This page intentionally left blank
Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE Library of Congress Cataloging-in-Publication Data Names: Lim, Pin, author. Title: Contract administration and procurement in the Singapore construction industry / Pin Lim (Nus, Singapore). Description: New Jersey : World Scientific, 2016. Identifiers: LCCN 2016028192 ISBN 9789813148031 (hardback : alk. paper) ISBN 9789813148048 (pbk. : alk. paper) Subjects: LCSH: Construction contracts--singapore. Classification: LCC KPP85.6.B84 L55 2016 DDC 343.595707/8624--dc23 LC record available at https://lccn.loc.gov/2016028192 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Copyright 2016 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the publisher. For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher. Desk Editor: Amanda Yun Typeset by Stallion Press Email: enquiries@stallionpress.com Printed in Singapore
To Charlene (mm)
This page intentionally left blank
Preface Contract Administration and Procurement is an important discipline in the management of cost, time and quality in construction projects. This book is written for the following: Developers Contractors Project Managers Architects Engineers Quantity Surveyors Consultants and professionals in the construction industry Students in project and facilities management, architecture, engineering and other allied courses There is a dearth of books on this particular subject in the Singapore construction industry. Most students, including myself when studying for my degree in Building, do not have a textbook or materials providing instructions in contract administration. We picked up the skill whilst on the job. For example, how does one value the works on site for the purpose of making progress payments to the Contractor? As a young Quantity Surveyor, I accompanied my senior to site and was taught the rudiments of estimating the value of work done on site. Although nothing beats learning through experience, this book endeavours to show how valuation of Payment Claims is made, how valuation of variations is arrived at, how the Final Account of a project is derived, and many other contract administration processes. Many examples and processes mentioned in this book are geared towards practice in the construction industry to benefit professionals and give students a foretaste prior to entering the industry. Consequently, draft letters, notices, certificates and other documents are provided in the book to help readers easily understand the processes. However, read- vii
viii Contract Administration and Procurement ers should not use such drafts as models or templates in their projects. Letters and other documents in respect of projects should be drafted in pursuit of a specific interest and in accordance with the facts and requirements in their specific circumstance(s). It should also be noted that there are many ways to draft letters and documents for a specific purpose. There is no one fixed way as the facts and circumstances may differ from project to project. And letters and documents should take into account the relevant facts and circumstances, as these are important factors in the pursuit of a specific interest. Similarly, the various flow-charts, time-lines and other diagrams are not cast in stone but allow for certain latitude, depending again on the facts and circumstances. The contract administration processes take into account various provisions of the Singapore Institute of Architects (SIA) Measurement Contract 9 th Ed, 2010, Public Sector Standard Conditions of Contract for Construction Works (PSSCOC) 7 th Ed, 2014, and the Building and Construction Industry Security of Payment Act (SOP Act). Disclaimer Draft letters, notices, certificates and other documents in this book ( Drafts ) serve as examples and illustrations for understanding only. They are not models or templates to be used in actual projects. The author does not warrant that the Drafts are suitable for use in projects or any other circumstances.
Acknowledgments I am grateful to Mr Winston Hauw, Partner, Rider Levett Bucknall, Singapore, for his advice and kindness, and Mr Wong Kin Hoong, Director, Kingsmen Exhibits Pte Ltd, for his invaluable assistance with materials. I am also thankful to Associate Professor Daniel Wong Hwee Boon for his kindness in providing materials, proof-reading and correcting errors in a few draft chapters of this book. If there are any errors in the book, they are wholly mine and I take full responsibility for them. I record my special thanks to Ms Amanda Yun, Senior Editor, World Scientific Publishing, Singapore for her help in the publication of the book and her team s effort in getting the book out in print in double quick time for students in August 2016. Last but not least, I thank my wife, Charlene, whose support is indispensable and a very present help indeed. Lim Pin B Sc (Building)(Hons), LLB(Hons)(London) Advocate & Solicitor, Barrister Associate Professor Department of Building School of Design & Environment National University of Singapore 1 August 2016 ix
