EOT & VARIATION IN DIFFERENT STANDART FORM

ICP824 CONSTRUCTION PROCUREMENT AND CONTRACT

INDIVIDUAL TUTORIAL

EXTENSION OF TIME & VARIATION Discussion between PWD 203A (Rev.1/2010) and PAM2018

Submission to: ASSOCIATE PROF. Sr. Ts. Dr. ZULHABRI ISMAIL PREPARED BY: AZZRI FAZRIL ROSMAN 2020916259 fazrilrosman@gmail.com

AZZRI FAZRIL ROSMAN I 2020916259

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TABLE OF CONTENTS

1.0

2.0

EXTENSION OF TIME...................................................................................................................................... 2 1.1

Introduction ........................................................................................................................................... 2

1.2

Extension of Time ............................................................................................................................... 2

1.3

Ground of Extension of Time ....................................................................................................... 2

1.4

Eligibility of Claims ............................................................................................................................ 3

1.5

Procedure of Claims........................................................................................................................... 4

1.6

Ascertaining Claims ........................................................................................................................... 5

1.7

Certificate of Delay Extension of Time................................................................................... 6

1.8

Conclusion ............................................................................................................................................... 6

VARIATIONS ........................................................................................................................................................ 7 2.1

Introduction ........................................................................................................................................... 7

2.2

Variations................................................................................................................................................. 7

2.3

Procedure of Variations .................................................................................................................. 7

2.4

Instruction to Variations ................................................................................................................ 8

2.5

Compliance of instruction.............................................................................................................. 9

2.6

Measurement of Variations........................................................................................................ 10

2.7

Adjustment of Contract Sum ..................................................................................................... 11

2.8

Conclusion ............................................................................................................................................ 11

EXTENSION OF TIME AND VARIATION | PWD203A AND PAM2018

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1.0

EXTENSION OF TIME

1.1

Introduction

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In PWD Form 203A (Rev.1/2010), two clauses that explained the procedure s regarding the Extension of time are Clause 5.0 - S.O Instruction and Clause 43.0 – Delay and Extension of time. In PAM2018 the relevant clause regarding the Extension of time are Clause 2.0 - Architect’s Instruction and Clause 23.0 – Extension of time.

1.2

Extension of Time

It is the shared goal for both Client and Contractor to complete the construction project in timely manner because both of the parties will incur additional cost and lost potential venue (Thomas et al., 1995). Extension of time is explained by Mohd Nazir (2008) as additional period given by the Contract Administrator to the contractor for any reasons mentioned in the contract. This provision in the contract is important for both Client and Contractor to protect each parties. Tan et al. (2010) mentioned that Extension of time not only for the benefit of Contractor to reduce their liability towards the liquidated damages but also beneficial to the Client side to preserve their right towards Liquidated Damages.

In this circumstances, it did not appear in the contract, where Contract Administrator have no power to extend the completion date that had been agreed on the early stage (Mohd Nazir, 2008). By extending the completion date, it preserves the contractor to complete the works under the contract as specified by Sundra & Harbans (2012) where they add on the explanation that failure to get the Extension of Time, imposed the contractor towards Liquidated Damages.

1.3

Ground of Extension of Time

Both PWD 203A and PAM2018 contain provision listing the relevant events that enable contractors to apply for Extension of time where there are ten relevant events highlighted in PWD 203A Clause 43.1(a) to 43.1(j) that act as a guideline for the contractor to claim any Extension of time. The completion date only can be adjusted according to the provision of contract where Tan et al. (2010) explained that in the event of the contractor delay happened for some events that did not highlight in the contract, contractor is not entitle for the Extension of time. They also explained that if both parties are agreeing to extend the completion date although contract did not mention any provision for entitlement of contractor to claim Extension of time, the completion date can be extended

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by preparing a separate agreement. Mohd Nazri (2008) had divide the delay of works on site to three categories that is delay due to the contractor side, delay due to the client side (including S.O) and delay due to the beyond the control of Client and Contractor.

