assignment-emcm (contract management) q3

7/28/2019 Assignment-EMCM (Contract Management) Q3

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Name: Mohd. Norizam Bin Md. Salleh

Matriculation No.: CGS 00534317

Intake: September 2010

Assignment EMCM5103

Q 3 - Page 1 of 24

Question 3

Your company has a 2-year, RM 80 million construction contract that has got into troubles.

The problems include:

Soil problems that necessitate additional RM 5 million of concrete piles and 2-month

delay.

Material price was up 20%.

Transportation cost was up by 30%.

Shoddy work by two sub-contractors has necessitated re-work causing RM 3 million

and a delay of 1 month.

Long monsoon season with heavy rain and flood caused a aggregate delay of two

months.

The consultant modified the design which caused RM 5 million worth of re-work

(including tear-down, clearing and re-build) and 2-month delay (including re-design

time).

Work efficiency is only 70% of original estimate

The client (owner) has threatened to sue your company for the delays and claim

penalties of RM 100,000 per day.

Your company may be facing huge direct financial losses and possible litigation. Your boss

put the blame on the project manager, who is your colleague, and he was removed from the


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Assignment EMCM5103

Q 3 - Page 2 of 24

project and subsequently asked to resign. You have been assigned by the management to take

over the project.

This is the golden opportunity for you to show off your skills, and to avoid the prospect of been

sacked!

Describe how you would manage the contract.

Be specific, i.e., solve the problems one by one. Dont just give general approaches. You are

solving a problem in this particular case study. Use all the knowledge and skills you have

learnt from the Contract Management module. You are encouraged to use your initiatives.

Present your solution with the following headings: Status Definition, Solution Approach,

Resolution of the legal and contractual problems, Strategy for Modern Contract Management,

Solutions of problems.

(Approx. 2 to 4 marks for each of the first four sections, rest for solution section)

[TOTAL: 20 MARKS]


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Assignment EMCM5103

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Answer 3;

The original contract worth is RM 80 million and the construction contracts duration is to be

completed in 2 years. Assumption was made that this is a government project, the Director of

JKR is the Superintending Officer (S.O) and the power was delegated to JKR District

Engineer. The project name is The Proposed Construction of Academic Building, Dental

Hospital, Hostel and Infrastructure Works for the Faculty of Dentist UITM Sungai Buloh,

Selangor Darul Ehsan. Also assumed that the contract is bounded by JKR (PWD) 203a

conditions of contract where bill of material is form part of the contract and shall also referred

to The Commercial Law of Malaysia.

Figure 1: Traditional Building Contract (BEM Bulletin, Sep-Nov 2007).

It is important to overcome the current difficulties, disadvantage and under pressure situation

and turn it to a better position. The proposal to overcome this situation shall be structured as

follows;


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Assignment EMCM5103

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1. Status Definition.

2. Solution Approach.

3. Resolution of the legal and contractual problems.

4. Strategy for Modern Contract Management.

5. Solutions of problems.

1. Status Definition.

This is a traditional contract where client (JKR) initiates and sanctions of a project, concept

design was done by the architect and the design engineering consultant who are the one who

design and prepare all the necessary document for tender. The company is now facing huge

direct financial losses, progress claims was freeze due to some unresolved issues and possible

litigation. The former project manager was removed from the project and I have just been

assigned by the management to take over the project.

In any contract three main criteria which are the time,cost andacceptableperformance with

safety and sustainability are upmost important to determine the project success. In order to

achieve that the commercial issue which is the cash flow and the adequate time are very-very

important or else the project cannot be running smoothly. We had analysed the project current

situation and it can be summarised as follows;


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Assignment EMCM5103

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Table 1: Summary of Estimated Delay and Forecast Additional Cost Incurred.

