end of public model.
programmes and the separation of the
government from its manufacturing and
other corporate activities. Privatization,
according to Starr, (1988), is the transfer of
public assets to the private sector through
various methods such as the sale or lease
of government land, infrastructure, and
other endeavors.
18
METHOD OF SELECTION CONTRACTOR
METHOD OF TENDERING
OPEN TENDER SELECTIVE TENDER NEGOTIATION TENDER
Figure 9:Method of Tendering.
A Quantity Surveyor must think about a lot of things before,
during, and after the construction process. A Quantity Surveyor's
focus should not be solely on the project's cost, but also on the
project's contractual administration. The tendering stage will take
place before the construction stage to locate the most acceptable
and appropriate contractor to accomplish the entire proposed
project without difficulty. Tendering procedures, according to
Mohemed et al., (2010), are complex and ambiguous because they
involve many jobs and individuals. According to Halaris et al.,
(2003), tendering is the process by which a consultant, specifically
a quantity surveyor, creates, displays, and manages tender
documents. In addition, it entails the action or responses from
interested contracts in order to bid and win the tender. In the
construction industry, there are 3 most common type of tendering
procedure to be used, which are open tender, selective and
negotiation tender.
19
METHOD OF SELECTION CONTRACTOR
OPEN TENDER
Open tender, as the name implies, is a tender that is open to any interested
contractors that meet the specified requirements to carry out the
proposed construction project to file and bid. The above-mentioned
requirements can be found in the tender advertisement, which can be
found in the newspaper, public media, or on the company's website.
Mohemed et al., (2010). The advertisement will also provide a summary of
the job, such as the employer's contact information, the title of the tender
project, specifics of the site visit, and so on. This strategy, according to
Mohemed et al., (2010), allows for new and unfamiliar contractors to
compete for the tender. In Malaysia, every project worth more than RM 1
million must go through an open tender process. It also promotes the
concept of contractor fairness. Insufficient information provided by the
contractor who bid the tender during the decision-making stage, on the
other hand, could result in an unfair, incomplete, and constructed result.
Government entities frequently use this sort of tender to ensure the
accountability of public funds. Most projects developed for the private
sector, particularly those that do not require any skill in the construction
process, will use this tendering system as well. This is because this strategy
attracts a large number of bidders, resulting in a more competitive bid. As a
result, the lowest possible tender price that is value for money can be
attained since, because the open tender is competitive, the contractor will
tend to bid the minimum possible price. The lowest bidding tender price
does not guarantee that the tenderer will win the contract, but other
factors will be considered, such as the tenderer's experience, financial
standing, and resources. As a result, an open tender will have a longer
tender process. The entire process will be unprofitable, and it will cost
money and time to individuals who are not qualified to tender. As a result,
the building company will employ a different tendering approach.
20
METHOD OF SELECTION CONTRACTOR
SELECTIVE TENDER
Selective or restricted tendering is a tender in which only a small number of tenderers
who meet a set of criteria are invited to bid. The previously mentioned requirements
are general experience with the type of project being considered, financial capability,
and management and supervisory competencies. Tenderers are usually invited based
on the client's preferences. This strategy is typically used when a project necessitates
specialist skills. This strategy will result in the least amount of competition among
tenderers. Mohemed et al., (2010). Furthermore, it can verify that only qualified
bidders are allowed to participate for the project. As a result, compared to an open
tender, the evaluation process will be simpler. The selection of tenderers, on the
other hand, will be done in two stages.
SINGLE-STAGED SELECTIVE TENDERING
After the client has provided at least 10 names of preferred tenderers, an
advertisement will be placed in the newspaper inviting the pre-qualified tenderers to
participate. Tenderers must include details about their previous work experience,
physical resources, and financial capability. Only tenderers who are qualified enough
can advance to the following round after the information provided is evaluated. This
will relieve other tenderers of the pressure of having to go through the
documentation process. The tendering process will be better managed as a result of
this.
TWO-STAGED SELECTIVE TENDERING
In most cases, only a maximum of six tenderers are chosen to bid for the project at
this stage. Those tenderers who are chosen at this stage are usually experts who have
specialized in buildability and project timing, resulting in a building that is cost-
effective and ultimately beneficial to the client. Tenderers must submit their bids by
the given date, time, and location at this point. The tenders will then be examined in
order to choose the best tenderer for the project.
In Malaysia, the decision to use this method should not be taken lightly, especially
when it comes to government projects. The decision to use this approach must be
approved by the Ministry of Finance (MOF), according to Seksyen 6(1) Akta Tatacara
Kewangan 1957 (Semakan 1972) and pekeliling-pekeliling perbendaharaan yang
berkaitan. Private initiatives, on the other hand, are not subject to the statute. As a
result, private projects might use this strategy to make the tendering process easier.
However, because it is less competitive, the price is projected to be higher.
