ECM 578 CONTRACT ADMINISTRATION

CONSTRUCTION OF KUALA
LUMPUR INTERNATIONAL
AIRPORTS (KLIA) LOCATED
AT SEPANG, MALAYSIA.

PREPARED BY:

ALIFF ZULKARNAIN BIN SHUKRI (2019451578)

NURNAQIBAH BINTI MD RAUB (2019689718)
HANIS NUR SHAZLIN BINTI HAZLEY (2019660006)
NUR SYAZWANA BINTI MOHAMAD (2019467806)
ALYA ZULAIKHA BINTI ABDUL RAZAK (2019455012)
 SUMMARY

THIS ASSESSMENT FOCUSES ON

THE ANALYSIS OF A CONTRACT
DOCUMENTATION OF A PROJECT.
THE AIM OF THE ASSESSMENT IS TO
REVIEW THE CONTRACT AGREEMENT
MADE BY A COMPANY.
FOR TASK 1, PARTIES INVOLVED
INCLUDING ITS RESPONSIBILITIES IS
LISTED. NOT ONLY THAT, BENEFITS
AND DRAWBACKS OF THE PROJECT
ALONG WITH THE FORM OF
PROCUREMENT PROCESS IS
ASSESSED.
AS FOR TASK 2, POTENTIAL ISSUES
IS LISTED AS WELL AS RELEVANT
CLAUSE BASED ON THE LISTED
POTENTIAL ISSUES. ALL CLAUSES
RELATED TO THE ISSUES WERE
EXPLAINED IN RESPECT TO
CONTRACT CLAIMS AND DISPUTES,
MODIFICATION AND CHANGE ORDER,
AND CONTRACT TERMINATION.
 INTRODUCTION PARTIES INVOLVED
Kuala Lumpur International Airport 2 (KLIA2)
is a new purpose-built mega terminal, which
is designed to replace the older, low-cost
terminal at the Kuala Lumpur International
Airport. It is located in Sepang District of
Selangor, approximately 45 kilometres (28
mi) south of Kuala Lumpur city centre. The
new terminal features the world’s tallest air
traffic control (ATC) tower standing at a
height of 133.8m (438ft). The terminal is
located within 2km of KLIA and is connected
via Express Rail link’s high-speed train. The
terminal is capable of accommodating 45 Responsibility: Ensure the suitable
million passengers a year. management arrangements that
made for the project.
TYPE OF CONTRACT
Turnkey contract. Typically a construction
contract under which a contractor is employ
to plan, design and build a project or an
infrastructure and do any other necessary
development to make it functional or ‘ready
to use’ at an agreed price and by a fixed
date. In turnkey contracts, most of the time
employer provides the primary design. The
contractor must follow the primary design
provided by the employer. The concept is
contractor shall hand over the project fully
in the operational state. Responsibility: Design of the
project and execute the work
DURATION activities that are required within
The contract started on 15 July 2010 and the expected time.
completed in May 2014

PROJECT COST
MYR 4billion (approximately $1.23 billion)
 ADVANTAGES
Less management work Reduced project timelines. Reduced cost overruns.

Turnkey contracts relieve building The contractor selected to Turnkey projects also deliver cost
owners of the burden of managing complete a turnkey construction savings to client because client is
or monitoring projects. This is project is in charge of both only responsible for the lump sum
because the contract makes the planning and executing the agreed upon during contract
business or individual who was project. When a result, as the negotiations. Any increases in
awarded the contract responsible plans are finalised, the contractor costs, such as rises in the prices
for the whole project. As a result, may begin selecting of materials, are covered by the
client can simply wait for the keys subcontractors and material contractor.
to an operational building to be suppliers. This early purchase of
delivered at the conclusion of the suppliers and subcontractors
approved project period. allows the project to be finished
faster because no time is wasted
during the procurement process.

