The new payment clauses in the PWD 203/203A (REV. 1/2010) conditions of contract in aligning to CIPAA

Abstract

Payment disputes is one of the biggest issues in the construction industry normally faced by contractors which results from default in payment by the employers. In the construction project, these payment default are issues on non-payment, late payment and under payment that impacts Malaysian construction industry causing delay in completion of the project. In order to mitigate the problem, a resolution to disputes relating to timely payment which is speedy and economical needs to be formed. The Government of Malaysia being one of the largest employer in Malaysia construction industry, in realizing problems on the impact of cash flow to construction contracts, has alongside with the industry main players addressed the issues to be taken seriously and thereon supports the formation of the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012). The proposed CIPAA 2012 came into operation on 15th April 2014 to address payment issues on improving cash flow and principally aims to alleviate the problem with regular and timely payments made to the unpaid party. This act opens up avenue for contractors to dispute certification of payment by employers. Therefore it is very essential that the Government of Malaysia, plan strategies to overcome or minimize payment problems in projects handled directly by Government. Public Works Department (PWD) as the Government’s project implementation agency, needs to improve and align its current payment-related procedures to suit CIPAA 2012 requirements thus minimize any potential claims arising from the contractor. PWD has taken steps to make amendments to the Standard Conditions of Contract PWD 203/203A (Revision 1/2010) to further strengthen the payment procedure on ensuring contractor is paid fairly and accordingly. In conclusion, the amendments made to the PWD 203A (Rev. 1/2010) Conditions of Contract is determined to align to the principle aims of CIPAA in ensuring regular and timely payment, hence proceeds to mitigate the possibility of Government projects being dragged into adjudication through CIPAA 2012.