No Description Delay Cost (RM)

i) Soil Problems, additional concrete piles (fallunder provisional quantities)

2 months 5.0 Million

ii) Material price was up 20%. 3.0 Million(Assumption)

iii) Transportation cost was up by 30% 0.3 Million(Assumption)

iv) Shoddy work by two sub-contractors hasnecessitated re-work


v) Long monsoon season with heavy rain andflood 2 months

vi) The consultant modified the design whichcaused to re-work and additional design time.


vii) Work efficiency dropped to 70% of originalestimate productivity

2 months 1.0Million(Assumption)

viii) The client (owner) has threatened to sue yourcompany for the delays and claim penalties ofRM 100,000 per day.

Not

effective

yet

Max 10% of

Contract Value 8

Million (estimated)

Total 9 months 25.3 Million

Note:Marked inblue - Consultant/Client issues

Marked inred - Contractor issues

Project progress claims have been very little since a couple of monthsduring the monsoon

and floodas the work progress is affected very badly. In the same time due to the shoddy

works by our two sub-contractors, our progress claims under their portion were not being

approved and not paid. These had tarnished the project cash flow very badly and had caused

thepayment to suppliers, sub-contractors, machineries and even the wages to our in house

workers were also two months delayed. Due to this the project had loose its momentum and

productivities were reduce to 70%.


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Assignment EMCM5103

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Need to carry out additional pilling works due to soil issue, estimated cost incurred RM 5

million with two months additional time. In addition JKR had requested their consultant to

redesign some building section where all of this had resulted to some reworks and

additional to existing job scope. This shall involve quite extensive amount of money where

RM 5million worth of re-work (including tear-down, clearing and re-build) and 2-month

delay (including re-design time) shall be required.

Due to petrol/diesel hikes, natural disaster and redevelopment for those affected countries e.g.

Japan, Australia, New Zealand, United States and others, currently the company need to

absorb the materials and transportation escalation costsof 20% and 30% in which these had

worsened the project cash flow. The project will be at lost shall we are forced to absorb all

these additional cost not to mentioned the heavy penalty/LAD of approximately RM

100,000.00 per day for 9 month which is surely additional of RM 8 million (Normally,

maximum LAD is limited to 10% of the contract value).

The company shall requires additional funding to finance theadditional incurred cost of RM

25.3 million and may requires additional time of nine (9) months to complete all these

works shall no step or action taken to resolve them via contractually approach. Additional

32% of cost from the total contract value (25.3 million / 8 million X 100 = 32%) is very huge

and surely cannot be covered with the 15% (12 million) estimated net profit. In addition RM 4

million (5% of the contract value) are deducted gradually from the claims and shall be retained

for 12 months after the completion date as retention money.


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Assignment EMCM5103

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Basically all the matter arises here can be portrayed in these followings figures;

Figure 3: Provisional Quantities in Conjunction to PWD Form 203a Condition of

Contract Clause 26.5 to 26.7.

Chart 4: S.Os Instruction and Variation are in Conjunction to PWD Form 203a Condition

of Contract Clause 5.0 to 24.0.


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Assignment EMCM5103

Q 3 - Page 8 of 24

Chart 3: Failure to Complete on Time (BEM Bulletin, Sep-Nov 2007).

Chart 4: Price Escalation Who Will Pay??? (BEM Bulletin, Sep-Nov 2007).


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Assignment EMCM5103

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2. Solution Approach.

I believe collaboration approaches between contractor, consultants and client is the best

strategy to overcome this issues. After all Conditions of Contract in PWD Form 203a is a

very established form of contract and the most important is it offers a very fair deal to all the

parties involves. We can fight for our right via collaboration approach and win-win strategy.

However shall the matter have been left for a length of time and therefore some personnel that

represent the parties involves might leaved the project either resigned or being assigned to

another project, the solution even via collaboration also not as simple as it take especially

when the person who give the instruction is no more in the picture.

The good working relations between all the parties involves i.e. the client, consultant and

contractor that have the spirit of partnering and sharing the common goal objectives to

complete the project within budgeted cost, scheduled time and at acceptable performance with

safety and sustainability shall ease the collaboration and the negotiation of all parties in

finding the best solution methods to resolves these issues.

