Top 6 Challenges Malaysian Contractors Will Face After MCO

workers facing issues at contruction site

As of February 2021, Malaysia is now a few weeks into its second Movement Control Order (MCO) as a result of the COVID-19 pandemic. It is unclear when the MCO will end. Even after the restrictions have been lifted, life will never be the same as pre-MCO times, especially in the construction industry.

In order to be successful, construction businesses will have to anticipate and adapt to new challenges.

Below are the top 6 challenges contractors will face post-MCO.

1. Stringent Workers’ Accommodation Requirement

workers dormitory

Due to several COVID-19 clusters originating from construction sites and factories, the government is seriously looking into curbing the source of COVID-19 spread—workers’ accommodation.

The Workers’ Minimum Standards of Housing and Amenities (Amendment) Act 2019 (“Amended Act”) is currently enforced together with the Employees’ Minimum Standards of Housing, Accommodations and Amenities (Accommodation and Centralised Accommodation) Regulations 2020.

What does this mean for contractors?

Contractors providing workers accommodation now have stricter laws and regulations to follow. Failure to follow such law is an offence; upon conviction, contractors will be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 1 year or both.

This law includes obtaining “Certificate of Accommodation” from the Director General of Labour Department Peninsular Malaysia. The provided accommodation needs to fulfill certain requirements such as:

  1. to provide separate accommodation to employees of the opposite gender;

  2. to take necessary preventative measures to ensure employees’ safety and well-being;

  3. to ensure that the electrical wiring systems comply with safety requirements in accordance with the relevant written laws;

  4. to ensure that the employees receive the necessary medical assistance where necessary;

  5. to take preventative measures to contain the spread of infectious diseases as ordered by the Medical Officer of Health in accordance with the relevant written laws and the employer shall, at his own expense, make arrangements as ordered by the Medical Officer of Health so that all or any of the employees be given immunization against any infectious disease; and many more as listed in the Amended Act itself.

2. Price increase on raw material

stacks of rebar for construction project with graph showing increasing price trend

The pandemic severely disrupted the global supply chain, as of February 2021, raw material prices have increased by 30-40%. Contractors that have existing projects not only will see its profit being slash but potentially risk making a loss to complete the projects.

One may ask, can contractors go back to its client and ask for the client to take up the price increment?

This depends on the contract. The majority of the construction contract will entail “no changes on contract price regardless of raw material price fluctuation”. Contractually, contractors may not be able to ask for more money as a result of raw material price fluctuation.

3. Mandatory QLASSIC

stamping document for approval

In 2017, the Quality Assessment System in Construction (QLASSIC) was formed in a bid to measure quality within the sector. In 2019, the Works Ministry reiterated its commitment to making the QLASSIC certification mandatory for all upcoming developments by 2020, as outlined in the National Housing Policy 2.0 (NHP 2.0). This plan was partly disrupted by MCO, but soon enough, QLASSIC will be mandatory in all construction projects.

Stricter regulations will also be introduced to reduce accidents and injuries during projects. This will include ensuring all contractors who are bidding for projects will account for the extra cost needed to meet with health and safety requirements in their estimates.

In other words, contractors will face higher cost to do business.

4. Competition With Foreign Contractors

construction with red background

Beginning in 2009, our government began removing restrictions on foreign equity participation in various construction-related industries. As a consequence, this has attracted lots of foreign investors, especially those from China. Statistics by the Malaysian Investment Development Authority (MIDA) showed that China has taken over Singapore’s rank as the biggest investor in Malaysian real estate.

However, the attention from China has also paved way to an increase in foreign competition, stirring up unease in Malaysia’s construction markets. Based on the Construction Industry Development Board’s (CIDB) statistics, local contractors’ market share in value had consistently fallen year-on-year from 94% to 78% from 2006 to 2014.

“Of late, we are seeing more participation from Chinese contractors in the Malaysian market either directly or through joint ventures with local contractors. In our view, we think the edge that Chinese contractors have over other foreign contractors as well as our local ones is access to funding, cheaper labour, access to materials and fast turnaround construction period,” AllianceDBS Research opined.

The presence of Chinese contractors has sparked mixed views, no doubt forcing local contractors to become more competitive, driving many to up their game in efficiency and productivity. Some regard these foreign contractors as a threat because it is tough to compete with cash-loaded Chinese contractors. Not only are they richer than most contractors in Malaysia, but they also bring in materials and labour in droves from China, leaving many local contractors at a loss.

5. Shortage of Skilled Labour

construction labourer

As a result of the pandemic, many countries have closed their borders, making it harder to import skilled labour. Malaysian contractors rely heavily on foreign labour, so with the shutdown of the source of labour, the cost of labour has driven up as the country now faces a shortage of labour.

