THE PURPOSE OF CIPAA
Payment disputes in the construction industry have become a common problem in Malaysia and in most countries, especially in developing countries. About 50% of Malaysia construction projects experience Under Payment, Late Payment and/or Non-Payment issues which causes complication to the projects to the extent that some of the projects are abandoned wherein innocent third party purchasers become victims of delayed and abandoned projects.
One of the main elements for the complication is the client’s inadequate finance or main contractor’s poor cash flows for the project. The amount of money involved in construction industry is enormous and when payments from the clients are delayed, most of the contractors/sub-contractor would not be able to bear the heavy day to day construction expenses by themselves which includes the cost of material, labour and other necessary day to day expenses. The issue of payment dispute would eventually result in time over-run, cost over-run and total abandonment of the project.
Therefore, the construction payment dispute requires to be dealt with at worst, a cheaper, quicker, simpler, legal binding and enforceable resolution enabled by an adjudication proceeding, which is what CIPAA has specially drafted to resolve the issues with provisions such as PROHIBITION of Conditional Payment, to STREAMLINE payment procedures and provide REMEDIES for the recovery of payment.
The relevant bodies in the construction industry, namely the Construction Industry Development Board (CIDB) and Master Builders Association Malaysia (MBAM), IEM, BEM, PAM are in support of CIPAA and are making efforts to promote its smooth application and enforcement.
The Construction Industry Payment and Adjudication Act (CIPAA) 2012 has come into operation with effect since 15 April 2014.