QS & Construction Procurement has a new look

Salam and dear all, This blog has a new look (thanks to Blogger and others). I hope all will enjoy the new look Wassalam.

10th Malaysia Plan (2011-2015)

Salam and dear all,

1. The Malaysian Prime Minister yesterday, 10^th June 2010, tabled in Parliament the 10^th Malaysia.
2. The 10^th Plan, covering the period between 2011 and 2015, aims to transform Malaysia towards becoming a high-income and high productivity economy.
3. According to the Plan the per capita income is targeted to increase to RM 38,845 in 2015 (RM 26,420 in 2010) on the basis that real GDP grows at a rate of 6% per annum. Unemployment rate is expected to be at 3.1% in 2015.
4. A sum of RM 230 billion has been allocated for development under the 10^th Plan.
5. The breakdown (%) of the RM 230 billion is as follows:
   1. General administration 5%,
   2. Security 10%,
   3. Social 30%,
   4. Economy 55%.
6. There are 5 strategic trusts namely;
   1. Designing government philosophy and approach to transform Malaysia through the National Key Results Areas,
   2. Creating a conducive environment for unleashing economic growth,
   3. Moving towards inclusive socio-economic development,
   4. Developing and retaining a 1^st World talent base, and
   5. Building an environment that enhances quality of life.
7. To generate high income for Malaysia, the government has identified 12 National Key Economic Areas (NKEAs) namely oil and gas, palm oil, financial services, wholesale and retail, tourism, ICT, education services, electrical and electronic, business services, private healthcare, agriculture and Greater Kuala Lumpur.
8. Read the 10^th Malaysia Plan documents at: http://www.pmo.gov.my/dokumenattached/RMK/RMK10_Eds.pdf
9. Read the Prime Minister's speech on the 10^th Malaysia Plan at: http://www.pmo.gov.my/dokumenattached/speech/files/RMK10_Speech.pdf

Wassalam

References:

• 10^th Malaysia Plan 2011-2015
• Prime Minister's speech on the 10^th Malaysia Plan
• StarSpecial Malaysia Plan 2011-2015, The Star, Friday 11^th June 2010.

Partnering in Construction Part 2: Construction Partnering

Salam and dear all,

1. The following notes (abridged) are taken from Khairuddin, 2002, Construction procurement in Malaysia: Processes and systems, constraints and strategies, IIUM, Chap. 10, pp155-167.
2. The concept of 'Construction Partnering' for the PWD was developed in 1999-2000 by a Special Committee in the PWD, headed by Khairuddin (when Khairuddin was serving the PWD).

   Partnering

3. Partnering is a concept based on co-operative efforts for mutual benefits.
4. Construction Partnering is neither a form of construction procurement system nor a form of project management technique or tool.
5. Construction Partnering is more of a management approach that focuses on promoting and creating positive working relationship amongst the key players of the processes of construction procurement. It encourages teamwork and avoids dispute, enhances trust and shares goal.

   Why partnering?

6. Many past disputes and problems associated with construction procurement were attributed to barriers that exist between clients and the constructors. This is because they represent 2 distinct organizations with separate aims and objectives and each makes decisions based on their own goals and objectives.
7. In partnering, efforts are made to design for each project a problem-finding and problem-solving team comprising of members from both parties and recognizes and honours the objectives of all parties and that of the project.
8. Its key purpose is to align and unite the parties – client and constructor – with a shared goal of completing the project in a cost effective and timely manner.

   Benefits of partnering

9. The benefits may include: 1. Greater certainty of the outcome in cost and time, 2. Reduced wastage, 3. Improved communications amongst the parties, 4. Improving safety, 5. Reduced costs associated with disputes, and 6. Potential for continuous improvement.
10. The application of partnering during the construction of the Kuala Lumpur International Airport (KLIA) is said to be among the key factors that enabled the mega airport to be completed in record time.

    Elements of partnering

11. The 3 key elements of partnering are: 1. Mutual objectives (to be agreed and committed at the outset of the project), 2. Problem resolution, and 3. Continuous improvement.
12. Provisions for partnering must be incorporated into tender advertisements and into the tender and contract documents (if partnering is to be made contractual).
13. The provisions may include: 1. The intention of the parties to partner, 2. Workshops and a 'partnering charter', 3. Monitoring performance, 4. Continuous improvement, 5. Resolution of disputes, 6. Good communication, and 7. Definition of roles of key personnel in the partnering arrangement – Facilitator, Client and Contractor's representatives.
14. One of the key elements in "Construction Partnering" that was developed by the PWD then was to encourage and facilitate the contractor to propose innovation.
15. If the contractor's proposal is accepted by the government, the contractor benefits by retaining savings in costs (one-half) and other non-monetary rewards (such as earlier completion date if there is saving in time). The government benefits from value added to the work, reduced costs and earlier date of occupation.
16. Consequently, the concept calls for a partnering contractor to have special characteristics including 1. Commitment, 2. Vision (continuous improvement, dispute avoidance, etc), 3. Quality conscious, 4. Innovative and active in R & D, 5. Experienced and possess the necessary financial and technical capabilities, and 6. No or minimal record on confrontation.

    Partnering and VECP

17. In my earlier postings I said that VECP (see The Star, 8^th June 2010, pN25) and Partnering are similar. The key similarities relate to win-win situation for the government and the contractor, sharing of the money saved and that they both require contractors with the necessary qualifications (see items no 14-16 above).

    Conclusion

18. This posting pointed out the similarities between VECP and Partnering.
19. Notwithstanding whatever is the initiative called or labeled, VECP or Partnering, the effort by the Ministry of Works to reduce costs in the procurement of public sector infrastructure and facilities is commendable.
20. The aim of this blogger in publishing this and the earlier postings is simply to highlight that a similar effort has been initiated and put in place in 2000, and that it is worth a re-visit.

