CIPAA

A STUDY OF THE EFFECTIVENESS OF THE MALAYSIAN CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT (CIPAA) VIS-À-VIS THE IMPACT OF OVERSEA CONSTRUCTION PAYMENT LEGISLATIONS ON THEIR RESPECTIVE CONSTRUCTION INDUSTRIES CHEANG LI ZHE A project report submitted in partial fulfilment of the requirements for the award of Bachelor of Science (Hons.) Quantity Surveying Faculty of Engineering and Science Universiti Tunku Abdul Rahman Jan 2017 ii DECLARATION I hereby declare that this project report is based on my original work except for citations and quotations which have been duly acknowledged. I also declare that it has not been previously and concurrently submitted for any other degree or award at UTAR or other institutions. Signature : Name : CHEANG LI ZHE ID No. : 1203599 Date : 25.4.2017 iii APPROVAL FOR SUBMISSION I certify that this project report entitled “A STUDY OF THE EFFECTIVENESS OF THE MALAYSIAN CIPA ACT VIS-À-VIS THE IMPACT OF OVERSEA CONSTRUCTION PAYMENT LEGISLATIONS ON THEIR RESPECTIVE CONSTRUCTION INDUSTRIES” was prepared by CHEANG LI ZHE has met the required standard for submission in partial fulfilment of the requirements for the award of Bachelor of Science (Hons.) Quantity Surveying at Universiti Tunku Abdul Rahman. Approved by, Signature : Supervisor : Sr. Chang Khong Thong Date : 25.4.2017 iv The copyright of this report belongs to the author under the terms of the copyright Act 1987 as qualified by Intellectual Property Policy of Universiti Tunku Abdul Rahman. Due acknowledgement shall always be made of the use of any material contained in, or derived from, this report. © 2017, Cheang Li Zhe. All right reserved. v ACKNOWLEDGEMENTS I would like to express my gratitude to my research supervisor, Sr. Chang Khong Thong for his invaluable advice, guidance and his enormous patience throughout the development of the research. In addition, I would also like to express my gratitude to my loving parents and friends who had helped and given me encouragement when facing with difficulties in completing this study. Furthermore, the responses from the respondents are much appreciated as this study would not be successful if it was not for them. vi A STUDY OF THE EFFECTIVENESS OF THE MALAYSIAN CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT (CIPAA) VIS-À-VIS THE IMPACT OF OVERSEA CONSTRUCTION PAYMENT LEGISLATIONS ON THEIR RESPECTIVE CONSTRUCTION INDUSTRIES. ABSTRACT The problems of cash flow in the construction industry is a common phenomenon. It happens anywhere and Malaysia is no exception. The main purpose of this research is to study the effectiveness of Construction Industry Payment and Adjudication Act (CIPAA) by investigating whether it has eased the problems of cash flow in the construction industry. Since construction industry plays a pivotal role in national economic, its problems need to be rectified as soon as possible. CIPAA is enacted as a solution to this problem. However, whether CIPAA has served its purpose remains a question. This study intends to look into this question. A questionnaire survey was conducted to solicit the opinions or feedbacks from main contractors, consultant QS and subcontractors. 35 respondents took part in the survey. This study found that cash flow has become smoother since CIPAA was introduced. However, conditional payment and problem of timeliness in paying remain. Also, most of the construction industry players are satisfied with the duration of CIPAA. Furthermore, CIPAA is considered as a relatively affordable and speedy dispute resolution mechanism when compared to arbitration or litigation, given a rating of 4 out of 5, overall. Issues on breach of natural justice and jurisdiction problems of adjudicators are found to be the concern of the industry players. It is also learnt that the construction industry stakeholders think that it is fair to have adjudication reply with no further ground for respondent to response to that reply. The power to award adjudication cost given to adjudicator is seen as a deterrent towards CIPAA, especially to small and medium- vii sized company. Extension of coverage of CIPAA to oral and “partly oral, partly written” construction contracts and adjudication review are sought after. viii TABLE OF CONTENTS DECLARATION ii APPROVAL FOR SUBMISSION iii ACKNOWLEDGEMENTS v ABSTRACT vi TABLE OF CONTENTS viii LIST OF TABLES xiii LIST OF FIGURES xiv LIST OF APPENDICES xxi CHAPTER 1 2 INTRODUCTION 22 1.1 Background 22 1.2 Problem Statement 23 1.3 Aims and Objectives 25 1.4 Research Scope 25 1.5 Research Justification 26 1.6 Research Methodology 26 1.7 Chapter Organisation 26 LITERATURE REVIEW 28 2.1 Payment Dilemma in Construction Industry 28 2.2 The Importance of Timely Payment and thus Cash Flow in Construction Industry 29 2.3 30 Overview of CIPAA Implementation ix 2.4 2.5 2.6 2.7 2.3.1 Registered Matters 30 2.3.2 Registered Matters by Months 31 2.3.3 Registered Matters by States 32 2.3.4 Claimant Statistics 33 2.3.5 Respondent Statistics 34 2.3.6 Types of Adjudication Disputes 35 2.3.7 Decisions Released 36 2.3.8 Claimed Amount 38 2.3.9 Government Related Adjudication Proceedings 40 2.3.10 Number of Adjudicator Empanelled by States 41 2.3.11 Referral of Disputes Decided Under CIPAA to Arbitration or Court 42 2.3.12 42 General Court Stand and Court Case Introduction to Adjudication in United Kingdom 43 2.4.1 Adjudication in UK 44 2.4.2 Adjudication Statistics 45 Introduction to Adjudication in Singapore 48 2.5.1 Adjudication in Singapore 50 2.5.2 Enforcement Mechanism 51 2.5.3 Adjudication Statistic 51 Introduction to Adjudication in Australia 55 2.6.1 Adjudication in New South Wales 55 2.6.2 New South Wales (Statistics) 56 2.6.3 Queensland (Statistics) 59 Main Features of CIPAA 61 2.7.1 Make Conditional Payment Void 61 2.7.2 Securing Direct Payment from Principal 61 2.7.3 Suspension or Reduce the Rate of Progress of the Works 61 2.8 Shortcomings of CIPAA 62 2.8.1 Jurisdiction of the Adjudicator Is Not Made Clear 62 2.8.2 Does Not Address Whether the New Adjudication Regime Could Apply to Contracts Entered into Before 15 April 2014 62 x 2.8.3 Intentional Delay by Uncooperative Defendant 2.8.4 Relatively Long Adjudication Response Relatively Short Adjudication Reply 3 and 63 METHODOLOGY 65 3.1 Research Strategy 65 3.1.1 Quantitative Research 65 3.1.2 Qualitative Research 65 3.2 4 63 Approaches to Data Collection 66 3.2.1 Fieldwork Research 66 3.2.2 Desk Study Research 66 3.3 Research Design 67 3.4 Data Analysis Method 68 3.4.1 Descriptive Statistics Method 68 3.4.2 Inferential Statistics Method 68 RESULTS AND DISCUSSION 4.1 69 The View of General Respondents and CIPAA Participants Towards The Implementation of CIPAA 4.1.1 Percentage of CIPAA 69 Participants to All Respondents 70 4.1.2 Cash Flow 71 4.1.3 Eradication of Conditional Payment 72 4.1.4 Adjudicator's Inquisitional Role 73 4.1.5 Reliable Dispute Resolution Mechanism 74 4.1.6 The Adjudicators Empanelled by KLRCA 75 4.1.7 Relatively Speedy Process Compared to Arbitration or Litigation 4.1.8 76 Relatively Affordable Compared to Arbitration or Litigation 77 4.1.9 Dispute Resolution of CIPAA 78 4.1.10 The Duration of Initiation of Adjudication, Appointment of Adjudicator and Adjudication Proceedings 79 xi 4.1.11 4.2 Relatively Long Period of CIPAA When Compared with Other Similar Legislations 81 4.1.12 Preferred Remedy 82 4.1.13 Improvements Felt in Malaysia 85 4.1.14 Power to Award Adjudication Cost 88 4.1.15 Adjudication Reply 89 4.1.16 Reach of CIPAA 90 4.1.17 Issues of Breach of Natural Justice and Adjudicator’s Jurisdiction Problem 91 4.1.18 Adjudication Review 92 4.1.19 Rating of CIPAA 93 The View of Main Contractors, QS Consultants and Subcontractors Respectively Towards The Implementation of CIPAA 94 4.2.1 Percentage of Each Party Involved in CIPAA 94 4.2.2 Cash Flow 95 4.2.3 Eradication of Conditional Payment 97 4.2.4 Adjudicator's Inquisitional Role 99 4.2.5 Reliable Dispute Resolution Mechanism 101 4.2.6 The Adjudicators Empanelled by KLRCA 103 4.2.7 Relatively Speedy Process Compared to Arbitration or Litigation 4.2.8 105 Relatively Affordable Compared to Arbitration or Litigation 107 4.2.9 Dispute Resolution of CIPAA 109 4.2.10 The Duration of Initiation of Adjudication, Appointment of Adjudicator and Adjudication Proceedings 111 4.2.11 Relatively Long Period of CIPAA When Compared with Other Similar Legislations 114 4.2.12 Preferred Remedy 116 4.2.13 Improvements Felt in Malaysia 122 4.2.14 Power to Award Adjudication Cost 128 4.2.15 Adjudication Reply 130 xii 5 4.2.16 Reach of CIPAA 4.2.17 Issues of Breach 132 of Natural Justice and Adjudicator’s Jurisdiction Problem 134 4.2.18 Adjudication Review 136 4.2.19 Rating of CIPAA 138 CONCLUSION AND RECOMMENDATIONS 140 5.1 Introduction 140 5.2 Findings 141 5.3 Research Limitations 142 5.4 Research Contribution to Malaysian Construction Industry 143 5.5 Recommendation for Further Research 144 REFERENCES 145 APPENDICES 151 xiii LIST OF TABLES TABLE TITLE PAGE Table 2.3.1.1: Total Registered Matters (3years) 30 Table 2.3.5.1: Payment Response 34 Table 2.3.7.1: Decisions Released 36 Table 2.3.7.2: Decisions Released In Favour of Claimant or Respondent 36 Table 2.3.9.1: Government Related Adjudication Proceedings 40 Table 2.3.10.1: Malaysian Adjudicators Empanelled by State 41 Table 2.3.11.1: Concurrent Referral of Decided Adjudication Proceedings 42 Table 2.4.2.1: Adjudications by All Reporting Adjudicator Nominating Bodies (ANB) 45 Table 2.4.2.2: Sources of Appointment of Adjudicators 47 Table 2.4.2.3: Comparison of Successful Adjudication’s Decisions Parties in 47 Table 2.5.3.1: The Number of Applications for Adjudication 51 Table 2.5.3.2: Categories of Claimants against Respondents 52 Table 2.5.3.3: Disputed and Adjudicated Amounts 53 Table 2.5.3.4: Number of Review Applications 54 Table 2.5.3.5: Categories of Claimants against Respondents 54 xiv LIST OF FIGURES FIGURE TITLE PAGE Figure 2.3.1.1: Registered Matters from 14.4.2014 to 15.4.2015 (Term Based) 30 Figure 2.3.2.1: Registered Matters from 15.4.2014 to 15.4.2016 (Month Based) 31 Figure 2.3.3.1: Registered Matters from 15.4.2014 to 15.4.2016 (State Based) 32 Figure 2.3.4.1: Claimant Statistics from 15.4.2014 to 15.4.2016 33 Figure 2.3.4.2: Claimant Statistics from 15.4.2014 to 15.4.2016 (Term Based) 33 Figure 2.3.5.1: Respondent Statistics from 15.4.2014 to 15.4.2016 34 Figure 2.3.6.1: Type of Adjudication Disputes 35 Figure 2.3.7.1: Decision Released In Favour of Claimant and Respondent 37 Figure 2.3.8.1: Claimed Amount 38 Figure 2.3.8.2: Number of Disputes by Range of Claim Amount 39 Figure 2.4.2.1: Growth Rate in Adjudication Referrals in United Kingdom 46 Figure 2.6.2.1: Number of adjudication applications by payment claim value range 2014/15 56 Figure 2.6.2.2: Total claimed and adjudicated amounts 2014/15 57 Figure 2.6.2.3: Claimant Type 2014/15 57 xv Figure 2.6.2.4: Respondent Type 2014/15 58 Figure 2.6.3.1: Percentage of Claimant Type Year to Date 59 Figure 2.6.3.2: Percentage of Respondent Type Year to Date 59 Figure 2.6.3.3: Application Lodged by Region Year to Date 60 Figure 2.6.3.4: Percentage of Claimants Receiving Full Claim Amount 60 Figure 4.1.1.1: Percentage of CIPAA Participants to All Respondents 70 Figure 4.1.2.1: Cash flow 71 Figure 4.1.2.2: CIPAA Participants: Cash flow 71 Figure 4.1.3.1: Eradication of Conditional Payment 72 Figure 4.1.3.2: CIPAA Participant: Conditional Payment Eradication of 72 Figure 4.1.4.1: Adjudicator's inquisitional role Figure 4.1.4.2: CIPAA Participant: inquisitional role 73 Adjudicator's 73 Figure 4.1.5.1: Reliable dispute resolution mechanism Figure 4.1.5.2: CIPAA Participant: resolution mechanism Reliable 74 dispute 74 Figure 4.1.6.1: The adjudicators empanelled by KLRCA Figure 4.1.6.2: CIPAA Participant: empanelled by KLRCA The 75 adjudicators 75 Figure 4.1.7.1: Relatively speedy process 76 Figure 4.1.7.2: CIPAA Participant: Relatively speedy process 76 Figure 4.1.8.1: Relatively affordable 77 Figure 4.1.8.2: CIPAA Participant: Relatively affordable 77 Figure 4.1.9.1: Dispute resolution of CIPAA 78 Figure 4.1.9.2: CIPAA Participant: Dispute resolution of CIPAA 78 xvi Figure 4.1.10.1: Duration of initiation of adjudication 79 Figure 4.1.10.2: Duration of appointment of adjudicator 80 Figure 4.1.10.3: Duration of adjudication proceedings 80 Figure 4.1.11.1: Relatively long period of CIPAA 81 Figure 4.1.11.2: CIPAA Participant: Relatively long period of CIPAA 81 Figure 4.1.12.1: First choice among three remedies available 82 Figure 4.1.12.2: CIPAA Participant: First choice among three remedies available 82 Figure 4.1.12.3: Second choice among three remedies available 83 Figure 4.1.12.4: CIPAA Participant: Second choice among three remedies available 83 Figure 4.1.12.5: Last choice among three remedies available 84 Figure 4.1.12.6: CIPAA Participant: Last choice among three remedies available 84 Figure 4.1.13.1: Timeliness in paying 85 Figure 4.1.13.2: CIPAA Participant: Timeliness in paying 85 Figure 4.1.13.3: Certainty in obtaining payment 86 Figure 4.1.13.4: CIPAA Participant: Certainty in obtaining payment 86 Figure 4.1.13.5: Improvement in willingness of main contractors to seek amicable settlement with sub-contractors 87 Figure 4.1.13.6: CIPAA Participant: Improvement in willingness of main contractors to seek amicable settlement with sub-contractors 87 Figure 4.1.14.1: Power to award adjudication cost 88 Figure 4.1.14.2: CIPAA Participant: Power to award adjudication cost 88 Figure 4.1.15.1: Adjudication reply 89 xvii Figure 4.1.15.2: CIPAA Participant: Adjudication reply 89 Figure 4.1.16.1: Reach of CIPAA 90 Figure 4.1.16.2: CIPAA Participant: Reach of CIPAA 90 Figure 4.1.17.1: Issues within CIPAA 91 Figure 4.1.17.2: CIPAA Participant: Issues within CIPAA 91 Figure 4.1.18.1: Adjudication Review 92 Figure 4.1.18.2: CIPAA Participant: Adjudication Review 92 Figure 4.1.19.1: Rating