21
METHOD OF SELECTION CONTRACTOR
NEGOTIATION TENDER
A direct negotiation between the client or his representative and a single contractor is
used to carry out the negotiation tender. The client and the chosen contractor
negotiate the contract terms, according to Mohemed et al., (2010). Because direct
negotiating has no competition, this technique cannot be employed arbitrarily. As a
result, the cost could be quite high. This is also to prevent cronyism and injustice. This
approach may be considered if the construction is too complex and unique, and only
a small number of contractors are available to meet the contract requirements in
terms of expertise and technologies, or if it involves a national security project, or if
there is an emergency where construction must be completed as soon as possible,
and a lengthy tendering process is not possible.
Direct negotiations focus on pricing, scope and specifications, technical proposals,
delivery or completion deadlines, and contract variation, according to the EU-
Malaysia Chamber of Commerce and Industry, (2018). Negotiation tenders, like
selective tendering, can only be used for government projects if the Ministry of
Finance approves them (MOF). For example, the direct negotiation tendering
technique was used for the second phase of the upgrade project for the Pantai
Regional Sewage Treatment Plant at Bandar Baru Sental.
Following the selection of a tender technique, the tendering process will begin in
accordance with the type of tender method chosen. A contractor who wishes to bid
on the tender must purchase the tender documents and submit the completed
tender at the specified date and location. Tender deposits for government projects
must be made in the form of a bank draught or a money order. Meanwhile, earnest
money for the private project must be set aside. The tenderer must give both a
tender deposit and earnest money to ensure that the tenderer returns the priced
tender in excellent condition and to demonstrate the tenderer's seriousness in
bidding the tender. It is, however, refundable to unsuccessful tenderers. The
successful tenderer's deposit will be returned once he submits the performance
bond. Tenders will be opened for evaluation after the deadline for submission. Tender
evaluation takes time in order to make the best conclusion possible. According to
Mohemed et al., (2010), tender evaluation is the most important step in the
tendering process since it determines which contractor is the most qualified to win
the contract.
TENDERING PROCEDURES 22
According to Mohemad et al., (2010),
tendering is a list of processes to
produce, display and manage tender
documents by client or consultant. It is
also involving action to perform
bidding by interested contractors in
order to win the contract by
responding to tenders with their skills
formation and capabilities.
Ng et al., (2007), stated that tendering
processes begin with the analysis to
ensure tender specification meets with
end users need, followed selection of
contractor, tender invitation and
ending with contract awarding and
contract monitoring. The period of
tendering processes begins with tender
preparation and end with tender
completion.
In construction industry, there are
three different types of tender namely
open tender, restricted tender and
negotiated tender. Laryea, (2017).
These three types of tender method
are largely practiced in the Malaysian
construction industry.
Figure 10: Tendering Process.
TENDERING PROCEDURES 23
I. Preparation of Tender Specification
The tendering process begins when the client initializes a construction project. Client
will hire consultant to produce tender specification by conducting feasibility study. The
consultant determines the estimated cost, time of project completion and procurement
procedures. The consultant prepares the content of tender document. The consultant
prepares the content of tender document. The content of tender documents consists of
information regarding on instruction to tenderers, form of tender, conditions of
tendering, technical specifications, drawings, bill of quantities (BQ) and qualification
documents. Mohemad et al., (2010). It also should include the briefing and site visits
information. All the documents prepared by the consultant will be submit to the client
for the approval.
II. Tender advertisement
Contractors are invited to compete for this contract through advertisement. Client
displays notice call for tender invitation once all the required document has been
prepared. The client advertises the notice on printed media such as newspaper, public
media or website. Normally, the notice will be advertised in major national
publications. This procedure is known as Invitation To Tender (ITT). In Malaysia, tender
advertisement for government project will be advertised in main newspaper such as
Berita Harian and Utusan on every Monday and Thursday. Typical contents of tender
advertisement are client’s details, title of tender, brief description of the work, details
of site visit and the details of submission of tender.
III. Contractor purchases tender documents
Contractors view the advertisement. Those who interested to bid for tender will
purchase the tender documents within the duration stipulated in the advertisement.
The contractor needs to pay the documentation fees either in the form of Bank
Guarantee or Money Order to get the Tender Document. The contractor will fill the
tender documents. They must fill the bill of quantities (BQ) with their own rate and
quantities. There is a list of forms that need to be completed by the contractor.
TENDERING PROCEDURES 24
IV. Tender submission
The completed tender documents must be submitted by the time, date and to the
stipulated office as stated in the tender advertisement. The tender must be in sealed
envelopes. Tenders submitted after the date and time stipulated by the employer falls
under the category of a ‘late tender’. The submission of the tender will be no longer
accepted if the tenderer submits their tender after the dateline.
V. Tender Opening
All the submitted tenders will be aggregated and opened by a designated person or a
member of the tender committee assigned at the place and time fixed in the
procurement notice. As each tender is opened, the tender evaluation committee shall
record the details of each tenderer into a tender list schedule. Ramanathan and
Narayanan. (2016). The details consist of the name of tenderer, registration details,
tender price and time for completion proposed.
VI. Tender Evaluation
All the tenders will be evaluated. Mohemad et al., (2010) stated that evaluation is the
most crucial stage in tendering processes due to its contribution to the decision in
choosing the most qualified contractor for the project. The bid price, time for project
completion, financial standing, work experience, technical competence, equipment
facilities and current list of work are the criteria that will be evaluated by a group of
appointed committees. Ramanathan and Narayanan, (2016).
