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IN DEPTH STUDY OF MALAYSIAN STANDARD FORM OF

CONSTRUCTION CONTRACTS: PWD 203A VERSION 2007

Oh Chin Phang

Bachelor of Engineering with Honours

(Civil Engineering)

2010

Faculty of Engineering

UNIVERSITI MALAYSIA SARAWAK

BORANG PENGESAHAN STATUS TESIS

Judul: IN DEPTH STUDY OF MALAYSIAN STANDARD FORM OF


SESI PENGAJIAN : 2009/2010

Saya, OH CHIN PHANG

(HURUF BESAR)

mengaku membenarkan tesis * ini disimpan di Pusat Khidmat Maklumat Akademik, Universiti

Malaysia Sarawak dengan syarat-syarat kegunaan seperti berikut:

1. Tesis adalah hakmilik Universiti Malaysia Sarawak.

2. Pusat Khidmat Maklumat Akademik, Universiti Malaysia Sarawak dibenarkan membuat salinan

untuk tujuan pengajian sahaja.

3. Membuat pendigitan untuk membanguankan Pangkalan Data Kandungan Tempatan.

4. Pusat Khidmat Maklumat Akademik, Universiti Malaysia Sarawak dibenarkan membuat salinan

tesis ini sebagai bahan pertukaran antara institusi pengajian tinggi.

5. ** Sila tandakan (√) di kotak yang berkenaan.

SULIT (Mengandungi maklumat yand berdarjah keselamatan atau kepentingan Malaysia

seperti yang termaktub di dalam AKTA RAHSIA RASMI 1972).

TERHAD (Mengandungi maklumat TERHAD yang telah ditentukan oleh organisasi/badan di

mana penyelidikan dijalankan).

TIDAK TERHAD

Disahkan oleh

_______________________ __ ___________________________ (TANDATANGAN PENULIS) (TANDATANGAN PENYELIA)

Alamat tetap: 49, Jln Suadamai 4/1

Bdr Tun Hussein Onn, Bt 10, IR. Ting Sim Nee

Cheras, 43200, Selangor.D.E. (Nama Penyelia)

Tarikh: Tarikh:

CATATAN * Tesis dimaksudkan sebagai tesis bagi Ijazah Doktor Falsafah, Sarjana dan Sarjana Muda

** Jika tesis ini SULIT dan TERHAD, sila lampirkan surat daripada pihak berkuasa/organisasi

berkenaan dengan menyatakan sekali sebab dan tempoh tesis ini perlu dikelaskan sebagai

SULIT dan TERHAD.

The following Final Year Project Report:

Title : In Depth Study of Malaysian Standard Form of Construction

Contracts: PWD 203A Version 2007

Name : OH CHIN PHANG

Matric No : 17082

Has been read and certified by:

Ir. Ting Sim Nee Date

Supervisor

i

IN DEPTH STUDY OF MALAYSIAN STANDARD FORM OF


OH CHIN PHANG

This project is submitted to

Faculty of Engineering,

University Malaysia Sarawak

in partial fulfilment of

the requirement for the

degree of Bachelor of Engineering with Honours

(Civil Engineering) 2009

ii

To my beloved friends and family

iii

ACKNOWLEDGEMENT

I wish to express my sincere gratitude to my dissertation supervisor, Ir. Ting

Sim Nee for her continuous support from the inception till the completion of this

thesis. She has never given up on me and has continuously been patient and kind to

me. I would also like to thank her for the ideas and views that she has given to me.

Meanwhile, I would also like to thank the people in the construction industry

who were so willing and cooperative in the questionnaire surveys that i passed out.

They were all kind and really gave good opinions on the topic which I am surveying.

Next, special thanks go out to my fellow coursemates, Judith Chan, Micheal

Chai, Timothy Wong and Samuel a/l Nadarajan who were more than willing to help

me with my scope of work and also to give very good ideas.

