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DEVELOP A RATING SYSTEM AND TOOL TO EVALUATE CONTRACTOR’S PERFORMANCE

1.0 Introduction

The construction industry constitutes an important element of the Malaysian economy. Although it accounts for only 2.7% of the gross domestic product (GDP) in 2006, the industry is critical to national wealth creation as it acts as a catalyst for, and has multiplier effects to the economy and also enables other industries namely manufacturing, professional services, financial services, education and others. Recent years’ decline in the performance of the Malaysian construction industry has resulted in the urgent need for the Malaysian construction industry to chart its direction towards strengthening its foundations to face current and future challenges. On 24 June 2003, the Construction Industry Development Board (CIDB) and the Building

Industry President Council (BIPC) jointly organized the Presidents and Chief Executive Officers (CEOs) Roundtable on “Establishing priorities to improve the Malaysian construction industry for the future.” The Roundtable was participated by CEOs of major construction and property development companies, presidents of professional institutes and building industry associations as well as officers from various Government departments. The Roundtable identified and recommended measures to improve the Malaysian construction industry. CIDB was then entrusted with the role of coordinating the various measures recommended and establishing the 10 Working Groups (WGs) which included:

a. Construction Industry Master Plan (CIMP).
b. Technology, Knowledge and, Research and Development (R&D)
c. Local and Foreign Projects
d. Human Resources
e. Productivity and Quality
f. Safety and Health
g. Industrialised Building Systems (IBS)
h. Building Materials
i. Payment
j. Finance
Each WG was given the terms of reference to identify issues relating to their respective areas and to propose recommendations and action plans to overcome these challenges. CIDB and BIPC then consolidated the proposals of the 10 WGs and produced the first draft of the consolidated master plan, the ‘Malaysian CIMP Framework 2005 - 2015’.

Subsequently, CIDB further enhanced the document into a 10-year Master Plan for the construction industry that spans from 2006 to 2015. The CIMP is a comprehensive plan charting the strategic position and future direction of the Malaysian construction industry over the next 10 years. It is intended to provide industry stakeholders with a clear direction of the Malaysian construction industry through its clearly defined vision, mission, critical success factors, strategic thrusts, recommendations and action plans.

The CIMP is also intended to ensure that the construction industry is well positioned to support the nation’s overall economic growth and in meeting various challenges, such as the need to enhance productivity and quality along the entire construction industry value chain.

All this action shows that government and private agencies takes seriously about the problem rises in construction industry especially in dealing with our local contractor’s performance which will benefit most of the players indirectly.

2.0 Background

The construction industry enables the growth of other industries through its role as a fundamental building block of the nation’s socio-economic development. Educational institutions, Government offices, tourist attractions, transportation infrastructure, housing, commercial property including all the essential elements of a healthy, functioning economy, need to be built and maintained by the construction industry.

In order to continue leveraging on domestic opportunities and competing in the global marketplace, Malaysian construction industry players especially the contractors need to address a number of key strategic and operational challenges. There is a need to take a holistic approach in reviewing the factors impacting the contractor’s performance. The evaluation of the contractor’s performance is crucial to the success of a consulting assignment especially when today’s construction projects are becoming more sophisticated, large scale and risky. Improvements need to be implemented by all parties along the entire construction industry value chain for lasting transformation to occur. Therefore, in addition to contractors, clients, approving authorities, consultants, and other stakeholders must be involved in this transformation

There are many evaluation criteria might be taken into consideration while evaluating the performance level of the contractor. Among these criteria are:

a. Productivity
b. Quality
c. Human Resources
d. Knowledge
e. Innovation
f. Environment-Friendly Practices
g. Industry Sustainability
h. Professionalism

It was a big hope if this research will benefit others especially to the government and private sector, contractors, consultants and other organization that involve in the construction industry.

3.0 Problem statement

Construction projects are marked for their size, complexity in design, and speed of execution. They call for large amount of resources to be used, which include materials, manpower, equipment and finance. Most of the projects work under conditions of scarcity of resources, nearly all suffers from uncertainty in their supply. Delay in completion of the works results in increasing costs, and there is an intricate time-cost relationship for every project. The need for proper planning and management of construction can never be over-emphasized.

The increased demand for faster design and construction, and increased uncertainties and complexity in design and build has made projects more difficult to handle, and may generate more errors and changes. Unanticipated errors and changes in construction projects often cause delays in the schedule, cost overruns and affect project performance.


In recent times, there have been increasing incidents of defective work in Malaysia and elsewhere due shoddy workmanship, cheating and sometimes, design errors. The consequences could be catastrophic and fatal as in collapsing buildings, and sometimes less dramatic, but no less catastrophic from a financial point of view.



