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Construction
Construction contract contract
administration in Malaysia using administration
DFD: a conceptual model
1449
Heap Yih Chong and Balakrishnan Balamuralithara
Faculty of Engineering and Science, Universiti Tunku Abdul Rahman, Received 9 August 2010
Kuala Lumpur, Malaysia, and Revised 21 January 2011
Accepted 21 January 2011
Siong Choy Chong
Asian Institute of Finance, Kuala Lumpur, Malaysia
Abstract
Purpose – The purpose of this paper is to propose a conceptual model which is aimed at assisting
end-users, i.e. construction practitioners who are without a proper legal background for effective
administration of construction contracts, to enable them to make correct interpretations and decisions
in dealing with vast amount of legal information.
Design/methodology/approach – This study proposes the application of data warehouse
technology in the contract administration process of the construction industry. Upon identification
of a comprehensive list of problems associated with construction contracts based on the feedback from
12 reputed experts in the construction industry, a conceptual model is developed using a data flow
diagram.
Findings – The results show that data warehouse technology is feasible and practical to the
construction practitioners in the contract administration process.
Research limitations/implications – This research focuses only on the development of a
conceptual model and thus the practicability aspect of the model is a major concern. As such, the
resulting practical implications are limited and are constrained only to the construction industry in
Malaysia, raising the question of generalizability of the proposed model, as well as across different
industries and countries.
Practical implications – It is posited that the proposed conceptual model, when implemented,
would enable construction practitioners to administer construction contracts with better clarity
and accuracy, so that interpretation errors and disputes can be mitigated. This will facilitate the
development of harmonious working relationships.
Originality/value – The application of data warehouse technology in contract administration is
rather new in the construction industry. The conceptual model thus offers a more effective and proactive
approach in construction contract administration towards dispute resolution and/or prevention.
Keywords Malaysia, Construction industry, Contracts, Contract law, Decision support systems,
Contract administration, Data warehouse technology, Data flow diagram, Conceptual model
Paper type Conceptual paper
Introduction
Construction stakeholders always use a standard form of contract to regulate their
contractual obligations and expectations during the contract administration process. It is Industrial Management & Data
during this process that a vast amount of contract provisions are referred to. However, Systems
Vol. 111 No. 9, 2011
contractual conflicts or disputes seem to be inevitable in the construction industry pp. 1449-1464
especially on issues concerning interpretation and understanding of construction q Emerald Group Publishing Limited
0263-5577
contracts (Broome and Hayes, 1997; Candlin et al., 2002). This is not difficult DOI 10.1108/02635571111182782
IMDS to understand as the construction industry is a dispute-prone industry due to its
111,9 fragmented and adversarial nature (Cheung and Yiu, 2007; Chong and Rosli, 2009).
In general, interpretation error and misunderstanding of construction contracts can be
traced to the illegibility of contract clauses (Broome and Hayes, 1997; Cutts, 2004; Styllis,
2005) and legalese or technical legal terms or jargons (Candlin et al., 2002; Cutts, 2004).
More often than not, these issues result in disagreements between the contracting parties
1450 on their contractual rights and responsibilities.
A considerable number of prior studies have explored the issues associated with
interpreting and/or understanding construction contracts and their impacts (Martin,
1993; Thomas et al., 1994; Broome and Hayes, 1997; Rameezdeen and Rajapakse, 2007).
Other empirical studies have described the use of language and characteristics in
legal documents (Henkin, 1988; Hill, 2001; Feinmann, 2003; Cutts, 2004). These studies
reported that the construction contractors often encounter difficulties in understanding
contract documents due to their non-legal background and the inherent legal jargons
and concluded that contractors should be well versed in the interpretation clauses
stated in the contracts. Notwithstanding the considerable number of research conducted,
means to resolve these issues have not been effectively and adequately provided. This is
evident from the conflicts reported in a Malaysian major daily about the occurrences of
collapsed ceilings and burst pipes either at newly built or existing government buildings
(New Straits Times, 2007).
Accordingly, the contractors are required to fulfill the obligations of a standard
contract form issued by the Malaysian Public Works Department (PWD) – the PWD
203 A (Revised 10/83) Form, which is the most popular and widely used form by the
Malaysian public sector agencies. The form was formulated in 1983 based on the
English 1931 RIBA standard form of contract which is also modeled after by many
Commonwealth countries. The form had been in use in Malaysia for more than 20 years
(Lim, 2004) until the latest revision (PWD – 203 A (Rev. 2007)) was launched in 2008. The
revised version, however, is still considered new and fresh to the construction industry
and many contractors are still familiar with the former version. Owing to its technicality
and legalese nature, many contractors misinterpreted the conditions of the contract and
did not understand the legal obligations outlined in the contract. As such, they failed to
appreciate the genuine contractual rights and obligations in a construction project which
have resulted in the untoward incidents occurred at the government buildings.
