WHAT IS CIPAA 2012

On April 15 2014, the construction industry was revolutionized by the groundbreaking legislation of Construction Industry Payment and Adjudication Act 2012. This groundbreaking legislation has introduced a fair and efficient system for resolving payment disputes between parties involved in construction projects. Malaysia was the fifth country to adopt adjudication as part of the dispute resolution mechanisms.

The Construction Industry Payment and Adjudication Act (CIPAA) 2012, was enacted to address the longstanding issue of delayed or non-payment within the construction sector. It was specifically designed to ensure that contractors, subcontractors, suppliers, and consultants are paid promptly for the work they have performed or the materials they have supplied.

The CIPAA Act of 2012 establishes a comprehensive framework for construction adjudication payment disputes in Malaysia, offering a faster and more cost-effective alternative to traditional litigation or arbitration processes. Under this act, any party who is owed payment can initiate an adjudication proceeding to resolve the dispute. The process is swift and it involves an impartial adjudicator reviewing the evidence and making a binding decision within a fixed timeframe.

One of the key features of the act is its emphasis on cash flow in the construction industry. It requires that progress payments be made in a timely manner, enabling contractors and suppliers to meet their financial obligations and keep the project moving forward. This is because without cash flow, it will lead to delays in completion of projects, including compromising the quality of works and may lead to suspension of works. It is believed that with the introduction of CIPAA 2012, it will prevent abuses such as unjustified withholding of payment or delaying tactics employed by parties to gain a negotiating advantage.

It is also believed that the whole process will help the construction industry to experience more significant reduction in payment disputes and improved cash flow throughout the supply chain. This will wash away the negative image of the Malaysia construction industry as a whole and provide a positive impact on project delivery, allowing construction companies to focus on their core activities and promote a more sustainable and productive industry.