In partnering and collaboration contract approach, it can lower the risk of time and cost

overrun as the parties including the contractor, client and consultant are working together

towards the completion of the project and to complete them on time. This understanding of all

parties involve are also reducing the exposure to litigation. Less confrontation and a good


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Assignment EMCM5103

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working environment and trust contribute the fast solving problems before they escalate to

disputes. The project performance and quality are improved because energies are focused to

achieve the project goal and not misdirected to adversarial concerns.

The partners shall proactively anticipate and try to solve or avoided the problems. Variations if

happen mean they are really genuine and unavoided. With a good communications and

empowerment by senior management this shall be able to reduce the need of lawyers in the

administration. Good communication allows all parties to resolve issues expeditiously as they

can meet up frequently and this shall avoid mistake or rework. The opportunity for financial

successful also increased because of non adversarial or win-win attitude on all parties.

3.Resolution of the legal and contractual problems.

It is part of a project manager responsibility find an equitable, speedy and cheap method of

resolving disputes and maintains focus on the project. In my opinion collaboration and

cooperative attitude among all parties involves including the client (JKR), consultant and

contractor is still the best method to resolve all the issues and disputes face in this project

however shall it is fails we still have other options as proposed by alternative dispute

resolution approach as tabulated in Table 1, below;


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Assignment EMCM5103

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Table 2: Dispute Resolution Steps

Steps Cost/

Hostility

Name Process

1 Low Prevention Risk allocation, Incentive for cooperation, Partnering

2 Negotiation Direct negotiation, Step negotiations

3 Independent

Expert

Dispute review board, Standing arbitrator or Independent

expert.

4 Mediation Non-binding resolution, Mini-trial, Advisory opinion,

Advisory arbitration.

5 Arbitration Binding resolution6 High Litigation Civil Court, Judge

In my opinion and based from my previous experiences, all the issues arise here are straight

forward and can be resolved in conjunction to PWD Form 203a Conditions of Contractand

the Contract Document. If all parties have the spirit of partnering and sharing common goal all

these issues can be amicably resolved. Despite collaboration approach, negotiation is another

good approach to resolve all the crops up issues. In normal practice contractor shall approach

and convince the consultant and JKR especially on the variation orders that results to schedule

and commercial impacts.

The project team shall require to search for any documents that might help to support our

claim on the variation, escalation cost, provisional quantities and E.O.T., The document might

come in various forms e.g. Sites Instruction (if any), Notification of Change (if any), proof of

any instruction written on site diary, instruction recorded in the Minute of Meetings, soil

investigation report, piling records, rain records recorded in site diary and materials invoices,

PWD Cost of Index for escalation cost and etc.


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Assignment EMCM5103

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Convincing the consultant earlier then the client (JKR) might also help to resolve these issues.

Maybe we should approach their COW and their RE and put all the issues, stories and issues

to them for their understanding and for them to chew first. This can be done over a coffee talk,

golf game or even a karaoke session. That is where good communication and interpersonal

skill is very important. Later the consultant may give their good recommendation to the client

shall we managed to explain them properly and convincingly about the problems faced. This

can be followed appending all the issues, who responsible for it and how to solve in the

weekly or monthly meetings with that is attended by the consultant and the client/JKR.

It might creates a havoc as the quantities is quite big and not been highlighted in advance but

this is unavoided as that should be done by the earlier project manager. We will also include

all the issue arises in the coming biweekly or monthly report. After that notification about

these issues can be forwarded concurrently to both the consultant and the client (JKR). In

order to avoid an upset the client (JKR) we can also approach them separately. That is where

in modern contract management, good relations between all parties are important as after all

everybody are sharing the common goal to complete the work in time.

Theorically most of the issues arises are unavoidable and allows by the contract and therefore

with a good communication skill and approach might be able to achieve a mutual

understanding and solution. Shall everybody are transparent to each other, have a high respect

and understanding these issues can be easily be resolved cordially.


