One of the most essential contributors to the country’s developed economy is the construction industry especially in developing city such as Kuala Lumpur, Ipoh and Penang. The industry has developed rapidly due to the modern advancement of the sophisticated technology established in the line of work. Alongside with the development, many apparent disputes emerged during the construction process. A survey conducted by Abidin (2007) found that 51% of the disputes occurred typically contributed by the payment problem. It can be considered as the root hindrance for the other issues as payment is the fundamental and economic lifeblood in the construction industry.
The construction process involves prolonged durations and multiple phases of work. Hence, to fulfill the project goals, it is fundamentally important for the main contractor and subcontractor to maintain a good relationship. Unfortunately, the majority of the payment issue reported typically happened between both parties which include the delayed payment, underpayment as well as non-payment that are considered as debt. The Government is well-informed about the specific issues that occurred and established an initiative to develop a payment act to cater to the fundamental problem identified as Construction Industry Payment and Adjudication Act (CIPAA) 2012.
What is CIPAA 2012?
Construction Industry Payment and Adjudication Act 2012 or known as CIPAA 2012 is a payment act enacted and legislated by the Malaysia Parliament on 15 April 2014 to instantly resolve the paying disputes in the construction industry specifically between the main contractor and subcontractor that ended with the collection of payment. It is moreover to outlaw the practices of “Pay-When-Paid” where the subcontractor will only get paid when the main contractor gets the payment from the clients. The establishment of the Act, it provides speedy, timely and cost-effective resolutions for the disputes occurred due to the payment problems. As some of the main contractors practiced “Pay-When-Paid”, it indirectly can affect the duration of the project as well as slow down the payment process that contributed to the critical term of cash flow for the company especially in developing city such as Ipoh, Perak, Kuala Lumpur and Penang.
The enactment of the Act positively receives massive support from the credible bodies in the field including the Construction Industry Development (CIDB) and Master Builders Association Malaysia (MBAB). Considering that CIPAA 2012 is still a new element in the construction line of work that comprises of debt and payment collection, there is a high possibility for the construction’s players have a lack of awareness and knowledge pertaining to the matter.
Application of CIPAA 2012
The Act can be employed for any written construction contract that associated with any construction works conducted wholly or partially within the territory of Malaysia including Ipoh, Perak and Kuala Lumpur. As stated in Section 4 in CIPAA 2012, the terms “construction contract” can be applied for the construction work as well as the construction consultancy contract. The former comprises of architectural work, engineering, planning and feasibility study, landscaping and project management services, exterior and interior decoration, and surveying that contributed to the construction work. According to Section 3 in CIPAA 2012, the Act does not apply to the construction contract for any construction work of any building that is less than four stories high by the natural person which is solely for his business. The unpaid party or individual can claim for collection of payment for the work done or services declared under the terms of a written construction contract. It will be resolved by the adjudication process to collect the debt owed.
Adjudication and the Process
Adjudication is described as the new tools for resolving the disputes through an interim by binding to the dispute resolution procedure. An adjudicator is appointed as the interim to make the decision for the disputes within 45 days. Hence, the Adjudication Award can be obtained within 95 working days for the payment collection. It is extremely significant to ensure the swift resolution in line with the objective of CIPAA 2012 establishment. Next, once the disputes on the payment or debt arise, the procedure of adjudication can be conducted at any time during the construction process. In the adjudication procedure, the affected parties or individuals can report and files the disputes in arbitration or litigation. Arbitration is described as a way to resolve the conflict outside of the courts. Meanwhile, litigation is referred to as the process of taking legal action. As an adjudicator, he or she will provide security along with the remedies for the payment resolution in accordance with the decision made.
Who Can Benefit from CIPAA 2012?
Do you ever experience a payment dispute where you did not get paid for the job you have done? Do you know that actually you can have your collection of payment under CIPAA 2012? You want to acquire a better understanding and clear insight into how CIPAA 2012 works? Absolutely, this is for you. In light of the above matter, a HRDF claimable workshop on CIPAA 2012 will be conducted in Ipoh, Perak and Kuala Lumpur. Who can benefit from this course? Developers, employers, main contractors, sub-contractors, suppliers, project managers, contract managers, construction site managers, finance officers, project executives, quantity surveyors, and contract executives are encourage to participate.
