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The implementation of the 3rd Generation PBC has proven to be
successful in Malaysia. To date, several capability sustainment
contracts for Government moveable assets are running efficiently
where contractors are paid solely based on their performance.
Of late, in order to instill the commitment of
Government contractors, clauses on “investment
in capability” and the “use of local sub-
contractors” have been further strengthened.
This is to intensify industry development by urging
contractors to retain work in-country, accelerating
the growth of the supporting industry and creating
high skill jobs especially in the technology intensive
areas of MRO components. The commitment
and the action taken by the contractors will be
monitored and measured via SPMs.
The introduction of PBC in Government
procurements has also changed the norms in
contract negotiations. Usually, the main parameter
to be negotiated in Government contracts is the
price. With 3 rd Generation PBC, there are many
other variables that can be negotiated such as “at-
risk margin”, KPI weightages, performance levels,
PIP transition stages and others, which make it
difficult for the contractor to slant the negotiation
to its own advantage. This, in a way, motivates
Government negotiators to be more proactive in
preparing good negotiation strategies to get the
best deal for the Government, prior to negotiating
a PBC with the contractors.
Amongst the practitioners of PBC to date,
many appreciate the fact that PBC simplifies the
payment deduction process as it is done in a very
objective manner, hence removing elements of
subjectivity which can be grounds for challenge
by contractors. Unlike the current conventional
contracts where LD deductions are calculated
and made at a certain time (eg. at the end of the
contract) and involve significant paperwork and
specific approval process, the deductions in PBC
are easily made on “real-time” basis. The self-
regulating PBC has drastically simplified contract
management in such a way that deductions are
made only based on the contract with no other
justification/approval required.
There is also a general perception that PBC will
cost more than a conventional contract. This view
is invalid since the cost of a contract is directly
related to the scope of work and when a contract
is converted to PBC, the contract cost will likely
still be based on “man and material”. In fact,
all seven Stage 3 PBC capability sustainment
contracts implemented above did not experience
any significant cost increase. If any, the cost
increase must not exceed 15% of the original cost.
CONCLUSION
The implementation of the 3 rd Generation PBC
has proven to be successful in Malaysia. To
date, several capability sustainment contracts
for Government moveable assets are running
efficiently where contractors are paid solely
based on their performance. If a PBC on complex
moveable assets can be done, the same can
also be accomplished on non-moveable assets
such as roads/highways, Government buildings,
incineration plants, healthcare facilities and the
like. Facility Management must take advantage of
Capability Sustainment experience in employing
the latest PBC version to draw the best from its
contractors.
Whilst Government procurements through
open tender secure the best deal in terms of price,
unnecessary leakages/wastages that are often
discovered in conventional contracts can still
persist and must be dealt with. The 3 rd Generation
PBC is therefore a viable solution.
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