The ability to attract and retain the best talents always provides a company with a competitive advantage. But if this skilled labour shortage continues, contractors will be increasingly challenged to maintain superiority over competitors in the industry.

6. Technology Adoptionconstruction worker using technology in site

As businesses scramble to ensure their employees continue working, technology adoption has sped up within the construction industry. Most sectors, construction included, have also started practicing the work-from-home (WFH) concept. With employers and employees adapting to this new normal, it has become apparent that the WFH concept is here to stay even after MCO. One of the ways companies adapt to this new working condition is by adopting the necessary technology, including cloud-based software, integrated collaboration, and mobile project management.

In construction specifically, we will see a higher adoption rate of the use of building information modelling (BIM), industrial building system (IBS), laser scanning, and machine automation. BIM and IBS are becoming more commercially affordable.

Recognizing the contractors’ increasing need for technology specifically catered to the industry, Speedbrick offers several products for construction management, allowing contractors to manage their team and site efficiently in real-time, without needing to be on-site all the time.

The exorbitant upfront cost for technology adoption may not seem to be worthwhile in the beginning, but it is necessary and will be more cost-effective in the long run as multiple processes will be streamlined.

In a nutshell, the upcoming events/trends show that it will be tougher to be a contractor in the near future. It would be wise to prepare the business to be recession-proof, or at the very least, to be able to weather the challenging times ahead. However, businesses that successfully navigate this storm will be better equipped to capitalise on the recovery. Efficiency gained through the hard times would make businesses be more resilient and efficient; strengthening them for robust long term expansion.

See Speedbrick in action

Schedule a free demo with us to see how we have served projects worth more than RM13.2b, and achieved 99% client satisfaction along the way.

COVID-19 and Construction: Prevention and Control Measure at your Construction Site Entrance

construction workers queueing up for covid 19 temperature check

COVID-19 can spread through human to human contact, for which equal measures must be taken to protect your construction site. Construction companies must adopt all measures indicated by the authority to combat and contain the spread of the coronavirus on construction sites. This is especially important at the construction site entrance. The aim is to make your construction site a safe place where workers can carry out their work without interruption. 

Government Guidelines: 

At Site Entrance, Display Entrance Requirement Poster on COVID-19 Prevention 

Information on posters should clearly state the following:

  1. Visitor shall not enter the site in case of fever (over 37.5°) or other flu symptoms 
  2. All visitors must fill up a COVID-19 Prevention Questionnaire at the site entrance
  3. All visitors must wear facial masks

Set up Hand Sanitiser Station 

Ensure sufficient hand sanitizers are readily available at the site entrance. 

Set Up Body Temperature Checks and Screening at Construction Site Entrance

As it is a daily requirement to conduct body temperature checks and screening for symptoms such as coughing, sore throat, or breathing difficulties at the construction site entrance. 

Contractors should set up the following process at site entrance:

Instruction to site visitors is recommended as follow: 

Set Up Social Distancing Measures at Construction Site Entrance

Work Station Distance Recommended as Follow: 

Work Station Distance Recommended as Follow: 

Establish COVID-19 Emergency Response Plan

A COVID-19 Emergency Response Plan shall be in place at the site entrance to deal with visitors that have flu liked symptoms: 

  1. Record Visitor’s body temperature in the COVID-19 Prevention Questionnaire
  2. Ensure Visitor’s contact details are properly filled in
  3. Deny Visitor from entering the construction site

About Speedbrick 

Speedbrick is a leading provider of cloud-based construction management software. Our construction technology connects every department in your construction business allowing them to get things done faster. Our software is designed for contractors, by contractors. It allows different stakeholders to see different information to help them make better decisions. Available products are in the region of material management, project management, budget control, financial control, subcontractors claim control, and extension of time monitoring. Learn more at www.speedbrick.com

Restart Construction Work Post COVID-19: Stop Losing Money on Inventory

construction worker picking up materials

As contractors in Malaysia cope with resuming work after COVID-19 Movement Control Order (MCO), the first challenge is to conserve and lengthen your construction project’s cash runway as much as possible. Stopping unnecessary leakages is now more critical than ever for your construction business. 

Contractors that buy material will have experience in large quantities of leftover material after the project is finished. Over and double orders are common. This is because material management is a complex and intricate task that involves various parties such as quantity surveyor, site supervisor, project manager, and director. 

Construction supply chain management or material management is overwhelming, we simplified it. Find out how we did it here: https://www.speedbrick.com/compose/ 

With cash flow and profit being severely impacted by COVID-19, it is critical now for contractors to effectively monitor project material on managing construction projects. 

Here Are 5 Tips On Effective Material Management: 

Get the Right Quantity

To get the right quantity, it is essential to have a material take-off. Material take-off helps to obtain an actual total quantity of materials with the correct specifications that will be used in the construction project.

