class f contractor

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CHAPTER II

LITERATURE REVIEW : CLASS F CONTRACTORS

2.1 Introduction

Class F contractors are one of the eight classes in the works categories

registered with Unit Pendaftaran Kontraktor Negeri (UPK) in the state of Sarawak

(UPK, 1997). They also have to register with Pusat Khidmat Kontraktor (PKK)

which is under the Kementerian Pembangunan Usahawan. This is to enable them to

participate contract works or projects under the state and federal government. The

contract amount for Class F contractors are limited to RM100,000 and below.

However, in the Budget 2003 speech by the former Prime Minister Tun Dr. Mahathir

Mohd., the contract amount will be upgraded to RM200,000 and below for Class F

contractor as indicated in the 2003 Budget Speech. In an effort to help the class F

contractor, the government has fixed that all government contract works amounting to

RM100,000 and below should be given to Class F contractors. Some of the contract

works for the statutory boards also required Class F contractor. All these contract

works are awarded through tendering, quotation or requisition.

Class F license are only given to Bumiputra for the purpose of giving them an

opportunity to participate in the construction industry. This is a good move by the

government because many industries are monopolizing by the non Bumiputra.

This action coincides with the new Economic Policy whereby Bumiputra participation

is fixed at 30% in all sectors. It is hoped that the numbers of Bumiputra contractors

will be increased in the construction industries.


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Awarding of small contract works to Class F contractor is important because it

represents the first step for the Bumiputra contractors to learn how to handle contract

works in the construction industry. Most of these Class F contractors are those who

wanted to venture themselves into the construction industry. As a result, they can

improve their knowledge and experience which enable them to undertake bigger

projects in future.

2.2 Registered as a Licensed Contractor

In order to obtained contract works from the government agencies and

statutory boards, registration with Unit Pendaftaran Kontraktor Negeri (UPK) and

Pusat Khidmat Kontraktor (PKK) is compulsory. At this juncture, not only

government agencies and statutory boards, even the private sectors also required the

Class F contractors to be registered if they were to take up any contract work from

them. Besides, registration with the Construction Industry Development Board

Malaysia (CIDB) is also a must before obtaining a tender job or project. Example of

registration certificate of UPK and PKK of Class F contractors in Samarahan are

shown in Appendix C and D.


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Table 2.2 : Supplies and Services Heads (Source : UPK)

HEADS SUPPLIES AND SERVICES

I Civil Engineering Building Materials

II Mechanical & Electrical Engineering Plant /Equipment

III Water supply Materials

IV Office Machines / Equipment / Technical Supplies and

Others

V Chemicals and Materials

VI General Supply

VII Charter Services & Other Services

VIII Books / printing

IX Miscellaneous

2.2.2 Rules and Regulations for Registration with UPK :

( 1 ) Business Registration

Before a company, cooperative or business who wish to register with UPK,

they must register with Registrar of Business (Registration of Company’s name

Ordinance) or Registrar of Company (Company Act 1965), through the following

offices:

i) Registrar of Business

ii) Inland Revenue, Kuching

iii) District Offices in Sarawak

iv) Registrar of Company


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( 2 ) Current Accounts

The contractor should open a current account with any of the Commercial

Bank under the company’s name.

( 3 ) Capital

The contractor should possess the capital according to the class he applied.

The minimum capital needed for civil engineering works are as follows:

Table 2.3 : Minimum Capital According to Class (Source: UPK, 1997)

CLASS MINIMUM CAPITAL

A 600,001

B 400,001

BX 200,001

C 100,001

D 35,001

E 17,501

EX 7,501

F 5,001

( 4 ) Approval and Experience

For Class A, B and BX, the company must have at least one person possessing

a first degree (UPK, 1997). As for Class C, the company must have at least one

person possessing a diploma. For those contractors with Class D, E, EX and F

licenses, the owner should have experience and knowledge in the field that the

company applied for.


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( 5 ) Records for Work Done

The contractor should keep records of all the works he has done previously.

This is important in order to proof that the company has experience in carrying out the

work.

( 6 ) Equipment & Machinery

The contractor also need to declare the numbers of equipment or machinery

that the company possess in relation to the nature of the business.

