Standard D&B contracts to beef up construction contractual chain

AIAC launches Design and Build Standard Form of Contracts, said to be the 1st of such move in Asia


Malaysia has taken a major step forward to iron out some of the issues that plague the construction industry when it comes to contracts. The people involved in the industry can now make avail of a free set of documents for one portion of their work.

The Kuala Lumpur-based Asian International Arbitration Centre (AIAC) has introduced the Design and Build Standard Form of Contracts (D&B SFC), said to be the first of such set of documents in Asia.

Successful coordination of construction projects depends on efficient administration of the contractual chain, including D&B contracts entered into by the contractors and sub-contractors, AIAC said in a statement.

To address the needs of contracting parties involved in executing D&B works, it noted that the newly released document aims to complement the initial SFC set and provide smooth administration of contractual relationship.

Professional engineer and arbitrator Harbans Singh (picture) said one of the key characteristics of the document was to allocate risks relatively fairly between the parties.

“Such equitable apportionment of risk will obviate contractors and sub-contractors from adding risk premiums and allowances. This will lead to a fairer and more competitive commercial transaction between the parties. This may also minimise claims and disputes,” he told The Malaysian Reserve.

Harbans, author of the industry reference book “Harbans’ Engineering and Construction Contracts Management: Commencement & Administration (Second Edition)”, spoke at the document’s launch on July 3. The chief guest was Kuala Lumpur Construction Court Judge Datuk Lee Swee Seng.

In his presentation, Harbans said one of the key purposes of the document was to provide the basic legal framework evidencing the legal relationship between the parties like identifying the rights, obligations and duties.

The document was also meant to furnish a mechanism for regulating the conduct of the commercial relationship between the parties.

It is also intended to put in place the administrative procedures necessary to effect the legal and commercial relationship between the parties for achieving the purposes of the contract, as well as to establish the ambit of the powers and duties of the contract administrators under the contract between the parties.

“Hence, the purposes of these standard forms are multifold governing not only legalities, but also the important administrative issues to ensure that both parties are able to discharge and can actually discharge their side of the bargain in full performance,” he said.

Prepared by an expert advisory committee comprising distinguished professionals, AIAC said in the statement, the contracts reflected the best inter- national standards.

Among others, they include features such as the possibility of maintaining “Single-Point Responsibility” on the D&B contractor, the entailment of the contractor’s responsibility in all aspects of the work, employer’s responsibilities in terms of general contract administration and auditing of contractor’s works, elemental finalisation of account, and compliance with the Construction Industry Payment and Adjudication Act 2012.

The D&B SFC can be used essentially for D&B and Design and Con- struct Contracts in the building industry, it said.

It can be easily adjusted to specific needs of a project or user within or outside Malaysia, and guarantees the quality of the contract as being both legally sound and practically usable by the various players in the construction sector, it added.

It also said the D&B SFC is customisable, free and accessible at its portal.

Formerly known as Kuala Lumpur Regional Centre for Arbitration, AIAC provides institutional support as a neutral and independent venue for the conduct of domestic and international arbitration and other alternative dispute resolution proceedings.