Contracting is a very difficult business, yet it is easy to register as a contractor. To register as a Class F contractor, one has to show that one has RM10,000. they does not even require a pass in the Lower certificate of Education. But it will take at least 10 years to learn how to overcome all the inherent difficulties and become competitive and efficient.



Studies have shown that there are more failures and bankruptcies in contracting than any other business and also almost all construction projects are not completed within the originally scheduled time. The delay will cost the contractor more and that is why we can often see incomplete buildings and abandoned projects which had been undertaken by inefficient contractors.

On account of the sophisticated, dynamic and uncertain nature of construction projects, many vital decisions have to be reached by the clients which may be government and private based on the recommendation of the contractors they appoint. After the completion, the problem then might be transferred to the buyer or the owner of the project. The never-ending problem will continually haunt the owner until the end of the building life span.

On the other matter, during the construction process, some clients do not care about the contractor performance and its effects. In the same time, the consultant can not see some work mistakes or give the contractor the right instruction for his work. As a result, the scope and quality of project will be badly affected. On the work processes, contractor performance should be watched out and supervise by some of the party who is responsible like site agent, client and etc in addition to the contractor himself. If they ignore evaluation of contractor performance, all the parties involved may face serious problems in most cases.

In order to properly manage projects, accurate information is needed to diagnose performance. Accurate information relies on accurate measurements or control system, especially for larger and complex projects. Performance is reflected by measurements upon which corrective action is suggested taken. Accurate measurements help ensure successful projects. Accurate measurements should provide not only what they measure but also how well they differentiate performance. Poor contractor performance is a major cause of construction process inefficiency, leading directly to delays, rework and variations and contributing to increases in project time and cost, for both owner and contractors alike.

4.0 Aim / Objectives

a. To provide a procurement actions to assess how a contractor has performed in the past and likely to perform in the future.
b. To identify the main criteria used to evaluate the contractor performance in Malaysian’s construction project
c. To determine the weight importance of each criteria on the contractor performance evaluation
d. To provide recommendations for improvement of the overall contractor’s performance in Malaysian’s construction industry using the result of the evaluation survey.

5.0 Scope

All the contractors in Malaysian which registered with CIDB (under G1 until G7) and PKK (under class A until class F) which have past experience of 3 years in construction field that the researcher think is needed

6.0 Significant of the study

Every project owner is concerned about design and execution of their project. To achieve the end result of having the project done with the least cost, the shortest time and the best quality before it can be occupied by the end user. Since all the work at site is under the responsible of the contractor, the project owner should be aware of the contractor performance. Contractor performance should be monitored to ensure the quality of the project

In order to facilitate continuous improvement by contractors and to monitor performance, government agencies need to acquire, maintain and exchange information about the performance of contractors on projects.

Performance assessments based on contractors past performance record and during the course of project period will help the parties involved to reach a common understanding of the expectation about the work. They help to identify areas where the contractor is excelling and any areas that need improvement. Performance reports are used in the assessment of a contractor for future engagements including registration, pre-qualification and expressions of interest.

This research will show what criteria might be taken into consideration while the process of the contractor performance evaluation and the weight importance of each criterion. By knowing the weight of these criteria and evaluating the consultant performance, they can be watched out by the project owner and other party related in order to get achieve performance. Also, this research will be base for future studies in this field in Malaysia.

7.0 Methodology

The research methodology is the set of processes that will be taken or utilized to obtain the objectives of the research and to solve the research problem. The specific research methodology utilized in this research is a combination of quantitative and qualitative approaches in applied research that is common for the construction and management related problems. The combination of both approaches will assist in solving the overall problem


Figure 1.1: Research methodology

8.0 References

Bromilow, F. J. (1974). Measurement and scheduling of construction time and cost performance in building industry. The Chartered Builder, 10, 79-82.

Chan, A. P. C. (1999). Time-cost relationship of public sector projects in Malaysia. International Journal of Project Management, 19, 223-229.

Chang, Andrew, and Ibbs, C. William (1999). Designing levels for A/E consultant performance measures. Project Management Journal, 30(4), 42-54

Fidic, (2001). Guidelines for the evaluation of consultants performance

Ireland, V. (1986). A comparison of Australia and US building performance for high-rise buildings. University of Technology, Sydney, Australia: School of Building Studies.

Kaka, A. & Price, A. D. F. (1991). Relationship between value and duration of construction projects. Construction Management and Economics, 9, 383-400.

Kumaraswamy, M. M. & Chan, D. W. M. (1995). Determinants of construction duration. Construction Management and Economics, 13, 209-217.

Nkado, R. N. (1995). Construction time-influencing factors: The contractors perspective. Construction Management and Economics, 13, 81-89.

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