The first stage of evaluation is the prequalified stage where tenderer’s minimum
capabilities will be evaluated to see if they can carry out very well the contract if they
are awarded. Mohemad et al., (2010). Assessment would entail aspects involving
completeness of offer, reasonableness of work programme, technical conformance and
capability of tenderers. Contractor who has complete work programme has high
opportunity to get passed this first stage of evaluation.
TENDERING PROCEDURES 25
VI. Tender Evaluation (Cont’d)
A complete work programmed will contain adequate information of each activity that
will be carried out. Technical conformance is about technical information submitted by
the tenderer. For example, schedule of technical data, product information, drawings,
sketches, schematics, and method statement. This prequalification phase helps to
remove incompetent tenderers. Tenderers who have passed all the requirements
according to certain standard value will be evaluated in the next stage of evaluation.
The second stage of evaluation is where the assessment would entail aspects involving
completeness and accuracy of commercial offer, reasonableness of prices and financial
capabilities of tenderers. Client’s consultant prepared pre-tender estimate and
tenderer who has offered tender prices close to the consultant’s estimate has high
opportunity to win the contract.
VII. Tender Awarding
The qualified tenderers who have fulfilled all the requirements and conditions are
ranked in ascending order based on their points or credits. Mohemad et al., (2010).
Commonly, the construction contract will be awarded to the tenderer who has the
highest score. Mohemad et al., (2010). Unsuccessful tenderer will be notified, and their
deposit will be returned. For government and private project, letter of award will be
issued to the successful tenderer manually in a meeting.
FORM OF CONTRACT 26
In construction, standard form of contract is important in every
construction project to provide a legal framework that identifies the
parties’ rights, responsibilities, and duties. Standard form of
contract is a pre-agreed contract that binds between two parties
which consists of the contractor and the employer. It is published
and printed by an industry’s authority that is normally
acknowledged by both parties. Form of contract provides scope of
contract administrator’s duties and power, including the procedures
required to carry out the operation of the contract. It is considered
as a contract that cannot be negotiated due to the contract’s terms
and conditions have already been determined and are not
susceptible to any changes or further negotiation. Zolkafli et al.,
(2011).
The purpose of form of contract established is to ensure the
efficiency and effectivity of contract administration. It also aims to
prevent the disputes between parties involved. There are several
standard forms of contract that are commonly used in Malaysia,
which are Public Works Department (PWD), Pertubuhan Arkitek
Malaysia (PAM), and International Federation of Consulting
Engineers (FIDIC). Each of the types of form of contract to be used
depends on the type and nature of project, as well as the finance
involved. Zakaria et al., (2013).
FORM OF CONTRACT 27
i) Public Works Department (PWD)
Public Works Department of Malaysia (PWD) form of contract is the
standard forms of contract that is generally used by the public sector in
Malaysia, for both building and civil engineering construction projects. There
are two types of the PWD form of contract, which are PWD 203 and PWD
203A. PWD 203 is a contract without quantities where it is based on the
drawings and specifications, meanwhile PWD 203A is a contract where the
Bills of Quantities must be included in the contract. In PWD 203A Rev. 2007,
a lump sum contract is combined with either schedules of rates or bills of
quantities. The construction and design is separated in this type of contract,
where the employer hire the design team to prepare a complete design for
the contractor. Ashworth, (1991) as cited in Zakaria et al., (2013). Thus, most
of the risks are transferred to the contractor in this form of contract.
PWD 203A form is more commonly used in the construction projects under
government compared to PWD 203 form. The latest version for this standard
form of contract is PWD 203A Rev.1/2010. Normally for this type of contract,
the contractor will be invited to price the bills based on the Bills of
Quantities and submit the tenders to the client’s office. The project manager
must control and supervise the work via the schedule of planning
throughout the construction process, therefore bills of quantities becomes a
very important aspect in PWD 203A. Fahime et al., (2011). As a result, the
contractor is responsible for completing the job in accordance with the
specified amounts as stated in the contract documents. One of the reasons
that makes procurement of PWD203A become popular in Malaysia’s public
sector projects is that the government has the right to deduct such costs,
expenditures, and on-cost charges from any funds owed to the contractor, or
to collect from the contractor's performance bond as a debt owed to the
Government.
FORM OF CONTRACT 28
ii) Pertubuhan Arkitek Malaysia (PAM)
This standard form of contract was issued and prepared under one of the
Malaysian institution groups, which is Pertubuhan Arkitek Malaysia itself.
The PAM Form also consists of PAM Contract with quantities and PAM
Contract without quantities. Just like what has been entitled, PAM Contract
with Quantities is used when Bills of Quantities are part of the contract
document while PAM Contract without Quantities is based on drawing and
specification.
Pertubuhan Arkitek Malaysia (PAM) standard form of contract has been
extensively used in Malaysia since more than five decades ago, especially by
the private sectors in the construction industry. It is the most popular form
of contract used amongst the Malaysian private sectors, which about 90
percent of building contracts in private sectors are based on the PAM form
Rajoo, (2010). In addition, this form is a home-based form where risks are
known to be local industry and meant to be utilized as a building contract
rather than a civil engineering contract. PAM, (2006) as cited in Zakaria et al.,
(2013).