of CIPAA 93 Figure 4.1.19.2: CIPAA Participant: Rating of CIPAA 93 Figure 4.2.1.1: Percentage of each party involved in CIPAA 94 Figure 4.2.2.1: Main Contractor: Cash flow 95 Figure 4.2.2.2: QS Consultant: Cash flow 95 Figure 4.2.2.3: Subcontractor: Cash flow 96 Figure 4.2.3.1: Main Contractor: Eradication of conditional payment 97 Figure 4.2.3.2: QS Consultant: Eradication of conditional payment 97 Figure 4.2.3.3: Subcontractor: Eradication of conditional payment 98 Figure 4.2.4.1: Main Contractor: Adjudicator's inquisitional role 99 Figure 4.2.4.2: QS Consultant: Adjudicator's inquisitional role 99 Figure 4.2.4.3: Subcontractor: Adjudicator's inquisitional role 100 Figure 4.2.5.1: Main Contractor: Reliable dispute resolution mechanism 101 Figure 4.2.5.2: QS Consultant: Reliable dispute resolution mechanism 101 xviii Figure 4.2.5.3: Subcontractor: Reliable dispute resolution mechanism Figure 4.2.6.1: Main Contractor: empanelled by KLRCA The 102 adjudicators 103 Figure 4.2.6.2: QS Consultant: The adjudicators empanelled by KLRCA 103 Figure 4.2.6.3: Subcontractor: The adjudicators empanelled by KLRCA 104 Figure 4.2.7.1: Main Contractor: Relatively speedy process 105 Figure 4.2.7.2: QS Consultant: Relatively speedy process 105 Figure 4.2.7.3: Subcontractor: Relatively speedy process 106 Figure 4.2.8.1: Main Contractor: Relatively affordable 107 Figure 4.2.8.2: QS Consultant: Relatively affordable 107 Figure 4.2.8.3: Subcontractor: Relatively affordable 108 Figure 4.2.9.1: Main Contractor: Dispute resolution of CIPAA 109 Figure 4.2.9.2: QS Consultant: Dispute resolution of CIPAA 109 Figure 4.2.9.3: Subcontractor: Dispute resolution of CIPAA 110 Figure 4.2.10.1: Main Contractor: Duration of initiation of adjudication 111 Figure 4.2.10.2: Main Contractor: Duration of appointment of adjudicator 112 Figure 4.2.10.3: Main Contractor: Duration of adjudication proceedings 112 Figure 4.2.10.4: Consultant QS: Duration of initiation of adjudication, appointment of adjudicator and adjudication proceedings 113 Figure 4.2.11.1: Main Contractor: Relatively long period of CIPAA 114 Figure 4.2.11.2: Consultant QS: Relatively long period of CIPAA 114 xix Figure 4.2.11.3: Subcontractor: Relatively long period of CIPAA 115 Figure 4.2.12.1: Main Contractor: First choice among three remedies available 116 Figure 4.2.12.2: Consultant QS: First choice among three remedies available 116 Figure 4.2.12.3: Subcontractor: First choice among three remedies available 117 Figure 4.2.12.4: Main Contractor: Second choice among three remedies available 118 Figure 4.2.12.5: Consultant QS: Second choice among three remedies available 118 Figure 4.2.12.6: Subcontractor: Second choice among three remedies available 119 Figure 4.2.12.7: Main Contractor: Third choice among three remedies available 120 Figure 4.2.12.8: Consultant QS: Third choice among three remedies available 120 Figure 4.2.12.9: Subcontractor: Third choice among three remedies available 121 Figure 4.2.13.1: Main Contractor: Timeliness in paying 122 Figure 4.2.13.2: Consultant QS: Timeliness in paying 122 Figure 4.2.13.3: Subcontractor: Timeliness in paying 123 Figure 4.2.13.4: Main Contractor: Certainty in obtaining payment 124 Figure 4.2.13.5: Consultant QS: Certainty in obtaining payment 124 Figure 4.2.13.6: Subcontractor: Certainty in obtaining payment 125 Figure 4.2.13.7: Main Contractor: Willingness of main contractors to seek amicable settlement with sub-contractors 126 xx Figure 4.2.13.8: Consultant QS: Willingness of main contractors to seek amicable settlement with sub-contractors Figure Figure 126 4.2.13.9: Subcontractor: Willingness of main contractors to seek amicable settlement with sub-contractors 127 4.2.14.1: Main Contractor: adjudication cost 128 Power to award Figure 4.2.14.2: Consultant QS: Power to award adjudication cost 128 Figure 4.2.14.3: Subcontractor: Power to award adjudication cost 129 Figure 4.2.15.1: Main Contractor: Adjudication reply 130 Figure 4.2.15.2: Consultant QS: Adjudication reply 130 Figure 4.2.15.3: Subcontractor: Adjudication reply 131 Figure 4.2.16.1: Main Contractor: Reach of CIPAA 132 Figure 4.2.16.2: QS Consultant: Reach of CIPAA 132 Figure 4.2.16.3: Subcontractor: Reach of CIPAA 133 Figure 4.2.17.1: Main Contractor: Issues within CIPAA 134 Figure 4.2.17.2: Consultant QS: Issues within CIPAA 134 Figure 4.2.17.3: Subcontractor: Issues within CIPAA 135 Figure 4.2.18.1: Main Contractor: Adjudication review 136 Figure 4.2.18.2: Consultant QS: Adjudication review 136 Figure 4.2.18.3: Subcontractor: Adjudication review 137 Figure 4.2.19.1: Main Contractor: Rating of CIPAA 138 Figure 4.2.19.2: Consultant QS: Rating of CIPAA 138 Figure 4.2.19.3: Subcontractor: Rating of CIPAA 139 xxi LIST OF APPENDICES APPENDIX APPENDIX A: Questionnaire TITLE PAGE 151 22 CHAPTER 1 1 INTRODUCTION 1.1 Background During the late 1980s, in United Kingdom, the volume of construction work has been cut down significantly. As the volume of work plummeted, there was an increase in competition, resulting in longer payment period and underpayment in subcontracting sector. Sir Michael Latham was then asked to address this issue. He came out with a report known as the Latham Report, suggesting the adoption of adjudication within context of contract. His recommendation was adopted and statutory adjudication was enacted as a fast-track mean to resolve all payment disputes arising under construction contract. According to Glasgow Caledonian University Adjudication Reporting Centre (2012), from nil in early 2002, nominations of adjudicators have grown to over 2,000 per year. Besides, since the advent of adjudication, the Technology and Construction Court experiences a trimming in the volume of its work and the number of arbitrations has also been reduced to almost nil. Until April 2012, there are 20,878 cases of adjudication reported (ARC, 2012). It was a huge success. Viewing its successful implementation, various countries then follow suit. Among them are Australia (in the states of New South Wales, Southern Australia, Queensland, Victoria, Tasmania, Western Australia, Northern Territory, and Australia Capital Territory), New Zealand, Singapore, Malaysia and Ireland. 23 In conjunction with the 10th Malaysia Plan, The Construction Industry Payment and Adjudication Act 2012 was gazetted on 22 June 2012 and enforced on 15 April 2014. Its main objectives are to facilitate payments so that they are regular and timely, provide adjudication for rapid dispute resolution and provide solution for payment recovery. This Act is enforceable on every written contract related to construction work taken place in Malaysia, wholly or partly. It includes government construction contract. However, this Act is not enforceable on contract involved by a lay person for constructing building which is not more than three storeys high and solely meant for his occupation (Gould, n.d.). Clause 40 would be the only possible way out. It enables Minister for Works to exempt anyone and any works which is considered necessary. 1.2 Problem Statement In 2014, while Malaysian national gross domestic product (GDP) was at 6%, construction industry grew at a promising and encouraging 11.8%, indicating that the construction sector is one of the main contributing factors to national GDP (CIDB, 2015). This is further supported by Raza Ali, Mohd Shahir, Zulkipli (2014) who found that there is a strong positive correlation between construction sector and national economic growth. Hence, to maximise national growth, due attention should be given to this contributing sector. Any problems encountered should be addressed as soon as possible and as best as possible. Payment and cashflow problems has plagued construction industry for some times (Azman, et al., 2014). Cashflow is often referred to as lifeblood in construction industry. According to Karib, Shaffii and Nor (2008), the ease of cash flow is a must in delivering a successful project. “Regular financial injection is essential to make sure the contractor is able to proceed work diligently” statement further stresses the importance of cashflow in construction industry (Hasmori, Ismail and Said, 2012; Judi and Mohamd Sabli, 2010). Noushad Ali Naseem Ameer Ali (2006) contends 24 that consistent timely payment is very crucial as programmed cash flow is complimentary to a business, especially to construction industry. In addition, a timely payment is said to be very important since a longer payment period, has to be planned and factored in in the very beginning. Otherwise, it would have a ripple effect on other activities. Notwithstanding its significance, studies done by Hasmori et al. (2012) and Ye and Abdul Rahman (2010) found that clients delayed payments, delayed in returning retention monies and wilful withholding of the payment to contractor for their own financial advantages. Judi and Rashid (2010) are of the opinion that project delay, minimized profitability and even liquidation of companies could be due to irregular and untimely payment. It was proved right when more than 16,000 class F contractors faced bankruptcy issues pertaining to late or non-payments from their umbrella contractors in 2005 (Suhaini, 2005). Construction Industry Payment and Adjudication Act (CIPAA) was enacted to address this payment issue. To date, CIPAA has been in operation for almost 3 years. Now, the questions are “Has CIPAA addressed cashflow problem as it was intended to? “. Is it effective and efficient enough? If it is not, is there a mean to improve it further? If yes, how so? Another interesting question to look into will be “How has CIPAA performed in comparison to other similar legislations in other countries?” Considering the pivotal role the construction industry plays in economic growth of Malaysia, these questions have to be answered. This study will look into these questions and answers them accordingly. 25 1.3 Research Question 1. Has CIPAA addressed cashflow problem as it was intended to? 2. What construction industry stakeholders think of the effectiveness and efficiency of CIPAA? 3. What are the improvements on CIPAA that the construction industry stakeholders are seeking? 4. How has CIPAA performed compared to similar payment legislations? 1.4 Aims and Objectives The objectives of this study are 1. To investigate whether CIPAA has addressed the cashflow problems in the construction industry as it was intended to. 2. To get to know how the construction industry stakeholders think of the effectiveness and efficiency of CIPAA. 3. To get the insight of how CIPAA could be further improved. 4. To compare the effectiveness of similar payment legislations. 1.5 Research Scope The respondents will be construction industry stakeholders that are currently working in Malaysia. 35 questionnaires will be given out. Among them, 15 will be given to main contractors and QS consultant firms respectively. Another 5 will be given to subcontractors. 26 1.6 Research Justification Through this study, the performance of CIPAA in addressing cashflow problems in construction industry in Malaysia could be determined. Moreover, the valuable insights of how CIPAA could be further ameliorated from these “insiders” could be obtained. Furthermore, how CIPAA stands in compared to similar payment legislations in other countries could be ascertained. Since construction industry has a considerable economic multiplier effect, these questions could not afford to go unanswered. 1.7 Research Methodology This research will be conducted by using quantitative method. 35 questionnaires were received. The respondents will be main contractors, subcontractors and consultant QS that are currently working in Malaysia. More importantly, these respondents will be randomly selected for the purpose of this research. 1.8 Chapter Organisation This study comprises five chapters which are introduction, literature review, research methodology, result and discussion as well as conclusion. They are further described as follow: • Chapter 1 – Introduction. This chapter comprises study background, problem statement, aim and objectives, research scope, research justification, research methodology and chapter organisation. • Chapter 2 – Literature Review. This chapter is based on content from others works. It reviews the payment dilemma, the importance of timely payment and thus 27 cashflow in construction industry, current status of CIPAA and similar legislations in other countries. • Chapter 3 – Research Methodology. This chapter presents on the research method, data collection method, questionnaire design and data analysis. Basically, it tells how this research will be conducted. • Chapter 4 – Results and Discussions. The findings from questionnaires are tabulated and analysed. • Chapter 5 – Conclusion. This chapter will conclude the findings. Other than that, recommendations will be given. 28 CHAPTER 2 2 LITERATURE REVIEW 2.1 Payment Dilemma in Construction Industry Payment and cashflow issues are aged affair that infiltrate construction industry in Malaysia. (Azman, et al., 2014). It has a potential to create negative chain effect on other parties. A delayed payment by a party could affect the entire payment supply chain. For example, a late payment from an employer will cause sub-contractors and suppliers to receive late payment from the main contractor (Mohamad et al., 2012). Worst comes to worst, late payment could affect financial performance of a contractor, leading to bankruptcy (Ab. Halim, et al., 2010). To add insult to injury, this issue does not just extend to construction industry stakeholders. It affects the third party purchasers as well. And, this will be the nightmare not just for the purchasers but also the government (Tan, 2011). Some of the main factors are namely, late certification, client's poor financial management, bad culture, underpayment by the client and 'pay when paid' clauses in contracts (Che Munaaim, Mohd Danuri and Abdul-Rahman, 2012). Among them is conditional payment clause. This type of clause is outlawed by Section 13(1) of the NZ Construction Contracts Act 2002. So does all the similar legislations in other countries including Malaysia. The negative implication of such clauses is that subcontractors may finish up not being paid although they do their part and are not in breach of contract (Ameer Ali, 2006). Besides that, Cannon and Gibson (2014) are of the opinion that such clauses has been the primary cause to the insolvency of the supply chain, causing the parties further down the chain to be out of business. 