CIPAA ACT NEEDS URGENT REVIEW

The Construction Industry Payment & Adjudication Act (CIPAA) is an effective legal tool to resolve disputes between contractors and their clients. First set up in 2014, CIPAA has been hailed as a significant milestone in revolutionising the construction industry by providing a much-needed framework to ensure fair and timely payment for construction work. The ‘pay now, argue later’ saying was the reason for CIPAA’s success that served well to assist contractors to survive cash flow crunch. But the stark reality is that billions of ringgit are still stuck in dispute at adjudication, arbitration or litigation yearly.

Master Builders Association Malaysia (MBAM) feels that after a decade of its setup, the time is ripe to carry out a review of CIPAA with the view of ensuring the growth of a sustained construction industry. By right, CIPAA should be a simple process for contractors to resolve their disputes with clients. But when it involves the calling of expert witnesses, the process is mired with technicalities that incurs additional legal cost. As it is, disputing parties would have already spent at least RM40, 000 each for engaging their own lawyers. At the estimated legal fees from the 600 cases registered last year, the minimum total of legal fees spent would have surpassed RM48 million. However, since its inception, hundreds of million have been spent on the process.

To ensure the Act remains relevant and pragmatic, any review of the Act should be inclusive incorporating comments and feedback from stakeholders. MBAM understands that there may be intention to reform the Act by the relevant authorities. We would like to add to the feedback on what should be done and they are summarised as follows: There is an urgent need for a shorter duration of CIPAA process. Perhaps it should be reduced to 70 days from the original 105 working days. The usual duration of CIPAA process takes five months, and contractors as the claimant would have already suffered at least a few months of non-payment before taking CIPAA action. Without cash flows, it is tough for contractors to carry on to complete their contracted projects. Ideally, the duration should be shortened by half to 70 days or less in sync with practices overseas. It surprised us to find out that in Singapore the duration is a mere 21 days and in the United Kingdom it takes 28 days with the option to extend if the disputing parties agreed to it. Our neighbour Thailand is considering a duration of between 30 and 60 days.

To maintain adjudication as a straight forward process, payment disputes should be resolved based on where work has been done, it should be paid. As the old saying goes, pay your workers before their sweat is dried”. Currently, we realise that the CIPAA adjudication process is complicated and too many technical issues were brought into the process which complicate the dispute.

Oliver HC Wee KMN, AMN

MBAM President