The document discusses the traditional procurement method for construction projects. It begins by outlining the key aspects of the traditional method, including that the client hires consultants to handle design, cost control, and administration, while a contractor is hired to carry out the construction works. It then discusses the advantages and disadvantages of the traditional method based on a client's request to build a RM1.2 billion hotel and shopping complex within 5 years while maintaining full design control and minimal variations. The document recommends using the traditional method to meet the client's needs and control over the project. It provides a timeline and overview of risks associated with the traditional procurement approach.

1. PROCUREMENT

2. Traditional Procurement Method
The traditional procurement method is a conventional method used in the construction industry.
In the traditional method, the client take on the consultants which are assigned for design, cost
control, and contract administration, and that the contractor is in charge for carrying out the
works. The consultants consist of Architects, Civil Engineer, Mechanical and Electrical Engineer
and the Quantity Surveyor. The responsibility of the latter is applicable to all workmanship and
materials, including work by subcontractors and suppliers.
In some cases the client will appoint some of the sub-contractors to be engaged by the
contractor (variously referred to as named, nominated, or pre-selected). In such cases the
contractor may take full responsibility for their performance, or the contractor's responsibility
may be limited in some way, in which case a collateral warranty between client and
subcontractor will be essential. The contractor is usually chosen after competitive tendering on
documents giving complete information. However, the contractor can be appointed earlier,
either through negotiation or on the basis of partial or notional information.

3. Advantages and Disadvantages of Traditional Procurement
Based on WCW & AFL Berhad wishes, they want to build RM1.2 billion hotel and shopping
complex within 5 years and wished full control of the design with minimum variation. Therefore
we suggest use traditional method which can fulfill their needs. So, we had prepared the
advantages and disadvantages of traditional procurement.
Advantages
1.High quality works.
Usually the consultant team will provide a design at the initial stage.Therefore, consultant and
contractor able to advise client to decide which designs are more suitable for the project based
on their budget.
2.Cost control
Client can easily make decision based on the tender that submitted by tenderers because all
tenderers provide a tender which are based on the same information given.Since,the accuracy
of the range of construction cost are based on the complete design and specification, the client
able to choose the best or lowest price among those tender.
3 Familiarity of procurement
Among different types of procurement, Traditional procurement is the safest procurement
because it has been commonly used for a long time.Therefore, contractor and consultant can
easily avoid the mistake during the procurement state of a construction progress.
Disadvantages
1 Communication error
To make sure everything run smoothly,Client have to communicate with consultant and
contractor for updating their latest information.Unfortunately, there are so many organization,
consultants and contractors involved in a project so it might cause some parties could not get
the updated information.As a result, it will cause the client hard to manage the project.
2.Longer time taken
A design have to provided before tendering so it caused traditional procurement require more
time to complete the project.Plus,consultant and contractor have to pay responsibility if
problems occur during the project which mean the project might be delay to settle those
problems.

4. TIMELINE
Brief Stage
During the brief stage, the client will brief the consultants, which are the architect and quantity
surveyor on what the client wants. For example, what type of development does the client want
(Industrial, commercial, residential). The client also will brief the quantity surveyor on his budget.
Design Stage
Once the information has been given by the client with regards of what type of development,
construction and his stated budget, then the architect can start the design stage with the input of
all the information from the client and quantity surveyor.
Competition (Tendering) Stage
Once the design and drawing has been completed by architect and engineer, the quantity
surveyor will start preparing the bill of quantities to incorporate into contract document for it to
be tender out to all the contractors whether it is under open tendering, selective tendering or
direct negotiation.
Construction Stage
After the contractor has been selected, and the contract has been signed, the construction will
begin in the time frame as stipulated as in the contract document.

5. RISK
Risks are allocated between the employer and contractor through the various main procurement
methods. It can be concluded that traditional procurement has the lowest employer risk as
referred to the diagram. The risks are transferred to the contractors due to lump sum contract
where all the prices are fixed before construction works are set to begin. Employers are able to
bear minimum cost risk as contract sums are less likely to be adjusted. Cost certainty can be
assured.
Traditional procurement allows completion of design before works are being tendered out.
Therefore, clients are subjected to low design risk. Traditional procurement also provides
certainty in design quality as design is fully developed before contractor.
Lastly, traditional procurement has fixed contract date where it leads to medium time risk. There
is still a risk where contractor will not be able to complete the construction work in time.
However, contractors are entitled to claim Extension of Time.