( 7 ) Registration Fees

The contractor has to pay for processing and registration fees and the renewal

of license is every two years. The following are the schedule of registration fees for

various classes of license:

Table 2.4 : Schedule for processing, registration and renewal fees for license in

every two years (Source: UPK)

Class Processing Fees

(RM)

Registration Fees

(RM)

Renewal Fees For

Every Two Years

(RM)

A 100 5000 2500

B 100 3000 1500

BX 100 1500 750

C 100 500 250

D 50 250 125

E 50 150 75

EX 50 80 40

F 50 50 25


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2.2.3 Registration with CIDB

There are three categories of registration namely Civil Engineering Works,

Building Works, Mechanical & Electrical Works. These three categories are

classified according to the respective specialist works.

2.3 Organization Structure of Class F Contractor in Samarahan Division

The organization of Class F contractor is unique if compare with other classes

of contractors. This is because they are operating only in small projects with the

value of works amounting RM200,000 and below. In the case of contract work with

JKR Kota Samarahan, these contractors mostly involved works amounting to

RM10,000 to RM20,000. It is therefore difficult for the Class F to plan for a good

organization. The reason may be because most of the contractors are new and they

possess little knowledge on project management. However, a few contractors have a

good project management but they cannot form a good organization because of the

small project they get and with little profit they earned.

There is also having some Class F contractors who are more experience in

construction work and also have good knowledge in project management in running

their organization. However, they still cannot delegate all the works to their

underhand. These contractors still have to make all the major decision like

administration, accounts and handling of their employees.

The management of an organization is important because it is the basis for

running a business body. The formation of an organization in a Class F depends on a

few factors like:

(a) the size of work operated by the contractor

(b) experience of the contractor in the construction industry

(c) the knowledge of the contract with regards to the project management


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Therefore, the management of the organization for the Class F contractor is

the contractor himself. All the problems that arise and other affairs in relation to the

construction work will be handled by the contractor himself.

2.3.1 Development of Class F Contractors in Samarahan Division

As mentioned earlier, Kota Samarahan is a fast developing division in

Sarawak, as such, there are many construction activities being carried out since its

formation in 1986. The construction of roads, bridges, shop houses, housing estates,

government buildings like clinics, fire station, police station, schools, various

government department like Public Work Department, Agriculture Department,

Drainage & Irrigation Department and others. As a result, there are many Bumiputra

and Non-Bumiputra contractors from Samarahan and Kuching Division involved

themselves in the construction industries. For the Bumiputra contractors, many of

them are registered as Class F contractors.

This study aim at focusing on the Class F contractors participating in the

various projects in Kota Samarahan. As their value of works are limited to only

RM20,000 and below, thus, most of the contract works are of requisition amounting

to less than RM20,000 and on quotation or tendering with value of work amounting to

RM200,000.

2.3.2 Class F Contractor Registered with JKR Samarahan Division

All the Class F contractors who are interested to participate in the contract

works awarded by JKR Samarahan have to register themselves with the Contract

Section of JKR Samarahan. From the registration book for numbers of contractors

registered, most of these Class F contractors are from Kuching Division as shown in

Table 2.5


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From the statistic shown in Table 2.6, it is very obvious that most of the Class F

contractors come from Kuching Division. This is understandable because Kuching

Division is formed much earlier than Samarahan Division; therefore, there are more

Class F contractors in Kuching as compared to Samarahan Division. Furthermore,

these contractors have more working experience and well established than the

contractors in Samarahan Division.

The contractors from Kuching Division are allowed to participate in contract

works in JKR Samarahan because they are registered with UPK. According to UPK’s

registration guide book, those registered contractors are allowed to participate all

government contract works throughout Sarawak. This condition however is different

from those contractor registered with Pusat Khidmat Kontraktor (PKK) whereby the

contractors are allow to participate in the government contract work in that particular

division that they registered with (PKK, 1984). For example, if the Class F

contractors registered themselves with PKK in Kuching Division, they are not allow

to participate in the contract works in Miri Division. However, in Samarahan

Division, there is some exception whereby the PKK contractors from Kuching

Division are allowed to participate in the contract works. The reason is that, as

Samarahan Division is a newly set up Division, there are very few PKK registered

contractors. In order to carry out projects funded by the Federal government, these

contractors are therefore needed. For example, in the Road Maintenance Section in

JKR Samarahan, there are roads funded by the State and Federal Government. The

contract works for maintenance of Federal roads like grass cutting, construction of

R.C. drains and culverts, painting of road lines and etc., could only be done by Class

F contractors registered with PKK which will be awarded either by requisition or by

quotation. Majorities of these contractors are from Kuching. On the other hand, for

those roads under the state government, only those contractors registered with UPK

are allowed to participate.