29 2.2 The Importance of Timely Payment and thus Cash Flow in Construction Industry “Cashflow is the life blood of the building industry”. Lord Denning makes this statement starting with Dawnays vs Minter (1971) and finishing with Modern Engineering vs Gilbert Ash (1973). This statement clearly indicates how significant cashflow and on-time payment are towards the construction industry. For most contractors, payment certificate could be their one and only source of income while they are funding the whole of the building operation, including paying for wages of workers, materials and subcontractors, which will turn out to be a considerable sum. Therefore, full and timely payment is very important as they depend on it to run their business effectively (Walker and Wilkie, 2002). Seeing its importance, frictions are likely to arise resulting from untimely and underpayment, stirring working relationship on site and causing unnecessary strain. This is counterproductive since it wastes money, directly or indirectly, and may require to refer the disputes to arbitration or the court. Hence, proper cashflow distribution throughout the supply chain is not just a desirable attribute but a must for the proper operation of contracts (Cunningham, 2013). 30 2.3 Overview of CIPAA Implementation 2.3.1 Registered Matters Figure 2.3.1.1: Registered Matters from 14.4.2014 to 15.4.2015 (Term Based) Table 2.3.1.1: Total Registered Matters (3years) The sudden spike in the number of cases can be attributed to the success of the CIPAA legislation, efficient administrative mechanism, support from the judiciary and overall awareness among the industry players. It is anticipated that a total of over 350 matters will be registered with the KLRCA in 2016 (KLRCA, 2016). 31 2.3.2 Registered Matters by Months Figure 2.3.2.1: Registered Matters from 15.4.2014 to 15.4.2016 (Month Based) One thing is obvious, the average number of cases on a monthly basis is on the rise. There is a growth of 150% when compared to 2014-2015 statistics, reflecting the success of the reach of adjudication among construction industry players. It is also a sign of the faith reposed in CIPAA and a testament to its success (KLRCA, 2016). 32 2.3.3 Registered Matters by States Figure 2.3.3.1: Registered Matters from 15.4.2014 to 15.4.2016 (State Based) The bar chart above shows a spread of CIPAA over different states. It is a positive trend which indicates the reach of awareness of CIPAA in different states. Most of all, the statistic is promising and is indicative of the expanding reach of CIPAA (KLRCA, 2016). 33 2.3.4 Claimant Statistics Figure 2.3.4.1: Claimant Statistics from 15.4.2014 to 15.4.2016 Figure 2.3.4.2: Claimant Statistics from 15.4.2014 to 15.4.2016 (Term Based) Sub-contractor and main contractor continue to be the main claimant under CIPAA. Nevertheless, there is a marginal rise of consultants as claimant at 7.9% compared to previous year of 6%. It is anticipated that this trend will continue (KLRCA, 2016). 34 2.3.5 Respondent Statistics Figure 2.3.5.1: Respondent Statistics from 15.4.2014 to 15.4.2016 Table 2.3.5.1: Payment Response According to KLRCA (2016), main contractors and employers are the majority of respondents. There is an increase of payment respondent filed by the respondents from 23.8% to 35.7, showing gradual active participation in the proceedings. Observations of the Court in relation to Section 6 of CIPAA in the case of View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd could be one of the factors. Even though in obiter, the Court indicated that if the respondents did not file its payment response, he is not entitled to raise set off or counterclaims. The trend of increase is expected to continue. 35 2.3.6 Types of Adjudication Disputes Figure 2.3.6.1: Type of Adjudication Disputes According to KLRCA (2016), interim payment and final account are the most commonly referred disputes under CIPAA, making up for the majority of disputes at 52.9% and 21.65% respectively. Interim payment disputes experience a profound increase. A surge in cases for interim payment and final account shows the effective use of CIPAA by sub-contractors and contractors in resolving cash flow disputes before completion of the works. 36 2.3.7 Decisions Released Table 2.3.7.1: Decisions Released According to KLRCA (2016), out of 138 adjudication decisions rendered, 70 have been in favour of the claimant and full claim has been granted, while 55 decisions have had partial claims being granted. Only 13 cases have been dismissed so far. Some of the grounds to dismiss the claims were procedural non-compliance such as invalid payment claim or notice of adjudication and the matters falling outside the ambit of CIPAA. The cases involving dismissal of claims are not alarming in number and are seen to be in compliance with the provisions of CIPAA. Table 2.3.7.2: Decisions Released In Favour of Claimant or Respondent 37 Figure 2.3.7.1: Decision Released In Favour of Claimant and Respondent The trend of a majority of decisions rendered are in favour of claimant continues. Nonetheless, the figure of 97% in 2014-2015 has dropped to 86% in 20152016. Case dismissals because of procedural non-compliance is one of the causes resulting in the decrease (KLRCA, 2016). 38 2.3.8 Claimed Amount Figure 2.3.8.1: Claimed Amount The significant difference of claimed amount shows the wide reach and extent of the application of CIPAA. The considerable increase of highest claim amount is indicative of a rise in trend of high value adjudication disputes being referred. A total claimed amount of around RM1, 400,000,000.00 is indicative of the growing popularity and success of CIPAA. It is anticipated that more and more parties will resort to CIPAA, regardless of the claim amount (KLRCA, 2016). 39 Figure 2.3.8.2: Number of Disputes by Range of Claim Amount It is observed that a majority of the cases were filed with payment claims either up to RM150, 000 or between the range of RM300, 000 and RM800, 000. The trend is anticipated to continue with an increase in cases filed with other payment ranges as well (KLRCA, 2016). 40 2.3.9 Government Related Adjudication Proceedings Table 2.3.9.1: Government Related Adjudication Proceedings According to KLRCA (2016), the presence of these figures is an encouraging sign of growth of CIPAA in Malaysia, establishing its expansion both in public and private sectors. 41 2.3.10 Number of Adjudicator Empanelled by States Table 2.3.10.1: Malaysian Adjudicators Empanelled by State As reflected in Table 6, Kuala Lumpur WP and Selangor have the highest concentration of empanelled adjudicators. This trend remains the same as last year indicating the stronghold on CIPAA of the industrialized capital city (KLRCA, 2016). 42 2.3.11 Referral of Disputes Decided Under CIPAA to Arbitration or Court Table 2.3.11.1: Concurrent Referral of Decided Adjudication Proceedings It indicates the binding-but-not-final nature of adjudication and the awareness among parties of further redressals available to them. The successful party will still proceed to enforce the decision as provided for under Part IV of the act anyway, irrespective of whether the another party refers the matter to arbitration or litigation or not. 2.3.12 General Court Stand and Court Case As experience has shown in the UK, the successful applications to set aside adjudicator’s decision will be few and the court will favour the enforcement of awards. In Mudajaya Corporation Berhad v Leighton Contractors (Malaysia) Sdn Bhd (2015) 10 MLJ 745, there is an argument on the application of the exemptions afforded to Government Contracts under the CIPAA (Exemption) Order 2014. Mudajaya argued that the sub-contract with Leighton necessarily fell within the First Schedule of the Exemption Order although it was being constructed by private parties, the power plant in question was actually in control and regulation of the Government. However, the High Court reasoned that subparagraph 2(1) of the Exemption Order clearly exempted a construction contract that is a “Government construction contract”. It decided in favour of Leighton stating that keeping with the language of the provision, the Government must necessarily be a party to the 43 construction contract in question. All other contracts do not fall within the Exemption Order. In Econpile (M) Sdn Bhd and IRDK Ventures Sdn Bhd, the issue is on the effect of Section 19(5) of CIPAA – whether an adjudication decision delivered within time but released to the parties only after the payment of outstanding GST was made for the KLRCA’s Administrative Fee is void. Judge YA Tuan Lee Swee Seng held that the adjudication decision was validly made, delivered and released to the parties, based on the rationale that the release of the adjudication decision to the parties soon after confirmation that the GST of the adjudication authority, the KLRCA, had been paid was consistent and in compliance with the KLRCA Standard Terms of Appointment of the Adjudicator as provided for under Schedule II of the KLRCA Adjudication Rules and Procedure which are contractually agreed by the parties when receiving the Adjudicator’s Notice of Acceptance of Appointment (Form 6). 2.4 Introduction to Adjudication in United Kingdom Statutory adjudication is introduced with the enactment of Housing Grants, Construction and Regeneration Act of 1996. It came into force on first of May 1998. It is born to solve payment issues that have plagued the UK construction industry for a long time, causing countless contractors, big or small, to become insolvent. The early application of adjudication is faced with the question of enforcement and followed by procedural clarifications and finally jurisdictional challenges (Gould and Linneman, 2008). In Epping Electrical 2007 and Aveat Heating 2007, His Honor Judge Havery QC confirmed that adjudication decisions given outside the 28-day time frame is invalid. However, in Cubitt Building & Interiors v. Fleetglade 2006, it was decided that a decision reached within the agreed period but not delivered in time is valid, given that it could be shown that the decision was communicated forthwith. 44 With adjudication proceeding available, Technology and Construction Court experienced a considerable drop in its workload. Besides, construction disputes, even complex ones, can be dealt with in a much shorter time frame. According to Milligan, Cattanach and Jackson (2015), parties and their representatives are increasingly aggressive and bullish towards adjudication as the parties have grown accustomed to the practice. Their aim is pretty straightforward; to influence the adjudicators’ decisions. This is alarming as it could have affected the impartially and independence of the adjudicators (Bingham, 2002). Conducting training for adjudicators is one of the remedies provided in this report so that adjudicators manage to remain in control in the face of intimidation or discourtesy. Another solution is that all appointing bodies in each respective jurisdiction work jointly in order to formulate a uniform code of conduct to be issued to both parties upon appointment of an adjudicator (Milligan, Cattanach and Jackson, 2015). 2.4.1 Adjudication in UK After the crystallisation of a dispute, claimant may serve a notice of its intention to refer the dispute to adjudication to the defendant. That notice must identify the dispute and has the remedy sought after set out. The claimant is required to serve his or her statement of case, in other words, ‘Referral’ to the defendant within 7 days of the issuance of notice. If referral, which consists of detailed explanation of the dispute and its supporting documents, is not served within that specified period, the adjudication will be void. Appointment of an adjudicator also has to be done within that 7 days of the issuance of notice. It can either be an adjudicator agreed and named in the contract or randomly chosen by a nominating body. A small fee will usually be charged for the service. After the appointment of an adjudicator, a timetable will be set out by the adjudicator to facilitate issuance of response to the Referral, reply to that response and finally rejoinder to that reply. 45 Nonetheless, the adjudicator may only allow one submission by each party. Without the adjudicator’s permission, any submissions will be ‘unsolicited’. Those submissions cannot be ignored, though. Different weightage will be given to them depending on when they are issued within the established timetable. Within 28 days of Referral, the decision has to be made. However, if both parties agree, it can be extended to 42 days. Like other similar legislations, it is binding but not final. It can be toppled through arbitration or litigation. 