The first edition of PAM form of contract was introduced in 1969 and it
became the benchmark as the Malaysian Standard Form of Building Contract
since it was released. Then, the second edition is PAM 1998 was released to
replace PAM 1969 after PAM undertook a complete revamp on the first
edition. The latest edition for PAM form is PAM Contract 2018, which it is the
fourth edition for this standard form of contract. PAM 2018 is the revised
version of PAM 2006 that has been utilized since 2007 until the early of
2018. The current iteration of the contract includes the amendment for
duties and right of employers and contracts, materially affecting the regular
work progress, retention period and certificate of extension of time.
FORM OF CONTRACT 29
iii) International Federation of Consulting
Engineers (FIDIC)
International Federation of Consulting Engineers is known as FIDIC, is stands
for Federation Internationale des Ingenious-Conseils. The headquarter of
FIDIC is located in Geneva, Switzerland and there are around 102 countries
as its members. This standard form of contract has conditions that are
applicable to all types of construction, mechanical, electrical, and including
domestic contracts. Mishra, (2019).
According to Abdullah, (2019), the FIDIC forms of contract has been widely
used internationally especially for civil engineering works and it is also
preferably adopted for international project that are funded by international
agencies such as the World Bank, Asian Development Bank, etc. The parties
involved in FIDIC contract documents are the contractor, the employer, and a
designated engineer to administer the contract on behalf of the employer.
Zakaria et al., (2013).
The form of contract used by FIDIC is based on the type of project. For
example, the Conditions of The Red Book is used for civil engineering
construction, The Yellow Book: Conditions of Contract is used for electrical
and mechanical works including erection on site, The Green Book: FIDIC
Short Form of Contract that is suitable for simple building and engineering
works and lastly, the Orange Book: Conditions of Contract is meant for
design-build and turnkey project.
CONTRACT PRICE STRATEGY 30
The contract price strategy is the technique used by the
client to obtains a construction price and to pays the
contractor for completed work. Regarding this chapter, it will
be about contracts based on the pricing or payment criteria.
Under this type of contract there will be a fixed price and
also cost reimbursement.
Figure 11: Method of Contract Pricing.
CONTRACT PRICE STRATEGY 31
FIXED PRICE
Fixed price contract defines a total price for all construction-related activities
that occur during a project. It is a type of contract with a fixed price that
stays the same throughout the project, despite how much time is spent on it
or what materials are acquired. A fixed price contract, according to
Mangvwat et al., (2020), is one where the contract sum is decided before
the construction work begins. The contractor agrees to complete the work
for a price that has been predetermined. Fixed price contract can be divided
into two, lump sum contract and remeasurement.
A. Lump Sum Contract
Lump sum contract is widely utilized types of construction contract. A lump
sum contract is one in which the total amount of the contract is decided at
the beginning of the contract. According to Zainordin et al., (2019), the
contractor is obliged to do all of the work detailed in the bills of quantities or
drawings and specification, for a fixed of price. All cost, overheads, risk
contingencies and profit should be included in a lump sum price. This type of
contract is often based on Bills of Quantities and based on drawing and
specifications.
B. Measured and Value Contract
Under this type, the contract sum is determined when the work is complete
and after remeasurement to some agreed basis. Jeyakumar, (2020).
Remeasurement will be divided into two which is based on approximate
quantity and also based on schedule of rates.
CONTRACT PRICE STRATEGY 32
LUMP SUM CONTRACT
i) Based on BQ
For the type of contract based on Bills of Quantities, the
client will appoint an architect to prepare the design and
then the bills of quantities will be prepared by the quantity
surveyor. In this type, it will give advantages to the
contractor by allowing them to save cost during the
preparation of the quantities. It also can provide a fair basis
of competition between the contractors because they will be
priced on the same set of information.
ii) Based on Drawing and Specification
There will be no bills of quantities that will be provided to
the contractor to price it, instead they have to calculate their
own quantities based on the drawing and specification that
have been provided. Zainordin et al., (2019). As a result, no
quantity surveyor consultant will be involved during the
process. The advantages of this type are that the time spent
for producing the tender document is reduced because the
process of preparing Bills of Quantities has been removed.
CONTRACT PRICE STRATEGY 33
MEASURED AND VALUE CONTRACT
i) Based on Approximate Quantity
For the type of contract based on approximate quantities,
the quantities provided in the bill during tendering are
approximate, which also means that the quantity is not final
yet. As a result, there is the possibility of changes in price
either increase or decrease. It also allows the design and
construction to overlap. Although this contract provides
benefits such as enabling for early contractor selection and
the work on site can start early before the design is
complete, but it may be subject to remeasurement due to
the uncertainty.
ii) Based on Schedule of Rates
When the employers are uncertain of the correct quantities
that will be required during the contract, this method will be
utilized. For estimating purposes, it will require a list of
material rate, plant rate and also a labor rate. This is required
in order to get the overall cost of the project. The contractor
is only needed to provide rates for each item of work
specified in the Contract and only paid for the work that was
completed at the rates specified in the schedule. So due to
that, the overall cost of the project will only be known once
all of the work has been finished.