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2.3.3 Example of a Typical Contract Work Done by a Class F Contractor in

Samarahan Division

One of the contract works done by a Class F contractor was: “ The supply,

delivery and laying of asphaltic concrete (wearing coarse) for resurfacing from KM

0+850 to KM 1+300 and KM 8+760 to KM 9+210 along Jalan Datuk Mohd. Musa,

Samarahan Division.” Contract No. : PWDKS/WO/12/2001.

(Source: Road Maintenance Section, JKR Samarahan).

This contract was a Divisional Quotation whereby the contract amount should

not exceed RM100,000.00. The cost of this contract was RM97,350.00. The contract

period was one month from 09.08.2001 to 05.09.2001. The late En. Samsimon B.

Bujang – Road Maintenance Engineer was appointed as the Engineer’s Representative

for that project.

The purpose of resurfacing under the pavement maintenance was to reseal the

road surface, cover minor depression and strengthen the road pavement. This project

was carried out based on the annual road condition survey which was carried out on

March and September of each year. All the Federal and State funded roads have to be

inventorised. Those stretches of roads where the pavement shows lost of fines or

extensive corrugations (about 150mm) and depressions are rated Condition 3 in the

Road Maintenance Features and Condition Inventory form JKR/RMMS/11A.

This form will be submitted to JKR Headquarter for compilation which will then

submit for requesting fund from the Ministry. Upon receiving road maintenance fund

from the Ministry, it will be allocated to the Division Office and the Road

Maintenance Section will execute the work based on the fund allocated.

Prior to the commencement of the work, the contractor has to produce the

result of the bituminous mixture (Marshall Test Report) and mobilization of plants

such as asphalt paver, pneumatic tyred roller and steel wheeled roller to the site.

A thin layer of emulsified bitumen needed to apply using the emulsion sprayer, only

then the asphalt paver could start the laying of premix. The whole process of

resurfacing work for 900 meter length of road took about three days to complete.

This contract was carried out smoothly and the job was considered well done with no

road accident occurred. The resurfacing work in progress as shown in (Figure 2.1).


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( a ) Proper Traffic Orientation

( b ) Paving In Progress

( c ) Supervision By Technician


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( e ) Compact To Specified Thickness

( e ) Compact To Specified Thickness

( f ) Traffic Control At Work Zone

Figure 2.1 : Photos showing resurfacing work in progress


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2.3.4 UPK Work Heads and Sub-Heads

All Class F contractors are under one or more of the following Heads:

a) Head I (Civil Engineering Contractors)

b) Head II (Building Contractors)

c) Head III (Road & Earthwork Contractors)

d) Head VI (Reforestation & Landscaping Works)

( UPK, 1997 )

( a ) Head I (Civil Engineering Conractors)

This is for works in reinforced concrete, steel, masonry and timber bridges,

culverts, framed building, wharves, jetties, sea and river walls, retaining walls, water

supplies, services reservoirs and etc. (UPK,1997 )

Most of the class F contractors have Head 1. This is because JKR Samarahan

awards most of the contract works under Head 1. When more roads are being

constructed or upgraded, the related works such as construction of RC drains and

culverts, cleaning and clearing of earth drain, construction of retaining wall and

others. The contractors from Kuching Division mostly get these contract works

because they are more experience and they have their own group of skilled workers.

Some of these contractors own machinery like excavators for excavation works,

clearing and cleaning of earth drain and etc. They do not have to rent from other

people who are very costly and sometimes delay in completion of the works;

therefore, the work will be carried more efficiently. They can complete the work

much earlier and thus save time and cost. Time and cost are very important to class F

contractors because their profit margins are not high. They cannot afford to delay the

works; otherwise they will be making a loss. One the other hand, the local Samarahan

contractors are more interested in maintenance of bridges like painting of bridge

railing, repair and replace of the runner boards and deckings for wooden bridges;

painting of railing for wharves, jetties and others. Civil engineering contractors at

work as shown in (Figure 2.2).


