Status of estimates for emergency work

Abstract

In a normal prosedur, estimate is made based on drawings to predict the cost of a project for tender analysis purposes. However, in emergency works, such as land slides that disrupt public facilities, the normal procedure is inappropriate because of its time consuming process. Thus, the Malaysian Treasury issues Treasury Instruction AP55 that allows the Public Works Department (PWD) to shorten the time consuming procedure. In such eventuality, under AP55, in practice therefore, the PWD appoints, by means of a letter of intent, the contractor directly to carry the emergency work under design and built procurement method. The letter expressly specifies the estimated cost of the works and requires the contractor to start work immediately and prepare the design. The intention is that the contractor should prepare a design that fits the estimate. If the PWD is satisfied with the design and the cost, it will issue a letter of acceptance. In one particular project, the contractor had overdesigned and overestimated the cost resulting in PWD terminating the contract. The contractor claimed for the full estimated amount stated in the letter on intent. PWD argued that it would will only pay on quantum meruit basis. The contractor contended that the letter was not a letter of intent, but a letter of award. So the objective of this project to determine the validity of estimate, i.e., whether PWD is bound to pay the amount stated. From the findings, it can be concluded that if the letter is a true letter of intent, then the estimate reamins as estimate and the PWD is not bound by it. If the parties could not reach a binding agreement, then the contractor can only claim quantum meruit for the work done.