2.4.2 Adjudication Statistics Table 2.4.2.1: Adjudications by All Reporting Adjudicator Nominating Bodies (ANB) 46 The adjudication referral has stayed at around 1500 cases starting from year 7 and was expected to stay around that. However, because of the economic recession, the number of referral dropped. In year 18, it returned to that level again, reflecting economic recovery and a positive sign of stability in the construction industry (CDR, 2016). Figure 2.4.2.1: Growth Rate in Adjudication Referrals in United Kingdom Kennedy (2008) found that the appointments of adjudicator away from ANBs to direct appointment between years 5 to 8 could be due to the fees to be paid to ANBs for making nominations and the desire to have control over the quality of the adjudicator. A fee of around £150 to £500 will be charged to the parties for nominating the adjudicator if they refer to ANBs for appointment. Other than that, both parties could be concerned over the quality of the adjudicator and thus the quality of the decisions. Therefore, some parties specify a certain professional background and qualification the adjudicator must have, for example, postgraduate qualification in law, to the ANBs before the appointment. Some even appoint the adjudicators directly, knowing their professional background and qualities well. 47 Table 2.4.2.2: Sources of Appointment of Adjudicators Obviously, appointment through an ANB is the major source of appointment. It remained at 90.7% at year 14 and increased to 96% in the following year. In year 16, it dropped to 93.5%. The other mean are through agreement of the parties and named in the contract. Appointment through agreement of the parties accounts for 2.9% in year 15 and increased to 4.2% in the following year, while appointment of an adjudicator through named in the contract accounts for 1.1% in year 15 and increased to 2.3% in year 16. Payment remains the most referred disputes until year 16, falling to close second, behind final account disputes. At the same time, the variety of nature of disputes referred hikes (CDR, 2014). Consistent with the previous years, the sub-contractor against main contractor disputes remains the majority of disputes referred, followed by main contractor against employer and then by sub-sub-contractor against sub-contractor (CDR, 2014). Table 2.4.2.3: Comparison of Successful Parties in Adjudication’s Decisions 48 According to CDR (2014), claimant remains the most-likely-to-succeed party although its successful rate has been falling. Respondent successful rate has decreased from 17% in year 13 to 13% in year 16 as well. Split decision, however, has been on the rise. Dancaster (2008) found that not much cases are taken further after adjudication decisions. Nevertheless, the number of adjudicators’ decisions being put aside has elevated. The factors that are causing this are breach of natural justice and adjudicator’s jurisdiction issues. Walls (2004) opines that natural justice is way more difficult to deal with than a challenge to an adjudicator’s jurisdiction. It is suggested that adjudicators should be adapted to be more proficient in their understanding of law (Kennedy, 2008). One of the grounds to set aside the adjudicators’ decisions is he or she answers the wrong question. Another ground relates to the time when adjudication is commenced. Adjudication can only commence if a dispute has “crystallized”. If there is none, there can be no adjudication and any decision made will be treated as void. 2.5 Introduction to Adjudication in Singapore The Building and Construction Industry Security of Payment (SOP) Act 2004 introduces adjudication into Singapore. The Singapore regime is the seventh of its kind around the world, taking after the precedent regimes in the United Kingdom, Australia (in the states of New South Wales, Queensland, Victoria, and Western Australia) and New Zealand. The objectives of the Act are to make sure that the party is entitled to payment for works carried out or goods or services provided; rights of the party to suspend work or suspend supply of materials in the event of default payment, outlawing conditional payment in the contract and nullify any provisions of contract contrary to the Act (Lim, Leong, & Ng, 2010). The Act provides a framework for statutory adjudication and preserved the right of the contractual parties to refer any dispute arising from the contract to adjudication at 49 any time (Cheng, 2005). The adjudication arrangement in Singapore is closest to the regime in New South Wales (Teo, 2008), which focused on payment disputes, whereas the adjudication regime in UK focused on disputes on a much wider scope (Chan, 2006). One of the outstanding features includes the shortest timeframe the world has ever seen, that is, 14 days from the commencement of adjudication. It is to live up to the objective of speeding up payment and facilitating cashflow (Teo, 2008). Another interesting feature is that it allows the aggrieved party to seek a review of the adjudication decision by a new adjudicator or a panel of adjudicators. Other than that, ‘dispute settlement period’ is introduced to enable early exchange of information between the parties that may enhance the prospect of settlement. In addition, the claimant must serve a ‘notice of intention’ to respondent in order to apply for adjudication. Similar to UK and New South Wales, there is an ‘authorized nominating body’. Since it came into effect on 1 April 2005, myriads of improvement has taken place. One of them is timeliness of the main contractors in making payment. Besides, since then, there is more certainty in receiving payment which is due. Main contractors too have become more willing to settle payment with the subcontractors amicably. Consequently, subcontractors are more willing to enter into contract with main contractors who have not been dealt with before as they have more confidence with the act coming into force. The subcontractors are also becoming more professional in preparing their payment claims (BCA, 2006). According to Langdon and Seah (2013), there is a shift towards when adjudication applications are filed. Adjudication applications are often filed just prior to the commencement of a long holiday when offices, both adjudicator and respondent, are closed and staff involved are away. It will surely be a disadvantage to the respondent. It is suggested that changes to the provisions of the Act to be made to account for circumstances like this. Another limitation of the Act is that if the claimant becomes insolvent while review on the adjudication determination is carried out, the adjudicated amount paid may not be reimbursable as Sec.18(3) necessitates 50 the adjudicated amount to be paid to the claimant prior to the commencement of a review (Chan, 2006). 2.5.1 Adjudication in Singapore Anyone who has any written contract and has executed construction work in Singapore or supplied goods or services relating to such construction work is eligible to make a ‘payment claim’. Nevertheless, some established formalities have to be followed. Anyone receiving a ‘payment claim’ is required to write a ’payment response’ within the prescribed period. The respondent may agree to pay the claimed amount or to pay partially or not to pay at all. However, if the respondent is not paying the full amount, reasons for doing so have to be given in the payment response. Anything not set out in the payment response cannot be raised during adjudication. Like payment claim, some established formalities have to be complied with. Dispute settlement period, which is the period of 7 days after the date when the payment response is due to be provided, is where the parties could seek clarification from one another regarding the issue. In the meantime, amendment of payment response could take place. Respondent could even submit one if none has been provided before. If no settlement is reached during that conflict-resolving period, claimant may take it to adjudication. ‘Notice of intention’ to refer to adjudication must be served by the claimant before adjudication can take place. Then, lodging of adjudication application with the one and only ‘authorized nominating body’, namely, Singapore Mediation Center (SMC), could take place. After receiving adjudication application from SMC, adjudication response must be lodged by the respondent within 7 days. Then the adjudicator comes in picture. The adjudicator is required to make an adjudication determination within (a) 14 days from the initiation of adjudication (b) 7days in the case of no payment response has been submitted. The adjudication determination is binding but it is not final. If one is not happy with that decision, he or she could seek a review from a different adjudicator 51 or a panel of adjudicators, provided that the application for review is lodged within 7 days after adjudication determination has been served and the adjudicated amount exceeds the amount set out in the payment response by a prescribed amount. Prior to applying for review, full adjudicated amount is required to be paid so as to ensure its objective of facilitating cashflow is not compromised. Other alternative ways will be through arbitration or litigation. 2.5.2 Enforcement Mechanism Respondent has to pay the adjudicated amount within 7 days after adjudication determination is served. Else, claimant may suspend the execution of construction works or the supply of goods or services. In the event where claimant is a supplier of goods, he or she may exercise a lien on any unpaid yet supplied unfixed goods. Lastly, claimant may enforce the adjudication determination as a judgement debt through court. 2.5.3 Adjudication Statistic Table 2.5.3.1: The Number of Applications for Adjudication 52 According to Building and Construction Authority (2013), there were 999 cases of adjudication from its inception to the date of reporting. Out of 999, 531 applications have been determined. Among them, 519 have been in favour of the claimant and only a small fraction, that is, 12 have been decided otherwise. In other words, the successful rate for claimant is 97.7%, and that of respondent is only 2.3%. Table 2.5.3.2: Categories of Claimants against Respondents Like UK, cases of sub-contractor claiming against main contractor were the majority of the disputes referred, followed by main contractor v developer and subsequently by sub-subcontractor claiming against subcontractor. Out of 531 applications, the cases of subcontractor claiming against main contractor were 342, amounting to 64.4%. Whereas, the cases for main contractor v developer was 85, tantamount to 16%. The number of cases for sub-subcontractor was 75, equivalent to 14.1%. It was followed by consultant v developer and supplier v developer, amounting to 4.5% and 0.9% respectively (BCA, 2013). 53 Table 2.5.3.3: Disputed and Adjudicated Amounts Till 2013, the total disputed amounts have reached $909,999,862.23. The maximum disputed amount for a case is $116,251,933.51, while the minimum is $4900. The total adjudicated amount stands at $391,810,475.27. The maximum adjudicated amount is $30,071,968.64, whereas the minimum is $0 (BCA, 2013). According to Building and Construction Authority (2013), 302 cases, tantamount to 56.9%, have 90 to 100% of claimed amount as adjudicated amount. In other words, more than half of the adjudicated amount is of the similar value as claimed amount. Only 22.4% of adjudicated amount is less than half of the claimed amount. 54 Table 2.5.3.4: Number of Review Applications Table 2.5.3.5: Categories of Claimants against Respondents Out of 17 review applications, 10 was determined in favour of respondent and 7 in favour of claimant, tantamount to 58.8% and 41.2% respectively. In plain English, respondents have a higher successful rate in review application. In terms of review application, sub-contractor claiming against main contractor still remains the majority of the cases (61.5%), just like adjudication application. Whereas, main contractor v developer cases account for 23.1%. Sub-subcontractor v subcontractor and consultant v developer cases account for 7.7% each. 55 2.6 Introduction to Adjudication in Australia 2.6.1 Adjudication in New South Wales Adjudication in New South Wales (NSW) under Building and Construction Industry Security of Payment Act 1999 is the fourth regime of its kind, following United Kingdom, Scotland and Northern Ireland. It came into effect on 26 March 2000. Its aim, like other similar legislations, is to facilitate cashflow in construction industry, particular in NSW. It is applicable to construction contracts in NSW, where a party undertakes to execute ‘construction work’ or to supply ‘related goods and services’ for the other party. The mechanism begins with the claimant making payment claim against the respondent. The latter may provide a ‘payment schedule’ within 10 business days of the issuance of the payment claim. The payment schedule must contain concrete reasons for not paying the claimed amount fully or not paying at all. If the respondent does not provide the claimant with payment schedule, he becomes liable to pay the claimed amount fully. When the payment due date comes, the claimant could recover it through a court or through adjudication. If claimant chooses adjudication, then the claimant have to submit an adjudication application to the Authorised Nominating Authority (ANA) and the respondent within the time prescribed in the Act. An independent adjudicator will then be appointed by the ANA. The respondent may then lodge an adjudication response to the adjudicator prior to adjudication determination by the adjudicator. The prescribed timeline of the Act has to be complied with strictly. Else, the rights of the parties that would otherwise be available under the Act will be lost. If the adjudicator decides in favour of the claimant, the claimant may file the adjudication determination in a court and get automatic judgement for the adjudicated amount. If the respondent is unhappy with the outcome and wishes to set aside the adjudication determination, he or she could apply to the court. In the meantime, the unpaid portion of the adjudicated amount has to be paid as security pending the outcome of the court proceeding. Other than that, the Act allows claimant to suspend work pending payment. Besides, claimant could exercise a lien 56 over unfixed plant or materials supplied by him to the extent of the unpaid amount of the progress claim. 