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Assignment EMCM5103

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We shall then submit the detail justification and variation claim where normally it will be

followed by a few meetings as the consultant and the client want to know these issues in more

detail. Shall the consultant and the client agreed to the change order/variation and the EOT

that have been submitted, another meeting shall normally be called in order to quantify and

negotiate for the additional cost and EOT required.

Basically the following issues shall fall under the stipulated clause of the PWD 203a

Conditions of Contract;

Soil problems that necessitate additional RM 5 million of concrete piles and 2-month

delay. - fall under clause 26.0 Bill of Quantities, Sub-clause Provisional Quantities 26.5,

26.6 and 26.7 and additional time should fall under clause 43.0 Delay and EOT.

Material price was up 20% - fall under clause 30.0 Fluctuation of Price.

Transportation cost was up by 30% - fall under clause 30.0 Fluctuation of Price.

Shoddy work by two sub-contractors has necessitated re-work causing RM 3 million and

a delay of 1 month fall under clause 10.1 Obligation of the Contractor sub-clause i).

Long monsoon season with heavy rain and flood caused a aggregate delay of two months

- Clause 43.1 b) exceptionally inclement weather and clause 57.0 Effect of Force Majeure

sub-clause 57.2 c) can be used to apply for extension of time clause 43.0 Delay and EOT.

The consultant modified the design which caused RM 5 million worth of re-work

l(including tear-down, clearing and re-build) and 2-month delay (including re-design

time). - This fall under Clause 5.0 S.O.S Instruction and Clause 24.0 Variations. To apply

for extension of time clause 43.0 Delay and EOT.


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Assignment EMCM5103

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Work efficiency is only 70% of original estimate fall under 10.1 Obligation of the

Contractor sub-clause i) to complete the works on time. It is the responsibility of the

contractor to accelerate the works progress in order to get the work progress back to

right track.

The client (owner) has threatened to sue your company for the delays and claim penalties

of RM 100,000 per day. fall under clause 40.0 Damages for Non-Completion but this

can be avoided as most of the issues are actually subject to EOT in conjunction to clause

43.0 Delay and EOT.

In my opinion and through my past experiences dealing with various clients including JKR, all

the above issues are not so serious as for most of them we have the basis to make claim for

extra quantities, variation claims and EOT. I believed with the right approach, proper

documentations, convincing justifications and sufficient proof and supporting documents, all

these issues can be settled amicably. Most of the issues are actually allowed by the

Conditions of Contract of JKR/PWD Form 203a. The most important thing we need to

notify and justify to the consultant and JKR what make we feel we are entitle for the variation,

additional claims on provisional sum and the EOT.

In worst scenario shall some of our request being rejected although they are allowed by the

contract conditions, we can bring this matter to arbitration court. Litigation although it is

legally allowed in the contract law in the other hand is not advisable as it will be carried out

openly and might not favourable by the client. One thing for sure although our intention is to

protect the companys right and to recover from loses we also do not want this exercise to


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Assignment EMCM5103

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tarnish any parties and our potential for future job with them and other project provider might

also notice this as well and may not favourable to our action. Arbitration in the other hand

shall be carried out in a close court and can be settled quietly.

4. Strategy for Modern Contract Management.

In modern contract management win-win solution approach to all the parties involves is

something that everybody is looking forward to achieve best. In modern contract management

traditional approach which full with adversarial confliction should be avoided. Win-lose

strategy in traditional adversarial attitude might put the project in jeopardy. Conflicting does

not help the project to succeed. In modern contract management all the parties involved should

sharing the common goals which is to complete the project within budgeted cost, scheduled

time and at acceptable performance with safety and sustainability.

Treating all the parties as smart partner can plays a key role in attaining continuous

improvement especially in delivering of the construction project. The spirit of partnering

approach treats contractors as own resources, motivate them, recognition of commons goal

create atmosphere of trust, teamwork and goodwill which will facilitate this goals. Working in

a good working atmosphere shall ease all parties in discussing sharing ideas and making a

good decision shall any problem arise. By conflicting we not only will failed to solve the

problems but might go deeper into trouble.