CONTRACT PRICE STRATEGY 34
COST REIMBURSEMENT
Cost reimbursement contract where the contractor is reimbursed for the
actual expenditures incurred in performing the services plus a fee. The
quantities are not predetermined in the cost reimbursement contract, which
is different from the fixed price contracts. It is recognized as the most
uneconomical type of contract and should only be utilized in certain
situations such as where the cost is less important than the time.
Construction can begin earlier without a well-defined scope because all fees
will be refunded, and profits will be secured. Under this type of contract,
there will be cost plus percentage, cost plus fixed fees, cost plus fluctuating
fees, target cost contract (TCC) and cost plus guaranteed maximum price
(GMP).
i) Cost Plus Percentage
A type of contract in which the contractor is paid for the normal cost for a
project plus a percentage of the estimated cost as profits. The contractor’s
fee is a fixed sum that usually varies with the total construction cost. This
contract may put the client at a disadvantage because they are responsible
for all of the contractor’s mistakes. There is no incentive provided for the
contractor to be productive. If the contractor works inefficiently, there will
be more waste of resources. As a result of the increase, the fee that must be
paid to the contractor will also increase.
ii) Cost Plus Fixed Fees
A type of contract where the contractor is paid for the normal cost for a
project plus a fixed fee for their services. This type of contract is slightly
different with cost plus percentage where the fee paid to the contractor is a
fixed sum that does not change with the overall construction cost. It also
provided an advantage which is there is an incentive that has been provided
for the contractor to perform the work quickly as possible. As a result, the
construction cost might be reduced due to the shorter construction time.
This contract gives a disadvantage on the contractor side because even
though the overall cost of the construction is increased, their fees that
include profit and overheads remain constant.
CONTRACT PRICE STRATEGY 35
MEASURED AND VALUE CONTRACT
iii) Cost Plus Fluctuating Fees
In a contract like this, the cost of the project plus a fluctuating fee depending
on whether the final cost is above or below the original target cost. The
client pays the contractor the actual construction cost plus a fee that is
inversely variable to the increase and decrease in the agreed upon estimated
cost.
iv) Target Cost
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 parties will use a mechanism at the
end of the project to determine whether savings were realized and the
project was delivered for less than the goal cost, or whether expenses
overran, and the project was delivered for more than the target cost.
Following then, the contractor will either share the savings with the
employer or contribute to the overrun. As a result, the partners are sharing
the project's risk.
v) Cost Plus Guaranteed Maximum Price (GMP)
A guaranteed maximum price contract sets a maximum price that the client
must pay their contractor regardless of the actual cost. It simply means that
the contract price has been set to a limit that cannot be exceeded. If the cost
is exceeding the guaranteed maximum price, the contractor may be required
to cover it. It will provide benefits to the client where it can protect the
client against budget overruns and at the same time motivating the
contractor to save money.
CHAPTER 3 36
3.1 RESEARCH APPROACH
The research methodology will be dominant in carrying out the objectives and goals of the
study. According to Mohajan., (2018), The selection of an appropriate research
methodology is a critical decision for conducting effective scientific research, and it is
primarily focused on matching research objectives to the characteristics of the available
research methodologies. There are two kinds of data use in this research consists primary
data and secondary data. Primary data is the data that has been generated by the
researcher, surveys, interviews, experiments and specially designed for understanding and
solving the research problem. Secondary data is the data that supports the primary data
using literature review.
3.2 METHODS OF DATA COLLECTION
In order to complete this study, data and information about this issue were gathered from
numerous sources, including interview and literature reviews.
3.2.1 Interview
Interview is one of primary data that use qualitative method. The interview was done
in one session with construction professionals. The interview was held on 23
December 2021 with Sr Siti Nabilah Abdullah, a Quantity Surveyor Gred J41
who is currently working at Public Work Department Kangar, Perlis. Then, Google
Meet platform has been chosen to conduct the interview regarding the difference
between the current procurement trend and procedures with previous situation
before the pandemic.
3.2.2 Literature Review
A secondary source for this study is a literature review. To suit the goals of this study,
data was gathered from a variety of sources including articles, journals, books,
websites, and the internet. This source's information can assist in the completion of
this research. All of these resources can help to gain knowledge about this topic and
will be used for reference, data collection, and analysis.
3.3 METHOD OF DATA ANALYSIS
The information will be evaluated using both primary and secondary sources. The data will
then be transformed into a table with and explanation. The data provided during the
interview session and the literature review are used to make the majority of the
comparisons.
CHAPTER 4 37
Many nations, including Malaysia, have Larasati et al., (2021), said that the visible
seen an apparent increase in the influence on a construction project
frequency of corona virus infections since is that generated by workers being unable
March 2020 and prompting nationwide to work at any time and being unable to
lockdowns and other restrictions on travel get to work.
and closeness. According to Ogunnusi et
al., (2020), the current disease outbreak However, the project's productivity
called Coronavirus Disease 2019 (COVID- development was also hindered,
19) was announced, which hit all the necessitating that construction
nations of the world within four months participants alter the usual processes to fit
and was declared a pandemic officially in the new constraints and demands in order
March 2020. The virus, as well as the steps to keep the construction procurement on
used to try to contain it, had a significant schedule. In these unique times, the
impact on businesses and the economy in impact of this epidemic on stakeholders
general. like as owners, developers, contractors,
subcontractors, and supply chain suppliers
The COVID-19 epidemic wreaked havoc on would be both beneficial and detrimental.