Contractor are not entitled to the Extension of time if the delay is due to default by them and for any events of any default by Client or S.O, the contractor is entitled for Extension of time (Mohd Nazir, 2008). He also said that for the events that is delay due to beyond the both of the parties, the Contractor are entitle for claim Extension of time but the contractor is not entitle for the loss and expense. All the loss is borne by both parties. In PAM2018 and there are twenty-five relevant events aligned in PAM2018 Clause 23.8(a) – 23.8(y) where the numbers of provision listed are increased from PAM1998 version to PAM2006 version and latest PAM2018 version. This increasing numbers of relevant events had led to discussion where generally it considers to reduce risks by the contractor and increase the risk on the Client side (Tan et al., 2010).

1.4

Eligibility of Claims

Clause 43.1 PWD203A explaining regarding the eligibility of claim by the contractor for the Extension of time. “Provided that all such delays are not due to any act…, “, “Provided always contractor have taken reasonable steps”, “Provided further contractor shall not be entitle extension of time… remedy any default…”. Mohd Nazir (2008) mentioned that although in the contract highlighted the reasons that entitle contractor to grant Extension of time, but Clause 43.1 above said that the contractor must ensure and take reasonable steps to follow the contract to avoid the delay. The contractor will not considerable for claim the Extension of time without any reasonable step taken followed in the contract.

In PAM 2018 Clause 23.6 mentioned “constantly use his best endeavor to prevent or reduce delay in the progress of work…” It is the duty of the contractor to prevent or reduce delay where Keating Seventh Edition in page 730 (as cited by Tan et al., 2010) highlighted that ‘constantly use his best endeavor’ defined as ‘how far the contractor must take other steps depends upon the circumstances of each case, but it is thought that the proviso does not contemplate the expenditure of substantial sums of money”. In the same clause as above also mentioned “…to do all that may reasonable be required to the satisfaction of the Architect” (Clause 23.6) where Tan et al. (2010) emphasized that it is the duty of the contractor to do any prudent and reasonable that they can do to entitle to claim for Extension of time.

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Procedure of Claims

The process of the Extension of time in PWD 203A had been explained in Clause 43.1 “. It is the responsibility of the Contractor to apply for the Extension of time by giving written notice explaining regarding the causes of delay and relevant information and supporting documents to S.O (Mohd Nazir, 2008). They also said that S.O will determine the eligibility of the claims, checking either the delay is affecting the overall progress of the construction period, and issue a certificate Extension of time after proper justification if S.O decides that the contractor is entitle for Extension of time. This must be done in every occasion that delay occurs.

PAM2018 had clearly explained the timeline of the Extension of time process. In Clause 23.1 “within twenty-eight (28) days of the end of cause of the delay, the contractor shall submit to the Architects his final claim… all particulars to enable Architect to assess…”. Tan et al. (2010) mentioned that it is conditional precedent for the contractor to submit a notice to the Architect if he wishes to apply for Extension of time where any absence of such claim will affect their entitlement supported by Mohd Banuri (n.d) where they mentioned that the common problems are where contractor fails to give notice to the delay although it is mandatory in the contract. The notice must include the relevant events causing the delay and include all the related information including initial estimate, cause of delay and the effect of concurrent delay as per mentioned by Tan et al. (2010) Clause 23.1(b) mentioned that “within twenty-eight (28) days of the end of cause of the delay, the contractor shall submit to the Architects his final claim… all particulars to enable Architect to assess…”. This is explained by Tan et al. (2010) that the final claim must clearly show how the relevant event related to the delay on site that will affect the overall completion of the works. They also highlighted that this requirement of this timely submission by the contractor are to ensure Architect able to assess the claim before the act surrounding the claim become blurred by the passage of time. In discussing the factors that affect the submission by the contractor, a research by Norazian & Hamimah (2013) listed three issue regarding the Extension of time are poorly submission by contractor (such as lack detail and problem), late submission by contractor and the collection of relevant facts from the side.

