A Study on the Implementation of Construction Industry Payment and Adjudication Act 2012 (CIPAA) and Its Challenges

Lim, Shok Jin (2021) A Study on the Implementation of Construction Industry Payment and Adjudication Act 2012 (CIPAA) and Its Challenges. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

Text RQS#Lim Shok Jin#18WVR12824 - SHOK JIN LIM.pdf Restricted to Registered users only Download (1MB)

Abstract

The majority of disputes of a construction project are related to the payment because there is a large amount of money involved in a construction project. Usually, the payment disputes will be caused by the payment issues such as late payment, non-payment, and under payment from the Client. The consequences of the payment disputes in a construction project are delaying the progress of work and slowing down the project’s cash flow. Therefore, a solution was formulated to solve the payment disputes with the introduction of a new act which is the Construction Industry Payment and Adjudication Act 2012 (CIPAA). CIPAA has started operating in the Malaysian construction industry on 15 April 2014. However, there are still many parties involved in the construction industry who are not familiar with this Act even it has already operated for 6 years. Therefore, this research is conducted to discuss the concept and function of CIPAA in the Malaysian construction industry which can help parties understand clearly the CIPAA and help to improve the CIPAA. There are 3 objectives will be conducted to achieve the purpose of this research, which is to review the background of CIPAA, to identify the benefits of CIPAA, and to determine the challenges of CIPAA. The theoretical knowledge of the 3 objectives has been discussed in the literature review of this research. Other than that, the questionnaire also will be distributed to parties involved in the Malaysian construction industry to determine the information discussed in the literature review. Literature Review shows that the implementation of CIPAA in the Malaysian construction industry is to address the cash flow and resolve the payment disputes by providing a faster and cheaper mechanism. Next, the professional bodies such as CIDB, PAM, IEM, and others are the parties who have caused the successful application of the CIPAA Act 2012 in the construction industry. The procedure to apply an adjudication for resolving the payment disputes also has been stated. Besides that, the benefits of CIPAA discussed in the literature review including speedy mechanism, lower cost resolution, to address cash flow, confidentially, professional and competence amongst the construction parties, and the rights to suspend work and reduce the progress of work. The primary data collected through the questionnaire survey will be analyzed in Chapter 4 of this research. From the data analyzed, most respondents are agreed that these benefits discussed in the literature review have been brought to them by the application of CIPAA. Likewise, the literature review also showed the challenges faced by CIPAA in the Malaysian constriction industry. These CIPAA's challenges including the expansion of the jurisdiction of Adjudicator, larger complex claims, rough decision, lengthen the resolution time, 2-tiers dispute resolution, CIPAA become a redundant process and adjudication only benefits the third party. Most respondents also agreed that CIPAA was facing such challenges and these challenges also have affected the performance of CIPAA in the construction industry. Lastly, the 3 objectives of this research also have been achieved successfully. The ranking of the benefits of CIPAA also is identified based on the primary data collected from the construction parties in Malaysia. The 1st Rank benefit of CIPAA is the lower cost required compare to litigation and arbitration. However, the biggest challenge faced by the CIPAA is a larger complex claim which requires the Adjudicator to consider within a short timeframe. To be concluded, the CIPAA still has some room for improvement to make it become a perfect payment dispute resolution.