Malaysia's building sector, as it did on Chivilo et al., (2020). In other ways, in the
everything else. Throughout the MCO, short period since the epidemic began,
most building activity was suspended, procurement methods have had to
with the exception of urgent or required develop quickly. In the face of a changing
facilities. Biswas et al., (2020), mentioned global and national environment, this is a
that as a result of the covid 19 epidemic, rapid appeal to all parties to address both
the construction industry has seen a short- and long-term business difficulties,
financial downturn in practically all as well as devising project-by-project
nations, resulting in job losses. solutions.
Construction resource management is
necessary during the present COVID-19
outbreak.
CASE STUDY 38
BEFORE COVID - 19
PROJECT Pembinaan Sekolah Menengah Kebangsaan
Agama Jerlun, Kedah.
PROCUREMENT Traditional Method
TENDERING METHOD
Direct Negotiation
FORM OF CONTRACT PWD203A
START DATE 02 October 2014
COMPLETION DATE 28 December 2016
CONTRACT PRICE RM 56,600,000.00
CONTRACTOR USIMA SDN.BHD
PRICING STRATEGY Standard Pricing Strategy.
DURING COVID - 19
PROJECT Kerja-Kerja Naiktaraf Stadium Darulaman, Alor
Setar, Negeri Kedah Darul Aman.
PROCUREMENT Traditional Method
TENDERING METHOD
FORM OF CONTRACT Open Tender
START DATE
COMPLETION DATE PWD203A
CONTRACT PRICE
CONTRACTOR 7 July 2020
PRICING STRATEGY
26 January 2021
RM 4,300,000.00
PKB BUILDERS SDN. BHD
Additional Covid – 19 Safety and Health price in
Preliminary Items.
39
TYPES OF PROCUREMENT
COMPARISON
BEFORE COVID - 19 DIFFERENCES DURING COVID - 19
Type of procurement use for There is no difference in term
of procurement use during
case study before covid – 19 was covid – 19 as the case study
was practice traditional
traditional procurement procurement method.
method.
This procurement allows the Based on the interview that
client to choose the design
team, and the client may only has been done, the interviewee
choose a competent contractor
after receiving a Letter of Award said the selection of
during the tender bid process.
procurement eventually
depends on the clients’
Types of requirements, including how to
conduct the project and which
Procurement parties would be involved.
The client accepts the design Systems As a result, in light of the
work independently from the
architect, consults with a Selection Movement Control Order
quantity surveyor on cost
control, and the contractor is in (MCO) scenario, the
charge of the work on site.
construction sector need a
swift solution to the time-
consuming procurement
technique and bidding
procedure.
The traditional procurement As a result, the respondent,
technique is ideal for owners claimed that in today's
who wish to keep track of the construction industry, the
total duration of their building Design and Build procurement
projects. approach is more preferred.
The traditional procurement This is due to the procurement
technique does give the owner efficiency, which included only
with clear accountability as well the client and the selected
as greater design and contractor in a single contract
construction control. Traditional to execute the design and
procurement methods also construct operations until the
appear to take longer to project was completed.
complete than other
procurement methods
40
TYPES OF PROCUREMENT
BEFORE COVID - 19
TRADITIONAL PROCUREMENT
Type of procurement used for this project is traditional contract. Traditional contracts
are the most familiar types of contracts known in the engineering and construction
industry as it have been the main form of contract procurement for quite sometime.
This form of procurement is suitable for both experienced and inexperienced clients.
The design for construction will be fully develop before invite the tenderers. This will
give the client certainty about design quality and cost, but it can be slower than other
forms of contracting, as the contractor is appointed only once the design is complete.
So, contractor are not able to help improve the buildability and packaging of proposals
that have been prepared. According to Oshea et al., (2018), traditionally procured
construction project are known for having severe schedule delays because of spending
much time in design stage.
In traditional procurement, consultants are appointed for design and cost control and a
main contractor is selected later to carry out the work. The Traditional procurement
route is characterized by the client’s employment of an Architect as its principal agent.
The client appoints a team of consultants which comprising an Architect, Engineer,
Surveyor, and many more to prepare the contract documents and to monitored the
construction. These include a design, consisting of specifications and drawings, and
tender documentation to allow the selection of a Contractor.
The construction design will be fully developed before inviting the tenderer. This will
give the client certainty about design quality and cost at the early stage. Due to that,
the traditional procurement method seems to take a longer time to conduct than other
procurement as limited scope overlapping design and construction works. The
contractor is appointed only once the design is completed by the architect. So,
contractors are not able to help improve the buildability and packaging of proposals
that have been prepare. Hence, after reviewing all the scope and brief processes, the
traditional method is often recommended for projects where time is not a critical factor.
Suratkon, (2020).