6. COMPARISONS
Traditional procurement has the longest time frame as there is no concurrent work throughout
the whole project period. There might be considerations on the time frame where the client
wishes to complete the construction period within five years. However, five years is more than
enough to complete a construction of a RM1.2 billion hotel and shopping complex. It can be
proven by the construction of Kuala Lumpur Twin Tower which is a 1.6 billion USD project which
took only three years to complete the construction.
Procedures are in sequence where it comes one after another. Therefore, construction are only
commencing after design is being completed. Moreover, traditional procurement is based on
lump sum contract where prices are being fixed before commencing of construction work.
Financial risk being transferred to the contractor enables traditional procurement to has
minimum variation in contract sum. Client has partial or full control on design. Clients would first
appoint consultant team to come up with a design which fulfil their requirement. Client are able
to consider the best design before letting out to tender. Minimum variation in design is able to be
introduced during early stage of construction phase. Last but not least, traditional procurement
allows clients to deal with only consultant that is responsible of the project design and contractor
that is responsible of the construction. Clients that are not interested in dealing with too many
parties are recommended to give traditional procurement a go.

7. TENDERING

8. PART 2: TENDERING METHOD
2.1 What is tendering?
A tender is a submission made by prospective contractor in response to an invitation of
tender. A formal tender lists out the all the requirements the company needs for a project, and
also information regarding to capabilities of the tendering company. The tendering process is
mainly for choosing the contractor that will construct the works. There are 3 types of tendering
methods which are open tendering,selective tendering and negotiated tendering.
2.2 Recommendation for tendering method : Two Stage Selective Tendering
Generally, selective tendering is only open to selected number of contractors. The
contractors may be short listed based on company’s track record. Thus, Selective tendering
ensure only properly qualified tenderers which can ensure better quality of workmanship as well
as lowering the risk of delay of works during the construction period. This method is also said to
have a low risk but high reward method. Thus it is suitable since dealing with a mega project
requires a considerable amount of work quality in the construction works.
Selective tendering is the most commonly used method as it allows the tender price to
be the main deciding factor. With less number of tenderers tendering, it increases the chance of
the tenderers to obtain the contract, which motivates them to analyze the tender documents and
come up with their best price. Selective tendering generally tend to have shorter tender period
as the consultant does not need to evaluate the tender, since it is decided based on the price.
Seeing that less tenderers are involved, it requires less tender document which enables our
client to reduce cost of tendering, saves time and resources.
There are two types of selective tendering, which includes single stage selective
tendering and two stage selective tendering. We would recommend two stage selective
tendering. An advertisement will be placed in social platforms to invite interested tenderers.
However, this stage requires the tenderers to submit their companies’ particular in a “Pre
Qualification” form to vett on each tenderer’s financial capability, adequate experience and their
ability to meet the requirements of the complexity for this mega project. By eliminating the non-
competence tenderers through the prequalification process, it reduces the risk of buildability
issues during construction period, which fulfills the requirement of the client for wanting the
project to complete on time.

9. 2.3 Reasons for not choosing other method
2.3.1 Open tendering
Open tendering method has no restrictive list and allow all tenderers to participate in the
tender. However, it is a slow and costly process. This method results in a waste of time, money
as well as resources as there might be some tenderers who may be simply not suitable for the
contract. Since there are many tenderers, it reduces their chance of obtaining the contract. The
contractors has no incentive to study the tender documents in order to work out their minimum
price and shall roughly provide a price which bring them a profit if they secure the contract.
Handling a mega project requires a considerable amount of quality in the constructions
works which could result in failure of construction or even life-threatening situations if there isn’t
quality works. By using open tendering method, there is a risk of selecting new or unknown
contractors with poor workmanship, poor organization or no experience on the type of works
being tendered. Moreover, selecting the lowest tender price could result in under-priced
contractors. This could lead to either a rampant cutting of works, resulting in poor quality of
works as well as a delay to work due to the financial difficulties encountered by the contractor
because of undercutting of prices.
2.3.2 Negotiated tender
In construction industry, transparency is defined as easily understandable and
accessible information. Transparency ensures fair and equal treatment, thus it is open to the
public. Since negotiated tender is known for approaching only 1 experienced reputable
contractor, it isn’t considered to be transparent at all. Furthermore, negotiated tender method
generally has a higher price compared to open and selective tendering. Since this method is not
transparent to the public and only one contractor is approached, the contractor might price a
higher tender price and the client is unable to compare the price. In addition to that, approaching
a reputable contractor with good track records would definitely lead to higher pricing of tender.
Seeing that our client has no experience in the construction industry, he may not have
any working relationship with a contractor. Moreover, this method has a high risk where should
the negotiation process fails, it would be a great waste of time and resources at the same the
client has choose another contractor to tender, hence restarting the whole negotiation process.
As the client’s consultant quantity surveyor, we would want our client to get the best tender price
and spend his money wisely. Therefore this method is not recommended.