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Ascertaining Claims

In PWD 203A, mentioned that S.O is responsible to ascertain the application submitted by the Contractor and does it as soon as possible upon the contractor application. No specific time highlighted in this standard form of contract. It is highlight in Clause 43.1 that “… the S.O may if he is of the opinion that the Extension of time should be granted, so soon he is able to estimate the length of delay beyond the date or time aforesaid...” Mohd Nazir (2008) said that after S.O receive the written notice by Contractor, they must evaluate the eligibility of the claims referring to the provision of the contract. Any reasons in the opine of S.O that it is outside the Clause 43.1(a) – 43.1(j) will be rejected by S.O. Besides that, he mentioned that S.O are responsible for the evaluate either the claim by the contractor will affect the overall construction project. If S.O thinks that the contractor is entitle for the Extension of time, S.O will determine the day for the extension time granted to the contractor.

In PAM2018, Architect is the one that is responsible for ascertaining the Claim. Tan et al.

(2010) in explaining Clause 23.3 mentioned that if the Architect’s opinion the submission by the contractor is insufficient for him to evaluate the claim, Architect within the twentyeight days from the contractor receipt, request the contractor to provide further particulars and within twenty-eight days or any time highlighted by the Architect, the contractor to provide the particular information to the Architect. Tan et al. (2010) added a point where it is deemed to understand that if within that twenty-eight days the Architect did not write to the Contractor, the submission of the contractor considered completed. Besides that, in PAM2018 had provide one specific clause that discuss the other consideration of Extension of time where Architects need to evaluate the claim that include any completion data should not be earlier than existing completion date as per Clause 23.5(a) “the effect or extend any works omitted under the contract… shall not fixed the completion date earlier than the Completion Date stated…”. This statement also highlighted by Tan et al. (2010) that if there is omission of works, the Completion Date is not reduced. The second consideration to be take into account by Architect is as per Clause 23.5(b) “any other Relevant Events… in Architect Opinion will have the effect on the Contractor’s entitlement”. For this clause, Tan et al. (2010) mentioned that Architect can take into consideration to any relevant event that contractor has not applied for a basis of Extension of time.

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Certificate of Delay Extension of Time

Mohd Nazir (2008) defined Certificate of Delay and Extension of time as a certificate that given by S.O that declared the Contractor did not able to complete the work as specified in the contract for reasons that have been stated in the contract and due to this the existing completion date will be extended. In PWD 203A standard form of contract, Clause 43.1 highlight that “… then the S.O may if he is of the opinion… issue a certificate of Delay and Extension of time”. Mohd Nazir (2008) said S.O had evaluated the claim by Contractor and approved the extension time, he will prepare a Certificate of Delay and Extension of Time.

In PAM 2018, Clause 23.4 explained that after the Contractor submitted the sufficient details and particular, Architect will evaluate the claim and if there are no issue regarding insufficient information in the application, will issue the Certificate of Extension of time within six weeks from the receipt of sufficient information (Tan et al., 2010). They also aligned that if the period 6 weeks considered too long for the Architect to make a decision, the consultant could alter when the tender is prepared. Besides that, Architect still can grant the Extension of time after the issuance of Non-completion. It is mentioned at Clause 23.9 where Tan et al. (2010) said that when there is relevant occurs after the issuance of Certificate Non-completion (CNC), the Extension of time shall be granted by adding the days approved with the current existing Completion Date. There is provision in the PAM2018 contract that Architect may (but not obligated) within twelve weeks from the date of practical completion review and fixed the completion date as explained

by Tan et al. (2010). They said Architect are entitle to this if he opines that fixing the completion date is fair in regard to the relevant events where not been specificity notified .

