This chaptes consist of pathogens category, research findings “Dispute Causation: identification of pathogenic influences in construction” by Peter Love, Peter Davis, Joanne Ellis, and Sai On Cheung and Malaysian Industry Context.
1.1 Pathogens category
According to Busby and Hughes (2004), pathogens can be categorized in 8 categories as:
Table 1 The main categories of pathogens
Category Description Example
Practice arising from people’s deliberate practices It was the practice for designs to be checked only for internal consistency not consistency with external constraints and requirements
Task arising from the nature of the task being performed Trace quantities of a contaminant had disproportionate consequences in a particular process design task
Circumstance arising from the situation or environment the project was operating in Firm procured services in a market where there was inadequate information about the quality of products
Convention arising from conventions, standards, routines, and codes of practice A person adhered to a company standard that had previously always been superseded by ad hoc agreements –which as a result and unknowingly become obsolescent
Organization arising from organizational structure or operation Slow rump-up of projects led to delay in early tasks on which many others were dependent for information, and which therefore had to proceed on tentative assumptions
System arising from organizational system Latency in change control system meant that a significant amount of engineering information being used was obsolescent
Industry arising from the structural property of the industry Public contracting regulations required hat the firm consider vendors of whom they had no direct experience
Tool arising from the technical characteristic of the tool A design tool provided a layering facility that encouraged people to simplify their tasks but allowed them to forget possible inconsistencies with other parts of the design
1.2 Research findings
Research findings of the paper divide in 2 sections: (1) Research findings relating to dispute in Australia, and (2) Pathogen mitigation
1.2.1 Dispute in Australia
Here are the research findings in Australia:
1. 75 per cent cases were employment case disputes involving construction companies and employee’s superannuation, long service leave, and worker’s compensation. The remaining cases (25 per cent) that proceed to litigation involved “civil procedure” matters or focused on the meaning and interpretation of contractual terms.
2. Regarding to the case, it clearly indicates that a majority of disputes arise in are actually resolved using alternative dispute resolution process.
3. For sub-contractor, it was revealed that disputes that arise due non-payment are dealt with under the Security of Payments legislation and the use of adjudication.
4. A request for adjudication of a payment claim may arise because a payment claim is rejected, is disputed, not paid in full, or security of retention monies not returned by the due date under the contract. The typical causes of non-payment were found to be related to quality issues, change of scope, ambiguity of contract terms, and incomplete contract documentation.
5. No litigation occurs mainly between contractors, their client and unions. No litigation cases were identified that involved consultants and subcontractor, and as a result these were excluded from the focus groups that were undertaken.
6. The client group suggested that: (1) the prevailing skills shortage was a problematic issue for consultant and contractors and this was affecting their ability to deliver services within specified time frame; (2) the design documentation process evolved in ad hoc manner and as a result it was often incomplete for the purposes of tendering; (3) contractors frequently were not able to respond to changing conditions as their planning efforts were deemed to be reactive rather being proactive
7. In contrast to the perceptions of the client group, the contractor’s views as to dispute causes are extremely dissimilar. More emphasis is placed on the circumstance arising from the situation or environment the project operates in than on the task, practice, and organization suggested by the client group. Competitive tendering was identified as a dispute cause because price was deemed to be the primary selection factor for contractors.
8. The client and contractor group unanimously agreed that disputes were non-value adding and could cause considerable emotional and financial heartache for organizations involved.
9. The client and contractor agreed that the costs of resolving disputes were significant, particularly when litigation proceedings commenced. Total dispute cost is total direct cost and total indirect cost. Direct costs include fees and expenses paid to lawyers, paralegals, accountants, claims consultants, and other experts. Indirect costs are salaries and the associated overhead of in house lawyers, company managers, and other employees involved in processing disputes. Hidden costs are inefficiencies, delays, loss of quality to the project, and the cost of strained business relationship among the various parties.
10. Estimates of dispute costs provided from participants from both groups ranged from 0.5 per cent to 5 per cent of project’s contract value.
1.2.2 Pathogen mitigation
Pathogen mitigation should focus on the following areas: (1) process, (2) organization, and (3) task.
Research findings relating to process:
1. The minimization of scope changes is fundamental to dispute mitigation.
2. The procurement strategy and the selection of contractors and consultants is an area that requires attention and in particular a shift away from traditional to non-traditional method.
3. The use of competitive tendering often results in the lowest “price” being accepted by a client. Lowest price does not necessary result in best value for money.