    Records of workshop and seminars on Partnering held by the PWD include:

    Seminar on the Concept of Partnering in the Construction Industry, JKR Kuala Lumpur, 7^th September 1999.

    Workshop, Procurement via Partnering for the Construction Industry, Melaka, 14^th-15^th October 1999.

    Seminar on the Implementation of the Concept of Partnering in JKR, Penang, 21^st March 2000.

    Seminar, Introducing the Concept of Partnering in the Construction Industry with Specific Reference to Project Based Partnering in JKR, Putrajaya, 22^nd April 2000.

Wassalam.

Partnering in Construction Part 1: An overview on construction procurement

Salam and dear all,

1. In my last posting I commented on the Ministry of Works' proposal towards achieving value for money via a technique known as "value engineering change proposal." I also mentioned that in 2000 a similar technique but labeled as "construction partnering" was developed and put in place in the PWD (JKR).
2. The purpose of this posting and the next is to describe (briefly) what "construction partnering" is about.
3. Firstly, it is best to acknowledge that "construction partnering" is not a system of procurement. Consequently, it is appropriate to situate "construction partnering" within the overall concept of construction procurement. This posting therefore will provide an overview on construction procurement.

   Construction procurement

4. According to Khairuddin (Construction procurement in Malaysia: processes and systems, constraints and strategies, 2002, International Islamic University Malaysia) the term procurement, in the context of construction, refers to the processes and systems involved in acquiring constructed facilities. Consequently, construction procurement has 2 distinct body of knowledge i.e. the processes of procurement, and the systems of procurement.
5. Processes of procurement refer to the 7 main elements that represent the steps that are to be carried out when procuring constructed facilities. The 7 main elements are (in no particular order or sequence): 1. Initiation or promotion of a project, 2. Funding, 3. Design (3 sub-categories: schematic design, detailed design and specialist design), 4. Statutory approval, 5. Tendering, 6. Construction (2 sub-categories: management and physical construction on the site), and 7. Risk allocation.
6. Systems of procurement refers to how best the 7 element of the processes of procurement are to be planned and managed and it relates to how risks in procurement are to be allocated amongst the parties involved.
7. The key procurement risks are: time, price, design, project finance, effectiveness of the project in operation, and quality.
8. The key parties involved are the client, funder (if different from the client), consultants or designers, and the constructors (or contractor and sub-contractors).
9. There are 3 dominant systems of procurement in Malaysia: 1. Traditional or design-bid-build system, 2. Design-build and Turnkey system, and 3. Management approaches procurement systems (2 sub-systems: management contracting and construction management).
10. In a survey by Khairuddin (2002) the traditional or design-bid-build system of procurement is the most dominant system in use in Malaysia.
11. In terms of time and cost, Hashim (1996, in Khairuddin, 2002) reported that the management contracting procurement system is most efficient (least time and cost overruns).
12. Construction partnering could be used in any of the above systems of procurement.
13. In my next posting, I will provide an overview of "construction partnering".

Wassalam.

P/s: To achieve brevity it is not possible to provide further description on the subject of construction procurement. For detailed understanding please refer to the many publications on construction procurement including Khairuddin, 2002, Construction procurement in Malaysia: processes and systems, constraints and strategies, International Islamic University Malaysia.

JKR to Implement VECP... what happens to Partnering?

Salam and dear all,

1. The Star (Chan Li Leen, Tuesday 8th June 2010, pg N25) reported that the Works Ministry is 'looking at implementing a "value engineering change proposal (VECP)" to enable greater savings when carrying out government projects.'
2. According to the Works Minister 'the VECP was a written mechanism in the contract document that allows contractors to suggest alternatives or more innovative methods to carry out projects ... without sacrificing safety and functionality...'
3. The Minister further said VECP would be a win-win situation for the government and the contractor and that a mechanism is currently being designed to enable the contractor to share a portion of the money saved (arising from the alternatives or innovative methods proposed by the contractor and accepted by the government).
4. The article in full is available at http://thestar.com.my/news/story.asp?file=/2010/6/8/nation/6423474&sec=nation (copy paste).
5. The above report is very interesting in the sense that the government is persistent in looking at ways to achieve 'value for money' in the procurement of public sector projects.
6. However, I would like to point out that a similar government-contractor collaborative and win-win approach was initiated and promoted by JKR in 2000.
7. The approach otherwise known as "Construction Partnering" was formally announced to the Malaysian Construction Industry on 22nd April 2000 in Putrajaya via a seminar entitled Introducing the Concept of Partnering in the Construction Industry with specific reference to project based partnering in JKR. The seminar was officiated by the then Deputy Prime Minister (now Tun Abdullah Ahmad Badawi, former Prime Minister).
8. Prior to the seminar in Putrajaya several workshops and seminars including those held in Kuala Lumpur, Penang and Melaka were held to develop the concept and train JKR officers.
9. The continuous effort by JKR to better manage construction costs and contracts augur well for the construction industry especially for the procurement of public sector projects.
10. In addition, aspects including management of cost, contract administration, value engineering and management are matters that are closely related to the quantity surveying profession, and that these aspects are among the core courses (elective in the case of value engineering and management) in a typical undergraduate program in quantity surveying.
11. Consequently, I would like to see quantity surveyors, especially those in JKR, to take leadership in effort towards achieving greater 'value for money' in public sector procurement.
12. Insyaallah, I will elaborate on the JKR's concept of Partnering that was introduced in 2000 in my next posting.

Wassalam.