2.6.2 New South Wales (Statistics) Figure 2.6.2.1: Number of adjudication applications by payment claim value range 2014/15 72% of the total number of determinations were made for claims for less than $100,000. In these particular cases, adjudicators awarded, roughly, 87% of the claimed amount; 61% of claimants being given the full claimed amount. 18% of the total number of determinations were made for claims for $100,000 to less than $500,000. In these particular cases, adjudicators awarded, roughly, 66% of the claimed amount; 20% of claimants being granted the full claimed amount. 10% of the total number of determinations released were made for claims for $500,000 or greater. In these particular cases, adjudicators awarded, roughly, 43% of the claimed amount; 4% of claimants being conferred the full claimed amount (Fair Trading, 2015). 57 Figure 2.6.2.2: Total claimed and adjudicated amounts 2014/15 Roughly, claimants were awarded 44% of the amount claimed (Fair Trading, 2015). Figure 2.6.2.3: Claimant Type 2014/15 58 Figure 2.6.2.4: Respondent Type 2014/15 Contractors and subcontractors are the main claimants. Whereas, most common profile of the respondent are head contractors and clients (Fair Trading, 2015). Claimant has a high successful rate of over 90% in the adjudication process. In term of being awarded full amount of payment claim, subcontractor is more successful than main contractor (Uher and Brand, 2005). 59 2.6.3 Queensland (Statistics) Figure 2.6.3.1: Percentage of Claimant Type Year to Date Unsurprisingly, subcontractors were the majority of the claimant, tantamount to 66.83%, followed by contractors who were accounted for 21.29%. Head contractors come next, accounting for 5.94% (BCIPA, 2014). Figure 2.6.3.2: Percentage of Respondent Type Year to Date According to Building and Construction Industry Payment Agency (2014), 50% of respondents were contractors, while client accounts for 26.73%. Head contractor, on the other hand, accounts for 19.31%. 60 Figure 2.6.3.3: Application Lodged by Region Year to Date Brisbane tops the list, accounting for almost half the applications lodged, that is, 49.01%.It was then followed by Gold Coast, Mackay, Toowoomba etc (BCIPA, 2014). Figure 2.6.3.4: Percentage of Claimants Receiving Full Claim Amount According to Building and Construction Industry Payment Agency (2014), 80.95% of claimant received full claim amount when the claim amount was lesser than $5000. 70.59% of claimant received full amount when the claim amount ranged between $5000 to $9999. There is a downwards trend of claimants receiving full claim amount as the claim amount increases. 61 2.7 Main Features of CIPAA 2.7.1 Make Conditional Payment Void Section 35 of CIPAA expressly prohibits conditional payment. Section 35(2) sets out the condition to which a payment is considered as conditional payment. However, the scope of S35 conditional payment clauses – whether the conditional payment clauses are limited to the two types set out in Section 35(2) and whether these stated conditional payment clauses are exhaustive are brought to court. The Judge held that this proposition may not have been the will of the Parliament when CIPAA was enacted – where Section 35(1) states that “Any conditional payment provision…” , would deem the provision a more expansive interpretation that would accord with the purpose of CIPAA. It was held that Section 35 does not have to be interpreted exhaustively. Based on the factual circumstances of their contractual dispute, parties may be able to proof that any contractual obligation might be considered a ‘conditional payment provision’, although their current scenario may not specifically fall under the scopes as stipulated in Section 35(2). 2.7.2 Securing Direct Payment from Principal CIPAA permits the subcontractor to request direct payment of the adjudicated amount from the employer. And, in accordance with it, the employer has obligations to pay for it. Subcontractor could rely on it to recover the adjudicated amount from the employer where it has a decision against the main contractor who has failed to pay. 2.7.3 Suspension or Reduce the Rate of Progress of the Works The winning party will have the right to suspend or reduce the rate of progress of the works if there is an underpayment of the adjudicated amount as decided, provided 62 that written notice has been given to the losing party, indicating his intention to do so. If this happens, the winning party will entitle a reasonable extension of time and is able to claim for any loss and expense resulted from the suspension or reduction of the rate of progress of the works. 2.8 Shortcomings of CIPAA 2.8.1 Jurisdiction of the Adjudicator Is Not Made Clear Like UK, jurisdiction of the adjudicator is often complex and controversial. Redworth Construction Limited v Brookdale Healthcare Limted (2006) EWHC1994 and Harlow & Milner Ltd v Mrs Linda Teasdale (2006) EWHC 1708 both had jurisdiction as a key issue. 2.8.2 Does Not Address Whether the New Adjudication Regime Could Apply to Contracts Entered into Before 15 April 2014 CIPAA does not make clear whether the new adjudication regime could apply to contracts entered into before 15 April 2014. On this matter, KLRCA, the sole adjudicating body, has confirmed that it welcome construction disputes, regardless of whether the contract is entered into before or after that date (Cannon and Gibson, 2014). And, this issue is brought before the High Court and later the Court of Appeal. In UDA Holdings Berhad v Bisraya Construction Sdn Bhd & Anor. And Capitol Avenue Development Sdn Bhd v Bauer (Malaysia) Sdn Bhd (2015) 11 MLJ 499, the High Court is of the opinion that the intention of the Parliament in enacting the CIPAA was to provide a remedy to all construction contracts and payment claims made, regardless of when they might have been made. The Court of Appeal later upheld the High Court’s decision on appeal, suggesting that CIPAA could be given 63 retrospective effect to extend its application to payment disputes and their underlying contracts that arose before 15 April 2014. The necessary implication of these judgements is that parties can validly bring claims under the CIPAA so long as they are not time barred under the relevant limitation legislations and satisfy other requirements of the Act. 2.8.3 Intentional Delay by Uncooperative Defendant Since the clock does not start ticking for the date of the adjudication response or the eventual decision till the adjudicator is nominated, it is likely for the uncooperative defendant to drag either the selection of adjudicator or appointment of adjudicator by disagreeing with the terms and fees of adjudicator in the early period or wait for the last minute to submit the adjudication response even if it has been completed. Worst comes to worst, these three events could happen all together at a single adjudication process (Cannon and Gibson, 2014) 2.8.4 Relatively Long Adjudication Response and Relatively Short Adjudication Reply According to Cannon and Gibson (2014), the responding party will have up to 6 weeks to prepare its adjudication response. Unlike Malaysia, the adjudications carried out in the UK, Singapore or Australia do not have such luxury, having only between 7 to 14 days to respond. Unlike UK, Singapore, Australia and New Zealand regimes which exclude the bringing of defences of set-off or counterclaims which have not been raised before, there are no such restrictions in Malaysia. In fact, there are no restrictions on what could be included in the adjudication response at all. Hence, nothing is preventing a defendant from using these 6 weeks to compile something surprising to surprise the claimant. Thoroughly new contra-charges could be raised, leaving room 64 for tremendously strategic behaviour by the respondent, considering there are only 5 days for claimant to serve the adjudication reply from receipt of the adjudication response. The probability for the claimant to be overwhelmed by the surprising multiple lever arch files response is greater than it is supposed to be (Cannon and Gibson, 2014). 65 CHAPTER 3 3 METHODOLOGY 3.1 Research Strategy Research strategy can be divided into 2 types, which are, ‘quantitative research’ and ‘qualitative research’. The aim of the study as well as the type and availability of the information will determine which type of research to adopt (Naoum, 2013). 3.1.1 Quantitative Research Quantitative research is ‘objective’ in nature. Quantitative data are not abstract; they are hard and reliable; they are measurements of tangible, countable, sensate features of the world (Bouma and Atkinson, 1995). 3.1.2 Qualitative Research Qualitative research, however, is ‘subjective’ in nature. It emphasises on meanings, experiences, description and so on (Naoum, 2013). According to Gupta and Gupta (2011), it concerns with subjective assessment of attitudes, opinions and behaviour. Krysik and Finn (2010) is of the opinion that qualitative research is holistic in its approach and the data collected tend to be rich in narrative descriptions. Focus group 66 interviews and projective techniques are some of the techniques used (Gupta and Gupta, 2011). 3.2 Approaches to Data Collection According to Naoum (2013), the approach to be adopted for carrying out of the study depends very much on the nature of the investigation and the type of data and information that are required and available. There are 2 approaches to data collection; they are fieldwork and desk study. 3.2.1 Fieldwork Research Naoum (2013) finds these three approaches especially practical: 1. Survey approach – Data can be collected from a relatively large number of respondents in a relatively short time. The findings will then be generalized. 2. Case study approach – It provides an in-depth analysis of a specific problem. However, the findings cannot be generalized. 3. Problem-solving approach – It reviews the current situation, identifies the problem, gets involved in introducing some changes to enhance the situation and evaluates the implication of the changes. 3.2.2 Desk Study Research Secondary data can be stored in 2 formats, namely, statistical and descriptive. Statistical format refers to official statistics which are collected by the government related bodies. Descriptive format, on the other hand, refers to analysing and appraising the contents of an archival document (Naoum, 2013). According to 67 Kumar (2011), secondary sources offer second-hand data. However, none of the data collection method provides absolute information, be it a primary sources or be it a secondary sources. 3.3 Research Design This study will adopt survey questionnaire. In fact, this method is used extensively by various parties, namely, private individuals, research workers, private and public organisations and even by governments (Kothari, 2004). It is suitable to be adopted for descriptive and analytical surveys whose aim is clear enough to be explained in a few paragraphs, so as to figure out facts and opinions on what is happening (Naoum, 2013). According to Creswell (2014), it provides a quantitative or numeric description of trends, attitudes or opinions of a population by studying a sample of that population. The survey would be a structured survey with closed-ended questions. Mail, telephone, internet, personal interviews or group administration have been identified as ways to data collection (Fowler, 2009). Among these, the survey questionnaire will be sent via mail and face-to-face meeting. Only 35 questionnaires will be analysed; 15 from quantity surveying firm, 15 from main contractors, 5 from sub-contractors due to time constraint in analysing the data and difficulties in finding respondents. Of course, a larger sample will promise a more accurate and reliable current situations or views. However, this size of sample is believed to be able to reflect the current situations or views already. This survey will be cross-sectional, meaning the data will be collected at one point of the time only. 68 3.4 Data Analysis Method 3.4.1 Descriptive Statistics Method Serving a general overview of the results is what descriptive statistics method does. It is known as the simplest method of analysis as it will either analyse the responses in percentages or actual numbers (Naoum, 2013). Put simply, it describes what the data shows, presenting quantitative descriptions in manageable form (Social research methods, n.d.). It can be used even when there is no direct relationship between 2 variables. 3.4.2 Inferential Statistics Method Drawing conclusion which is extended beyond immediate data is what inferential statistics method does. Inferences are made from the data to more general situations (Social research methods, n.d.). In other words, inferential statistics are techniques allowing generalizations about the populations to be made where the samples were drawn. Hence, it is crucial that the sample accurately represents the targeted population (Laerd, n.d.). 69 CHAPTER 4 4 RESULTS AND DISCUSSION 4.1 The View of General Respondents and CIPAA Participants Towards The Implementation of CIPAA This section will discuss about the view of general respondents and the view of respondents who have taken part in CIPAA before separately towards the implementation of CIPAA. Every answer given by the respondents for every question in the questionnaire is tabulated and the general views of the main contractors, QS consultants and subcontractor combined and those CIPAA respondents are projected out in the form of pie charts. 