4. The use of negotiated or selective tendering juxtaposed with a policy whereby contractors openly present their margins and how they priced the project could potentially breakdown any “them and us” barrier that is perceived to prevail. The formation of alliances can be used to engender these traits, though for them to effective behavioral and cultural barriers need to be addressed.
Research findings relating to organization:
1. The management practices adopted by consultants and contractors have a role play in reducing the incidence of disputes.
2. To improve the quality of documentation that is produced, firms must initially adhere to policies and procedures, especially those embedded within quality assurance.
Research findings relating to task:
1. Firm need to make conscious decisions about the people they use to procure their projects.
2. The development of an emotionally intelligent team that is able to stimulate creativity and solve problems that arise during design and construction will be able to manage conflict more effectively and resolve issues through negotiation as a project progresses.
2 Overview characteristics, disputes, and resolution in Malaysian Construction Industry
2.1 Characteristics of construction industry in Malaysia
One of characteristics of construction industry is unique. It involves design and many parties. Basically, construction work is delivering model/design into reality. The process of delivering model/design usually starts with design concept stage for traditional method. This stage involves employer and consultant. Second stage is detail design. More parties involves in second stage. Third stage is procurement. This stage is initial stage to invite contractor in the works. Detail design must very clear in this stage due to a part of contract documents. Fourth stage is construction. Employer, contractor, subcontractor, supplier, and contract administrator are involved in this stage. The last stage is completion when contractor transfer the works to employer. The crucial stages which contribute to arising disputes are second stage through last stage.
However, there’s different perception between Bar Council and Construction Industry Response in CIDB book Construction Industry Response to BAR Council’s Views on CIPAA. In view of BAR councils, the construction industry is not unique that demands the introduction of adjudication with the aim to facilitate the cash flow (CIDB, 2010).
Characteristic construction industry of Malaysia divide in 7 parts (Chan, 2001): 1) Bumiputra contribution in management, (2) Non-uniform skill and plant distributions, (3) different administration between States, (4) foreign labor, (5) contractor service centre (PKK), (6) Construction Industry Development Board, and (7) Tender procedures and policy for government projects.
2.2 Problem faced by Malaysian Construction Industry
The construction industry is an important cog in the wheel propelling the Malaysian economy (Fong, 2005). The performance of Malaysia’s construction sector is closely related with the development of the country’s economy due to its broad link with other economic sectors and it is also an important catalyst to increase domestic demand (CIDB, 2009).
Although the industry is the main role of economic development, there are problems may arise such as: (1) diversity of manpower, (2) financial (3) delay or project doesn’t finish on time, (4) regulation, and (5) etc. These problems affect with one another and evolving disputes which take direct cost and indirect cost in Malaysian Construction Industry.
Regarding to CIDB (2009) 64,895 contractors were registered with CIDB, including 137 foreign contractors as at 31 December 2009. Diversity of manpower can cause the disputes for example: language.
The most influencing factor causing delay in construction projects in Malaysia is financial factor, where the second and third factor is coordination between contractor and employer and material problems (Alaghbari et al., 2007). Financial factor can affect every process in construction stages. Cash flow, lack of capital, late payment, set off, and certification by contract administrator building financial problem.
Regulation in construction industry also can trigger a problem. For example: securing the payment between the parties. In other country such as England and Australia, there is security payment act which regulate the payment in construction works. Since Malaysia doesn’t have yet, payments still the problem in the field.
2.3 Overview disputes and resolutions in Malaysian Construction Industry
The number of construction disputes cases in Malaysia waiting to be heard in courts is very high and it might take years before they can be resolved (Isa et al., 2009). CIDB (2010) stated that the cost of taking civil action through courts is relatively expensive in technically challenging and complex construction disputes reaching disproportionately high cost.
Nature of disputes in Malaysian construction industry are payment, default, performance bound, damages, variations, termination, delay, and defect (Asniah, 2007).
Asniah (2007) elaborated 72 cases of construction contract. According to her research dispute in payment is the highest than other disputes. 51% of case is the payment dispute among the contracting parties (employer, main contractor, and subcontractor). According to her research, 60% cases of disputes involved employer and main contractor, 17% followed by main contractor and subcontractor.
ADR (negotiation, mediation, and adjudication) is the preferred option (Chong & Rosli, 2009). Base on their research, the disputing parties will select ADR rather than arbitration and litigation. Mostly, they prefer choose ADR base on fair treatment, voluntary, flexibility, and speedy of the proceedings. The respondents on their research, choosing litigation base on factors: (1) enforceability of the decision, (2) bindingness of decision, (3) formality of the process, and (4) if the dispute is complex. They agree that litigation will take a long time periods proceedings.
