THE PURPOSE OF CIPA ACT
Delay payment in the construction industry has become a common problem in Malaysia and in most countries, especially in developing countries. About 50% of Malaysia construction projects experience Under Payment or Late Payment or Non-Payment issues which in turn causes the delay in completion of the project 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 element for the delay is the client’s inadequate finance or poor main contractor’s cash flows for the completion of project. The amount of money involved in construction works industry are 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 which includes the cost of material and labour and other necessary day to day expenses. The delay of payment would eventually cause time over-run, cost over-run, disputes, litigation and eventually total abandonment of the project.
Therefore, the construction payment dispute requires to be dealt with less costly, Speedier, Contemporary and with legal effect enabled by an Adjudication Mechanism which is what CIPAAct has specially drafted for resolving the issues with inter alia 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 this Act and are making affords to promote its smooth application and enforcements.
The Construction Industry Payment and Adjudication Act (CIPAA) 2012 has come into operation with effect from 15 April 2014.