70 4.1.1 Percentage of CIPAA Participants to All Respondents Figure 4.1.1.1: Percentage of CIPAA Participants to All Respondents After coming into existence for just 3 years, CIPAA respondents have almost reached one quarter of the total respondent. That means for every four people, one of them has taken part in CIPAA before. It is reflective of the confidence and faith the construction industry stakeholders have in CIPAA. 71 4.1.2 Cash Flow Figure 4.1.2.1: Cash flow Figure 4.1.2.2: CIPAA Participants: Cash flow 71% of respondent agrees that the cash flow is smoother since CIPAA is introduced, even though with varying degree (some agree some strongly agree). Whereas, CIPAA participants agree to that statement with an even higher percentage of 75%. This is certainly a testament to its success. 72 4.1.3 Eradication of Conditional Payment Figure 4.1.3.1: Eradication of Conditional Payment Figure 4.1.3.2: CIPAA Participant: Eradication of Conditional Payment Only 49% of respondent opines that conditional payment is eradicated after CIPAA is introduced, whereas 75% of CIPAA participant thinks so with 13% disagreeing to that statement. Since outlawing conditional payment is one of the most important features of CIPAA, the low agreeing rate that conditional payment is eliminated should be examined. 73 4.1.4 Adjudicator's Inquisitional Role Figure 4.1.4.1: Adjudicator's inquisitional role Figure 4.1.4.2: CIPAA Participant: Adjudicator's inquisitional role Majority of respondents and CIPAA respondents think that adjudicator's inquisitional role plays an important role in ensuring successful resolved of disputes. 74 4.1.5 Reliable Dispute Resolution Mechanism Figure 4.1.5.1: Reliable dispute resolution mechanism Figure 4.1.5.2: CIPAA Participant: Reliable dispute resolution mechanism A majority of 71% respondents (some agree some strongly agree) agree that CIPAA is a reliable dispute resolution mechanism. Even a higher approval rate is seen when it comes to CIPAA participants. 26% of undecided respondents may be due to unfamiliarity with CIPAA and it is believed that the approval rate will be increasing as they familiarise with CIPAA. 75 4.1.6 The Adjudicators Empanelled by KLRCA Figure 4.1.6.1: The adjudicators empanelled by KLRCA Figure 4.1.6.2: CIPAA Participant: The adjudicators empanelled by KLRCA It comes as no surprise as majority of respondents choose “neutral” when asked whether the adjudicators empanelled by KLRCA since only a quarter of them involved in CIPAA before. However, it does come as a surprise when majority of CIPAA participants feel the same, taking a middle stand. 76 4.1.7 Relatively Speedy Process Compared to Arbitration or Litigation Figure 4.1.7.1: Relatively speedy process Figure 4.1.7.2: CIPAA Participant: Relatively speedy process Most of the respondents and CIPAA participants are of the opinion that CIPAA is a relatively speedy process when compared to arbitration or litigation with CIPAA participants’ approval rate as high as 87% (some agree some strongly agree), fulfilling one of the very objectives of CIPAA of providing a mechanism for speedy dispute resolution. 77 4.1.8 Relatively Affordable Compared to Arbitration or Litigation Figure 4.1.8.1: Relatively affordable Figure 4.1.8.2: CIPAA Participant: Relatively affordable Majority of respondents and CIPAA participants agree to the statement that the cost of adjudication is relatively low compared to arbitration or litigation. 78 4.1.9 Dispute Resolution of CIPAA Figure 4.1.9.1: Dispute resolution of CIPAA Figure 4.1.9.2: CIPAA Participant: Dispute resolution of CIPAA 91% of respondent agrees to the statement stating dispute resolution provided under CIPAA is fast enough. The approval rate of CIPAA participants is, however, 100%, showing great satisfaction towards the duration of CIPAA. 79 4.1.10 The Duration of Initiation of Adjudication, Appointment of Adjudicator and Adjudication Proceedings Undoubtedly, there will be some respondents who are of the opinion that dispute resolution under CIPAA is not fast enough. Since CIPAA’s main attraction is its speedy dispute resolution, when stakeholders are questioning about its very essence, their opinions and suggestions need to be heard. Towards that end, a question of which part of CIPAA should be shortened is set. The respondents who have answered “No” in Section 4.1.10, will be asked which part of CIPAA, in their opinion, should be shortened. As there are not much respondents who answered “No”, please bear in mind that the percentage generated in this section is based on a very small sample. Since there was no CIPAA participant who answered “No”, there will be no analysis for this part. Figure 4.1.10.1: Duration of initiation of adjudication A majority of respondents think that the duration of initiation of adjudication, where non-paying party responds to payment claim, should be shortened. 80 Figure 4.1.10.2: Duration of appointment of adjudicator A majority of respondents think that the duration of appointment of adjudicator, should not be shortened. It may be due to the parties want to be certain that the adjudicator appointed has certain qualifications and has no conflict of interest so that his decision will be convincing, at least for the parties. (c)Should the duration of adjudication proceedings be shortened? 33% 67% Yes No Figure 4.1.10.3: Duration of adjudication proceedings Most of them think that the duration of adjudication proceedings should be shortened. 81 4.1.11 Relatively Long Period of CIPAA When Compared with Other Similar Legislations Figure 4.1.11.1: Relatively long period of CIPAA Figure 4.1.11.2: CIPAA Participant: Relatively long period of CIPAA Majority of respondents think that the duration of CIPAA is good enough. Whereas, 100% of CIPAA participants feel the same, in line with Section 4.1.9, where 100% of them agree that dispute resolution provided under CIPAA is fast enough. 82 4.1.12 Preferred Remedy Figure 4.1.12.1: First choice among three remedies available Figure 4.1.12.2: CIPAA Participant: First choice among three remedies available Most respondents and CIPAA participants will secure direct payment from principal if they have not received payment after adjudication determination is served in their favour. It is reflective of non-aggressive behaviour of Malaysian construction industry stakeholders. 83 Figure 4.1.12.3: Second choice among three remedies available Figure 4.1.12.4: CIPAA Participant: Second choice among three remedies available The second choice most respondents chooses is to slow down the works. Same goes to CIPAA participants. 84 Figure 4.1.12.5: Last choice among three remedies available Figure 4.1.12.6: CIPAA Participant: Last choice among three remedies available Given the less aggressive behaviour of Malaysian construction industry stakeholders, suspension of works is their last choice. It is a healthy trend as most of the industry players still view ‘completion of project’ their first priority even when they are treated unfairly. 85 4.1.13 Improvements Felt in Malaysia Figure 4.1.13.1: Timeliness in paying Figure 4.1.13.2: CIPAA Participant: Timeliness in paying Sadly, a majority of respondents do not think that there is any improvement in timeliness in paying in Malaysia since CIPAA is introduced. While, only 50% of CIPAA respondents feel the improvement. As facilitating regular and timely payment is one of the reasons why CIPAA is introduced, this situation needs to be studied. 86 Figure 4.1.13.3: Certainty in obtaining payment Figure 4.1.13.4: CIPAA Participant: Certainty in obtaining payment Only 49% of respondent feel that there is any improvement in certainty in obtaining payment in Malaysia since the introduction of CIPAA. Whereas, CIPAA participants, in overall, stay neutral on this matter. Further research on why this happens should be done. 87 Figure 4.1.13.5: Improvement in willingness of main contractors to seek amicable settlement with sub-contractors Figure 4.1.13.6: CIPAA Participant: Improvement in willingness of main contractors to seek amicable settlement with sub-contractors A majority of respondents feel that there is improvement in willingness of main contractors to seek amicable settlement with sub-contractors, while CIPAA participants stay undecided on this matter. 88 4.1.14 Power to Award Adjudication Cost Figure 4.1.14.1: Power to award adjudication cost Figure 4.1.14.2: CIPAA Participant: Power to award adjudication cost Majority of respondents and CIPAA participant opine that the power to award adjudication cost given to adjudicators will discourage the application of adjudication, particularly to small and medium-sized company, who are already financially stretched. Measures have to be taken to prevent this from happening. 89 4.1.15 Adjudication Reply Figure 4.1.15.1: Adjudication reply Figure 4.1.15.2: CIPAA Participant: Adjudication reply Majority of respondents and CIPAA participants think that it is fair to have adjudication reply with no further ground for respondent to response to that reply. 90 4.1.16 Reach of CIPAA Figure 4.1.16.1: Reach of CIPAA Figure 4.1.16.2: CIPAA Participant: Reach of CIPAA Majority of respondents are of the opinion that CIPAA should extend its reach to cover all types of construction contracts, be it written, oral or partly written and partly oral, whereas only 50% of CIPAA participants think so. 91 4.1.17 Issues of Breach of Natural Justice and Adjudicator’s Jurisdiction Problem Figure 4.1.17.1: Issues within CIPAA Figure 4.1.17.2: CIPAA Participant: Issues within CIPAA Most of the respondents, especially CIPAA participants, show serious concerns towards the issues of breach of natural justice and adjudicator's jurisdiction problem. One of the possible solutions is constantly providing training and workshop to the adjudicators so that these predicament can be minimized. 92 4.1.18 Adjudication Review Figure 4.1.18.1: Adjudication Review Figure 4.1.18.2: CIPAA Participant: Adjudication Review Majority of the respondents, especially CIPAA participants, are of the opinion that CIPAA should have adjudication review. It is indicative of the parties’ wish for a fairer and more transparent mechanism. 93 4.1.19 Rating of CIPAA Figure 4.1.19.1: Rating of CIPAA Figure 4.1.19.2: CIPAA Participant: Rating of CIPAA Majority of respondents and CIPAA participants rate CIPAA four out of five, which is later given a description as good. It is reflective of the parties’ faith reposed in CIPAA. 94 4.2 The View of Main Contractors, QS Consultants and Subcontractors Respectively Towards The Implementation of CIPAA This section will discuss about the view of main contractors, QS consultants and subcontractors respectively towards the implementation of CIPAA. Every answer given by the respondents for every question in the questionnaire is tabulated and the general views of the main contractors, QS consultants and subcontractor are projected out in the form of bar charts and pie charts. 4.2.1 Percentage of Each Party Involved in CIPAA Figure 4.2.1.1: Percentage of each party involved in CIPAA 40% of subcontractor respondent has taken part in CIPAA before, be it as a claimant or a respondent. 33.3% of main contractor respondent and only a small fraction of 6.7% of QS consultant respondent have been involved in CIPAA before. Subcontractor is the mostly CIPAA involved party in this study, followed by main contractor and lastly QS consultant. This is in line with the KLRCA report stating subcontractor is the most common profile of the claimant in CIPAA, ensued by main contractor and eventually consultant. This trend could be attributed to the fact that the lower the parties down the construction chain, the more they are being pressured 95 financially, not getting paid. In addition, it is reflective of the reach of CIPAA among subcontractors, main contractors and QS consultants. 4.2.2 Cash Flow Figure 4.2.2.1: Main Contractor: Cash flow Figure 4.2.2.2: QS Consultant: Cash flow 96 Figure 4.2.2.3: Subcontractor: Cash flow Majority of respondents, be it main contractor, consultant QS or subcontractor, think that CIPAA has eased the cash flow in the construction industry, although with different intensities. 97 4.2.3 Eradication of Conditional Payment MAIN CONTRACTOR: CONDITIONAL PAYMENT IS ERADICATED AFTER CIPAA IS INTRODUCED Strongly agree Agree Undecided Disagree Strongly disagree 0%7% 20% 27% 46% Figure 4.2.3.1: Main Contractor: Eradication of conditional payment Figure 4.2.3.2: QS Consultant: Eradication of conditional payment 98 Figure 4.2.3.3: Subcontractor: Eradication of conditional payment A majority of main contractor and QS consultant agrees that conditional payment is eradicated after CIPAA is introduced, although not with a lopsided result that it is supposed to be. Whereas, only 40% of subcontractor respondent agrees with the statement. While outlawing conditional payment is one of the primary objectives of CIPAA, this area is indeed worthy of special note and attention. Parties concerned should look into this “situation” seriously and think of ways to ensure conditional payment is eradicated thoroughly. 99 4.2.4 Adjudicator's Inquisitional Role Figure 4.2.4.1: Main Contractor: Adjudicator's inquisitional role Figure 4.2.4.2: QS Consultant: Adjudicator's inquisitional role 100 Figure 4.2.4.3: Subcontractor: Adjudicator's inquisitional role Majority of main contractor, QS Consultant and subcontractor respondents agree that adjudicator's inquisitional role plays an important role in ensuring successful resolved of disputes. 101 4.2.5 Reliable Dispute Resolution Mechanism Figure 4.2.5.1: Main Contractor: Reliable dispute resolution mechanism Figure 4.2.5.2: QS Consultant: Reliable dispute resolution mechanism 102 Figure 4.2.5.3: Subcontractor: Reliable dispute resolution mechanism Majority of main contractor, QS Consultant and subcontractor respondents agrees that CIPAA is a reliable dispute resolution mechanism. 60% of main contractor respondent is of the opinion that CIPAA is a reliable dispute resolution mechanism. 