41
TYPES OF PROCUREMENT
DURING COVID - 19
DESIGN&BUILD PROCUREMENT (PREFERABLY)
During the current COVID-19 pandemic, there is not much difference in the selection of
procurement methods for the project. Therefore, successful organizations are using this
time to maximize both internal and external impact, showcasing an unwavering
commitment to collective well-being. According to Abdullah, (2021), the selection of
procurement eventually depends on the client's requirement including on how to
conduct the project and which parties would be involved and design and build
procurement is more preferably during pandemic.
The mechanism by which a project is delivered has a significant influence on the
project's performance and construction quality. Park et al., (2015). The general contract
requirements must operate in combination with and complement the remediation
project's particular criteria. Ogunsanmi, (2015), stated that every construction
procurement technique has its own fundamental features that define and regulate its
framework. Using the right type of procurement contract such as design and build can
have a significant impact on a project's success since each type of procurement contract
comes with specific benefits and downsides. A design and build project are one in
which a single organization handles both engineering and construction. A single
integrated business, a consortium, a joint venture, or another entity might serve as the
design builder. Gad et al., (2015).
According to Putro and Latief, (2020), the Design Build Institute of America (DBIA)
mentioned that the design and build method is a project delivery approach in which the
contractor and the owner enter a single contract to offer architectural or engineering
design and construction services. In this situation, contractor that has been chosen in
design and build project will be responsible for all process of construction starting from
design stage and construction until the completion of project. Yuristanti et al., (2020)
stated that the design and build method also provides for good communication
between the designer and the builder, allowing for the incorporation of the contractor's
expertise and construction experience into the design that can result in reducing the
likelihood of design modifications. Hassan and Le, (2021), mentioned that design and
build contract agreements have a unique form in which a single sentence or paragraph
can refer to numerous disciplines.
42
METHOD OF SELECTION CONTRACTOR
COMPARISON
BEFORE COVID - 19 DIFFERENCES DURING COVID - 19
Direct negotiation was the Selection Open tender was the method
method selection tender of selection tender used for
used for case study in SMKA case study in Naiktaraf
Agama Jerlun, Kedah. Contractor Stadium Darulaman, Kedah.
However, open Tender is However, due to complex
usually adopted especially and tedious tendering
for government project process for open tender
since it will be more during the pandemic,
competitive. Hence, lowest selective tender is usually
possible tender price that is adopted. Though it is less
value for money can be competitive, however the
obtained. evaluating process is easier.
The difference in the selection of tender before and after Covid-19 hits the country
can be seen either open tender or selective tendering. The method used for
selection of contractor is depends on the scope of project and the process of
selection tenderer. However, during pandemic covid – 19, the simple process of
tendering will be chosen as method of tendering because of the limitation to follow
the tendering procedure. Abdullah, (2021).
As for the Pembinaan Sekolah Menengah Kebangsaan Agama Jerlun, Kedah, the
selection of tender method is done before the pandemic strikes. Therefore, since it
is a government project, the project adopted the direct negotiation tendering as a
measure to select the best contractor to construct the project. According to
Abdullah, (2021), if the selection of tender will be decided before pandemic, open
tender approach of tender method will be adopted. This is because this method is
competitive, hence lowest possible tender price that is value for money can be
obtained.
In addition, school is not an essential building project during the pandemic
compared to before pandemic that requires fast completion, therefore, selective
and direct negotiation tendering is not necessary to be implemented, plus it
requires the approval from Ministry of Finance (MOF).
43
METHOD OF SELECTION CONTRACTOR
BEFORE COVID - 19
DIRECT NEGOTIATION
Negotiated tenders are extensively used in the engineering and
construction industry commencing from tendering till dispute resolutions.
Since the contractor is part of the project team at a very stage of the
project, this results in better communication and information flow.
Sometimes negotiated tenders can be used when there is a very tight
deadline, or emergency works are necessary. A negotiated tender has a
good chance of being satisfactory because, more often than not, it is based
on previous satisfactory working together by the employer and the
contractor. The Malaysian government procurement policy provides for a
variety of procurement methods, including direct negotiation and a request
for quote, both of which limit the number of people who may participate in
a government project. Ab Ghadas et al., (2018). The direct negotiation
tendering is suitable use for emergency project or for project that need to
completed earlier.
One of the latest issues in construction industry in Malaysia is about federal
building which is located in Tunjong Kelantan. The issue is criteria of choose
the contractor for the project. The project have been approved by direct
negotiation by past minister of finance which is Dato’ Seri Mohd Najib Tun
Razak. According to malaymail news on September 15, 2019, Prime Minister
disputes the approval of the chosen direct negotiation as type of tender for
the selection of contractor. The prime minister said he never approved
anything; maybe they received approval before this and the letter of
approval the contractor by ministry of finance was say forge. Annuar,
(2019). So, it is important to make sure all procedure for direct negotiation
tender must be follow and understand correctly.
44
METHOD OF SELECTION CONTRACTOR
DURING COVID - 19
OPEN TENDER
An open tender is one that invites all interested contractors that
satisfy the stipulated requirements to submit and bid on the
proposed construction project. Because the open tender is
competitive, the contractor is tempted to submit the lowest
feasible quote. The lowest bidding tender price does not guarantee
that the tenderer will win the contract; other factors will be
considered, such as the tenderer's experience, financial condition,
and resources. As a result, an open tender will have a longer tender
procedure. The entire process will be unprofitable, and it will cost
money and time to individuals who are not eligible to tender. As a
result, the building company will employ a different tendering
approach.