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( a ) Drain cleaning in progress

b Re air brid e deck

( c ) Retaining wall construction

Figure 2.2 : Photos Showing Civil Engineering Contractors At Work – Head 1


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( b ) Head II (Building Contractors)

Under building works which involves works in frame and unframed building,

building repairs, painting, sanitary works and plumbing installation, carpentry and

joinery, water services, concrete drains works, including light timber and concrete

piling, steel fencing and demolitions ( UPK, 1997 )

In JKR Samarahan, only a few of the Class F contractors take up the contract

works like construction of the barracks of quarters. Majority of these contractors

subcontracted the job to those contractors who are more experience from Kuching

Division. They only do the monitoring work because of lack of skilled workers to

carry out the work; besides, it involved bigger capital to start the works and the

payment will only be made upon satisfactory of the project. Most of the Class F

contractors have little capital to run the business. Majority of them could only afford

to get one contract job at a time.

Most of the Class F contractors in Samarahan involved repairing and

repainting of buildings like government quarters, offices and etc. This is because

these types of works required not much capital and easier to monitor. The contractors

can easily get the labourers from their own villages to carry out the work.

For maintenance of sanitary and plumbing installation works for government

buildings, these groups of contractors are mainly from Kuching as they have more

experience in doing the work. Normally the contract is a term contract and the

contract period is one year or RM50,000.00 which ever come first.

Requisition job like dismantling and installing of new chain link fencing are

mostly done by contractors from Samarahan and Kuching Division and both of these

Class F contractors can do the job satisfactory. Building contractors at work as shown

in (Figure 2.3).


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( a ) R.C.Drain Construction

( b ) Repair of water pipes

( c ) Repair of government buildings

Figure 2.3 : Photos Showing Building Contractor At Work – Head II


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( c ) Head III (Road Works and Earth Works Contractors)

Under this head, it involves general earth works like site clearing, leveling and

drainage, jungle felling and terracing, farm road or gravel road and other related

works like sand filling and etc. ( UPK, 1997 )

For road works, it involves resurfacing using asphalt, road construction, repair

and maintenance of roads and its furniture, construction of foot path using reinforced

concrete or plank walk, others like constructing, repair and maintenance of road

railing, road line painting, installation of road studs, construction, repair and

repainting of road curbs or dividers.

Under general earthworks like site clearing, leveling, excavation and

improvement of drainage system, this entire job involves machinery like bull dozer,

excavator, tipper trucks, chain saw, timber mattress and others. All these jobs are

carried out by contractors who are more established, financially strong, have good

knowledge and experience of the works and others. These contractors are mostly

from Kuching Division. However, there are one or two Class F contractors in

Samarahan Division who also own these machinery and the contractor has proven that

he is capable of doing the job well.

As stated earlier, these contractors are also capable of carrying out the

construction of farm roads and gravel roads. However, these roads are only of short

stretch of about one to two km in length. For construction of long stretch of road, it is

undertaken by JKR direct labours under the Road Development Section in

Samarahan.

For resurfacing work that is resealing of existing surface using premix or

asphalt; JKR Samarahan normally call quotation for this activity. In the past this

activity was done by direct labours. This is because JKR had the skilled workers,

machinery, tipper trucks and etc. However, as time past, these skilled workers also

retired, the machineries like paver, roller, pneumatic tyre roller, tipper trucks and

others also beyond repair. Another problem is that it is more costly as the workers

make huge claims from the allowances they claim and the work progress is slow also.


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The contractors involve in the resurfacing works are those from Kuching. They have

a well established team comprising labours, equipment, machinery and others. These

people are very skillful and experience in the field. The reason is that besides doing

the government projects, they are mostly involved in the private sectors like sealing

the internal roads in the housing estate, shopping areas and others. They can carry out

the work effectively and efficiently. For Class F contractors in Samarahan, a few of

these contractors are trying to do the work in a small scale. They have the man

powers, tipper trucks, bitumen sprayer, roller and etc. but they have to rent the pavers

from others.

For the repair and maintenance of road pavement like pothole patching, this

activity is carried out by a few well established Class F contractors from Kuching.

