Let’s talk ‘Payment Recovery…’ When the Movement Control Order is lifted, the full extent of its impact on the construction industry will begin to surface. Cashflow constraints is inevitable. This may lead to payment disputes. Professionals in the construction industry are not immune to payment disputes. A survey within the industry already shows hundreds in millions of ringgit in outstanding professional fees. The MCO and its attendant impact on the construction industry may make this problem more acute. Is this a wider industry problem? Today we will § look at what has caused the build up of outstanding professional fees; § what are the best practices in the industry that may avoid these circumstances; § examine the remedies available to the practitioners on a construction project for recovery of the outstanding payments.
Ar. Anthony Lee Tee Group Chief Operating Officer and Transformation Officer Bina Puri Holdings Berhad Ar. Anthony Lee Tee has been a Registered Practising Architect since 1995, and continues to practice as an Accredited Architect, Independent Building Inspector, Forensics Building Inspector and Certified Trainer. He is a director of Architect Centre Sdn Bhd. He has 30 years’ experience in project coordination and in bridging communication with foreign-based client, consultants and with Japanese, Korean, Malaysian, Australian, India and Chinese contractors/sub-contractors. He is involved in projects in Thailand, Brunei, Sabah and Sarawak. Anthony’s experience has seen him being appointed as an expert witness in numerous dispute resolution matters in and outside Malaysia, including in international arbitrations. Anthony has now taken on the position as the Group Chief Operating Officer and Transformation Officer of Bina Puri Holdings Berhad. He oversees the entire operations for the Bina Puri Group of Companies, particularly its property and construction businesses. In this position, Anthony sees the impact of disputes on an industry player and appreciates the importance of a competent and efficient dispute resolution process. Having been on the side of a claimant as well as a respondent in a number of dispute resolution processes including CIPAA adjudications, Anthony has experienced the benefits and disadvantages of dispute resolution processes first-hand.
Mr. Foo Joon Liang FCIArb Partner, Gan Partnership Advocate & Solicitor High Court of Malaya Foo Joon Liang is a partner at Gan Partnership, a firm he co-founded in 2011. He is a Fellow of the Chartered Institute of Arbitrators (CIArb), United Kingdom and is presently the Chairman of the Malaysian Branch of CIArb. He sits on the panel of arbitrators and adjudicators of the Asian International Arbitration Centre (AIAC) and is one of the first 10 Malaysian appointees to the panel of arbitrators of the Hainan International Arbitration Court. He is listed as a Future Leader in Construction by Who’s Who Legal. Since his admission to the Malaysian Bar in 2000, Joon Liang has held an active dispute resolution portfolio in litigation, arbitration, and adjudication. He regularly appears as a counsel at all levels of Malaysian courts as well as in domestic and international arbitrations. In the past 10 years, his focus has largely been on construction dispute resolution and advisory. His forte is in complex engineering and geotechnical matters, particularly in engineering failures and collapses. He is also involved in disputes involving power plants and the full spectrum of other construction and infrastructure issues. His recent matters include the first Construction Industry Payment & Adjudication Act 2012 (CIPAA) decided at the Malaysian apex court, the highly publicised hill slope failure that led to a State Commission Inquiry, and a series of disputes arising from the collapse of a bridge which involved leading engineering experts from Europe and Asia.
MCO Impact Survey 28-31 March 2020
MCO Impact Survey 28-31 March 2020
In your experience, how important recovering overdue payments in maintaining good cash flow?
RM 500 mi $ This is a standard CONTRACT VALUE l S-Curve for a 3yr Construction Work time
RM 500 mi $ Point of CONTRACT VALUE l Break Even? RM 450 mi COST OF CONST. l This the S-Curve for the construction cost time mirrored negative chart earned value to positivity over time.
1) Preliminary Expenditure 2) Outflow to generate work done 3) Further Outflow to generate work done 4) First outflow claim only to receive 2mth later Workings of Construction cash flow
RM 500 mi $ CONTRACT VALUE l RM 450 mi COST OF CONST. l First Moiety (2.5%) Release Point of Break Even? RM 50 mil time PROFIT. Cost & Earning over project duration The yellow sink indicate nearly ¾ RETENTION of construction period where contractor in negative cash-flow. SUM 5% COST $
Variation Order The yellow sink indicate nearly ¾ of construction period where contractor in negative cash-flow. COST $
RM 550 mi Contractor pays 1 st CONTRACT VALUE l $ with their own money RM 495 mi to execute VO, while COST OF CONST. l waiting for VO to be reflected in the progress claim. RM 55 mil time PROFIT. Cost & Earning over project duration The yellow sink indicate nearly ¾ of construction period where contractor in negative cash-flow. COST $
RM 550 mi Contractor pays 1 st CONTRACT VALUE l $ with their own money RM 495 mi to execute VO, while COST OF CONST. l waiting for VO to be reflected in the progress claim. RM 50 mil time PROFIT. Cost & Earning over project duration The yellow sink indicate nearly ¾ of construction period where contractor in negative cash-flow. COST $
This delay certification will lengthen the negative yellow sink beyond the construction period. COST $
Minimum vs Extended CIPAA FC COA DLP : 12mth 90d HC EMPLOYER CONTRACTOR
What are the key strategies and procedures in debt recovery?
Key considerations for debt recovery Court / Arbitration / Adjudication? q What is the complaint – cause of action? What remedies are being sought? q What is the most effective manner to achieve such q remedies? q Any interim preservation steps required?
What are the options available for debt dispute resolution?
The Courts q Time frame § High Court § Subordinate Courts § Appeals
How about Arbitration? What is arbitration? § Mode of alternative dispute resolution § Private arrangement / mechanism for the resolution of disputes
Benefits of an Arbitration Arbitration v Litigation q Timelines q Cost q Autonomy of parties q Enforcement of Awards
What is Adjudication? q An interim measure to resolve contractual disputes under a written construction contract; q Complements other modes of dispute resolution (e.g. litigation, arbitration); q Manages disputes; q Decision within a short period.
CIPAA 2012 Applies to: § ” every construction contract made in writing relating to construction work carried out wholly or partly within the territory of Malaysia including a construction contract entered into by the Government " - s.2, CIPAA § " construction contract " - means a " construction work contract or construction consultancy contract ” § need the contract be in writing?
" construction work contract " defined: " means a contract to carry out construction work " - s.4, CIPAA "construction work" defined: " means the construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition of: a) Any building, erection, edifice, structure, wall, fence or chimney, whether constructed wholly or partly above or below ground level; b) Any road, harbour works, railway, cableway, canal or aerodrome; c) Any drainage, irrigation or river control work; d) Any electrical, mechanical, water, gas, oil, petrochemical or telecommunication work; or e) Any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, culvert, drive, shaft, tunnel or reclamation work, and includes – (A) Any work which forms an integral part of, or are preparatory to or temporary for the works described in paragraphs (a) to (e), including site clearance, soil investigation and improvement, earth-moving, excavation, laying of foundation, site restoration and landscaping; and (B) Procurement of construction materials, equipment or workers, as necessarily required for any works described in paragraphs (a) to (e) " - s.4, CIPAA
" construction consultancy contract " defined: " means a contract to carry out consultancy services in relation to construction work and includes planning and feasibility study, architectural work, engineering, surveying, exterior and interior decoration, landscaping and project management services " - s.4, CIPAA " carried out wholly or partly within the territory of Malaysia “ – s.2, CIPAA Does CIPAA apply to a project in Pakistan between foreign parties, where engineering design is done in Malaysia?
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