Builders: Don’t make us wait

Builders: Don’t make us wait
By Ooi Tee Ching
Published: 2008/11/17

Late payments in construction jobs may be a thing of the past as contractors are pushing for Parliament to pass a law to ensure faster payments and quick resolution of disputes.
Currently, although payments should be made within 30 to 60 days, which is the industry practice, it is often not the case.Contractors are now worried that as the economy is expected to slow further, they may have to wait longer for their money.They are now banking on the Construction Industry Payment and Adjudication (CIPA) Bill. Unfortunately, the draft, which was given to the Attorney General's Chambers in early 2007, has not made its way to Parliament.

Clients like government agencies and property developers, architects, engineers, and surveyors have all given their backing.However, the Bar Council, which is not a direct stakeholder in the construction industry, has yet to give its consensus.

"We've initiated this in June 2003 but until now the Bill has yet to be presented to lawmakers in Parliament," said Master Builders Association of Malaysia president Ng Kee Leen.Payment default is still a major problem because payment terms are usually on credit rather than on delivery. This means payment will be made after a certain period, after work is done.Ng said it is ironic that Malaysia has world-class construction standards and yet "mundane" things like timely payments are still not being practised.

"When there is late payment, projects are delayed, squeezing profits along the way. In the case of financially weak contractors, they may face bankruptcy," he told Business Times in an interview."Chronic problems of late and non-payments affect the entire delivery chain of consultants, contractors, building material suppliers, transporters and financiers. A rough calculation will show claims running up to billions of ringgit," he said.On average, construction jobs run into the millions and span over three years. With each progress payment involving big sums, Ng said the enactment of the CIPA Bill is vital to protect contractors' interests."This law will help to minimise payment defaults via timely and cost-efficient recourse to adjudication," he said.

Similar laws are already in practice in the region. Among them are Australia's Building and Construction Industry Security of Payment Act 2002, New Zealand's Construction Contracts Act 2002 and and Singapore's Building and Construction Industry Security of Payment Act 2004.In a separate interview, Malay Contractors Association, representing some 7,000 Bumiputera contractors, strongly support the CIPA Bill to be enacted as soon as possible.The association secretary general Datuk Osman Abu Bakar said traditionally payment disputes have been resolved via arbitration.Although the intent of arbitration was for a fast, cheap and binding resolution, the reality is different."A typical arbitration on construction dispute could take from a year to five. Payment disputes are rarely solved in less than a year," he said.

The CIPA Bill provides for contemporaneous resolution via adjudication within 14 to 42 days.Pending enactment of the CIPA Bill, the association appeals to banks and financial institutions not to take drastic action against Bumiputera contractors."Credit lines are vital to facilitate completion of construction projects. We appeal to the banks to be more understanding," he said.