Construction Industry Payment and Adjudication Act

One other issue that was also touched on in the BIPC meeting held on 22 August 2011 was on the proposed Construction Industry Payment and Adjudication Act (CIPAA). On the said matter, the construction industry has been and is still fraught with payment problems, i.e. late payment, under payment and non-payment.  Consequently, in the early 2000’s, forums and discussions were held to resolve the issue.  By the end of 2005, the CIDB under the Ministry of Works formed a task force to formulate the CIPAA.  The objectives are to facilitate regular and timely payment, provide a mechanism for speedy dispute resolution through adjudication and provide remedies for receiving of payment.  The CIPAA formulated by the CIDB task force however, encountered opposition from the Bar Council and Malaysian Institute of Arbitrators. The Attorney General had in September 2010 himself issued two (2) directives, i.e. adjudication is confined to progress payment disputes and KLRCA is charged with nomination of adjudicators. 

In the midst of the concerned developments over the aforementioned issue, KLRCA too came out with its own proposed CIPAA. In gist, KLRCA’s proposed CIPAA, amongst others, seek to exclude consultancy and construction supplies contracts from the coverage of CIPAA, apart from excluding oil and gas, defense and low rise owner occupied residential construction projects.  In addition it seeks to exclude construction contract not made in writing as well as confining adjudication under the CIPAA to only progress payment disputes.  Apart from that, it seeks to negate the right to a dispute to adjudication if the same subject matter between parties is commenced in court or arbitration.  The Ministry of Works too does not appear to have a role to supervise the implementation of CIPAA.

However, the stand of BIPC is that the Ministry of Works’ proposed CIPAA should be accepted. We consider that it is a compromise, after taking into account the experiences and views as well as consensus of the construction industry stakeholders. On the progress, we took note that the matter has been referred to the Chief Secretary to the Government (as the PEMUDAH Chairman) through a letter dated 5 August 2011 sent by REHDA.  The letter requested the assistance of the Chief Secretary to help finalize and approve CIPAA (as amended from the Ministry of Works’ version), and to date there has yet to be a reply to the said letter.