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Assignment EMCM5103

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In the other hand prolong or avoidance of problems and the issues faced are not giving the

project any good. All parties should understand that we are actually in this mess together and

therefore in making the project into a success all parties involves should give their best

commitment and to trust each other in solving the problems and achieving the mutual goals.

All parties should sit down and discuss about the project problems and what is the best

approach to resolve are the issues. For instance all parties involve should accept their fault

shall any, fairly treatment to other parties, to fulfil each party obligations as what have been

stipulated in the Conditions of Contract, to work as a team, and etc. in order to lead the

project towards a success. Owner and contractor work together to manage the risk and achieve

a better result for both parties.

Client also need to safeguards and to protect the contractors against unforeseen risks and

circumstances beyond their control for their mutual benefits. The key to all of this is

communication, consideration and anticipation for risk how to solve them before they occurs.

Farsighted project contract management Ex-ante Incentivization that plan incentives in

advance normally adopted to goverment projects where project risk are between low to

medium. In the other hand Ex-post Governance were used where the risk need to be monitored

closely to allow adaptation to deal with uncertainty or unforeseen events that can caused

incompleteness.

The following conclusion was made by the contractor on who should be responsible for each

problem arises;


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Assignment EMCM5103

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Table 3: Proposed Amicably Solution as Per Modern Contract Management Strategy.

No Description of Problems Responsibility of Proposed Solution

1 Soil problems that necessitate additional

RM 5 million of concrete piles and 2-

month delay. Under ProvisionalQuantities)

Client To allow contractor

claim for extra

quantities underProvisional Quantities /

re-measured items and

to grant EOT.

2 Material price was up 20%. Client Client to issue VariationOrder under Fluctuation

of Price (Building CostIndex).

3 Transportation cost was up by 30%. Client Client to issue Variation

Order under Fluctuation

of Price.

4 Shoddy work by two sub-contractors has

necessitated re-work causing RM 3

million and a delay of 1 month.

Main Contractor

and sub-

contractor

Main Contractor to

ensure the re-works is

carried out either by the

sub-contractors or

themselves.

5 Long monsoon season with heavy rain

and flood caused an aggregate delay oftwo months.

Client Client to issue EOT.

6 The consultant modified the design which

caused RM 5 million worth of re-work

(including tear-down, clearing and re-

build) and 2-month delay (including re-

design time).

Client/Consultant Client to issue Variation

Order and grant EOT

7 Work efficiency is only 70% of original

estimate.Main Contractor Main Cont to accelerate

the work at their owncost to fulfil their

contractual obligation.

8 The client (owner) has threatened to sueyour company for the delays and claimpenalties of RM 100,000 per day.

Main ContractorSubject towhether the

requested EOT is

sufficient or not.

Negotiation and requestfor the EOT.




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Assignment EMCM5103

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5. Solutions of problems.The following is our strategy on how to settle these problems;

a) Commercial Issues;Additional RM 25.3 million estimated shall be required in order to complete the works and to

pay the LAD and the statuses are tabulated below;

Table 4: Estimated Commercial Impact and their Solution.

No Description Cost (RM) What to do

i) Soil Problems additional concretepiles (Under Provisional Quantities)

5.0 Million To notify the Consultant and

JKR on Extra amount under

Provisional Quantities and

request EOT.

ii) Material price was up 20%. 3.0 Million(Assumption)

To notify the Consultant and

JKR request Variation Order

and EOT.

iii) Transportation cost was up by 30%. 0.3 Million

(Assumption)


JKR request Variation Orderand EOT.

iv) Shoddy work by two sub-contractorshas necessitated re-work.

3.0 Million To notify the sub-contractors

v) Long monsoon season with heavyrain and flood


JKR request EOT.

vi) The consultant modified the designwhich caused to re-work and

additional design time.

5.0 Million To notify the Consultant and

JKR and request Variation

Order and EOT.

vii) Work efficiency dropped to 70% oforiginal estimate productivity.