Besides, without the support of my beloved parents, it would not have been

possible for me to accomplish this thesis. Here I express my sincere love to them and

hope that they share in my delight. I dedicate this thesis to them.

iv

ABSTRAK

Borang kontrak JKR ialah borang kontrak yang lazimnya digunakan oleh sektor

awam di Malaysia yang merangkumi projek berskala besar dan ianya dibiaya oleh

kerajaan Malaysia. Borang kontrak JKR telah melalui proses rujukan dari JKR 203A

(Ruj. 83) kepada JKR 203A (Ruj. 2007) untuk menjadikan ianya lebih efektif

sebagai borang menetapkan syarat syarat perjanjian. Kajian ini bertujuan untuk

menjalankan satu analisis terperinci terhadap klausa yang terkandung di dalam

borang kontrak JKR 203A (Ruj. 2007) dan menilai klausa klausa tersebut dari sudut

yang neutral dan seterusnya menilai pengaplikasian klausa tersebut dalam industri

pembinaan di Malaysia. Kaedah survei digunakan untuk mendapatkan pandangan

golongan profesional untuk menentukan nilai kepentingan lapan (8) elemen yang

berkait rapat dengan kontrak iaitu elemen kejelasan, kelengkapan, konsistensi,

fleksibiliti, struktur pengurusan projek yang jelas, keadilan atau pembahagian

peranan dan pembahagian risiko. Sebanyak tujuh puluh lapan (78) klausa telah

dianalisis dan dinilai secara keseluruhan dengan tujuh magnitud pernilaian iaitu

kurang negatif, negatif dan sangat negatif, kurang positif, positif dan sangat positif.

Daripada kajian ini, borang kontrak JKR 203A ini boleh diklasifikasikan sebagai

positif. Beberapa cadangan telah dikemukakan untuk memantapkan lagi aplikasi

klausa klausa dalam borang ini.

v

ABSTRACT

The PWD forms of contract are the de facto standard forms of contraction contract

used by the Malaysian public sector and most of these big scaled projects are public-

funded which makes government a major player in the construction industry. PWD

standard form has gone through revision from PWD 203A Forms (Rev. 83) to PWD

203A Forms (Rev. 2007) to make it a better tool in governing project condition. This

research is aimed to carry out an in-depth study of all the clauses stated in PWD

203A (Rev. 2007) standard form of construction contract from a view of neutral

party and determine the adequacy of application of every clauses in the Malaysia

construction industry. Questionnaires used to collect the public’s opinion on the

degree of importance on the eight (8) elements identified as essential to a contract

form in Malaysia construction Industry, namely: clarity, comprehensiveness,

completeness, consistency, flexibility, clear structured project management

framework, fairness or role distribution and risk distribution. There are seventy eight

(78) clauses have been analyzed and evaluate the overall performance of clauses

based on the total evaluation score with seven magnitude of evaluation such as low

negative, average negative, high negative, neutral, low positive, average positive and

high positive. Through this research, the effectiveness and application of the revised

version of PWD 203A (Rev. 2007) in Malaysian construction industry is considered

as average positive evaluation and several recommendations have been suggested in

order to improve the overall performances of clauses.

