Security of payment in Malaysian construction industry: issues on sub-contract's direct payment

In Malaysia, sub-contractors have to bear with the current structure of payment mechanisms in the standard forms of contract, which are payment upon certification, direct payment from the employer, and contingent or conditional payment. However, „direct payment‟ provision is applied for in most of the nominated sub-contracts and not to the domestic sub-contractors; thus the Construction Industry Payment and Adjudication (CIPA) Act is proposed. This paper, though, is to disclose the findings on legal cases and sub-contractors‟ perspective on direct payment, by preliminary analyzing the quantitative questionnaire survey to the first 81 from the identified 1,500 sub-contractors throughout the country. Before that, from 186 cases, only 5 selected cases are analysed that thoroughly addressed the judgment of direct payment. It is found out that the particularly small sized subcontractors are definitely need to enhance their knowledge of the so-called the „Security of Payment‟ Regime to benefits from the proposed Act.Malaysia; Legal readiness; Sub-contractors; Security of payment; Construction industry

The legal conditionality of performance bond in Malaysian construction contract

In construction contracts, a 'performance bond' is a bond taken out by the contractor, usually with a bank or insurance company (in return for payment of a premium), for the benefit of and at the request of the employer, in a stipulated maximum sum of liability and enforceable by the employer in the event of the contractor's default, repudiation or insolvency. There are two types of performance bonds: Conditional bond or default bond; and Unconditional bond or on-demand bond. However, in Malaysia, the question of whether the performance bond in a construction contract is a conditional or an unconditional guarantees is still one of the issues relating to performance bond that has been discussed. Therefore, the objective of this research is to determine the phrase(s) in the Performance Bond in a construction contract that determine whether the performance bond is a conditional or unconditional on demand guarantee. In order to achieve this objective, the research was conducted by analyzing relevant court cases. From the findings, it can be concluded that unless an undisputed meaning of the words in the performance bond to make the performance bond to be purely conditional or unconditional 'on-demand' bond, most court interpreted performance bond to be an on-demand performance bond which is only conditional upon the beneficiary asserting the basis of the claim upon the issuer of the bond contending that there has been breach of contract.Performance Bond; Conditional Bond; Unconditional on-demand Bond; Malaysian Construction Contract

Corporate management structure of large Malaysian construction companies.

Corporate management structure is crucial for the understanding of corporate governance. Companies will have their own structure of corporate management. The environment and their planning and control mode will have an impact on way they do things daily, monthly and yearly. Learning the structure that suited most for different types of organisation would then be important and fruitful for any part that are related or affected by it. The aim of this study is to explore the parent company of large construction companies managing their local subsidiaries in Malaysia. This study is based on survey of the Malaysian contractors and aims to identify the corporate management structure in the Malaysian construction industry. The study found that construction firm need to develop a long-term vision of its strategic intent and need to upgrade productivity and have new technology. Parent companies need to maintain quality products to clients to projecting sound track record. Construction companies need o provide quality services to meet their client’s in formulation and implementing corporate strategies and business plan. They need to explore new construction technology to have competitive the edge in the market and they have to expand for regional expansion for higher business growth and synergies diversification to broaden revenue source, marketing plan and expand overseas markets

The adequacy of Malaysian security of payment legislation for sub-contractors in construction industry

In Malaysia, the particularly small sized subcontractors are definitely benefited from payment provisions in the proposed Construction Industry Payment and Adjudication Act (CIPA Act). However, they need to enhance their knowledge of the so-called the ‘Security of Payment’ Regime to benefits from the Act. Due to this, this on-going research attempts to introduce payment framework to the sub-contractors, in giving the knowledge, to claim for payment. This paper, though, is to disclose the finding of the level of knowledge that the sub-contractors have to the proposed Act, by preliminary analyzing the quantitative questionnaire survey. It was found that the adequacy of security of payment framework to the particularly small sized sub-contractors needs to be produced, and the analysis on effectiveness of the various avenues incorporated in the construction contract or statutes in the other developed countries as well as the proposed Act needs to be done. However, as long as the regime remains in proposal, the sub-contractors have to bear with the current structure of payment mechanisms in the standard forms of contract, which are payment upon certification, direct payment from the employer, and contingent or conditional payment.legal readiness; Malaysia; sub-contractors; security of payment; construction industry

Sub-Contractors’ readiness on the Malaysian security of payment legislation in construction industry