All these point to the imperative need of a detailed study on the lack of understanding,
particularly on the technical aspect of the language structure within the standard
contract form so as to serve as a basis to overcome the issues and challenges associated
with the form. In addition, it may also contribute to forms of similar construct used by
the Commonwealth countries. In so doing, this research aims to propose data warehouse
technology as an important and possibly practical measure in mitigating conflicts and
disputes arising from construction contracts. The introduction of such an approach
is considered new to the construction industry. Since data warehouse technology is an
analytical database that efficiently collects, organizes, and stores all relevant data in
support of management decision (Chau et al., 2002; Rujirayanyong and Shi, 2006), this
method is appropriate to be used for decision making especially when dealing with vast
amount of legal information in the construction contracts. While construction contracts
are considered as textual data in the data warehouse, this data are yet to be introduced
for business-decision making. This is a great challenge in research because the textual
data from construction contracts are not repetitive and is unstructured (Ho et al., 2009; Construction
Inmon and Valente, 2010). Therefore, a generic approach needs to be considered when contract
developing the data warehouse modeling (DWM) towards effective administration of
construction contracts. administration
The data flow diagram (DFD) method was selected to illuminate the process flow of
DWM in this study as the method focuses on object perspective (Luo and Tung, 1999)
with the primary reason to deliver a more clarified and accurate means of construction 1451
contract administration. Generic source of information can be sought in dealing with
the contractual issues instead of concentrating on a case-by-case basis. This method
also facilitates the process of retrieving, updating, and exchanging of information.
It thus provides useful information in better equipping the construction practitioners
to make more informed decisions to the contractual issues in contract administration
(Liu et al., 2007). In addition, it also assists contract drafters and experts to review and
clarify the clauses of the contract form in a way understandable to the parties. In other
words, it encourages a proactive approach in contract administration.
This paper is organized as follows. The next section reviews literature pertaining to
the construction contracts, followed by the description of data warehouse. The need for
data warehouse in contract administration is discussed next before the DFD method is
explained. As a result, a conceptual model is presented. The DWM and its features are
proposed and the results are discussed before concluding the paper.
Taking the above cues, this research incorporates the Plain English principles into the
DWM as part of the contract administration process in the construction industry.
Entity It was a data source or sink for the standard form of contract. The data
flow (contractual issue) moved out from the entity
DISPUTES
Data flow The arrow represented the information flow or movement either from
the process, entity or data store to another state. With a rule that the
Contractual issue flow must involve a process
Data store The data store was the data storage. It was retrieved to obtain the
necessary information regarding the project characteristics
D1 Project database Table I.
Explanation of DFD
elements and notations
IMDS specifically for the construction industry. Their feedback was taken into consideration
111,9 and this has contributed to the development of the final model.
The context diagram is the highest level of DFD which reveals an external picture
and overall function of an information system. The next level is Level-0 DFD which is
made up of a number of processes from the main activity in the diagram. This is followed
by Level-1 DFD, which decomposes from a parent process in the Level-0 DFD. The
1454 splitting of the diagrams presents better visualization of the model as shown Figure 1.
Context Diagram
Level-0 DFD
1.0
2.0
3.0
Figure 1.
Splitting of DFD diagrams
DWM Development
Construction
contract
administration
Sub-Model on the contents Sub-Model on the features
1455
• Project characteristics - Project characteristics
• Breakdown of contractual issues - Keywords searching
• Contract provisions - Breakdown of sub-categories
• Leading court cases - Updating or storing (if any)
• Involvement of local experts - Exchange of information (forum
for comments)
Figure 2.
DWM development for
contract administration
The experts identified in this study are busy people which made it impossible for
them to work together in the same physical location (Mitchell and Larson, 1987). The
interaction takes place between the experts and the researchers who act as facilitators.
Taking the cue from Brooks (1979), the Delphi technique has eight steps which begin
with the identification of panel of experts. In this regards, the purposive sampling
technique, particularly the judgment sampling, was employed. This non-probability
sampling technique is adopted due to the fact that the experts are in the best position
IMDS to provide the information required based on the criteria set by the researchers
111,9 (Sekaran and Bougie, 2010). Specifically, the experts were chosen because they hold a
significant position in their respective professional body. Because of their reputations
in the construction industry, they have frequently appeared in local publications
(i.e. magazines and daily newspapers) where their expert opinions are sought. More
importantly, they have had substantial experience in dealing with the PWD 203 A form.