vi

TABLE OF CONTENT

Page

ACKNOWLEDGEMENT iii

ABSTRAK iv

ABSTRACT v

LIST OF TABLES xvii

LIST OF FIGURES xxv

ABBREVIATIONS xxxiii

CHAPTER 1 INTRODUCTION

1.1 General and Definitions 1

1.2 Problem Statement 8

1.3 Research Hypothesis 12

1.4 Aim and Objectives 13

1.5 Scope and Limitation of Study 14

1.6 Research Significance 14

1.7 Structure of Thesis 15

CHAPTER 2 LITERATURE REVIEW

2.1 Introduction 18

2.2 Construction Contract 20

vii

2.3 Standard Form of Contract 28

2.3.1 Advantage of Standard Form of Contract 32

2.3.1 Disadvantage of Standard Form of Contract 35

2.4 Standard Form of Contract in Malaysia 38

2.5 PWD 203A (Rev. 2007) Standard Form of

Construction Contract 41

2.6 Comments on PWD 203A (Rev. 2007)

Standard Form of Construction Contract 43

2.7 “Ideal” Standard Form of Contract 59

2.8 Previous Form Studies 66

2.9 Summary 79

CHAPTER 3 METHODOLOGY

3.1 General 80

3.2 Research Framework 83

3.2.1 Literature Review 83

3.2.2 Structured Questionnaire 83

3.2.2.1 Sampling Method 88

3.2.3 Form Analysis of PWD 203A

Standard Form of Construction Contract 90

3.2.4 Quantitative and Qualitative Analysis 90

3.2.5 Results Summary / Discussion 94

3.2.6 Conclusion and Recommendations 94

viii

CHAPTER 4 RESULTS AND DATA ANALYSIS

4.1 General 95

4.2 Method 97

4.2.1 Samples 97

4.2.2 Calculation of Importance Weights 98

4.2.3 Calculation of Total Evaluation Score

in Clause Analysis 103

4.2.3.1 Example of Calculation of Total

Score of Evaluation 105

4.3 Clauses Analysis 107

4.3.1 Clause No 1.0: Definitions and Interpretation 107

4.3.2 Clause Analysis No 2.0: Contract Period 111

4.3.3 Clause Analysis No 3.0: The S.O and

S.O. ’S Representative 114

4.3.4 Clause Analysis No 4.0: S.O.’S Right

To Take Action 117

4.3.5 Clause Analysis No 5.0: S.O.’S Instructions 120

4.3.6 Clause Analysis No 6.0: Scope of Contract 123

4.3.7 Clause Analysis No 7.0: Contract Sum 126

4.3.8 Clause Analysis No 8.0: Contract Documents 129

4.3.9 Clause Analysis No 9.0: Representations,

Warranties and Undertakings Of

The Contractor 133

4.3.10 Clause Analysis No 10.0: Obligations of

The Contractor 137

ix

4.3.11 Clause Analysis No 11.0: Inspection of Site 140

4.3.12 Clause Analysis No 12.0: Programme Of

Work 143

4.3.13 Clause Analysis No 13.0: Performance Bond

or Performance Guarantee Sum 147

4.3.14 Clause Analysis No 14.0: Indemnity In

Respect of Personal Injuries and

Damage to Property 151

4.3.15 Clause Analysis No 15.0: Insurance Against

Personal Injuries and Damage

to Property 154

4.3.16 Clause Analysis No 16.0: Indemnities to

Government In Respect Of Claims

By Workmen 158

4.3.17 Clause Analysis No 17.0: Employees’ Social

Security Act, 1969 161

4.3.18 Clause Analysis No 18.0: Insurance of

Works 165

4.3.19 Clause Analysis No 19.0: Setting Out 169

4.3.20 Clause Analysis No 20.0: Unfixed Materials

and Goods 173

4.3.21 Clause Analysis No 21.0: Compliance

with the Law 176

4.3.22 Clause Analysis No 22.0: Design 179

x

4.3.23 Clause Analysis No 23.0: Employment

of Workmen 183

4.3.24 Clause Analysis No 24.0: Variations 187

4.3.25 Clause Analysis No 25.0: Valuation

of Variation 190

4.3.26 Clause Analysis No 26.0: Bill of Quantities 194

4.3.27 Clause Analysis No 27.0: Measurement

of Works 198

4.3.28 Clause Analysis No 28.0: Payment to

Contractor and Interim Certificates 201

4.3.29 Clause Analysis No 29.0: Adjustment of