DISADVANTAGES
Limited client involvement. Strong scope definition is Budgets may be higher than
required necessary.
This type of contract will have a
limited ability to participate in the Before beginning the engineering Turnkey contractors may generate
various activities that are and design phase of a turnkey project budgets that are higher
associated with client project. For project, the scope must be than necessary. This is because
instance, client may have no properly defined. In other words, those budgets are presented
authority to make decisions in after the scope has been before the designs of the project
selecting the sub-contractors that determined, changing changes have been finalised. Secondly,
will offer different services during and adding extra components to turnkey contracts may have
the project. This may prevent the project should not be done. higher budgets in order to cover
client from choosing preferred Because construction, any unpredictable increases in
service providers. procurement, and planning budget requirements, such as
activities may have already begun, price increases due to inflation.
changes during engineering must Client may therefore end up
be kept to a minimum. paying much more to the turnkey
contractor than you would have
paid in another kind of contract
where you have more say over the
execution of the project.
 Problem occurring in the KLIA 2 project
affecting project performances.

PROBLEMS SOLUTION

Due to lack of proper management, even the Allowing continuous scope changes while
best-prepared plans might lead to project controlled by the configuration management
failure. The working relationships among the process and clustering all scope changes
participants and stakeholders, as well as together to be completed later as an
whether or not they support the project enhancement project are the two most often
management, are important aspects of project used strategies for scope change control. There
execution. The concept of a future modification are risks and benefits in both of these
in the project was not well received by the strategies. When to choose one over the other is
linked parties or agencies, who saw it as a black more of a grey region than a black-and-white
hole that may lead to a project defect. It is decision. Furthermore, the project manager
critical for individuals working on the KLIA2 must collaborate with the client to either
project to deal or adapt to changing negotiate a later project delivery date or
circumstances, but they did not succeed. If the minimise the scope of the project once the
scope of work expands as a result of a change in deadline has been set. Furthermore, successful
a concept, the workforce or workload for initiatives require a clear and well-managed
workers must expand as well. scope.
A feasibility study is a preliminary investigation
The ground had to settle for some 24 months
carried out at the beginning of a project. They're
which leading to additional costs overruns and
usually carried out when there's a lot of
construction delays. The challenges that occur
uncertainty or conflict over a prospective
during the construction process of KLIA2 include
development. If an environmental impact
that the airport's completion has been delayed
assessment (EIA) is required, assessments that
five times, and many people are sceptical that
are best completed as part of feasibility studies
the contractors will be able to meet the new
may be required. As a result, it is important to
opening date of May 2, 2014. Malaysia Airports
do the research so that they may learn more
Holdings Bhd (MAHB) blamed AirAsia in June
about the soil conditions in the development
2011 for the delay, citing AirAsia's request to
area. If there are any concerns with the soil
increase passenger capacity from 30 million to
before the project begins, the parties involved
45 million per year, as the cause of the delay.
can figure out the best alternatives. The problem
According to an inside source, the main issue
with the soil condition at the international
with the project was the earth's instability in the
airport was solved by repairing and resurfacing
area, which necessitated additional piling and
the problem areas and injecting polyurethane
reinforcing work.
under the ground.
 Problem occurring in the KLIA 2 project
affecting project performances.