1456 The second step involved determining the willingness of the individuals to serve on
the panel. All the experts identified were contacted and explained the nature of this
study. The researchers were pleased that all the 12 experts identified earlier had
consented to the study. Appointments were made to meet the experts (step 3) where they
were presented with the sub-models as well as the issues involved in different stages of
the construction contract (see Table II for details). Their concerns and feedback were
analyzed (step 4), compiled and incorporated in the resulting sub-models (Figure 2) and
the issues highlighted in Table II. The compiled information were then sent to each of the
experts by e-mails for review (step 5) in which their responses were again analyzed in an
aggregate form (step 6). Steps 7 and 8 were not directly applicable to this study as the
experts who evaluated the compiled information based on their positions unanimously
agreed to the information presented. As a matter of fact, the experts commended
on the extent of comprehensiveness of the sub-models developed and the issues in the
Contents of DWM
The context diagram of the first sub-model is shown in Figure 3. This level presents an 1457
overall picture of the process flow model and briefly illustrates how the clarified and
organized references or guidelines are produced. The activity numbering “0” is the only
process involved in the context diagram, i.e. mitigating or preventing contractual
issues systematically and proactively.
Subsequently, the Level-0 DFD is a child diagram from the context diagram as
shown in Figure 4. This model presents the most comprehensive data where it provides
detailed information on the process involved.
The first activity is to classify the project characteristics and contractual issues.
There are two types of information which flow into the project database. The first stores
the new or additional data from a new case, while the second is a database that contains
previous project particulars. This project database (D1) is vital as different project
characteristics would have different effects and implications on the contractual issues.
The project particulars could be classified as:
.
Type of project (building construction, road construction, etc.).
.
Contract or procurement system (lump sum contracts, cost reimbursement, etc.).
.
Procurement method (traditional, design and build, etc.).
. Standard form of contract (international or local contract form, e.g. joints
contract tribunal, new engineering contract, etc.).
The potential contractual issues can be categorised into three main stages as
shown in Table II. As such, the classified project particulars will be checked against
the three work stages, i.e. pre-contract stage, construction or commencement of work
stage and post-commencement stage to identify all issues related to the dispute.
Cross-reference may be needed between the three work stages in order to search for all
of the related issues. These work stages are derived from literature review and
organized in such a way to clarify the contractual activities the contracting parties are
involved in.
The second activity is to identify the relevant contract clauses related to the issue at
hand. The relevant contract provisions are identified from the contract form (D2). The
targeted issue is classified according to the project particulars under the first activity
of selecting the contract form. A reference will be made to the main clause and its
0
Mitigate/ Clarified
DISPUTES Contractual issue prevent references/guidelines
contractual END-USERS
issues Figure 3.
systematically Context diagram of
and contents of DWM
proactively
IMDS
111,9
DISPUTES
Contractual issue
New cases (if any)
1.0
1458
Classify the Feedback/data refinement (if any)
D1 Project database project
characteristics
Previous cases and
contractual
issue
Targeted issue
2.0
D2 Standard Form
Identify the Extra info (if any)
Contract clauses relevant
contract
clauses
Contract provisions
3.0
D3 Literature and court cases
Investigate
Background data and and organize
legal principles the provisions
in detail
Comprehensive details
4.0
D4 Plain English guidelines
Clarify the
content for
Clarity aspects the ease of
understanding
Drafted references/guidelines
5.0
Verify and
comment the
references by
mixture of
experts for
the consensus
Clarified references/guidelines
Figure 4. END-USERS
Level-0 DFD of contents
of DWM
sub-clauses of the contract relevant to the issue in addition to other related clauses Construction
in order to gain a wider view on the expressed contractual obligations and expectations. contract
All the related clauses will be combined and cross-referred. The principle of read and
interpret as a whole is applied to produce the contract provisions regarding the targeted administration
issue.
The third activity is related to enhancing the information on the contract provisions.
It is important to consider some background data and legal principles in order to achieve 1459
a comprehensive reference and details related to the contract provisions. In achieving
this, the latest leading court cases and literatures (D3) are the main sources for this
exercise. This is because court cases provide the common law principles and legal
positions for a particular issue, while literature sources help in organizing and
recognizing the characteristics of the issue from different perspectives. It is possible that
the content of each clause may be reverted to the second process if there is extra
information generated after investigating the literature and court cases.