Contract Sum 205

4.3.30 Clause Analysis No 30.0: Fluctuation

of Price 208

4.3.31 Clause Analysis No 31.0: Final Account

And Payment Certificate 211

4.3.32 Clause Analysis No 32.0: Effect of S.O.'S

Certificates 215

4.3.33 Clause Analysis No 33.0: Deduction from

Money Due To Contractor 218

4.3.34 Clause Analysis No 34.0: Prime Cost /

Provisional Sums 221

4.3.35 Clause Analysis No 35.0: Materials,

Goods and Workmanship 224

xi

4.3.36 Clause Analysis No 36.0: Inspection and

Testing Of Materials, Goods

and Equipment 227

4.3.37 Clause Analysis No 37.0: Constructional

Plant, Equipment, Vehicles and

Machineries 231

4.3.38 Clause Analysis No 38.0: Possession of Site 234

4.3.39 Clause Analysis No 39.0: Completion

of Works 238

4.3.40 Clause Analysis No 40.0: 0 Damages For

Non-Completion 242

4.3.41 Clause Analysis No 41.0: Sectional

Completion 245

4.3.42 Clause Analysis No 42.0: Partial Occupation/

Taking Over By Government 249

4.3.43 Clause Analysis No 43.0: Delay and

Extension of Time 253

4.3.44 Clause Analysis No 44.0: Claims for Loss

And Expense 257

4.3.45 Clause Analysis No 45.0: Investigation by

The Government and Other Persons

In Case Of Accident, Failure or

Other Event 261

4.3.46 Clause Analysis No 46.0: Access for

Works, Etc. 264

xii

4.3.47 Clause Analysis No 47.0: Sub-Contract

or Assignment 267

4.3.48 Clause Analysis No 48.0: Defects after

Completion 270

4.3.49 Clause Analysis No 49.0: Unfulfilled

Obligations 274

4.3.50 Clause Analysis No 50.0: Suspension

of Works 277

4.3.51 Clause Analysis No 51.0: Events And

Consequences of Default By

The Contractor 280

4.3.52 Clause Analysis No 52.0: Termination

on National Interest 286

4.3.53 Clause Analysis No 53.0: Termination on

Corruption 289

4.3.54 Clause Analysis No 54.0: Payments upon

Termination 293

4.3.55 Clause Analysis No 55.0: Certificate of

Termination Costs 296

4.3.56 Clause Analysis No 56.0: Surviving Rights 300

4.3.57 Clause Analysis No 57.0: Effect of Force

Majeure 303

4.3.58 Clause Analysis No 58.0: Site Agent and

Assistants 306

xiii

4.3.59 Clause Analysis No 59.0: Nominated

Sub-Contractors and/or Nominated

Suppliers 309

4.3.60 Clause Analysis No 60.0: Payment to

Nominated Sub-Contractor or Supplier 313

4.3.61 Clause Analysis No 61.0: No Liability of

Government to Nominated and/or

Sub Contractor or Supplier 317

4.3.62 Clause Analysis No 62.0: Responsibilities

of Contractor to Nominated and/or

Sub Contractors or Suppliers 320

4.3.63 Clause Analysis No 63.0: Intellectual

Property Rights 323

4.3.64 Clause Analysis No 64.0: Antiquities 326

4.3.65 Clause Analysis No 65.0: Arbitration 329

4.3.66 Clause Analysis No 66.0: Notice, Etc. 332

4.3.67 Clause Analysis No 67.0: Amendment 336

4.3.68 Clause Analysis No 68.0: Confidentiality 339

4.3.69 Clause Analysis No 69.0: Stamp Duty 342

4.3.70 Clause Analysis No 70.0: Severability 345

4.3.71 Clause Analysis No 71.0: Waiver 348

4.3.72 Clause Analysis No 72.0: Laws Applicable 351

4.3.73 Clause Analysis No 73.0: Successors Bound 354

4.3.74 Clause Analysis No 74.0: Epidemics

and Medical Attendance 357

xiv

4.3.75 Clause Analysis No 75.0: Technology

Transfer 360

4.3.76 Clause Analysis No 76.0: General Duties

and Performance Standard 363

4.3.77 Clause Analysis No 77.0: Restriction And

Procedure on Use of Imported Materials

and Goods 367