10. 2.5 Timeline for Two Stage Selective Tendering method

11. CONTRACT
ARRANGEMENT
Type of Contract

12. From the client’s requirement for this project, Lump Sum contract will be recommended as the
client wants to have minimum variations to the Contract Price during construction.
Lump Sum contract is a fixed sum contract where contractors undertake to be responsible for
carrying out the complete contract work for a stated total sum of money. Under a lump sum
contract, a single ‘lump sum’ price for all the works is agreed before the works begin. This type
of contract is usually based on Bills of Quantities and drawings. It is generally considered an
advantageous contract agreement if the work is well-defined with construction drawings, pre-
construction studies, specification and others so it enables the contractor to price the work they
are being ask to carry out accurately. It can be seen to reduce client’s risk as they give the client
some certainty about the likely cost of the works.
However, contractors have to bear more risk than some other contract forms, with there being
fewer mechanisms available for them to change their price. The price of a lump sum contract
tend not to be fixed, but it allows the price to change under certain circumstances such as when
there is a variations in the contract, relevant events which caused by the clients, undefined
provisional sums, fluctuation of cost, and so on. As a result of the additional risks encountered
by the contractor, a considerable sum can be added to their tender to foresee the rising costs
they may have to incur, and the client must pay the additional sums despite of whether the risks
materialise or not. The contract sum will be less likely to change if the works are better defined
when the contract is agreed.
Advantages of Lump Sum contract
1.Lower risk apportioned to the client
Since a fixed rate is agreed before the work begins, it limits the client’s exposure and liability
during the construction. When the construction cost is fixed, then the client is not liable for any
contractor’s cost overruns. This offers a greater degree of certainty on the client’s cost, which is
necessary in securing a construction loan.
2.Lump sum arrangements are fairly simpler to manage
The client makes payments in a regular instalment, usually monthly, based on the percentage of
the work completed, provided that the contractor has a reliable and stable cash flow.
3.Early completion and superior performance
Contractors has greater control over profit expectations, he will have more incentive to complete
the project quickly by increasing its efficiency and production to minimize overhead and
maximize its profit since the fees is fixed and move on to the next job.
Disadvantages of Lump Sum Contract

13. 1.Limited flexibility for design changes
Changes of drawing and specification can be troublesome and may be costly as Lump sum
contract provides limited flexibility for design changes. It will be difficult to obtain if the client
wants to make changes to the project during the construction because the contractor bid on the
project in accordance with the completed design.
2. Contractor select its own means and method
Since the project is closed book, the owner must able to write the desired specification and
materials that is required for the contractor to use during construction, otherwise the contractor
may be free to use the lowest cost means, methods and materials consistent with the
specification to reduce cost and increase their profit margin. In order for the client to protect
himself, he have to work closely with the design team during the planning stages of the project
to make sure that everything he wants is documented in the final designs.
Factors that lead to dispute and claims arising from Lump Sum Contract:-
1.Change Orders
In the case of change order proposals received or suggested by the client that may demand
bigger expenses, the price of quotation could produce disagreements.
2. Scope and Design changes
A contractor can suggest design changes based on their past experience or construction
method. Contract provision should be able to make clear on how those alteration will be
addressed and who will be responsible to bear the additional expenses.
3. Compensation for early completion
Lump sum contract may include an early completion of work compensation for the contractor as
it might produce a greater savings for the client. However, those clauses must be stated clearly
and detailed in the construction contract.
4. Unbalanced bids
Some of the projects might need to submit payment application using unit prices and unit
quantities. In these circumstances, the contractors may make an unbalanced bid by rising unit
prices on such items needed early in the project, such as transportation, insurances and
reducing unit price on items which have to be used in later stages.