Once the take-off quantity is established, it serves as a baseline to allow the person in charge to easily cross-check whether materials subsequently ordered by the project site are within the project’s budget. This is a standard protocol for effective material management. Early alerts are useful to prevent double and over-orders from occurring.

Get your material from the right supplier

Costs shall not be the sole deciding factor for choosing the right supplier. You will need to ensure suppliers have the capability to deliver the number of materials you need according to the delivery schedule. Things to look out for when choosing a supplier include credit facility, price, ability to deliver according to your delivery schedule and after-sales support.

It is advisable to always have at least one backup supplier for every material you order to your project site. This ensures projects can run smoothly even if your first-choice supplier could not deliver.

Order building materials at the right time

Buying in bulk no doubt saves your money, but delivering material before it is needed may pose the risk of damage and theft. Delivering large quantities of materials in advance is unwise as you bear the risk of transfer and storage. Similarly delivering too late will cost you idling and operation costs. It is always optimum to ensure delivery of material right before you need to use it. This allows time for material inspection and reduces the risk of theft and damage.

Deliver to the right place

Most project sites are huge; contractors may have different teams working at different locations in a project site. Loading and unloading bulky material is expensive as it requires the incurring of machinery cost. It is important to ensure materials are being delivered at the right place, to eliminate double handling, unnecessary storage and it ensures the quality of the material is not being jeopardised during unnecessary double handling.

Negotiate for the best cost

As contractors spend most of their project value purchasing building material, it is essential to buy them at the right cost to ensure profitability. During the procurement stage, it is advisable to cross-check with the prices quoted during tender stage. Price comparison and negotiation skills are useful in obtaining the best price possible. Sometimes, you may even consider paying cash to get a further reduction in material price! The trick is to always ensure your suppliers get paid on time for better bargaining power. 

Hear from HAB Construction Sdn Bhd on how Speedbrick has helped save them hundreds of thousands on material management here.

 

 

About Speedbrick

Speedbrick is a leading provider of cloud-based construction management software. Our construction technology connects every department in your construction business allowing them to get things done faster. Our software is designed for contractors, by contractors. It allows different stakeholders to see different information to help them make better decisions. Available products are in the region of material management, project management, budget control, financial control, subcontractors claim control, and extension of time monitoring. Learn more at www.speedbrick.com

 

Construction Sites And Covid 19, How Is The Construction Industry Affected

workers wearing mask on construction site

As the war against Covid 19 intensifies in Malaysia, the government of Malaysia has issued a restriction of movement that has essentially halted the operations of various businesses in Malaysia in order to limit the spread of the virus. On 16.3.2020, the Prime Minister, via a special message, issued the Restriction of Movement Order pursuant to Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. The Government. 

One of his directives are as follow:

“Complete restriction of movement and assembly nationwide, including religious activities, sports, social and cultural events. To enforce this restriction, all houses of worship and business premises are to be closed, except supermarkets, public markets, sundry shops and convenience stores selling essential goods…”

However, it is unclear if the construction site falls under the definition of Business Premises. As a construction site is technically not a business premise, does this mean contractors are allowed to resume operations as normal despite this restriction? This sudden and drastic Restriction of Movement has created a lot of confusion in the construction industry as it is unclear if construction site works are allowed to operate normally. 

As a result we have a situation where some contractors continue operations and end up being fined.

The ambiguity of the order has led to different interpretations, exposing the contractors that do continue to operate during this period to the risk of jail time and an extensive fine. 

On 17.3.2020, DBKL issued a notice “Notis Pematuhan Perintah Kawalan Pengerakan” which request for construction parties including the main contractor, nominated subcontractor, domestic subcontractor, site workers, to obey the Restriction of Movement Order. It further recommends the following steps to be taken:

  1. Ensure and control the safety and cleanliness of the construction site
  2. Ensure construction sites are free from the threat of damage and theft
  3. Ensure that the proper safety record and documentation on site
  4. Have an updated photographic snapshot of the construction progress as of 17.3.2020 and to take all necessary steps to ensure that work can continue after the order has been rescinded.

Similar notices were issued by other local authorities including Majlis Perbandaran Petaling Jaya and Majlis Perbandaran Kajang, Ministry of Energy and Natural Resource 

On the morning of 18.3.2020, a Prevention and Control of Infectious Diseases (Measures within The Infected Local Areas) Regulations 2020 was gazetted, with this Regulation, it provides a glimpse of clarity that where Regulation 3 states that: 

(1) No person shall make any journey from one place to another place within any infected local area except for the following purposes:

(a) to perform any official duty;

(b) to make a journey to and from any premises referred to in regulation 5;

(c) to purchase, supply or deliver food or daily necessities;

(d) to seek healthcare or medical services; or

(e) any other special purposes as may be permitted by the Director-General.