The reason is that they have the manpower, equipment like pavement cutter, bitument

sprayer and machinery like pedestrain roller, and others to carry out the activity.

There are also a few Class F contractors from Samarahan doing the pothole patching

activity. Their performance is encouraging because it is only the initial stage for them

to get involve in road work activity. For installation of road signs, this activity is

mostly done by the contractors from Kuching. The materials like reflective sheeting

for road signs are expensive and also they need special equipments to do the cutting

of letters and sticking of these sheeting onto the aluminum sheeting or galvanized zinc

sheet.

Another activity that the Class F contractors from Samarahan is able to

participate is the construction of reinforced concrete footpath including painting work.

These footpath are normally constructed near schools, villages by the road sides and

others. The works are either on requisition or quotation depends upon the length of

the proposed footpath. Road line painting especially using the thermoplastic materials

are done by contractors from Kuching. To paint thermoplastic road line, it needs

special equipment for boiling of the thermoplastic materials then use the machine for

painting road lines. It also needs a truck to transport the materials, machine and the

workers. The workers also need to train and have knowledge in calculation so that

they can do the job correctly as specified. This contract work awarded by JKR

Samarahan is either on requisition or by quotation, again it depends on the volume of

work required.


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For work in construction, repair and maintenance of road curbs or dividers,

which are usually taken up by the local contractors. The ready made road curbs are

normally supplied by JKR. The contractors only need to prepare concrete base for

arranging the curbs and some cement mortar to joint those curbs. Once completed

they will do the painting work. Majority of these local contractors can perform the

job satisfactory. Road works and Earth works contractors at work as shown in

(Figure 2.4) and (Figure 2.5).

( a ) Road line painting

( b ) Repair of road pavement in progress

Figure 2.4 : Photos Showing Road Works And Earth Works Contractors – Head III


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( a ) Upgrading of kampung road

( b ) Installation of Information sign

( c ) Repainted guardrails

Figure 2.5 : Photos Showing Road Works And Earth Works Contractors – Head III


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( d ) Head VI Reforestation (Forestry) & Landscaping works

Under subhead 5 (b) grass cutting (Source: UPK), most of the Class F

contractor in Samarahan have this Head and sub-head. Grass cutting is a monthly

activity. There are about one thousand over kilometers of roads in Samarahan

Division and the length keeps increasing as more roads are being constructed.

Therefore, this activity is very popular among the Class F contractors. The

contractors only need to purchase bush cutters and form a grass cutting team. JKR

Samarahan normally award the grass cutting contract as term contract and the period

is about nine months or one year depending on the rate per kilometer cutting. When

there is a function like VIP visit , a requisition work for grass cutting will be issued.

Grass cutting & Landscaping works as shown in (Figure 2.6).

( a ) Grass cutting in progress

( b ) Landscaping in progress

Figure 2.6 : Photos Showing Reforestation (Forestry) & Landscaping Works – Head VI


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2.3.5 Percentage of The Total Value Awarded To Class F Contractors

From the total value of contract works awarded to Class F contractors in JKR

Samarahan against the total value of contract works for the Year 2002 (Table 2.7) and

(Figure 2.7), we can see how active these contractors are in Samarahan Division. The

limitation however is to get the data for the year to year value of contract works

awarded to these Class F contractors are not available; as there is no proper recording

of the data. As a result, we cannot compare with the past year performance.

Table 2.7 : Total Value Of Contract Works For Class F Contractor For Year

2002 (Source: Contract Section, JKR Samarahan)

FUND

TOTAL VALUE OF

WORK

(RM)

TOTAL VALUE

AWARDED TO

CLASS F

CONTRACTOR

(RM)

PERCENTAGE OF

TOTAL VALUE

(%)

STATE 18,500,000.00 14,000,000.00 76

FEDERAL 1,500,000.00 730,000.00 49

Total Value Awarded to Class F Contractor for Year 2002

18,500,000.00

1,500,000.00730,000.00

(49%)

14,000,000.00

(76%)

0

2,500,000

5,000,000

7,500,000

10,000,000

12,500,000

15,000,000

17,500,000

20,000,000

STATE FEDERALFund

V a l u e ( R M )

TOTAL VALUE CLASS F

Figure 2.7 : ShowingTotal Value of Contract Works for Class F Contractors for

Year 2002

class f contractor

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