Contract Administration


1. Why is proper contract administration required?
  Contract administration and supervision play an important role in Government procurement to ensure that contractors meet all their obligations under a signed contract. It is the responsibility of each officer to ensure that the government gets value and maximum benefit for payment made by the government. It includes ensuring the quality of goods supplied meet specifications in the contract or if services are provided, such services are in accordance with the specifications/frequencies and in accordance with the agreed quality. For the procurement of work, it must include the scope of work specified and agreed in the offer/contract. In addition, supplies shall be provided within an agreed period and if works, the work shall be completed within the period offered or specified in the contract. If the contractor fails to supply or late to complete work, then action should be taken to impose fines/LAD where applicable.
2. Is a Letter of Intent issued evidence that a contract is offered to a certain party?
  Letter of Intent is not binding on the Government to a contract agreement and does not imply that a contract existed.
3. What is a Letter of Acceptance?
  Letter of Acceptance (LOA) is a letter confirming the acceptance of an offer based on the conditions set forth in the tender document, the draft contract documents that had been issued earlier, the conditions that had been agreed in the Letter of Intent and other conditions that had been agreed. LOA shall be issued to the successful contractor after completion of all negotiations and an agreement is reached. All conditions and changes that had been agreed in the negotiations should be clearly stated in the LOA.
LOA is a valid legal document and is part of the contract documents.
4. How long is the period set within which to return the Letter of Acceptance?
  Normally, the contractor shall return the LOA in a period of 14 days from the date of the offered letter. Longer period may be granted but must be limited to a reasonable period.
5. What is the format/form of Letter of Acceptance (LOA)?
  LOA shall be in the format/form prescribed by Treasury. Please refer to the relevant SPP that remains in force (SPP No.5/2007).
6. Is the contract entered between the Department and the contractoror or between the Ministry and the contractor?
  Under Section 2 of the Government Contracts Act 1949 (Revised 1973), all contracts are tied on behalf of the Government and as such should be made under the name GOVERNMENT OF MALAYSIA.
7. Who can sign the contract on behalf of the Government?
  Contracts can be signed by the Hon. Minister or an officer authorized by the appropriate Hon. Minister in accordance with the provisions of the Government Contracts Act 1949 (Revised 1973) (act 120).

All the Secretary Generals of the Ministry should identify the appropriate officials to sign the contract and ensure that delegation of power and the limits authorized in writing was obtained accordingly from the Hon. Minister of the Ministry concerned. This empowerment should be reviewed annually and updated. Only officers who have empowered can sign the contract.
8. Is there a format/example to delegate power to sign a contract?
  Format to delgate power to sign a contract are shown in the Table in the Government Contracts Act 1949 (Act 120).
9. Is the authorisation to sign a contract calculated according to a year’s contract value or the total value of the contract?
  The authority to sign a contract covers the total contract value and not the value of a year’s contract.
10. What is the authorised officers limit to sign the contract.
  Setting contract limits is based on the total contract value of the contract and the contract value. If there are many contracts with large and small values, and at the Federal and State level, it is possible that more officials should be delegated the authority to sign contracts. It is up to the Agency to determine the number of officers and sets the value to sign the contract. For example, office cleaning contract, security services, grass cutting, office rental, photocopier rental and others are appropriately signed by the officer in charge of that service.
11. Can the quantity contract or timed contract of Ministries/Departments be ridden by other agencies?
  Yes, other agencies can acquire the necessary supply of goods from the quantity contract or timed contracts of Ministries/Departments that have a contract as a major user certain goods or from their contractors on the same conditions, provided that:
  (a) approval obtained from the Ministries/Deparments concerned;
  (b) prior approval from Treasury or the State Financial Authority has been obtained; and
  (c) contract does not involve additional contract ceiling amount (the balance unacquired by the Ministries/department can be purchased by the ridden agency).
12. Specific procurement has been allocated to Bumiputera contractors or Manufacturers, and they have a priority price. However, the contractor has lost the status of Manufacturer / Bumiputera when the contract is still in force. Can action be taken against the contractor?
  The contract should have clauses that state explicitly that the contractor shall always retain the status of Bumiputera / Manufacturer, and if at any time the status has dropped/lost, the contract automatically is deemed to have expired or may be terminated. If that clause is specified in the contract, action can be taken to terminate the contract and performance bonds seized.
13. A contractor normally cannot sub-contract part, any part or the entire contract to any party without the approval of the Government. There are sub-contract cases that has occurred. Can action be taken against the contractor?
  The contract should have clauses that state explicitly that the contractor cannot sub-contract part or any part or the entire contract to any party without the prior Government approval. If there is evidence that some or any part or the whole contract was subcontracted, then action can be taken to terminate the contract and performance bonds seized. Therefore, agencies need to monitor contracts and ensure that sub-contracting did not occur during the contract period.
14. What type of action can be taken against a contractor/supplier who fails to comply with contractual obligations?
  Some form of actions may be taken, some of which are based on the provisions contained in the contract agreement with the contractor/supplier and the Government. A common action taken includes imposing fines/LAD and terminate the contract. In addition, the Agency may report to the Government Procurement Division(BPK), Ministry of Finance and Contractor Service Centre (PKK) on this matter. In this case, BPK/PKK can take some actions such as issuing a warning, suspend registration, cancel the registration and blacklist the board of directors (refer to SPP No. 6 of 2010).
15. Who can sign the contract on behalf of the Government?
  Under Section 2 of the Government Contracts Act 1949 (Act 120) of all contracts must be made on behalf of the Government. Contract can be signed by the Minister or by any public official duly authorised in writing by the Minister.
16. Should the contract documents be stamped and who should pay for it?
  Contracts must be stamped and the cost shall be borne by the contractor.