The fourth activity involves the comprehensive details that must be clarified due to
the weak understanding and poor interpretation of the issues in the construction
industry. The use of Plain English (D4) of the clarity aspects is to be adopted to provide
a clear meaning of its content so that they are simple and easy to understand. The list
of the Plain English guidelines is shown in Table III. After the process of clarification,
draft references or guidelines will be produced.
The activity numbering 5.0 is the last process of the conceptual model. This process
is considered the most important because it is the centre of the quality system which
provides useful information and references to end-users. Therefore, Delphi method
approach is incorporated under this process to denote a consensus derived at from a
mixture of experts. Construction industry is unique and adversarial in nature and this
consensus is vital especially when dealing with contractual conflicts or disputes. After
the process of verification and commentary, the clarified references or guidelines will
serve as a useful reference to the construction practitioners for decision making. The
verification process by the experts does not confined only to the language structure but
also to the meaning and certain legal intents of the contents.
1 Reduce the unnecessary words to keep it as short as possible if more than 20 words in a sentence
2 Put accurate punctuation in a “long” sentence
3 Shorten the sentence for ease of reading to average 15-20 words
4 Use positive style rather than negative style
5 Use illustrative examples or flow chart in treating procedures as processes
6 Avoid too many cross-references between clauses
7 Use verbs instead of noun phrases
8 Use the active voice instead of passive voice
9 Use everyday words and grammar and only include legal terms where it has to
10 Use vertical list to break up complicated text Table III.
11 Eliminate the repetition or redundancy of words Plain English usage
Use language of obligation correctly: avoid using “shall”, but still using it to express party’s and guidelines
12 obligation in standard form
IMDS Features of DWM and a theoretical working example
111,9 Figure 5 shows the main process in the development of DWM features. It serves to search
and refer to the clarified and organized references or guidelines by the construction
practitioners.
Level-0 DFD is shown in Figure 6. A contractual issue is extracted from the
construction disputes. The issue will be classified according to the project particulars.
1460 Project database (D1) is referred to in order to provide a list of choices for selection. The
choices are listed from the four main elements of the project, i.e. project type, contract
procurement system, procurement method, and standard form of contract. Then, the
specified particulars of the project will be sorted out.
The next activity is to target a main issue from the contractual issues database (D2).
All the contractual issues are stored in the three work stages of the database. The issue
can be retrieved by searching using keywords or by selecting the concerned issue from
the breakdown of issues. A targeted issue is then obtained. Subsequently, the targeted
issue will be further examined based on the characteristics of the issue to investigate
and seek the root cause of the main issue.
The last process is to select the references or guidelines for the root cause of the
dispute. The data warehouse database is set up to store all the clarified references or
guidelines elicited from the experts. The database performs two functions. Primarily,
it provides the consensus data by the experts based on the issue’s root causes. The next
function is to keep all the comments or discussion by the construction practitioners
regarding the particular issue or its sub-topics. It will serve as a forum of discussion for
the practitioners in exchanging and sharing information.
Discussion
This study proposes two sub-models using the DFD which to date is non-existent. They
were identified, verified and modified though a series of discussions and interviews with
12 reputed experts. The first sub-model describes how to build up the content of the
DWM, while the second explains how the clarified references or guidelines are to
be referred to by the construction practitioners through a system. These sub-models are
discussed separately in order to illuminate a better understanding on the DWM.
The first sub-model requires a detailed study to be carried out towards the standard
form applied in the construction contract administration. Next, it clarifies the language
structure within the Plain English concept. This concept is vital towards facilitating
understanding of the contents since the practitioners are not from the legal background.
After that, the clarified information is verified by the experts or experienced staff within
the construction organization. As such, it offers significant contribution of the data
warehouse towards information retrieval through keyword searching and breakdown of
issues faced in construction administration.
0
Sorted
Contractual issue Search and references/guidelines
DISPUTES refer to the END-USERS
Figure 5. clarified and
Context diagram organized Comments/discussion
references/
of features of DWM
guidelines
Construction
DISPUTES
contract
Contractual issue administration
1.0
Specified particulars
2.0
3.0
Sort and
examine for
the sub-
topics/root
cause from
the issue
Breakdown of the issue
4.0
D3 eDR database
Select the
reference/
Consensus data by the experts guidelines
Clarified references/guidelines
Figure 6.
Comments/discussion Level-0 DFD
END-USERS of features of DWM
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Corresponding author
Siong Choy Chong can be contacted at: eddy.chong@aif.org.my
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