1.8

Conclusion

It can be said there are different between PWD203A and PAM2018 standard forms of contracts. Comparing both standard forms of contract, there are twenty-five ground of Extension of time in PAM2018 more than ten clauses mention in PAM2018. In terms of procedures of Extension of time, PAM2018 had provide in detail the timeline regarding the process as compared to PWD203A standard forms of contract. Generally, both standard forms come out with different clauses where each of them has their own strength to protect the parties in the contract.

EXTENSION OF TIME AND VARIATION | PWD203A AND PAM2018

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2.0

VARIATIONS

2.1

Introduction

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In PWD Form 203A (Rev.1/2010), there are four clauses that explained about the Extension of time are Clause 5.0 - S.O Instruction, Clause 24.0 - Variations, Clause 25.0 Valuation of Variations and Clause 28.0 - Payment to contractor and Interim Certificate.

The relevant clauses regarding the Extension of time in PAM2018 are Clause 2.0 Architect Instructions, Clause 11.0 Variations and Clause 30.0 Certificate and Payments.

2.2

Variations

The term Variation is defined in both PWD 203A and PAM2018 standard form of contract.

In PWD 203A, the term Variations is defined as changes, variance, which necessities the alteration and modification of the design, quality, and work stated in the contract documents (Mohd Nazir, 2008), while in PAM2018 the variations are described as alterations or modifications of the design, quality or quantity of the works. Although the Variation order have the requirement in the construction contract to be valid by law, it must be complying with the applicable legalities as highlighted by Sundra & Harbans (2012) and they said a variation can be order if there is any provision in the contract, if not it must comply with the common law. Comparing both standard form PAM2018 explain the variation term as in wider definition where there is additional clause regarding the changes of provision in the contract regarding to the limitation of working hours, working space, access to or utilization of any specific part of the site, execution and completion of the works in any specific order and execution of temporary works compared to PWD 203A for the types of the variation where all of this clearly highlight on item 11.(d)(i) – 11.(d)(v).

2.3

Procedure of Variations

In PWD 203A, the procedure of variations is explained in several clauses. First, Clause 24.1 that explained the instruction of S.O regarding any variations in a form of variation order. The instruction from S.O can be within the period from the possession of site until practical completion as (Mohd Nazir, 2008). After the instruction by the S.O, Contractor shall comply with the instruction as per explained in Clause 24.1. The valuation of variation will be done by S.O as per Clause 25.1, 25.2 and 25.3. Any variation either additional or omission will be paid to the Contractor referring to Clause 28.6.

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The provision clause regarding the process of variation in PAM2018 are quite similar with PWD 203A. Under Clause 11.2, the Architect will issue Architect Instruction (AI) to Contractor for the Variation and Quantity Surveyor will conduct a valuation under Clause 11.5 and contractor to submit complete details required for the valuation purpose. If details and particular that are submitted by the contractor are insufficient, within 28days from receipt of contractor’s submission, Quantity Surveyor can request the contractor the details and particular. Within 28 days from the request, the contractor have to submit the requested information and within 30 days from the submission, Quantity Surveyor will conduct another valuation. The valuation rules are explained in Clause 11.6 and payment to the contractor will be paid through Clause 30.

2.4

Instruction to Variations

The power to issue the instruction should be on the Contract Administrator or any person authorized by the client as explained by Sundra & Harbans (2012) where can either be named in the in the contract or any formal letter by the client. Both standard form PWD 203A and PAM2018 explained regarding the power in issuing the instruction to the contractor where S.O has the power to issue the instruction to the contractor. In Clause 5.1(a) “the variation as referred to in Clause 24…” and PAM2018 Clause 2.0 “…comply with all instructions issued by him to the Architect…”.