PROBLEMS SOLUTION

Because of the time limitation, MAHB should

reduce design and order changes while also
According to the research, several decisions
minimising additional work during construction
made during the building of the KLIA 2 project
had an impact on the project's performance to tackle this problem. However, if those
Furthermore, when the Home Ministry modifications are required, a thorough plan must
demanded that the government's security be developed and an effective control system
measures regarding immigration controls must be followed. It has the ability to reduce cost
include a complete separation between the increases while maintaining expected
international arrivals and departure halls, as performance. Thus, in order to reach the project
well as a separation of the halls between goal, the client should make a quick and efficient
domestic and international passengers, more decision and increase the quality of the provided
scope changes were required. To fulfil these project, as a delayed decision would disrupt the
requests, the design was modified from the project's timeliness and cause unnecessary
original 2-story terminal building of 150,000 delays, as well as have a negative impact on the
square metres to a revised 9-story terminal project's quality. Contractors should plan and
structure of 257,000 square metres, as
schedule the project well since it provides as a
illustrated in figure 3.0. Furthermore, the
blueprint for how the project will be carried out.
Department of Immigration realised that the
intended 35 immigration counters would not Because the construction of an international
meet their demand for a ten-minute service airport is a mega project with great complexity,
turnover, and sought additional revisions to there is a considerable risk of delays and cost
raise the immigration counters to 45.Because of overruns. A good project schedule includes
these adjustments, the principal contractor was accurate estimates of resource needs, labour,
unable to meet the completion schedule and and work durations. It also outlines how the
requested an extension. The issue became even team will keep track of the schedule and deal
worse when AirAsia reversed its decision on the with modifications once the baseline timetable is
completely automatic luggage handling system accepted. As a result, proper project planning
that had been approved upon a year and a half and scheduling are critical in order to deliver the
before. KLIA2 opened on May 2, 2014, at a cost of project on time or ahead of schedule, as well as
RM4 billion rather than the original RM1.7 billion. to complete the project within the allowed
budget.
 POTENTIAL ISSUES
Public Health Safety Environmental Society
According to the finding The KLIA2 is sinking and There was a period of The closing of the airport
from Syazwani Sahrir et might become a risk to time when the noise for the treatment work
al., 2014, due to the safety, Air Asia warns, level reached a point will affect the operations
expansion of the airport, (Today New, 2015). KLIA2 where continued of airlines, thus it will be
the air quality was was reported by Air Asia exposure might cause inconvenient for the
considered to be (the new terminal’s sound pollution and public. The closing of
dangerous to human biggest user), where the adversely affect people's KLIA2 may cause their
health since several of KLIA terminal is sinking health, including the flight dates to be
the sampling points with the structure chance of hearing loss, postponed. Given the
exceeded the regulatory failure, which is a crack (Syazwani Sahrir et al., degree of soil
threshold for respirable appearing in the 2014). This production of settlement, which is
and inhalable dust for taxiway, and the planes high noise levels is due projected to be entirely
outdoor. need to drive through to the operation of stabilised in five years,
the pools that are machinery at the Malaysia Airports
forming from water. construction site during Holdings Bhd (MAHB) MD
the construction period. Datuk Badlisham Ghazali
said there is no
assurance that stopping
the airport for months
for remedial works will
prevent the issue from
recurring, (The Malaysia
Reserve, 2017).
 CONTRACT CLAIM AND MODIFICATION AND
DISPUTES CHANGE ORDERS