This page intentionally left blank
About the Author Lim Pin is an Associate Professor in the Department of Building, School of Design and Environment, National University of Singapore. He is also the author of Elements of Construction Law in Singapore. He graduated with a B.Sc. (Building)(Hons) from the National University of Singapore. He started his career as a Quantity Surveyor in the Lands and Estates Organization of the Ministry of Defence where he was fully engaged in contract administration work and procurement in construction projects. Subsequently, he practised as an advocate and solicitor in construction arbitration and commercial litigation. He was also legal counsel to corporations owning and managing properties such as Sentosa Development Corporation and also oversaw legal matters in property management in Suntec City. xi
This page intentionally left blank
Contents Preface Acknowledgments About the Author Chapter 1 Introduction 1 1.1 Parties in a Construction Project 1 1.2 Roles of and Relationships Between Parties 5 1.3 Time-line in a Construction Project 10 1.4 Pre-Contract Administration 10 1.5 Post-Contract Administration 11 Chapter 2 Procurement 17 2.1 Meaning of Procurement 17 2.2 Key Concepts to Good Procurement 17 2.3 Methods of Sourcing a Contractor 20 Chapter 3 Project Delivery Methods 41 3.1 Meaning of Project Delivery Method 41 3.2 Different Types of Project Delivery Methods 41 3.3 Risks Assessment Between Owner and Contractor for Different Payment Models 72 Chapter 4 Contract Document 75 4.1 Conditions of Contract 76 4.2 Form of Tender 76 4.3 Form for Insurer Bond/Bank Guarantee ( the Guarantee ) 76 4.4 Roofing and other Guarantees or Warranties 77 4.5 Preliminaries 78 4.6 Prime Cost (PC) & Provisional Sum 81 4.7 Particular Specification 84 vii ix xi xiii
xiv Contract Administration and Procurement 4.8 PC Supply Rate 84 4.9 General Specification 85 4.10 Cost Breakdown 88 Chapter 5 Payment Claim 105 5.1 What is a Payment Claim? 105 5.2 When to Make a Payment Claim? 106 5.3 How to Make a Payment Claim? 108 5.4 Why make a Payment Claim? 127 Chapter 6 Payment Response and Payment Certificate 129 6.1 What is a Payment Response? 129 6.2 When to Make a Payment Response 129 6.3 How to Make a Payment Response 131 6.4 Why Make a Payment Response 157 6.5 Practice of Making Payment Claims and Payment Responses in the Construction Industry 157 6.6 What is a Payment Certificate? 159 6.7 When to Issue a Payment Certificate 160 6.8 How to Issue a Payment Certificate 160 Chapter 7 Variations 163 7.1 What is a Variation? 163 7.2 Instructions and Directions in the SIA Form of Contract 164 7.3 Instructions in the PSSCOC Form of Contract 167 7.4 Valuation of Variations 167 7.5 Rates for Variations 168 7.6 Sample Valuation of Variations 170 7.7 Agreed Valuation of Variations 178 7.8 Valuation of Variations in a Payment Claim 179 7.9 Valuation of Variations in a Payment Response 182 7.10 Differences in Valuation of Variations in Payment Claims and Payment Responses 182 Chapter 8 Loss & Expense and Material Price Fluctuation Claim 187 8.1 What is a Loss & Expense Claim? 187 8.2 How to Make a Claim for Loss & Expense in Accordance with PSSCOC Form of Contract 188
Contents xv 8.3 How to Make a Claim for Loss & Expense in Accordance with SIA Form of Contract 197 8.4 What is a Claim for Material Price Fluctuation? 198 8.5 Computation for Material Price Fluctuation 198 Chapter 9 Time for Completion 201 9.1 Completion Date as stipulated in the Contract 201 9.2 Extension of Time 202 9.3 Delay 207 9.4 Concurrent Delay 210 9.5 Issuing of Extension of Time in Practice 216 Chapter 10 Defects in Construction Works 219 10.1 What are Defects? 219 10.2 SIA Form of Contract in Rectifying or Resolving Defects 221 10.3 SIA Form of Contract in Resolving Defects During and Post Maintenance Period 225 10.4 PSSCOC Form of Contract in Resolving Defects 235 10.5 PSSCOC Form of Contract in Resolving Defects During Defects Liability Period 237 10.6 Powers in Resolving Defects During Progress of Works and Defects Liability Period in PSSCOC Form of Contract 240 Chapter 11 Final Account 243 11.1 What is a Final Account? 243 11.2 Final Account in the SIA Form of Contract 244 11.3 Final Account in the PSSCOC Form of Contract 246 11.4 Example: Final Account 1 249 11.5 Example: Final Account 2 251 Index 271