Both standard forms PWD 203A and PAM2018 highlighted that “…no variations required by the S.O shall vitiate the contract” where explained that instruction giving by the other person are not valid. Sundra & Harbans (2012) mentioned that only a specific person authorized to vary the work where any instruction of other person is not contractually valid. Mohd Nazir (2008) explained that S.O can give instruction regarding the general instruction to the contractor in the period from possession of site until the issuance of Certificate of Making Good Defect (CMGD) but for the instruction regarding the changes of works only can be issue until the practical completion only and this is in line with Tan et al., (2010) in explaining regarding the PAM contract where they highlighted that after the issuance of Certificate Practical Completion (CPC), Architect have no power to issue instruction to variation exclude anything related to comply with the requirement of any Authority and service provider.

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“All instruction issued by S.O shall be in writing…” PWD 203A Clause 5.2 and PAM2018 Clause 2.2 highlight that the instruction by S.O/ Architect should be in written. In PWD 203A Clause 5.2 highlight “…If such instruction given orally, the S.O shall then issue a written instruction within seven (7) days…”. Mohd Nazir (2008) mentioned that verbal instruction regarding the variation works, technically not a sign for them to comply with the works but they need to wait official instruction in writing from S.O. Any instructions

by S.O given verbally is not valid and there is no need for Contractor to start the works without that written instruction. The oral instruction has to be confirmed in writing within 7 days as explained in Clause 5.2.

In PAM2018 Clause 2.2 highlight a written instruction must be in writing and entitle Architect Instruction (AI) where any written instruction does not take effect unless entitled by “AI” or “CAI” and all the written instruction by the Architect can be AI when confirmed in writing by contractor entitle “Confirmation of Architect Instruction” (CAI) or when confirm in writing by Architect himself with an AI both as per PAM2018 Clause 2.2(a) & Clause 2.2(b). In related to that, Sundra & Harbans (2012) discussed regarding this issue where they said the instruction must be in writing and wher e the verbal instruction is issued, it will be effective when confirmation by the authorized person.

2.5

Compliance of instruction

The contractor has to comply with the instruction of S.O where in Clause 24.1 PWD 203A mentioned that “…Upon the issuance of such Variation order, the Contractor shall forthwith comply with the variations Order issued by the S.O”. Besides, in PAM2018 explained the consequences in Clause 2.3 “Upon receipt of a written instruction from the Architect the contractor may request the Architect to specify in writing…”. Discussion regarding the instruction by the Contract Administrator, any order must within the scope and not render the work contracted as explained by Sundra & Harbans (2012) where it can be considered as ‘cardinal changes’ when in the form of financial changes, physical changes or combination both. This ‘cardinal changes’ are invalid by law and it is not a duty for the contractor to comply with the instruction.

Both standard forms discuss if any failure of contractor complying with S.O/ Architect instruction where in PWD 203A highlight a timeline where if the contractor did not

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comply with S.O instruction, S.O will be sent written notice to the contractor to comply the instruction. If within 7 days from the written notice contractor did not comply the instruction, S.O have the power to either undertake the departmentally or employ and pay other contractors to carry out the job where any payment to the third party will be recovered from the Contractor as highlighted in PWD 203A (Clause 5.3) “…All cost and expenses incurred...shall be deducted from any money due or to become due to the Contractor…”.

In PAM2018 Clause 2.3 “If the time of compliance [which shall not be less than seven days from the receipt of AI] … and the Contractor does not comply …” explained that the time specified by Architect must be less than 7 days from the receipt of AI and where any noncompliance by the Contractor towards the instruction, the Employer may employ and pay another person to execute the works where the cost that include employing other party to execute the works and any additional cost shall be set off from the Emp loyer as highlighted in standard form “…Any set-off by the Employer shall be recoverable from the Contractor…” (Clause 30.4).