14. Form of contract
There are few types of contract forms being used in the construction industry. As in this
situation, we would advise our client to use PAM Contract 2006 With Quantities. PAM contract
is suitable for private sector and traditional contract. Besides that, PAM Contract with Quantities
are commonly used for bigger projects because for big projects, a well define BQ is necessary
to reduce any disputes and discrepancies, even a small error or miscalculation may arise to a
huge financial loss. Some clauses in PAM form 2006 secures the risk of client such as quality,
extension of time. Some changes on the roles and responsibilities of the parties are introduced
to the contract.
Contractor obligation
Contractor plays his role as “Employer” who pays the sub-contractor’s such sum as agreed in
the contract document. Besides that, contractor has the responsibilities to instruct sub-
contractor of the work in PAM 2006.
Sub-contractor obligation
By referring to PAM 2006, sub-contractor have a dual obligation to carry out and complete the
works in accordance described in contract document. Such work should be referring to the
drawings, specification and bill of quantities to meet the quality and type of materials.
Employer commercial consideration

15. Quality
By referring to PAM 2006, the contractor shall take the responsibility to carry out for all the
works according to the standards described in the contract documents like materials, goods and
workmanship by the sub-contractor. Clause 6.1 which states that if there is any discrepancy
between the actual quality and specification in the contract, the contractor can instruct sub-
contractors to demolish and rectify the defect works without affecting the contract sum. Besides
that, the sub-contractor must provide defect liability period after completion of works and correct
the defects within 28 Days from receipt of schedule of defects from contractor. If he fails to
correct the defect within the stated time, employer has the right to pay other party to do and
such cost incurred will be compensated which in PAM 2006 under clause 15.3.
Time
In PAM 2006, clause 23.0 Extension of time, it protects employer from risk of time delay.
Contractor has the right to claim for extension of time if any Relevant Events stated in clause
23.8 happen. The contractor shall submit a written notice to employer regarding his intention to
claim for additional time within 28 days from the date of commencement of the Relevant Events.
The contractor shall send his final claim for extension of time to Architect to assess any
extension of time. If the contractor fails to submit within the stated time, it shall be deemed that
the contractor is able to complete the project on time. Besides that, clause 23.6 in PAM 2006,
states that the contractor has the responsibility to not only prevent delay of the progress but also
to reduce delays. For instance, the contractor can show that he is proactive in preventing such
delays happen by rescheduling, resequencing of works, revising his methods of working.
How to claim for Insurance for loss and damage of property or person
Injury to person or loss and/or damage of propertyand indemnity to employer (clause 18)

16. In the PAM Contract 2006, under clause 18, it is about the compensation will be paid to the
Employer if there is any loss and/or damage of property. As for Clause 18.1 stated in the PAM
Contract 2006, contractor shall take full responsibility and indemnify the employer if there’s any
injury and death caused by the carrying out of the Works and to identify that the same due to
any negligence, omission, default and/or breach of contract by the Contractor or of any Person
for whom the Contractor is responsible.
Clause 18.2 and clause 18.3 is slightly similar to clause 18.1, which 18.2 says that
Contractor shall indemnify against loss and/or damage if Contractor or any Person for whom the
Contractor is responsible breach the contract.
Last clause under the clause 18 is 18.4 which is mentioned that any compensation given
under Clause 18.1 to 18.3 shall not be rejected or reduced when any negligence or omission
caused by the authorized representatives which are the Employer, Architect or Consultants.
Insurance against injury to person and loss and/or damage of property (clause 19)
Under clause 19, the PAM Contract 2006 has stated that Contractors must make certain
that all workmen have their insurance to the commencement of any work under the Contract,
take out and maintain in the joint names of Employer, Contractor, sub-contractor and other
interested parties. There are 2 main types of insurance for workmen, separated into Employees
Social Security Scheme & Workmen’s Compensation Scheme. Contractor and Employer would
have to be assured of having a licensed insurance company as mentioned in clause 19.5.
Employees’ Social Security Act 1969
- This is the Act that should be applied to local workmen registered by the Contractor employed
on the Works who are subject and registered under Employees Social Security Scheme a.k.a
“SOCSO”. “SOCSO” is known as Social Security Organization. It is established to protect
Malaysian employees under Employees Social Security Act, 1969.
Insurance for local workmen not subject to SOCSO
- If there are workers who are not registered under SOCSO, Contractor should also have a
backup insurance for the workers and such insurance policy must be maintained and valid up to
the Completion Date and the extended maintenance cover shall be for Defects Liability Period
plus a further three (3) months. If the project has been prolong, Contractor shall reconfirm that
the insurance and Defects Liability Period must be updated to the extended completion date.
Contractor shall inform the authority to extend the insurance cover period not less than one (1)
month before the expiry of the insurance in force.
Workmen’s compensation insurance for foreign workers
- The compensation for foreign workers is similar to the insurance for local workmen who are
not registered under SOCSO. Contractor is liable for any damage and loss and should
indemnify and maintain a similar insurance policy for all foreign workers employed on the Works

