Radical Changes To Standard Forms of Contract To Adress Problems In The Malaysian Construction Industry
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Date
2004-04
Authors
Leng, Chan Kar
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Abstract
The construction industry in Malaysia has been plagued by the rising of claims, disputes and litigation.
Malaysia has recently seen an increase numbers of 'claim-artist' (claim consultant) ever ready to
serve the Contractors. The economic changes over the last decade also had its impact on the
contractors. Competitions are now greater and profit margins are leaner. Employers on the other
hand, want buildings to be built and handed over faster. At the same time, new building technologies
and products ripples through the industry leaving Architects and Engineers trying hard to grapple the
changes. Design and bidding documents are seldom adequately complete prior to the tendering
· · exercise. Hence, tender documents. and conditions of contracts were 'tinkered' in an amateurish way·
loading substantial amount of risk on to the Contractor. All these in tum, precipitated certain notable
changes in attitude of Contractors towards cost recovery and claims. On the legislation front, the Act
520 [The Lembaga Pembangunan lndustri Pembinaan Malaysia Act 1994] was enacted to pave way
for the establishment of Construction Jndustry Development Board (CIDB) and empowerment of
CIDB to regulate the industry. CIDB is entrusted with the responsibility to address pertinent issues
and problems faced by the industry. CIDB has drafted and issue a Standard Form of Contract in year
2000. Meanwhile, Pertubuhan Arkitek Malaysia (PAM) issued a revised Standard Form of Contract in
year 1998 to replace the old 1969 PAM Form that has been used for over 30 years by the private
sector. Currently PAM is in the final drafting of Revised PAM Form of Contract 2003 to address
shortfall in PAM Form 1998. Stakeholders and constituents of the industry are of the opinion that
improved contracts or further tightened of clauses in a contract will better govern the projects and
control of disputes. In line with this development in standard forms of contracts in Malaysia, this
survey attempts to understand contractual problems in Malaysia and promote the tenets of New
Engineering Contract (1 81 Edition -1993) issued under the sanction of The Institution of Civil
Engineers in United Kingdom. This research is to establish that what the industry urgently requires is
flexibility in management structures which is essential in dealing with complex and changing business
environment. NEC is said to be a solid testament to good sense, effective project management and
shall replaces o_ld techniques of spinning out arguments over variations at the end of project hoping
to cash in during final account period. This survey attempts to investigate on probability of philosophy
of NEC being implemented to address some long standing contractual problems. The survey
concluded that the industry is generally not ready for the radical changes stated in NEC.
Nevertheless, the industry showed encouraging response to certain aspect in NEC such as
adjudication providing rooms for further development in Malaysia
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Keywords
Construction Industry