Around evening time of 18.8.2020, the Ministry of Work released it’s Frequently Asked Questions (FAQs) answering some queries in relation to the construction industry. Briefly, it confirms that all construction projects have to be stopped apart from those that involve work that’s critical. It defines critical works as

 “kerja-kerja yang mana jika sekiranya tidak diteruskan boleh mendatangkan mara bahaya atau kemudaratan kepada pekerja, orang awam atau persekitaran”

 It gave a list of critical works as follow: 

  1. Slope Repairs;
  2. Pothole Repairs;
  3. Traffic Management Control;
  4. Examination of Lifts/Escalators/TravelatorsPemeriksaan and other critical electrical and mechanical equipment;
  5. Facility upgrading works in premises with critical services;
  6. Traffic light repairs;
  7. Construction repairs on the damaged Bailey Bridge;
  8. Emergency works that are stated on a prior contract; and 
  9. Any other construction that needs to be completed that may be a hazard. 

However, before such critical work can be carried out, recommendations letter must be obtained from the person in charge of the project / Resident Engineer / Principal Submitting Person for the project, and such recommendations need to be submitted to the relevant ministry of work / local authority for its approval. 

It looks like, apart from the exception stated in Regulation 3(1) above, no person should leave their premises at all. Together with the above FAQs issued by the Ministry of Works, it’s mostly settled that construction sites do not fall under essential services and construction sites should stop work unless it falls under the category of critical works. 

This then brings up a series of unaddressed issues/concerns such as:

  1. Does the Restrictive of Movement constitute as a Force Majeure event?
  2. Who is going to bear for the loss of time and cost?
  3. Are the contractors entitled to claim for Extension of Time (EOT)?
  4. If so, do developers get to claim for the same, and from who?
  5. What happens to the workers that are currently working? 

The Ministry of Work had made it clear that the Government will not bear for any loss and expense during this unforeseen period, it looks like many in the industry are left hanging not knowing what to do. 

On the same day, Master Builders Association Malaysia have also issued a letter to the Chief Executive of Construction Industry Development Board Malaysia (CIDB), requesting for construction work to be continued as the severity of impact toward the construction industry. In view of the FAQs issued by the Ministry of Works, the chances for the Government to resume work in the construction industry is low. 

So, what options do the industry players have? 

Malaysian Institute of Architects (“PAM”) issued an Advisory Note to its members on 18.3.2020 in which they perceive this Restrictive Movement Order does constitute as a Force Majeure event under the PAM Contract 2006 which entitles contractors to apply for EOT. 

On 19.3.2020, PAM issued another Advisory Note to its member, reminding fellow architects of their legal duty to instruct a contractor to revise the Works Programme to cater for the temporary suspension and it is at the affected contractor’s liberty to submit his claims for an Extension of Time and/or for any loss and additional expense arising. The Architects role is to ensure that these claims are submitted wholly in accordance with the terms of the contract and assessed fairly. 

With all the above information, Speedbrick would like to recommend the following steps to be taken by the contractors: 

Firstly, immediately review your construction contracts, familiarise yourself with the clauses in relation to Extension of Time and Force Majeure.

Secondly, draft the following letters to your client:

  1. To inform your client that your work is being suspended pursuant to the Restrictive Movement Order;
  2. To apply for an Extension of Time and/or any loss and additional expense arising;
  3. To notify your client of your intention to invoke the Force Majeure Clause. 

By doing so, you have fulfilled the notice requirement that may be required under the construction contract. 

Thirdly, you are to keep proper records of your current work progress and record on how you are being affected during this difficult period. Although this may not prevent the foreseeable risk and issues that are going to happen in the near future, but at least there is a proper paper trail and documentation detailing the necessary impact. 

As you may well know, the lack of clarity has brought up a bucket load of issues that will continue to compound over time, as the construction industry as a whole comes to terms with the measures taken to stop the spread of the virus. We can only hope that the chain of consequences will be minimised to prevent further unnecessary losses from continuing as a result of this order as it may heavily impact the cash flow and the financial stability of many construction companies in the industry. 

As part of the construction industry, Speedbrick recognises the difficulties that construction companies are going through. We hope that during this unprecedented time, you maintain proper documentation and site security safety to prevent any unnecessary losses on your end further. Most importantly, ensure that safety continues to be a priority for everyone involved.

Speedbrick Solutions is a construction software company specialises in helping its clients stay in control and ahead of construction risks. Two modules are available now, Speedbrick COMPOSE: managing supply chain management risk and Speedbrick ECHO: managing project financial performance and important contractual terms,including EOT management.