17. referring to Workmen’s Compensation Act 1952 and Workmen’s Compensation Order 1998
which is the Foreign Worker’s Compensation Scheme.
Liquidated and Ascertained Damages (LAD)
Where there is a breach of contract, the party that is suffering the lost can claim damages for
the breach. These are the factors that have to be seen to allow for claim which there has been a
breach of contract. Furthermore, that the breach has caused its loss. Lastly, the amount of the
loss for the employer.
The benefits of LAD are the contractor have to pay when there is a breach of a specific contract
and the employer does not have to prove any loss to claim for damages. Secondly, it also
prevents the contractor from committing the specific breach. Thirdly, court proceedings which
are costly and time-consuming are avoided by implementing this method so the problem gets
solve quicker. Lastly, it also provides the employer a bridge of confident to continue the work
because it provides commercial certainty for both parties.
However, there are some scenarios where the contractor can bring up to prevent them from
getting claimed and there Penalty, no valid completion date, waiver by employer, issue of final
certificate , employer causes delay and last when the appendix has “NIL” inserted against the
figure.
These are reasonable pre-estimate of the damage that the employer might sustain in the event
of late completion are Loss of Capital, Professional Cost, Loss of income, Extra cost for
fluctuation and lastly extra cost for other works.
Health & Safety

18. How to Enhance Health & Safety Requirements
A single construction has lots of managements that need to be handled appropriately. One
of the most concern factor while a construction is going on is basically the safety of the workers
on site. Occupational Safety and Health Administration (OSHA) is famous for its protection for
the health and safety of the workers. Their assurance on health and safety has approved by lots
of Employers.
The Employer should:-
1. Appoint a safety advisor
- A safety advisor is extremely essential for the construction works to give professional advices
on the precautions and safety measures and by that, there will be a huge improvement in the
Site’s health and safety standard. OSHA has mentioned clearly about the safe environment in a
working place. Under clause 8.1 of OSHA, Training and Competency has been one of the most
highlighted part for them as they only prefer workers who have learnt about the safety
precautions and make sure workers will apply them on site. Sometimes, workers are not aware
of the safety signs but the safety signs are one of the ways to help workers to know what is
going on on the particular work site.
2. Proposed Site Safety Management Plan (SMP)
- With the aid of safety supervisor, a Safety Site Management Plan that is compliance to
Occupational Safety and Health in Construction Industry (Management) can be developed for
the project in order to ensure a safer working environment for all involved individuals such as
employees, contractors, visitors and the community.
It is a documented safety plans for a specific construction workplace that should include the
following matters:
(i) General principles of prevention
(ii) Minimum welfare facilities required for construction sites
(iii) Work involving particular risks
3. Allow Specifications for Health and Safety
- Besides specifications for building designs, a separate specifications for health and safety can
be developed to enhance the Health & Safety requirement of the project. The Health & Safety
Specification may include any details regarding health and safety matters that needs extra
attention from all relevant parties.
Quality
By referring to PAM 2006, the contractor shall take the responsibility to carry out for all the
works according to the standards described in the contract documents like materials, goods and

19. workmanship by the sub-contractor. Clause 6.1 which states that if there is any discrepancy
between the actual quality and specification in the contract, the contractor can instruct sub-
contractors to demolish and rectify the defect works without affecting the contract sum. Besides
that, the contractor must provide defect liability period after completion of works and correct the
defects within 28 Days from receipt of schedule of defects from contractor. If he fails to correct
the defect within the stated time, employer has the right to pay other party to do and such cost
incurred will be compensated which in PAM 2006 under clause 15.3.
Time
In PAM 2006, clause 23.0 Extension of time, it protects employer from risk of time delay.
Contractor has the right to claim for extension of time if any Relevant Events stated in clause
23.8 happen. The contractor shall submit a written notice to employer regarding his intention to
claim for additional time within 28 days from the date of commencement of the Relevant Events.
The contractor shall send his final claim for extension of time to Architect to assess any
extension of time. If the contractor fails to submit within the stated time, it shall be deemed that
the contractor is able to complete the project on time. Besides that, clause 23.6 in PAM 2006,
states that the contractor has the responsibility to not only prevent delay of the progress but also
to reduce delays. For instance, the contractor can show that he is proactive in preventing such
delays happen by rescheduling, resequencing of works, revising his methods of working.
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