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There are several articles by Ir Harbans Singh published by BEM. Look for the Law & Engineering sections in each publication:

http://www.bem.org.my/v3/publications03.html

PENULTIMATE CERTIFICATE

PAM 1998 Form

Penultimate Cert is issued between CPC and Final Accounts. After the conclusion of Final Accounts (which period of finalization is stated as within 6 months after CPC) the contract sum would be duly adjusted. Subsequently, a Penultimate Certificate (which is an interim certificate) would be issued to pay for the entire amount due to the Contractor leaving only the retention sum based on 5% of original contract sum. (Note: the retention sum would not be adjusted according to the revised contract sum)

Hence, the amount stated in the Penultimate Certificate would be the difference between Original Contract Sum and Final Contract Sum less the retention sum. There would be no further payment certificate issued after the Penultimate Certificate until Final Certificate is issued after CMGD.

PAM 2006 Form

If we look closely at the timeline for Final Certification under PAM06, we will notice that the purpose of Penultimate Cert is significantly changed due to a longer period of final measurement. The Final Accounts could be concluded beyond the CMGD (See Appendix: if non stated, shall be 15 months after CPC)

The purpose of Penultimate Cert under PAM06 is now meant to release monies due to NSC before Final Cert to MC. If there is no NSC there will be no Penultimate Certificate

PWD Form 203A (Rev10/83)

There is no expressed provision for a Penultimate Certificate under this form.
Since there is no specific period for finalisation of final account, there are no issues similar to the ones in PAM98 form.

While Clause 48(a) require the contractor to submit all documents within 3 months after CPC to enable the SO to prepare the Final Account, the is no specific time requirement for the SO to finalise the Final Account accept during the issuance of Final Certificate which is only due 3 months after CMGD. Hence, after CPC is issued, the main contractor is expected to finance the loss and/or expense that arises from any variation until payment is made under Final Certificate

Furthermore, Clause 28(f) provides a direct payment mechanism for Gov to make payment directly to NSC if the need arise.

Client v Contractor Part 3

Let’s take a break from the story, and look at the legal implications behind the situation.

Whenever work is done in response to request by a party, even without a written contract, the party providing the service/work is entitled to a quantum meruit claim. The expression quantum meruit basically means ‘the amount he deserves’ or ‘what the job is worth’. It is a claim for a payment for the work executed where no price has
been agreed or quantified, and usually a claim being assessed in a ‘reasonable sum’, ‘reasonable remuneration’, ‘fair market rates’, ‘fair commercial rates’ or on similar terms.

Read more on quantum meruit at: http://www.mbam.org.my/mbam/images/@ENTRUSTY%20-%20QuantumMeruit%20(100-103).pdf

In Adam and Joe’s situation, Joe must substatiate his claim by proving the total costs incurred and payments made by him in carrying out the works.

Another example is where a plumber has been called in by a house owner for an emergency repair and no price was agreed in advance. Upon completion, the plumber cannot simply take advantage of the situation and drop a bomb on the house owner. He is only entitled to a reasonable sum for such service, nothing more and nothing less.

Should Adam and Joe decided to sign a proper agreement right from the outset; they would have had a proper CONTRACT SUM which was agreed by both parties. In general, a contract sum would overrule quantum meruit claims. A contract sum can be below or above the fair market price and both parties has to honour it!

to be continued...

Client v Contractor Part 2

Within a week, Joe came in with his workers and started on the renovation work. When the work was well in progress, Joe sat down with Adam to discuss payment. Joe asked for an RM10k progress payment to pay for materials and his workers. Satisfied with the progress, Adam wrote a check immediately!

2 weeks later, when the plumbing and wiring were almost completed, the works came to a complete stop. There had been no workers at site for 3 days. Adam went to see Joe to seek clarification. He found out that Joe had terminated his Indonesian sub-contractors and was facing some financial problem. He had spent RM25k so far and material prices were rising partly due to shortage of cement and sand in the market. He foresaw that it would cost more than RM55k to complete the whole renovation.

Adam started to wonder whether he had been shortchanged. He didn’t have a clear idea of what the final cost would be but he was very clear on his limited budget.

to be continued..

Client v Contractor Part 1

Adam just moved in to a new neighborhood. He met Joe, his new neighbor and found out that Joe is a Class F contractor. He also found out that they came from the same hometown and the bonding started instantly. One day over a cup of tea he mentioned to Joe his intention to renovate his kitchen and that he had a few quotations ranging from 25k to 50k. Joe offered his service and suggested that he will give better value for money! As he was trying to appear not being too calculative to his new friend, Adam accepted the offer, and no definite cost or time limit was mentioned. He was comfortable enough to trust that his good neighbor will do it within reasonable cost and reasonable time. At the back of his mind, Adam even believed that Joe will do the job for minimal profit!

to be continued..

Independent Certifier in PWD contract

The PWD contract was drafted with the intention to have an independent certifier intact. A typical PWD contract would mention the client as the Government of Malaysia. The officers empowered to execute the contract should be the person named in the Government Contract Act 1949 i.e. Works Minister, Director of Works etc.

The SO however, may or may not be another officer with an official designation in the relevant department who must act fairly and impartially in performing his duties.

In Perini Corporation v Commonwealth of Australia (1969) it was held that the Director of Works, who was the certifier under the contract, in making his decision was entitled to consider departmental policy but would be acting wrongfully if he were to consider himself as controlled by departmental policy.It was implied that the Commonwealth should not interfere with the Director of Works' duty as a certifier.

After a Certificate of Practical Completion (CPC) is issued, can an Architect issue an Interim Certificate?(LAM Paper 2 Q2a)

CPC is a significant milestone as well as a moot point in construction contracts. PAM 06 allows CPC to be issued with minor outstanding works and/or defects (see clause 15.1(a)) with the following conditions:

1. Employer can have full use of the works for their intended purposes
2. The outstanding works are minor in nature
3. Contractor has given to the Architect written undertaking to complete/make good such works.

With that in mind, an interim certificate could be issued after CPC at any time before the final certificate, upon completion of these outstanding works/defects.

Another reason for issuance of interim certificate after CPC would be to revise or correct any previous payment certificate (see clause 30.3)

To further clarify the matter clause 30.1 expressly states:

“ ..After issuance of CPC, interim certificates shall be issued as and when further amounts are ascertained by the Architect and QS as payable to the Contractor by the Employer”