Discusión/Discusión

Construction organisations in this study is refer to contractors in Malaysia. The discussion focuses on contractors, as they are the dominant party in the industry (Table 2.9). In addition, due to the nature of construction, contractor organisations typically operate over a number of geographical regions under a collective brand, affording them a degree of independence (Raiden and Dainty, 2006). With this fragmented system, the contractor culture operates under a ‘knowledge is power’ hoarding methodology (Williams, 2012). Furthermore, personnel in contractor organisations prefer to perform their tasks in project management based on past experience and advice passed down from mentors rather than on written standard procedures or textbooks or established analysis (Tupenaite et al., 2008). Knowledge in construction industry is therefore mostly in the heads of knowledgeable workforce and is lost when the workforce relocates or retires (Noordin et al., 2012).

In Malaysia, the majority of the contractors (i.e. almost 90%) are classified as small and medium-sized firms (i.e. G6 category and below – Table 2.13). The estimated number of contractors registered with CIDB is shown in Table 2.13.

Table 2.9 : Estimated numbers of construction organisations in Malaysia

Discipline Registered construction organisations

Architect firms 1424

Engineering firms 1837

Quantity surveying firms 313

Contractor firms 64,593

Source: Malaysia Country Report (2010)

Types of contractors in Malaysia

The Malaysian construction industry is generally separated into two areas: general construction, which comprises residential construction, non-residential construction and civil engineering construction. The second area is special trade works, which comprises activities of metal work, electrical work, plumbing, sewerage and sanitary work, refrigeration and air-conditioning work, painting work, carpentry, tiling and flooring work, and glass work. The contractors in Malaysia are composed of three separate specialisations, as shown in Figure 2.4. These are classified further as specialist categories: building construction (B), civil engineering construction (CE), mechanical and electrical construction (ME). These specialist categories are further subdivided into subspecialties (Appendix H). As per a CIDB ruling, a construction company can be registered in more than one category and subspecialty within one grade (tendering limit) as long as it satisfies the registration requirements, as per Figure 2.4 below.

Definition of size of organisations in Malaysia

Before the formation of the Malaysia National SME Development Council (NSDC) in June 2004, there was no standard definition of small and medium enterprises (SMEs) in use in Malaysia. A broad definition of SMEs is provided, along with specific definitions for micro, small and medium enterprises. For wider coverage, businesses are considered as SMEs as long as they meet either the threshold set for annual sales turnover, or the number of full-time employees (Bank Negara Malaysia, 2005). According to the NSDC (2005), for consistency and comparability of data across sectors, the working definition for SMEs in the mining and quarrying sector and construction sector is based on the SME definition for the services sector (see Table 2.10 and Table 2.11).

Table 2.10 : Summary of the approved SME definitions in Malaysia based on the number of full-time employees. Sector Size Primary agriculture Manufacturing (including manufacturing agro-based & manufacturing related services) Service sector (including ICT, mining

and quarrying, and construction sector)

Micro Less than 5

employees Less than 5 employees Less than 5 employees Small Between 5 & 19

employees Between 5 & 50 employees

Between 5 & 19 employees Medium Between 20 & 50

employees

Between 51 & 150 employees

Between 20 & 50 employees

Source: Bank Negara Malaysia (2005).

Table 2.11 : Summary of the approved SME definitions in Malaysia based on annual sales turnover Sector Size Primary agriculture Manufacturing (including manufacturing agro-based & manufacturing related services) Service sector (including ICT, mining

and quarrying, and construction sector)

Micro Less than 200,000 Less than 250,000 Less than 200,000 Small Between 200,000 &

less than 1 million

Between 250,000 & less than 10 million

Between 200,000 & less than 1 million

Medium Between 1 million & 5 million

Between 10 million & 25 million

Between 1 million & 5 million

Definition of size of organisation in the Malaysian construction sector

Defining the size of an organisation in construction services based on the definition by the NSDC does not reflect the true size of the construction companies in Malaysia (CIDB, 2006). To show the exact picture of the size of Malaysian contractor companies, CIDB Malaysia recommends that the definition for SMEs in the construction sector should be based on paid-up capital or tendering capacity for the following reasons:

 Contractors registered with the CIDB are awarded grades of registration from G1 to G7, G1 being the lowest grade and G7 the highest. These grades reflect the tendering capacity of the construction firm, whereby Grade G1 may tender only for projects less than RM200, 000 and in the other extreme, Grade G7 companies have no tendering limits. Therefore, a construction firm cannot undertake contracts exceeding the value that it is registered for.

