Gov't approves bill to resolve payment issues in construction sector

The ordinance will be published in the Government Gazette on 27 December.

The government has approved the Construction Industry Security of Payment Bill, which addresses ongoing payment issues in the construction sector and provides improved protection for stakeholders.

The ordinance will improve contractual payment terms, prohibiting the use of unfair payment terms such as "pay when paid."

It also introduces an adjudication mechanism to provide a speedy, cost-effective, and binding resolution process for payment disputes in the interim in the construction industry.

Moreover, the bill also aims to reform the longstanding payment problems in the industry and provide better protection for the stakeholders in the supply chains of the construction industry to receive their entitled payment on time, whilst seeking to reduce the occurrence of wage arrears of workers.

The government expects that the project procurement cost could be reduced over time as price premiums for risk in association with payment problems will gradually decline following improved security of payment.

The ordinance applies to main contracts for carrying construction work with contract values not less than $5m, and main contracts for the supply of goods or services related to the construction work with contract values not less than $500,000.

This applies to both public and private projects, with a wider scope of application for the former.

The ordinance will be published in the Government Gazette on 27 December. 

Whilst the power of the Secretary for Development for registration and administration of adjudicator nominating bodies (ANBs) will take effect on the gazettal date, the remaining provisions of the ordinance will come into operation on 28 August 2025.

Construction contracts entered into on or after that date will be governed by the ordinance.

Before the implementation of the remaining provisions in August next year, the government and the industry will undertake a series of preparatory work, including registering ANBs, training a sufficient number of adjudicators, reviewing and revising the standard contract and subcontract templates, and conducting publicity and promotion activities.

The government strives to publish relevant documents and accept ANB applications in January next year, allowing the relevant organisations to submit their applications promptly to align with the implementation timeline of the ordinance.