2.6

Measurement of Variations

In PWD230A “All variations instructed in writing by S.O…shall be measured and valued by S.O”. Clause 25.1 explained that all the confirmed variation shall be measure and value

by S.O regarding the works done by the contractor. When the measurement needs to be done on site, S.O shall give notice to the Contractor in assisting S.O or S.O representatives in conducting measurement. The Contractor shall provide S.O with particular information required as explained in Clause 27.1. Besides, in Clause 11.5 PAM2018 “All variations shall be measured and valued by the Quantity Surveyor…” explained by Tan et al. (2010) that any recording on site, the contractor should assist Quantity Surveyor to carry out the measurement works and the contractor are given opportunity to present to jot down the notes and measurement as required.

PWD 203A Clause 25.1 highlighted “…The valuation of variations …shall be made in accordance with the following rules…” where referring to Clause 25.1 (a)(b)&(c) and Clause 25.2 there are four type of rules in valuation variations highlighted in this standard form where Clause 25.1(a) explaining regarding the contract rates for a similar work or

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omission of any works, Clause 25.1(b) regarding the adjusted contract rates for similar character or condition and valuation of any remaining items works, Clause 25.1 (c) regarding the Agreed rates for applicable different works and lastly for any works that cannot properly be measured S.O may allow daywork price as in the appendix contract documents as per explain in Clause 25.2. The rules in PWD 203A are also similar to the clause highlighted in PAM2018 in Clause 11.6(a)-11.6(d) where it also highlights four circumferences in valuation variation.

2.7

Adjustment of Contract Sum

The variations are one of the criteria to be included in adjusting the contract sum as per PWD 203A where highlighted in Clause 29.0 “The amount to added to or deducted from the Contract Sum in respect of expense or loss due… variation under Clause 24…”. It is explained clearly for any variations or additional expenses in the standard form PAM2018 in Clause 11.9 “As soon as Architect and Quantity Surveyor have ascertained the amount of Variations and/ or additional expenses… shall be added to the Contract Sum.” This is explained by Tan et al., (2010) that after Architect had ascertained the amount of the variations claimed by the contractor, he has to added the amount in the Contract Sum. 2.8

Conclusion

Generally, it can be concluded that there are similarity and also contrary between both PWD 203A and PAM2018 where the term Contract Administrator refer to Superintending Officer for PWD 203A and Architect for PAM2018. For the Contract Administrator’s instruction for both need to be in writing where PWD 203A must be confirm by S.O within 7 days if any oral instruction and in PAM2018 need AI instruction or any CAI. If the contractor fails to comply with the instruction PWD 203A had given two options and one option had been explained by PAM2018. The variations items as highlighted on PAM2018 are similar to PWD 203A but with additional clause. Generally, both standard forms come out with different clause and each of the standard form have their own strength to protect the parties in the contract.

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REFERENCES Agreement and Condition of PAM Contract 2006 (With Quantities) – Persatuan Arkitek Malaysia (2006) Mohd Banuri M.S, Othman M., Abdul Rahman H., Lim C.C (n.d), Application and Assessment of Extension of time Claim: Finding of Case Studies conducted in Malaysia. p.1529 Mohd Nazir Ismail, 2008. Pengenalan Kepada Pentadbiran Kontrak (Berdasarkan Borang Kontrak JKR 203A). 3rd ed. Shah Alam: Pusat Penerbitan Universiti Teknologi MARA. Norazian M.Y, Hamimah. A. (2013). Issues Associated with Extension of time (EoT) Claim in Malaysian Construction Industry. Elsevier Ltd, 740-749. Retrieved 20 June 2020, from http://www.sciencedirect.com.

Standard Form of Contract P.W.D Form 203A (Rev.2007) – Government of Malaysia (2007) Sundra, R., & Harbans, S. (2012). Construction Law in Malaysia (1st ed.). Thomson Reuters Malaysia.

Tan, P., Low, K., Jerry, S., & Chee, S. (2010). Handbook for PAM 2006 contract (1st ed.).

Pertubuhan Akitek Malaysia Thomas, H.R., F.R Smith and D.J Cumming (1995), Have I reach substantial completion.

Journa of Construction Engineering and Management, 121(1): P.121-129

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