The most common problems in construction industry encountered were human performance problems (e.g., the lack and inadequacy of something such as lacked of skill, experiences, and etc) (Lim & Mohamed, 2000). This research finding is similar to research findings by Noraziah (2008). In her research findings, lack f proper communication between the contracting parties is the most causation in the works. The client mentioned that workmanship or quality control of contractor and lack of proper planning both in terms f physical works and financial aspects also can cause the disputes. Different from client, contractor mention that complexity of the works under contract can also cause the disputes.
Generally, cause of dispute construction consists of: (1) cause by client, (2) cause by consultant, and (3) cause by contractor (Noraziah, 2008). According to contractor’s and consultant’s view, late payment and changes and variation requirement are the most cause of dispute by client/employer. According to client’s and contractor’s view, overdesign, underestimating the costs involved, lack of appropriate competence and experience, oversight of design and specification, and late issue of design information/drawings are the most cause dispute by consultants. According to client’s and consultant’s view, delay/suspension f works, poor standard of work, inadequate site management, and poor planning and program are the most cause dispute by contractors.
The total dispute in Malaysian industry cost can divide into tangible and intangible cost. Tangible cost is a real cost which disputing parties must spent. Arbitrator cost from KLRCA depends on the amount of the project (KLRCA, 2011). The range of cost is from RM 8.750 to RM 400,000 with amount dispute range from RM 0-125,000 to RM 250,000,000. Example of tangible cost is payment for mediator, adjudicator, arbitrator, lawyer, and etc. Intangible cost is the cost which can convert to money such as relationship between the disputing parties. One of impacts of construction disputes is diminution of respect between parties-deterioration of relationship and breakdown in cooperation (Poh, 2005).
3 Identify pathogen of nature of dispute in Malaysian Construction Industry
Identification pathogen base on journals, master thesis, and article related to Malaysian construction industry disputes. The table from client’s view, consultant’s view, and contractor’s view is on Table 2.
Table 2 Identification pathogen in Malaysian Construction
NO Disputes P T Ci Co O S I T
P=Practice T=Task C=Circumstance Co=Convention O=Organization S=System I=Industry T=Tool
1 Lack of proper communication between parties
2 Workmanship or quality control problems
3 Late payment to contractor
4 Scope of change, variation requirements
5 Poor briefing in design stage
6 Late issue of design information/drawing
7 Lack of experience, skill, and competence
8 Over design and underestimating the costs involved
9 Delay, slow down the works, and suspension of works
10 The works are defect
11 Coordinating with subcontractor
12 Payment to subcontractor
13 Unpaid contractor
14 Material shortages
15 Interpretation of contract
4 Pathogen mitigation in Malaysia Construction Industry
According to the paper by Love et al. (2010), it suggested that pathogen mitigation should focus on the following areas: (1) process, (2) organization, and (3) task. Process pathogen mitigation means pathogen mitigation in procurement strategy, design stage, tendering stage, and construction stage. Organization pathogen mitigation means pathogen mitigation in organization of the contracting parties. Task pathogen mitigations how to mitigate pathogen that arise by human behavior in the projects.
Generally in Malaysia, the construction works start with design, tendering, and construction. Design goal is to provide cost estimation of work and modeling the works for contractor to carry out the works. Detail design and estimation cost is main part of tendering process and contract document. To achieve the goal the project objectives, it transform to the terms of the contract. Contractor carries out the works in as specified in contract document.
Pathogen in design stage in Malaysia even it small according to Asniah (2007), it create another disputes. Default in design stage can lead to wrong cost estimation and failure of construction. Needs of tools to ensure that the design is in good quality must perform by consultant who carry out the design, the client, and the government. Certification and registration consultant in professional association such as PAM or registered in CIDB is example of tools that increase level of responsibility to their design. The client has to coordinate with his consultant through the design process and has a knowledge about the logical and concept of design, but not necessary in detail. Government regulation is very important for minimum standard quality in design. Using Malaysian Standards can bring immense benefits to all stakeholders (SM, 2009).
Quality management system (QMS) is another tool to mitigate the pathogen in design process. The main advantages of implementation of QMS are enhanced image and reputation of organization followed by performance improvement and increased customer satisfaction (Said et al., 2011).They states that the main problem encountered by organizations with the implementation of QMS in Malaysia Construction Industry is lack of awareness in benefits of QMS, followed by lack of QMS exposure among workers.