80% of QS Consultant respondent and subcontractor respondent feels the same. 103 4.2.6 The Adjudicators Empanelled by KLRCA Figure 4.2.6.1: Main Contractor: The adjudicators empanelled by KLRCA Figure 4.2.6.2: QS Consultant: The adjudicators empanelled by KLRCA 104 Figure 4.2.6.3: Subcontractor: The adjudicators empanelled by KLRCA A majority of 67% of main contractor respondent and QS Consultant take a middle stand when asked whether the adjudicator empanelled by KLRCA is knowledgeable enough, neither agree nor disagree. While, in subcontractor side, similarly, 60% of subcontractor respondent chooses neutral when asked whether the adjudicator empanelled by KLRCA is knowledgeable enough. The large undeciding groups of respondents may be attributed to the lack of experience in CIPAA. Since CIPAA has just been introduced in 2014, there are not much parties that have been involved in CIPAA before. Therefore, being not familiar with CIPAA, the respondents are likely to choose “undecided choice”. 105 4.2.7 Relatively Speedy Process Compared to Arbitration or Litigation Figure 4.2.7.1: Main Contractor: Relatively speedy process Figure 4.2.7.2: QS Consultant: Relatively speedy process 106 Figure 4.2.7.3: Subcontractor: Relatively speedy process 73% of main contractor respondent and QS Consultant respondent thinks of adjudication as a relatively speedy process compared to arbitration or litigation. However, only 40% of subcontractor respondent feels the same. 107 4.2.8 Relatively Affordable Compared to Arbitration or Litigation Figure 4.2.8.1: Main Contractor: Relatively affordable Figure 4.2.8.2: QS Consultant: Relatively affordable 108 Figure 4.2.8.3: Subcontractor: Relatively affordable Majority of main contractor, QS Consultant and subcontractor respondents agree that the cost of adjudication is relatively low compared to arbitration or litigation. 109 4.2.9 Dispute Resolution of CIPAA Figure 4.2.9.1: Main Contractor: Dispute resolution of CIPAA Figure 4.2.9.2: QS Consultant: Dispute resolution of CIPAA 110 Figure 4.2.9.3: Subcontractor: Dispute resolution of CIPAA 87% of main contractor respondent agrees that dispute resolution provided under CIPAA is fast enough, whereas 93% of QS Consultant agrees to the statement. Every subcontractor respondent taking part in this study agrees to the statement. This unanimous high rating given by various stakeholders can be attributed to the efficient administrative mechanism of CIPAA and, of course, the success of CIPAA legislation. 111 4.2.10 The Duration of Initiation of Adjudication, Appointment of Adjudicator and Adjudication Proceedings Certainly, there will be some respondents are of the opinion that dispute resolution under CIPAA is not fast enough. Since CIPAA’s main attraction is its speedy dispute resolution, when stakeholders are questioning about its very essence, their opinions and suggestions need to be heard. To that end, a question of which part of CIPAA should be shortened is set. The respondents who have answered “No” in Section 4.2.10, will be asked which part of CIPAA, in their opinion, should be shortened. As there are not much respondents who answered “No”, please bear in mind that the percentage generated in this section is based on a very small sample. Figure 4.2.10.1: Main Contractor: Duration of initiation of adjudication 112 Figure 4.2.10.2: Main Contractor: Duration of appointment of adjudicator Figure 4.2.10.3: Main Contractor: Duration of adjudication proceedings 113 Figure 4.2.10.4: Consultant QS: Duration of initiation of adjudication, appointment of adjudicator and adjudication proceedings 50% of main contractor respondent, who has answered “No” in Section 4.2.9, thinks that the duration of initiation of adjudication should be shortened. However, none of them opines that the duration of appointment of adjudicator should be shortened. While, 50% of them are of the opinion that the duration of adjudication proceedings should be shortened. On the consultant QS side, the consultant QS respondent, who has answered “No”, thinks that every phase of CIPAA, be it duration of initiation of adjudication, appointment of adjudicator or adjudication proceedings, should be shortened. 114 4.2.11 Relatively Long Period of CIPAA When Compared with Other Similar Legislations Figure 4.2.11.1: Main Contractor: Relatively long period of CIPAA Figure 4.2.11.2: Consultant QS: Relatively long period of CIPAA 115 Figure 4.2.11.3: Subcontractor: Relatively long period of CIPAA When compared to other similar legislations, the process of CIPAA is relatively longer. When asked to compare, majority of main contractor, consultant QS and subcontractor respondents think that the duration of CIPAA is good enough. In other words, most of the respondents are satisfied with the duration of CIPAA. 116 4.2.12 Preferred Remedy Figure 4.2.12.1: Main Contractor: First choice among three remedies available (A)CONSULTANT QS: IF YOU HAVE NOT RECEIVED PAYMENT AFTER ADJUDICATION DETERMINATION IS SERVED IN YOUR FAVOR, WHAT WOULD BE YOUR FIRST CHOICE AMONG THREE REMEDIES AVAILABLE? Slow down the works Secure direct payment from principal 14% Suspend the works 22% 64% Figure 4.2.12.2: Consultant QS: First choice among three remedies available 117 Figure 4.2.12.3: Subcontractor: First choice among three remedies available A majority of main contractor respondent and consultant QS respondent would prefer “secure direct payment from principal” over other choices. A majority of subcontractor, however, would slow down the works if they have not received payment after adjudication determination is served in their favour. 118 Figure 4.2.12.4: Main Contractor: Second choice among three remedies available Figure 4.2.12.5: Consultant QS: Second choice among three remedies available 119 Figure 4.2.12.6: Subcontractor: Second choice among three remedies available It is interesting to note that an equal amount of 46% of main contractor respondent chooses “secure direct payment from principal” and “slow down the works” as their second choice. Nevertheless, since “secure direct payment from principal” is their first choice, so “slow down the works” option will be the second. Consultant QS also feels the same, choosing “slow down the works” as their second choice. Similar to main contractor situation, an equal amount of 40% of subcontractor respondent chooses “suspend the works” and “slow down the works” as their second choice. As “slow down the works” is their first choice, “suspend the works” remedy will be their second. 120 Figure 4.2.12.7: Main Contractor: Third choice among three remedies available Figure 4.2.12.8: Consultant QS: Third choice among three remedies available 121 Figure 4.2.12.9: Subcontractor: Third choice among three remedies available “Suspend the works” will be the last choice among three remedies available for main contractor and consultant QS. As “suspend the works” is subcontractor’s second choice, “secure direct payment from principal” would be their last choice. 122 4.2.13 Improvements Felt in Malaysia Figure 4.2.13.1: Main Contractor: Timeliness in paying Figure 4.2.13.2: Consultant QS: Timeliness in paying 123 Figure 4.2.13.3: Subcontractor: Timeliness in paying Sadly, only a majority of main contractor respondent thinks that timeliness in paying in Malaysia has improved since CIPAA is introduced. Majority of consultant QS and subcontractor respondents do not feel the same. 124 Figure 4.2.13.4: Main Contractor: Certainty in obtaining payment Figure 4.2.13.5: Consultant QS: Certainty in obtaining payment 125 Figure 4.2.13.6: Subcontractor: Certainty in obtaining payment Majority of main contractor and subcontractor respondents do not think that there is any improvement in certainty in obtaining payment in Malaysia since the introduction of CIPAA. However, majority of consultant QS feel otherwise. 126 Figure 4.2.13.7: Main Contractor: Willingness of main contractors to seek amicable settlement with sub-contractors Figure 4.2.13.8: Consultant QS: Willingness of main contractors to seek amicable settlement with sub-contractors 127 Figure 4.2.13.9: Subcontractor: Willingness of main contractors to seek amicable settlement with sub-contractors Majority of respondents, be it main contractor, consultant QS and subcontractor, unanimously think that there is an improvement in willingness of main contractors to seek amicable settlement with sub-contractors since CIPAA is introduced. It is a positive trend in which construction industry stakeholders are seeking - rebalancing of power. With CIPAA in power, subcontractors are no longer a prey, who used to suffer financially due to stuck cash flow. 128 4.2.14 Power to Award Adjudication Cost MAIN CONTRACTOR: DO YOU THINK THE POWER TO AWARD ADJUDICATION COST GIVEN TO ADJUDICATORS WILL DISCOURAGE THE APPLICATION OF ADJUDICATION, PARTICULARLY TO SMALL… Yes No 27% 73% Figure 4.2.14.1: Main Contractor: Power to award adjudication cost Figure 4.2.14.2: Consultant QS: Power to award adjudication cost 129 Figure 4.2.14.3: Subcontractor: Power to award adjudication cost Majority of main contractor, consultant QS and subcontractor respondents are of the opinion that the power to award adjudication cost given to adjudicators will discourage the application of adjudication, particularly to small and medium-sized company. The power of awarding adjudication cost given by CIPAA to adjudicators may deter small and medium-sized company to refer their disputes to CIPAA because if the adjudicators find that the claimants are partly at fault too and may award part of adjudication cost to the financially drained claimants. This area is indeed worthy of attention. 130 4.2.15 Adjudication Reply Figure 4.2.15.1: Main Contractor: Adjudication reply Figure 4.2.15.2: Consultant QS: Adjudication reply 131 Figure 4.2.15.3: Subcontractor: Adjudication reply Majority of main contractor and consultant QS respondents opine that it is fair to have adjudication reply with no further ground for respondent to response to that reply. However, majority of subcontractor respondents think that it is unfair and there should be another reply to that reply. It is interesting to see subcontractors, who are down the construction chain, feel that this mechanism that is to their advantages, is unfair and think that there should be another reply to that reply. 132 4.2.16 Reach of CIPAA Figure 4.2.16.1: Main Contractor: Reach of CIPAA Figure 4.2.16.2: QS Consultant: Reach of CIPAA 133 Figure 4.2.16.3: Subcontractor: Reach of CIPAA Majority of main contractor, consultant QS and subcontractor respondents hope that CIPAA could extend its reach to cover all types of construction contracts, be it written, oral or partly written and partly oral, just like in New South Wales. 134 4.2.17 Issues of Breach of Natural Justice and Adjudicator’s Jurisdiction Problem Figure 4.2.17.1: Main Contractor: Issues within CIPAA Figure 4.2.17.2: Consultant QS: Issues within CIPAA 135 Figure 4.2.17.3: Subcontractor: Issues within CIPAA Majority of main contractor, consultant QS and subcontractor respondents collectively think that issues on breach of natural justice and adjudicator’s jurisdiction problem affect the effectiveness of CIPAA. This indicates that various parties show serious concerns towards issues of breach of natural justice and adjudicator’s jurisdiction problems. 136 4.2.18 Adjudication Review Figure 4.2.18.1: Main Contractor: Adjudication review Figure 4.2.18.2: Consultant QS: Adjudication review 137 Figure 4.2.18.3: Subcontractor: Adjudication review 87% of main contractor respondent and 100 % of Consultant QS and subcontractor respondent wishes that CIPAA to have adjudication review. These high percentage of approval for adjudication review from various groups indicates that the parties are seeking a fairer and more transparent adjudication determination. 138 4.2.19 Rating of CIPAA Figure 4.2.19.1: Main Contractor: Rating of CIPAA Figure 4.2.19.2: Consultant QS: Rating of CIPAA 139 Figure 4.2.19.3: Subcontractor: Rating of CIPAA Majority of main contractor and consultant QS respondents rate CIPAA 4 out of 5, which is later given a description as good. However, a majority of subcontractor respondents rate CIPAA 3 out of 5, which is later given a description as average. 140 CHAPTER 5 5 CONCLUSION AND RECOMMENDATIONS 5.1 Introduction Basically, this chapter summarizes the findings found in this study. Of course, the findings lead back to the objectives of this research which are: 1. To investigate whether CIPAA has addressed the cashflow problems in the construction industry as it was intended to. 2. To get to know how the construction industry stakeholders think of the effectiveness and efficiency of CIPAA. 3. To get the insight of how CIPAA could be further improved by studying similar payment legislations in other countries. Research limitations faced will also be discussed in this chapter. Besides, the contributions of this research to the construction industry will be looked into. Last but not least, there are suggestions for further research. 141 5.2 Findings Majority of respondents feel that cashflow has become smoother since CIPAA is introduced. However, not so much for the conditional payment problems. Surprisingly, majority of respondents except main contractors do not think that timeliness in paying has improved although CIPAA is in power. 