In Malaysia, subcontractors are definitely benefited from payment provisions in the proposed Construction Industry Payment and Adjudication Act (CIPA Act). However, the particularly small sized sub-contractors need to enhance knowledge of the so-called the ‘Security of Payment’ Regime to improve their awareness of the benefits of the Act. Due to this, this on-going research attempts to introduce balance and proper guidelines to the sub-contractors, in giving the knowledge, to claim for payment and the main contractors able to make prompt payments. Before that, the research may first identify the payment provisions in the standard forms of contracts as well as in domestic sub-contracts especially on Contingent Payment, and exploring the problems and legal issues relating to payment default. Then, by determining the level of knowledge that the sub-contractors have to the proposed CIPA Act, and analysing the various avenues which improve the payment problem in the construction industry those have been incorporated in the construction contract or statutes in the other developed countries as well as the proposed CIPA Act, the aim may be achieved. The purpose of this paper, though, is to disclose the finding of the first objective of the on-going research. In the standard forms of construction contracts, currently, the payment structure to the sub-contractors are divided into three: payment upon certification, direct payment from the employer, and contingent payment or conditional payment. As long as the Malaysian ‘Security of Payment’ Regime remains in proposal, the sub-contractors have to bear with the current structure of payment mechanisms.legal readiness; Malaysia; sub-contractors; security of payment; construction industry

Security of payment regime in construction industry: are Malaysian sub-contractors ready?

In Malaysia, the particularly small sized sub-contractors are definitely benefited from payment provisions in the proposed Construction Industry Payment and Adjudication Act (CIPA Act), but need to enhance their knowledge in order to improve their awareness of the benefits of the Act. Accordingly, this on-going research attempts to introduce proper guidelines to the sub-contractors, in giving the knowledge, to claim for payment. Firstly, the research explored the problems and legal issues relating to payment default in law cases and standard forms of contract. By downloading from the Malayan Law Journal, cases that indicated the issues of payment to the subcontractors, were analyzed. It is found that on its relevancy, the adjudicator shall be equipped enough with the knowledge on the issues to become a good and reliable adjudicator, as well as sub-contractors will need to enhance their knowledge on the issues of payment in order to be successful in benefitting the proposed CIPA Act. However, as long as the CIPA Act remains in proposal, the sub-contractors have to bear with the knowledge of the current structure of payment mechanisms in the standard forms of contract, which are payment upon certification, direct payment from the employer, and contingent or conditional payment.construction industry; Malaysia; readiness; security of payment; sub-contractors

Partnering Project Success Criteria in Malaysia

Partnering is used as an approach in the procurement system as it could lead towards improving the performance of the construction industry. Organizations which used the partnering approach in their past construction projects are now reporting favorable results, which include decrease in project costs, delivery of project to program, time quality and buildability. Despite these benefits, there remain are still risks associated with this mode of procurement. Risk management process and partnering are critical to the succession of the construction project. Three (3) case studies were looked into to support this study. The opinions and techniques of risk mitigation were gathered. It was found that the most critical construction partnering risk is the partner’s financial resources, the clients’ problems and economic conditions and financial problems with one of the partner. It is hoped that the risk management programme will help to reduce such risks

Contractors’ Approaches to Risk Management at the Construction Phase in Malaysia

Abstract - Often times, contractors failed to identify, plan, strategize, analyzed, execute, monitor, control and manage the risk involves during construction phase in Malaysia. Consequently, the contractor failed to complete the project on schedule, within client’s budget and quality. The idea of introducing formal risk management among Malaysian contractors during construction phase is seem to be a proactive approach to achieve the project objectives. This paper intends to identify the application of formal risk management among the contractors during the construction phase in Malaysia. Questionnaires and interviews were used. It was found that although the risk management process in Malaysian construction industry has been introduced, most of them are not well structured and not being implemented in a formal manner. Therefore, it is suggested that these contractors should try to implement formal risk management and hope that the construction industry in Malaysia can enjoy the benefits and lead our industry effectively into the next stage of building the nation.Keywords : Risk Management, Contractors, Construction Phase, Malaysia

Assessing Extension of Time Application in Malaysian Construction Industry: Views from Professionals

AbstractThis paper aims to investigate the current practice of extension of time claim assessment by contract administrators and identify difficulties faced by them during the assessment process. A survey approach using questionnaires as an instrument revealed that poor factual evidence and flaws in claim presentation are the principal factors leading to delays in the assessment process. The findings imply that efficient contract administration and well-organised record keeping will lead not only to successful project management but also will increase the chances of a successful contractual claim. These findings are expected to offer a significant contribution to industry players, researchers and also academics, thus helping to identify areas for further improvement

Extension of time claim assessment in Malaysian construction industry: views from professionals / Norazian Mohamad Yusuwan and Hamimah Adnan.

This paper aims to investigate the current practice of extension of time claim assessment by contract administrators and identify difficulties faced by them during the assessment process. Findings from the questionnaire survey revealed that poor factual evidence and flaws in claim presentation are the principal factors leading to delays in the assessment process. The findings imply that efficient contract administration and well-organised record keeping will lead not only to successful project management but also will increase the chances of a successful contractual claim. These findings are expected to offer a significant contribution to industry players, researchers and also academics, thus helping to identify areas for further improvement