Three type of procurement recognize in Malaysian Construction Industry is conventional method (design-tender-build), design-build, and management contracting. Conventional method is a common method and recognize by the parties (government and private). Many standard forms in Malaysia base on conventional method such as PAM, CIDB, and PWD. PWD has design and build form to fulfill the requirements of design and build procurement. But, in my opinion, this form is not totally “design and build”. Government as employer can change the design in the process of construction. Management contracting usually use for complex construction that involve high technology, many parties, and high cost.
There’s no best method of procurement. It depends on client needs and it is very important at the very outset of the project to carefully consider all factors when selecting the most appropriate procurement approach for a construction project because each system has its own feature and peculiarity that will have effect on the cost, time and quality of the project (Rashid et al., 2006). If client’s constraint is time, he may use design and build method. Traditional procurement method usually use for client who focus on quality and cost. Management contracting method will proper if the project is complex, involving many professional, parties, and very high cost. Selecting the proper type of procurement can mitigate the pathogen. Each method has own risk such as time risk, cost risk, and performance risk. However, traditional method is the most popular method in Malaysia. Mitigation of this method can start with design stage, tendering stage, and construction stage as I mention above.
Tendering process also can incubate the pathogen. It consists of 4 element: (1) bidder, (2) type of tendering, (3) how to select the proper bidder, and (4) documenting the contract.
Malaysian Government has Act 520 Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994. In part VI-Registration of Contractors, no person shall undertake to carry out and complete any construction works unless he is registered with the Lembaga and holds a valid certificate of registration issued by Lembaga. The keyword in that part is certificate and registration.
Bidder who want involve in tendering process must has certificate and registered by Lembaga. Certification and registration is similar to screening process and to ensure that the bidder has a minimum qualification to involve in construction works in Malaysia. CIDB has mechanism for registration of contractor who will become a bidder in projects. Contractor must be registered by Companies Commission of Malaysia, has experience, has financial capacity, and personal resources. Certification and registration is to prepare that the contractor who win the tender can carry out the works and avoiding contracting out his contract to another contractor.
There are two types of tendering: (1) open tendering and (2) selective tendering. Open tendering will attract a number of bidders. Therefore, it will become a competitive tendering. Open tendering often result in the lowest price in Malaysia. There are possibilities from contractor submitting the lowest price to get the project and then trigger them to adopt opportunistic practice when carry out the works. “Win first, works later” mind can incubate pathogen.
Method of selecting the bidder held by tender official is very important. The lowest price paradigm should be removed for criteria. Past experiences, financial stability, personal capabilities, equipment capabilities, and arbitration/litigation history of bidder organization is the factor that can be used for criteria matrix.
After the contractor is selected, the parties (client and contractor) will enter to the contract. Intensive communication and coordination in drafting contract will reduce the pathogen incubating. The terms in the contract must be clear and the contracting parties understand their obligation right, duty, and liability to the contract. Using standard form such as PAM, PWD, CIDB, and FIDIC will give benefit to both parties cause they has been tested and improved by the official who made the form.
FIDIC provides mechanism of avoiding the dispute by dispute review board (DRB) clause. The concept of DRB is to develop partnership among the parties. The parties appoint the penal which from professional or expert relating to the contract and works to avoid the disputes. With this partnership, the contracting parties want to ensure that disputes did not linger and affect working relationship. Moreover, the parties want to ensure effective communication among them. Usually, DRB included in the contract eq. FIDIC Red Book standard form. There are clauses regulate DRB such as clause 20.2, 20.3, 20.4, 20.7, and 20.8. Disputing parties must incorporate by reference the general conditions of dispute board agreement contained in FIDIC form. It would give a benefit to contracting parties to use DRB for avoiding the dispute. Standard form Malaysia may use this mechanism included in the contract or existing standard form. Culture of Malaysian people seems proper with project partnership avoiding dispute.
Construction stage is a place where the pathogen accumulated. This is the place for dispute battle. Each party stands on his argument to win a battle. The big battle in Malaysian Construction Works is payment. Without payment, the party’s cash flow who entitled payment from others will be hampered. Lord Denning stated in 1970: “There must be a ‘cash-flow’ in the building trade. It is very lifeblood f the enterprise”. In Malaysia, problem of payment is not between contractor and client, but also between contractor and subcontractor. Regarding to payment issues to protect the rights of parties involving in construction works, Security Payment Act is under consideration in Malaysia which recommended by CIDB. Purpose of security payment act is to ensure that any person, partnership or company who undertakes construction work (or supplies related goods or services) is entitled to receive and is able to recover progress payments for carrying out the work. UK, NZ, and Singapore had established this act.