CLAUSE 14.0:0: INDEMNITY IN RESPECT OF PERSONAL CLAUSE 21:0 COMPLIANCE WITH THE LAW
INJURIES AND DAMAGE TO PROPERTY In the contract document, clause 21 emphasizes compliance
This clause states that the Contractor and the Government with the law. This section explains how the law is applied to
agreed to execute all of the Contractor's duties under this the works by legislation, regulation, or bylaw, as well as
contract at its own risk and release to the maximum degree any order or directive issued by any public body or public
permitted by law. Because the government bears no service organisation, which must be obeyed by the
responsibility or liability for the mishaps, a contractor can contractor in every way. The contractors are responsible for
be sued for any form of accident, damage, injury, or death. submitting the approval to the S.O and indemnify
The Government becomes responsible when the government against any penalties or liabilities. If the
Contractor's reckless use, misuse, or abuse, or any loss, contractor makes many modifications after the tender
damage, or harm caused by any cause that damaged the deadline, the contractor must inform the S.O. and justify the
work because of property or person, occurs. As a changes. If the contractor breaks the law or fails to notify
consequence, this clause will make it easier for the the S.O, the contract will be terminated. The S.O has the
Contractor and the Government to work out their disputes. ability to cancel the contract since the contractor did not do
the proper thing, which may have affected the contractor's
CLAUSE 68.0: SAFETY AT THE SITE performance.
This clause specifies that the contractor need to comply
with all relevant laws, rules, by-laws, directives, or orders CLAUSE 68.0: SAFETY AT THE SITE
of the relevant authorities on the requirements of safety at Regarding to the safety at the site in clause 68, the
work, and need to ensure that his personnel workmen and contractor must ensure that the works at the construction
sub-contractors comply with such safety requirements at site, as well as the equipment, machinery, and other items
all times during the execution of works. on the execution site, are safe. All of this must be in good
condition, and the sounds produced by the machinery must
CLAUSE 68.4: SAFETY MEASURE not be too disturbing for the public. To prevent the noise
This clause explains that the contractor need to ensure all produced by the construction site, a noise barrier can be
the equipment, machinery, and tools at the construction site installed, and to control the level of air quality, the
are in safe, good condition, and capable of performing their contractor needs to check the air quality regularly to
function well. The contractor is responsible for ensure that it is not harmful to the public.
implementing a safe construction approach on the work
place for all personnel. The contractor should supply all CLAUSE 35:0 MATERIALS, GOODS, AND WORKMANSHIP
workmen on site with the essential safety equipment, Clause 35 is specifies about the materials, goods, and
including but not limited to safety boots, safety helmets, workmanship. All the materials, goods, and workmanship
and protective clothes, without limiting his liability under must follow the specification and standards of the
the contract. workmanship in the industry. The contractor needs to
submit the certificates to the S.O to prove that the materials
CLAUSE 44.0: CLAIMS FOR LOSS AND EXPENSE and goods comply with the specification. Next, the
In this clause, it state that if the Contractor suffers any contractor also needs to carry up any test of materials
direct loss and/or expenditures not covered by the contract, when getting the instruction by the S.O.
the Contractor must notify the S.O in writing within 30 days
of the claim. To allow S.O. to determine the direct loss or CLAUSE 22:0 DESIGN
expenditures, the Contractor shall submit full particulars of This clause explains that regardless of any government-
the claims, including any necessary supporting supplied design and requirements, if the contractor is
documentation. Then, the amount of direct loss and the required to undertake the design of any parts of the works
expenses will be added to the Contract Sum. under the contract, the contractor need to ensure that the
design is suitable, functional, safe, and integrates with the
design and specifications of the works. Then it must be
completed, authorised, and endorsed by a competent and
certified professional. The contractor needs to submit all
the drawing, specifications, calculation, and any other
relevant information to the S.O for the approval. The works
cannot begin without the prior written consent of the S.O.
CONTRACT TERMINATION
CONCLUSION
CLAUSE 49.0: UNFULFILLED OBLIGATIONS As a conclusion, every project
Malaysia Airports Holdings Bhd (MAHB), which has
faced criticism over several delays in completing
has its own problems or issues.
KLIA2 and the inflating costs, said previously that it A great organization will be able
had served notification to the contractors that they to face any problems in order to
were unable to meet their contractual obligations for
the opening date. The contractor should be given
ensure the project is successful.
more time to complete the project due to unexpected They need to be able to face any
and complicated design modifications. obstacles and circumstances
CLAUSE 24.0: VARIATIONS
that might occur during the
The delays were justified because all of the variation construction period. It is crucial
orders (VOs) that caused the contractor's problems for organisations to get good
were due to client-requested changes for which the
company had to revise the documentation. The
contracts that limit risk while
clients change their minds on certain aspects of the providing the best possible
project as construction progresses, leading to as project outcomes through
much as 10–20% in VOs per project. The result is that
projects rarely finish on time. As a result, any
effective contract administration.
variation order issued pursuant to this clause does If there are any disputes or
not relieve the contractor of his obligations under conflicts, the contracts can be
clause 22.1(c).
used to prescribe how the
CLAUSE 5.0: S.O.’S INSTRUCTION parties will proceed to settle the
The S.O. may, from time to time, issue further problem. Contract preparation
drawings, details, and/or written instructions in
order to proceed with the work. The S.O. has the right
should be done with great care
to take action on any issue regarding the project. The and with the help of an expert. It
contractor shall not be entitled to any time extension is also critical to establish and
or additional cost or expense arising from
compliance. There are changes in the design that
adhere to proper contract
could cause a delay and cost overrun on this project. administration procedures in
The contractor needs to always be prepared for any order to ensure that the project
circumstance in order to complete the project. The
help from S.O. is needed due to VO's approval. It
is finished on time and within
might assist in a successful project. budget.
CLAUSE 43.0: DELAY AND EXTENSION OF TIME
The contractor has taken all reasonable steps to
avoid or reduce such delays and shall do all that is
reasonably required to satisfy the S.O. in order to
proceed with the work. Upon it becoming reasonably
apparent that the progress of the work is being
delayed, the contractor shall forthwith give written
notice as to the causes of the delay and relevant
information. The S.O. may, if he is of the opinion that
the extension of time should be granted, as soon as
he is able to estimate the length of the delay beyond
the date or time aforesaid, issue a Certificate of
Delay and Extension of Time giving a fair and
reasonable extension of time for completion of the
works.