91% of respondents and 100% of CIPAA respondents opine that dispute resolution provided under CIPAA is fast enough, showing great satisfaction towards the duration of CIPAA. The majority of the other 9% who thinks otherwise is of the opinion that the duration of initiation of adjudication and adjudication proceedings but not the duration of appointment of adjudicator should be shortened. It may be due to the parties want to be certain that the adjudicator appointed has certain qualifications and has no conflict of interest so that his decision will be convincing. It comes as no surprise as most of the respondents think that adjudication under CIPAA is a relatively speedy and affordable dispute resolution mechanism when compared to arbitration or litigation. However, the respondents do show their concern towards issues on breach of natural justice and jurisdiction problems of adjudicators, which may render the adjudication results not enforceable. In general, the performance of CIPAA is given 4 out of 5, indicating a sign of faith various parties have reposed in CIPAA. It is further strengthened when 88% of CIPAA participants think that CIPAA is reliable. Most of the respondents think that it is fair to have adjudication reply with no further ground for respondent to response to that reply. Nevertheless, subcontractor respondents find that is unfair and think that there should be another reply to that reply, like what has been practiced in UK. Majority of respondents wish that CIPAA could extend its reach to cover all types of construction contracts, be it written, oral or partly written and partly oral, just like in New South Wales. Many feel that the power to award adjudication cost given to adjudicator will discourage the application of CIPAA, particularly to small and medium-sized company. 94% of respondent wishes that CIPAA to have adjudication review. These high percentage of approval for adjudication review is reflective that the various parties are seeking a fairer and more transparent adjudication determination. 142 Compared to UK claimant’s successful rate of 50%, CIPAA has a much higher claimant’s successful rate of over 90% as in New South Wales. Although CIPAA successful rate is still behind Singapore claimant’s successful rate of 97.7%, CIPAA is considered to be quite effective. Like UK, Singapore and Queensland, the trend of the most common profile of the claimant continues to be the subcontractor, followed by main contractor. However, in New South Wales, contractor is the main claimant, ensued by subcontractor. 5.3 Research Limitations There are some research limitations throughout the execution of this research. One of them is small sample size. Most of the questionnaires sent out through email have never made their way back, hence, resulting in small sample size. Initially, this research is further divided into 4 parts, which are main contractors, consultant QS and subcontractors as well as suppliers. However, since none of the supplier has responded, its scope has decreased to 3. Furthermore, for the subcontractor part, this study has only managed to capture 5 respondents, again due to low response rate. Hence, for the subcontractor part, the results may not be as accurate as that of main contractors and consultant QS, which have a sample size of 15 respectively. Lastly, since CIPAA has just been enforced for 3 years, most of the construction industry players have not been involved in CIPAA before and are not familiar with it yet. Hence, the data captured will not be that accurate. It can be seen through the choosing ‘undecided’ or ‘neutral’ choices frequently. 143 5.4 Research Contribution to Malaysian Construction Industry Through the execution of this research, it is learnt that most of the construction industry players are aware of CIPAA, be it main contractors, subcontractors or consultant QS, and admitted that CIPAA has eased the cash flow in the construction industry. However, conditional payment still prevails despite the introduction of CIPAA. The timeliness in paying still has room for improvement. Since outlawing conditional payment and facilitating timely payment are one of the most important features of CIPAA, KLRCA and the relevant authorities should look into this predicament seriously and think of ways to ensure that conditional payment is eradicated thoroughly and industry players get paid timely so that the very objective of introduction of CIPAA is achieved. It is also learnt that the industry players are happy about the duration of CIPAA, even though it is relatively longer compared to similar legislations. Moreover, the study shows that most of the respondents are concerned towards issues of breach of natural justice and adjudicator's jurisdiction problem which may render the adjudication determination unenforceable. Hence, KLRCA should be constantly providing training and workshop regarding to that matters to minimise the occurrence of such matters so that the effectiveness of CIPAA is not questioned. KLRCA and relevant authorities could consider to extend CIPAA’s reach to cover all types of construction contracts, be it written, oral or partly written and partly oral. Moreover, many of the respondents are also seeking CIPAA to have adjudication review. Perhaps KLRCA could consider their suggestion. Of course, it is easier said than done. But at least it is what can be drawn from this study. 144 5.5 Recommendation for Further Research The following potential topics are recommended for further research: (a) A study on the effects of CIPAA on conditional payment. (b) A study on the effects of CIPAA on timeliness in paying. (c) A study on the issues on breach of natural justice and jurisdiction problems of adjudicators towards the implementation of CIPAA. (d) A study on the practicability of CIPAA to extend its reach to cover all types of construction contracts, be it written, oral or partly written and partly oral. 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Research design: Qualitative, quantitative, and mixed methods approaches. 4th edn. Thousand Oaks: SAGE Publications. Cunningham, T., 2013. Will The Construction Contracts Bill Improve Subcontractor Cash Flow? [pdf] Ireland: Dublin Institute of Technology. Available at: <http://arrow.dit.ie/cgi/viewcontent.cgi?article=1009&context=beschreoth> [Accessed 15 July 2016] Dancaster, C., 2008. Construction adjudication in the United Kingdom: Past, present, and future. Journal of Professional Issues in Engineering Education and Practice, [e-journal] 134(2), pp. 204–208. Available through: Universiti Tunku Abdul Rahman Library website [Accessed 20 July 2016]. Fair Trading, 2015. Adjudication in New South Wales Annual Report 2014/15. [pdf] Available at: <http://www.fairtrading.nsw.gov.au/biz_res/ftweb/pdfs/Tradespeople/Adjudication_a nnual_report_2014_2015.pdf> [Accessed 1 Jan 2017] Gould, N., no date. Adjudication in Malaysia. 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Building and Construction Industry Security of Payment (SOP) Act. Available at: <http://www.bca.gov.sg/SecurityPayment/others/SOP_briefing_slides.pdf> [Accessed 27 November 2016]. Milligan, J.L. and Cattanach, L.H., 2014. Report No.13. [pdf] Glasgow Business Park: Construction Dispute Resolution. Available at: <http://www.cdr.uk.com/documents/FINALREPORT13.pdf> [Accessed 8 July 2016] Milligan, J.L. and Cattanach, L.H., 2016. Report No.15. [pdf] Glasgow Business Park: Construction Dispute Resolution. Available at: <https://www.adjudication.org/sites/default/files/Report%2015.pdf> [Accessed 12 February 2016] Naoum, S.G., 2013. Dissertation research and writing for construction students. 3rd edn. New York: Routledge. Royal Institution of Chartered Surveyor, 2015. The extent and impact of intimidation in UK statutory adjudication. [pdf] Sydney, Australia: RICS. Available at: <https://www.adjudication.org/sites/default/files/The%20Extent%20and%20Impact %20of%20Intimidation%20in%20UK%20Statutory%20Adjudication.pdf> [Accessed 13 February 2017]. Seah, C.M., 2013. Security of Payment Act – Bane or Boon? A Langdon & Seah Consultancy Information Sheet, 13(2). [online] Available at: <http://studylib.net/doc/8182524/security-of-payment-act-%E2%80%93-bane-orboon%3F> [Accessed 20 February 2017]. Social Research Methods, n.d.. Research methods knowledge base. [online] Available at: < https://www.socialresearchmethods.net/kb/statdesc.php> [Accessed 1 April 2017]. Tan, T.H., 2011. Sustainability and housing provision in Malaysia. Journal of Strategic Innovation and Sustainability, Vol. 7 No. 1, pp. 62-71. 150 Walker, I and Wilkie, R, 2002. Commercial Management in Construction, Blackwell Science, Oxford. Teo, J.P., 2008. Adjudication: Singapore Perspective. Journal of Professional Issues in Engineering Education and Practice, 134(2), pp. 224–230. doi: 10.1061/(asce)1052-3928(2008)134:2(224). Available through: Universiti Tunku Abdul Rahman Library website [Accessed 7 January 2017]. Uher, T.E. and Brand, M.C., 2005. Analysis of adjudication determinations made under security of payment legislation in New South Wales. International Journal of Project Management, 23(6), pp. 474–482. doi: 10.1016/j.ijproman.2005.05.002. Available through: Universiti Tunku Abdul Rahman Library website [Accessed 15 December 2017] 151 APPENDICES APPENDIX A: Questionnaire Dear valued respondent(s), I am a final year student pursuing Bachelor of Science (Hons) Quantity Surveying at Lee Kong Chian Faculty of Engineering & Science, Sg Long Campus, University Tunku Abdul Rahman, Malaysia. For my final year project, I am conducting a research on “A Study of The Effectiveness of The Malaysian CIPAA Act vis-à-vis The Impact of Oversea Construction Payment Legislations on Their Respective Construction Industries”. This research paper is under the supervision of Sr. Chang Khong Thong. This questionnaire consists of three sections: Section A: Respondent's particulars. Section B: Survey on the application of CIPAA. Section C: Suggestion on improvement that can be made. Your kind assistance is absolutely vital to the success of this study. I shall be grateful if you could spare about 10 to 15 minutes of your valuable time in filling up the questionnaire. I assure you that the information collected from you will be kept confidential and used only for my research work. If you have any queries or comments regarding this survey or interested in knowing the findings, please do not hesitate to contact the undersigned at 017-4858521 or lzcheang@hotmail.com. Thank you for your cooperation. 152 Section A – Respondent’s Particular 1. Role in construction industry □ QS Firm □ Main Contractor □ Sub-contractor □ Supplier 2. Years of involvement in construction industry □ 0-5 years □ 6-10 years □ 11-20 years □ More than 20 years 3. No of times involved in CIPAA matters, be it as a claimant or a respondent □ 0 □ 1-5 □ 6-10 □ 11-15 □ 16-20 □ More than 20 times 1. 2. 3. 4. 5. 6. 7. Since the introduction of CIPAA, payment systems have changed to meet the new requirements and cash flow is smoother than ever. Conditional payment is eradicated after CIPAA is introduced. Adjudication’s inquisitional role plays an important role in ensuring successful resolved of disputes. CIPAA is a reliable dispute resolution mechanism. The adjudicator empaneled by KLRCA is knowledgeable enough. Adjudication is a relatively speedy process compared to arbitration or litigation. The cost of adjudication is relatively low compared to arbitration or litigation. disagree Strongly Disagree Neutral Agree Statement Strongly agree Section B - Survey on the application of CIPAA 153 Section C – Suggestion on improvement that can be made. 1. “Dispute resolution provided under CIPAA is fast enough.” Do you agree with this statement? If your answer is no, then proceed to question 2. Otherwise, just skip question 2. A. Yes B. No 2. Which part of the adjudication, in your opinion, should be shortened? You may tick as many as you think relevant. □ Initiation of adjudication where non-paying party responds to payment claim □ Appointment of adjudicator □ Adjudication proceedings 3. How do you find adjudication reply? Do you think it is fair to have adjudication reply with no further ground for respondent to response to that reply? A. Yes, it is fair B. No, it is not fair but it is alright as it is part of the price to be paid in exchange for speed C. No, there should be another reply to that reply 4. In New South Wales, all types of construction contracts, be it written, oral or partly written and partly oral are subjected to the Act. However, CIPAA is only applicable to written construction contracts. Do you think CIPAA should extend its reach to cover it all? A. Yes B. No 5. In UK, Ireland and Malaysia, adjudicators are given the power to award adjudication cost. Do you think this will discourage the application of adjudication, particularly to small and medium-sized company? A. Yes B. No 6. In other countries, the time frame allowed in similar legislations are much shorter compared to CIPAA to facilitate faster cash flow. How do you think? This question differs from question 1 in the sense that it requires you to think relatively (as compared to other similar legislations). A. Good enough B. Shorten further 154 7. There are cases where breach of natural justice and jurisdiction problems of an adjudicator rendered the adjudication results not enforceable. Will you think these kind of situation affect the effectiveness of CIPAA and make you to reconsider to pursue under CIPAA? A. Yes B. No 8. If you have not received payment after adjudication determination is served in your favor, what remedy would you choose? Please rank the choice from 1(first choice) to 3(third choice). □ Suspend the works □ Slow down the works □ Secure direct payment from principal 9. Upon the application of adjudication in Singapore, numerous improvements have been felt. Do you think there is any improvement in Malaysia as in Singapore? You may tick as many as you think relevant. □ Timeliness in paying □ Greater certainty in obtaining payment □ Greater willingness of main contractors to seek amicable settlement with sub- contractors to avoid adjudication 10. In Singapore, there is an adjudication review available. Would you suggest CIPAA to follow suit? A. Yes B. No 11. How would you rate effectiveness of CIPAA [from 1(lowest) to 5(highest)]? A. 1 B. 2 C. 3 D. 4 E. 5 END OF QUESTIONNAIRE