Strategic Thrust 2 of Construction Industry Master Plan (CIMP) 2006-2015 proposed the introduction of Construction Industry Payment and Adjudication Act (CIPAA). CIPAA is still in review process. There’re many different perception between Bar Council and party in construction industry For example: The main remedy for non-payment is taking civil action and asking for summary judgment said Bar Council, in other hand construction industry said that taking action to the courts relatively expensive and taking a lot of time. Summary judgment is only useful where payment issues are undisputed.
Another issue in construction phase is site condition, coordination and communication, variation, material shortage, and workmanship. These issues are pathogen in Malaysia.
Differing site condition can create dispute. This issue is a pathogen from design phase. Unfortunately, even in popular standard form such as PAM, CIDB, and PWD said that contractor must ensure the site condition; sometimes they did not do that due to time or poor program. The better way to reduce this is ensure the contractor check the site, or before submit their proposal in tendering process they must investigate the site. The most popular case in Malaysia regarding to site condition is Highland Tower and Dr. Abdul Hamid Rashid. Failure in describing site condition by consultant and contractor caused a lot of cost and death.
Coordination and communication between the parties is very important. This is the role to reduce the dispute. Weekly meeting, monthly meeting, and etc can increase level of coordination. Honest behavior must be created by contracting parties. Discussion about the works must be held intensively. Good communication and coordination can avoid the dispute.
There are 3 main factors that lead to variation: poor planning and design, unforeseeable condition, and client want to change. Variation can reduce by proper design. There’s a different matter if the client want to add a works. Understanding the right regarding to variation between the parties is important. If there’s a variation, there will be a claim such as money claim or time claim.
Material shortage and workmanship is caused by poor management and planning of contractor. Thus, this pathogen can reduce if the client selecting the proper contractor.
Factors affecting construction organization (Chew & Chai, 1996): (1) lack of management commitment, (2) inconclusive interpretation of standard requirement, (3) training policies, (4) the successful organization implementation the QMS. Malaysian construction works has been adopted these factors into their organization.
The best way to mitigate pathogen in Malaysian construction industry regarding to organization is understanding leadership among the parties. Leadership is not a good leader, good management, top executive, person who can manage staff, or etc. Leadership is that the relating parties understand the goal of the project and responsible to the goal of project. Client, consultant, and contractor are a one team to achieve a common goal. They must understand each other.
The main issue of organization in Malaysian Industry contract is similar to Australia-research findings by Love et al. (2010) such as contract documentation. Contract documentation is product of all parties not just a client. The most important thing is that the parties understand the contract and leadership is involved in preparing the document contract.
Regulation of standard of organization of contractor and consultant will reduce dispute in organization perspective. I think, CIDB has develops mechanism to improve quality of organization of consultant and contractor.
Emotional intelligence (EQ) is ability, skill or, in the case of the trait EI model, a self-perceived ability to identify, assesses, and controls the emotions of oneself, of others, and of groups (Wikipedia, 2011). According to Love et al. (2010), the development of an emotionally intelligent team is able to stimulate creativity and solve problems that arise during design and construction will be able to manage conflict ore effectively and resolve issues through negotiation as a project progress.
Malaysia can adopt the EQ to reduce the dispute in construction works. Client, contractor, and consultant must have a plan to develop EQ for their manager, staff, and personnel. Recruitment of the personnel is similar to selecting the contractor. There will be matrix criteria for selection and EQ must be one of them. EQ is proper to Malaysian culture whereby the people is not individuals, spirit of partnering and understanding still exist in Malaysia.
1. Research findings by Love et al. (2010) are similar to research findings of certain experts in Malaysia. There is different perception of dispute causation between contractor and client. However both parties in Malaysia agree that dispute will take a cost which is direct cost and indirect cost.
2. Distinction in Australia and Malaysia is dispute between contractor and sub-contractor. There’s no case has been identified between parties through the litigation.
3. Payment in Malaysia is still the big issues until today. Regarding to CIMP 2006-2015. I hope CIPAA, Security Payment Act will apply as soon as possible.
4. Pathogen mitigation can be held by 3 factors: process, organization, and task. Malaysia has adaptability to use the mitigation. However, adopt EQ to the personnel of organization is not an easy but it can be done. The most important thing for mitigation is certainty of design and contract document. Nobody wants to involve in dispute but not anybody want to give the best effort to avoid the dispute in the future.
5. Registration, certification of contractor and consultant will give benefit to know basic of their basic skill and capability. Conducting Quality Management System is good for pathogen mitigation.
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