During covid – 19 pandemic, the implementation of open tender
seems not very suitable because it have quite complicated
procedure. Due to the obvious drawbacks of open tender, such as
the influence of design changes, the quality of final goods, and so
on, the continued use of this tendering process in building projects
has become debatable. Kang et al., (2018). However, open
tendering creates the most competition among suppliers and has
the added benefit of allowing new or developing vendors to
compete for contracts. So, it is suitable to be used if client want to
get the best price for proposed construction. Government agencies
frequently employ this sort of tendering to ensure the
accountability of public expenditures. Abdullah, (2021). Most
structures developed for the private sector, particularly those that
do not require any skill in the construction process, will use this
tendering system as well.
TENDERING PROCEDURES 45
COMPARISON
CASE STUDY
BEFORE COVID - 19 DIFFERENCES DURING COVID - 19
Since the case study project use Tender Open tender usually will start with
direct negotiation tendering, Advertisement tender advertisement where the
the tender advertisement will purpose is to let all contractor
be letter of invitation to tender. know the information about the
The letter will give to selected proposed project. It is to get many
contractor. contactor to participate.
After the letter invitation Project Brief & When the contractor interested
accept by selected contractor, Site Visit into project, contractor need to
the project brief and site visit attend site visit and project brief as
will be done to understand it is one of requirement to
overall information about purchase the tender document.
project.
Contractor will also purchase Purchase of All contractor who interested to
tender document to price even Tender bid for project after project brief
the project was direct and site visit, contractor can
negotiation. It is to make sure purchase tender document to
the price can be discussed pricing. Contractor need to pay
between client and contractor. certain amount for tender.
The submission of tender Submission of The tender must be submitted to
document is same with open tender the client 12 noon sharp. The late
tender. It must submit before submission even 1 minute will
12 noon sharp. consider disqualified.
Tender evaluation for direct Tender The tender will go through strict
negotiation is more to Evaluation evaluation starting from opening of
discussion and negotiation tender until tender report. It will
about the price between client involve expert tender committee to
and contractor. evaluate the tender.
Letter of award will be released Letter of award will be released to
after the discussion was done. Letter of Award the contractor who manage to win
the tender.
TENDERING PROCEDURES 46
COMPARISON
E - TENDERING
BEFORE COVID - 19 DIFFERENCES DURING COVID - 19
Can be advertised at anytime. Tender Advertisement can still be made to
Details in the advertisement Advertisement ensure that Perancangan
depends on the approval of all Perolehan Tahunan (PPT) 2021 can
parties in the project. be carried out as usual. However,
parties involved should ensure that
the tender submission date is
reasonable and consider on the
announcement by the government
on the opening of the economic
sector.
Project brief and site visit will Project Brief & project brief and site visit will be
be done physically. Interested Site Visit done through online video
tenderers must attend the conference such as Google Meet,
project briefing and site visit at Zoom, WEBEX, etc.
place, date and time stipulated
in tender advertisement.
purchase the tender document Purchase of purchase the tender document
manually at the location, date, Tender through a secure platform subject
and time stipulated in the to the guidelines issued by The
tender advertisement. Ministry of Finance (MOF).
Submit the completed tender Submission of tenderers are need to send tender
documents manually by the Tender document through courier.
time, date and place as stated Submission are not allowed to be
in the tender advertisement. done through online because it is a
confidential information.
Process of tender evaluation Tender The meetings for tender evaluation
requires physical meeting Evaluation process is conducted through
among tender committee. The secure online platform subject to
meetings will be conducted guidelines issued by The Ministry
physically at employer’s office. of Finance (MOF).
The letter of award is awarded Letter of Award The letter of award will be
Letter of Award to the awarded to the successful tenderer
successful tenderer physically through courier to avoid any
in a meeting conducted by the physical contact.
client.
TENDERING PROCEDURES 47
BEFORE COVID - 19
DIRECT NEGOTIATION
Figure 12: Direct Negotiation Process.
Since this proposed project is a direct negotiation, the invitation of the contractor
for this project happened when JKR get the approval from the ministry of finance
to do that. The letter will send to the contractor to appoint the contractor for the
project with direct negotiation. After the tender sell to the contractor the process
of pricing the bills of quantity will happen. In this stage contractor will give the best
and appropriate rate for each elements of the works. Then contractor will invite to
meeting with the JKR to negotiate the rate and the total cost of project.
Finally, the contract will be award after the contractor and client is agreeing with
the total cost of project. Client will send the letter of acceptance and award letter
for the project to give the contractor sign that letter. Before bind a contract
document the client will check all contractor certificates to make sure all
certificates are true. Then client will also double check the bills of quantities in
tender document to make sure the rate and amount are calculated correctly. It is
because all the calculation and bills of quantities and that tender document will be
bind as contract document after the contractor is accept the project. Client should
also give a briefing to the contractor about the project continuously to make sure
contractor is aware with the condition of contracts.
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