1.0Million(Assumption)

Catch up plan to increase

productivity by adding

resources.viii) The client (owner) has threatened to

sue your company for the delays and

claim penalties of RM 100,000 per

day.

Not effective yet

8 Million

(estimated)

Max 10% of Contract Value

Shall request for EOT.

Total 25.3 Million

Note:Marked inblue - Consultant/Client issuesMarked inred - Contractor issues


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Assignment EMCM5103

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The details of action and justification to be made shall be as follows;

i. Due to soil problems that necessitate additional RM 5 million of concrete piles and the

project was delayed 2 months because of it. Under Bill of Quantities Contract, the

concrete piles quantities should fall under clause 26.0 Bill of Quantities, Sub-clause

Provisional Quantities 26.5, 26.6 and 26,7 Therefore despite we can actually claim the

additional quantities under re-measured items we can also apply for extension of time due

this issue under clause 43.0 Delay and EOT.

In addition shall we refer to the case of, The Privy Council held in the case of Mitsui

Construction Co v. Attorney of Hong Kong (1986) 33 BLR 1 that quantities for certain

works in the BQ under re-measurement contract are wildly wrong (in this case

substantially increased) and contractor was entitled to higher rates for those works.

ii. Material price was up 20% due to patrol hikes and a lot of development going on in

almost in every part of the world which had push the materials cost to an upward trend. In

JKR 203a there is a clause that allows claims for escalation on materials. It is under clause

30.0 Fluctuation of Price.

iii. Transportation cost was up by 30% due to patrol hikes and increase on maintenance and

spare parts cost. The clause 30.0 Fluctuation of Price of the Contract Conditions shall be

used.


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iv. Shoddy work by two sub-contractors has necessitated re-work causing RM 3 million and

a delay of 1 month. The two sub-contractors are actually the nominated sub-contractors

for this project, under clause 61.0 stated no liability to the government because of the

nominated sub-contractor/supplier failure to do their job. But being our sub-contractor we

can either instruct them to repair or re-do their shoddy job or we can deduct their claims

and retention money and seeking the S.O. approval either to do it ourselves or to engage

other sub-contractors. After all the payments to nominated sub-contractor/supplier are

made direct to them deducted from the main contractor claims. Therefore shall our claim

are not approved due to their shoddy job, they also shall not got their claims. Clause 60.0

Payment to Nominated Sub-Contractor or supplier.

v. Long monsoon season with heavy rain and flood caused an aggregate delay of two

months. Clause 43.1 b) exceptionally inclement weather and clause 57.0 Effect of Force

Majeure sub-clause 57.2 c) can be used to apply for extension of time clause 43.0 Delay

and EOT.

vi. The consultant modified the design which caused RM 5 million worth of re-work

(including tear-down, clearing and re-build) and 2-month delay (including re-design time).

This additional works should be fall under Clause 5.0 S.O.S Instruction and Clause 24.0

Variations, where the price shall later being discussed and agreed by all parties. The

agreed addition/omission shall be later be adjusted to the contract sum. To apply for

extension of time clause 43.0 Delay and EOT.


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Referring to section 71 (Act 136) Contract Act 1950 stated, Where a person lawfully

does anything for another person, or delivers anything to him, not intending to do so

gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make

compensation to the former in respect of, or to restore, the thing so done delivered.

(Emphasis supplied). Case of Aw Yong Wai Choo & Ors v. Arief Trading Sdn Bhd. &

Anor [1992] 1 MLJ 166 are referred.

vii.Work efficiency is only 70% of original estimate fall under 10.1 Obligation of the

Contractor sub-clause i) to complete the works on time. It is the responsibility of the

contractor to accelerate the works progress in order to get the work progress back to right

track.

viii. The client (owner) has threatened to sue your company for the delays and claim penalties

of RM 100,000 per day. Maximum of RM 8 million as max LAD are limited to 10% of

Contract Value. I believed it should fall under clause 40.0 Damages for Non-Completion

but this can be avoided as most of the issues are actually subject to EOT in conjunction to

clause 43.0 Delay and EOT.

