Construction contract administration in Malaysia using DFD: a conceptual model

Publication Date27 Sep 2011
AuthorHeap Yih Chong,Balakrishnan Balamuralithara,Siong Choy Chong
SubjectEconomics,Information & knowledge management,Management science & operations
Construction contract
administration in Malaysia using
DFD: a conceptual model
Heap Yih Chong and Balakrishnan Balamuralithara
Faculty of Engineering and Science, Universiti Tunku Abdul Rahman,
Kuala Lumpur, Malaysia, and
Siong Choy Chong
Asian Institute of Finance, Kuala Lumpur, Malaysia
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
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 warehousetechnology, Data flow diagram,Conceptual model
Paper type Conceptual paper
Construction stakeholders always use a standard form of contract to regulate their
contractual obligations and expectations during the contract administration process. It is
during this process that a vast amount of contract provisions are referred to. However,
contractual conflicts or disputes seem to be inevitable in the construction industry
especially on issues concerning interpretation and understanding of construction
contracts (Broome and Hayes, 1997; Candlin et al., 2002). This is not difficult
The current issue and full text archive of this journal is available at
Received 9 August 2010
Revised 21 January 2011
Accepted 21 January 2011
Industrial Management & Data
Vol. 111 No. 9, 2011
pp. 1449-1464
qEmerald Group Publishing Limited
DOI 10.1108/02635571111182782
to understand as the construction industry is a dispute-prone industry due to its
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
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

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