 A construction company therefore adopts a structure based on its grade of registration and therefore their financial or tendering capacity. As their order book expands they can then apply to be upgraded to a higher grade of registration, thus increasing their financial and tendering capacity.

 The different grades of registration are awarded based on criteria such as the financial capacity (paid-up capital), personnel resources and track record (experience and performance) of the company. The different grades of registration reflect the financial and tendering capacity of the company and therefore its size. Table 2.12 shows the value of the work which approved construction companies can tender for; construction companies can apply for promotion to a higher grade.

Table 2.12 : Contractors’ classification according to tendering capacity and paid-up capital Grade of registration Tendering capacity (MYR) Paid-up Capital/net capital (MYR) Contractor category/size G7 No limit RM 750,000 (USD247,500) Large G6 Not exceeding 10 million

(USD 3.3 million)

RM 500,000

(USD165,000) Large G5 Not exceeding 5 million

(USD 1.65 million)

RM 250,000

(USD82,500) Medium

G4 Not exceeding 3 million (USD 990,000)

150,000

(USD49,500) medium

G3 Not exceeding 1million (USD 330,000) RM 50,000 (USD16,500) Small G2 Not exceeding 500,000 (USD 165,000) RM 25,000 (USD8,250) Small G1 Not exceeding 200,000 (USD 66,000) RM 5,000 (USD1,650) Micro

Source: CIDB Malaysia (2010)

General Definition of SME contractor firms by CIDB Malaysia

A small and medium enterprise in the construction industry is an enterprise with paid-up capital not exceeding MYR250, 000 or tendering capacity not exceeding MYR5 million.

Specific definition by CIDB Malaysia

 A micro enterprise in the construction industry is an enterprise with paid-up capital of less than MYR5, 000 or tendering capacity of less than MYR200, 000.

 A small enterprise in the construction industry is an enterprise with paid-up capital of between MYR5,000 and less than MYR50,000 or tendering capacity between MYR200,000 and less than MYR1 million.

 A medium enterprise in the construction industry is an enterprise with paid-up capital of between MYR50, 000 and less than MYR250, 000 or tendering capacity between MYR1 million and MYR5 million.

According to the CIDB (2006), defining SMEs in the construction industry based on the company’s financial or tendering capacity is a better reflection of its true size and its capacity to undertake the various aspects of construction projects. Based on contractor registration records with the CIDB, the number of contractors registered is increasing year by year. In 2012, a total of 69,490 contractors registered with the CIDB (CIDB,

2013). Of this total, 52% were micro contractors, i.e. those in the G1 category, who are qualified to tender for projects valued at less than MYR200,000; (27%) were small contractors, i.e. those in G2 and G3 categories; 10% were medium (G4–G5); whilst only 9% (6,836) were big contractors (G6–G7). The status of contractors registered with the CIDB in different grades as at 2012 is shown in Table 2.13 and Figure 2.5.

Table 2.13 : Number of contractors registered with the CIDB

Grade Tendering Capacity Annual

turnover 2010 2011 2012

G1 Not exc. 200,000 5,000 32,987 32,752 36,399

G2 Not exc. 500,000 25,000 8,077 8,187 8,665

G3 Not exc. 1 million 50,000 10,761 10,437 10,351 G4 Not exc. 3 million 150,000 2,766 2,686 2,922 G5 Not exc. 5 million 250,000 3,962 3,817 4,317

G6 Not exc. 10m 500,000 1,507 1,398 1,692

G7 No Limit 750,000 4,533 4,573 5,144

Total 64,593 63,850 69,490

Source: CIDB Malaysia (2013)

Figure 2.5: Malaysian contractor population by grade Source: CIDB Malaysia (2013)