The company shall required additional funding to finance the additional RM 25.3 million

which consists of RM 13.3 million that we feel a claimable amounts from client due to

variation to original scope of works and provisional sum and RM 3 million for repair/redo the

shoddy works and RM 1 million for accelerating the works progress for catch up plan


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including increase resources e.g. manpower, machineries, longer working hours and etc and 8

million for the LAD (maximum of 10% of the contract value).

However wemight be able to recover RM 3 million for the shoddy works from the two sub-

contractors or to instruct them to carry out the repair and redo works at their cost. Although

contractually we can recover them from the two sub-contractors but there is a possibility it is

not going to happen after all their performance bond is only 10% of their work value of RM 5

Million which is only worth RM 500, 000.00. Good news is the client (JKR) has not paid their

work portion yet therefore the sub-contractors might not have the capacity and money to carry

out the redo works.

My suggestion is, to buy the raw materials and supply required machineries in order to assist

our sub-contractor but they need to supply the manpower and supervision. Later all these

additional cost shall be deducted from the sub-contractors claims. One thing for sure they must

be agreed but both parties and necessary notices and meeting need to be carried out to make

them legally minuted in order to avoid any future argument. Another alternative is to take over

the sub-contractors works and to be deducted accordingly from their contract.

Shall the cost are more we can either forfeit their performance bond and bring them to

arbitration court or litigation or to absorb the excess cost..

My proposal requires us to spend extra RM 1 million from our own pocket for the catch up

plan but shall this can be carried out within the approved period of EOT,this might enable us


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to avoid from paying high penalty or LAD. The partnering spirit and our effort to drive the

work progress back to the right track might be sufficient to convince the consultant and client.

b) Delay Proposed EOT Required.

Below is how we strategise to resolve the delay issue;

Table 5: Showing How Many EOT Required in Completing all Problematic Issues.

No Description Delay Month

M1 M2 M3 M3

i) Soil Problems, additional concrete piles(Provisional Quantities)

2 months

ii) Material price was up 20%.

iii) Transportation cost was up by 30%

iv) Shoddy work by two sub-contractors has

necessitated re-work

1 months

v) Long monsoon season with heavy rain and flood 2 months

vi) The consultant modified the design which causedto re-work and additional design time.

2 months

vii) Work efficiency dropped to 70% of originalestimate productivity

2 months

viii) The client (owner) has threatened to sue your

company for the delays and claim penalties of RM

100,000 per day.

Total Required EOT 4 months



Total extension of time (EOT) required shall be as the above table, where due to long

monsoon and flood (this incident had occurred) we need a replacement of two months the


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Assignment EMCM5103

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effected works can be carried out concurrently with the additional pilling works due to soil

problems. For the change of design, this activity shall be carried out immediately after the

piling works completed. This because the sequence of works as the pilling works needs to be

completed before we could build the building structure. For this activity we are also entitled

for EOT therefore in total only four months additional numbers of days are required. Two

months additional duration also requires to carry out the acceleration works and one month for

the repair/redo works as the result of our sub-contractors fault, we will also carry out them

concurrently and to complete them within the requested EOT duration.

By doing this weshall complete all of the said activities within the four (4) months required

additional periods and possibly no penalty/LAD will be imposed to us. As mentioned earlier

I personally feel that with win-win approach all these issues can be amicably resolve and the

common goal of completing the project within budgeted cost, scheduled time and at

acceptable performance with safety and sustainability can be achieved. It is important for

every party involve giving a high respect to each other right and acting accordingly in

conjunction to the conditions of contract fairly for everybody benefit and towards achieving

the project common goals.

All in all as other issues are more or less under control, we only need to spend additional cost

of RM 1 million for the acceleration of works and shall be given VO and the provisional

quantities amounted of RM 13.3 million. In which RM 5 million for additional concrete piles

(provisional quantities), RM 3 million for materials escalation, RM 300 thousand for

transportation escalation cost and RM 5 million for the rework due to the change in design.

assignment-emcm (contract management) q3

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