4.3.78 Clause Analysis No 78.0: Time 371

4.4 Summary of Results 374

4.4.1 Summary of Results Based On Total

Evaluation Score of Clause Analysis 374

4.4.2 Summary of Results for Agreement Level

of Attribute of Clause 385

4.4.2.1 Summary of Result in Term of

Clarity 385


Comprehensiveness 391


Completeness 397


Consistency 403


Flexibility 409

xv


Clear Structured Project

Management Framework 415


Fairness or Role Distribution 421


Risk Distribution 427

CHAPTER 5 DISCUSSION AND RECOMMENDATION

5.1 General 434

5.2 Positive Evaluation of General Conditions 434

5.2.1 High Positive Evaluation of General

Conditions 435

5.2.2 Average Positive Evaluation of General

Conditions 436

5.2.3 Low Positive Evaluation of General

Conditions 442

5.3 Negative Evaluation of General Conditions 448

5.3.1 High Negative Evaluation of

General Condition 449

5.3.2 Average Negative Evaluation of General

Condition 452

5.4 Summary for Positive Evaluation and Negative

Evaluation of General Condition of Contract 454

xvi

5.5 Overall Performance 457

CHAPTER 6 CONCLUSION

6.1 General 460

6.2 Research’s Findings 460

6.3 Recommendation 462

6.4 Research’s Constraint 463

6.5 Suggestion for Future Research 463

6.6 Conclusion 464

REFERENCES 465

APPENDIX 475

xvii

List of Table

Tables Page

3.1

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

The Magnitude of Evaluation of the General Conditions

for Clause

Format of Table to Analyze Result of Structured

Questionnaire Survey

Importance Weight of Criteria

Importance Weight of Each Criterion in Percentage Form

The Magnitude of Evaluation of the General Conditions

for Clause

Example of Calculation for Total Evaluation Score of a

Sample Clause

Summary of Total Evaluation Score and Magnitude of

Evaluation

Total Evaluation Score and Magnitude of Evaluation for

Clause No.1.0


Clause No.2.0


Clause No. 3.0


Clause No. 4.0

93

99

100

102

104

105

107

110

113

116

119

xviii

4.11

4.12

4.13

4.14

4.15

4.16

4.17

4.18

4.19

4.20

4.21

4.22


Clause No. 5.0


Clause No. 6.0


Clause No. 7.0


Clause No. 8.0


Clause No. 9.0


Clause No. 10.0


Clause No. 11.0


Clause No. 12.0


Clause No. 13.0


Clause No. 14.0


Clause No. 15.0


Clause No. 16.0

122

125

128

132

136

139

142

145

150

153

157

160

xix

4.23

4.24

4.25

4.26

4.27

4.28

4.29

4.30

4.31

4.32

4.33

4.34


Clause No. 17.0


Clause No. 18.0


Clause No. 19.0


Clause No. 20.0


Clause No. 21.0


Clause No. 22.0


Clause No. 23.0


Clause No. 24.0


Clause No. 25.0


Clause No. 26.0


Clause No. 27.0


Clause No. 28.0

164

168

172

174

178

182

186

189

193

197

200

204

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4.35

4.36

4.37

4.38

4.39

4.40

4.41

4.42

4.43

4.44

4.45

4.46


Clause No. 29.0


Clause No. 30.0


Clause No. 31.0


Clause No. 32.0


Clause No. 33.0


Clause No. 34.0


Clause No. 35.0


Clause No. 36.0


Clause No. 37.0


Clause No. 38.0


Clause No. 39.0


Clause No.40.0

207

210

214

217

220

223

226

233

237

237

241

244

xxi

4.47

4.48

4.49

4.50

4.51

4.52

4.53

4.54

4.55

4.56

4.57

4.58


Clause No. 41.0


Clause No. 42.0


Clause No. 43.0


Clause No. 44.0


Clause No. 45.0


Clause No. 46.0


Clause No. 47.0


Clause No. 48.0


Clause No. 49.0


Clause No. 50.0


Clause No. 51.0


Clause No. 52.0

247

252

256

260

263

266

269

273

276

279

284

288