Fewer unjustified construction payment delays due to adjudication scheme

Singapore, 20 October 2011 – The number of cases of unwarranted delays in payment for construction-related work has dropped considerably despite the substantial increase in activity in the construction industry.

This was revealed by Justice Lee Seiu Kin in his keynote address at the 1st National Conference on Construction Adjudication – Tactics & Strategies. Justice Lee said that while total amount of certified progress claims has increased from 12 billion dollars in 2005 to nearly 27 billion dollars in 2010, less than 1% of the value of these claims has been disputed.

One of the major reasons for this is the availability of a fast and low cost adjudication scheme under the Building and Construction Industry Security of Payment (“SOP”) Adjudication Act.  The Act was enacted in 2005 to ensure that building projects in Singapore are not stalled because of the delay in progress payments due to contractors and subcontractors.  The Singapore Mediation Centre (‘SMC’) is appointed as the Authorised Nominating Body to administer the adjudication cases. 

Justice Lee Seiu Kin said that the SOP Act has effectively eliminated an avenue for delaying payments without justification. “Previously, it was easy for a paying party to initiate court or arbitral proceedings to dispute the validity and/or extent of their payment obligations, resulting in a long delay in making payments.”

The adjudication mechanism has reduced the incentive for paying parties to delay payment. Contractors and subcontractors who face payment issues during the course of a project can submit their payment claims for adjudication to SMC instead of waiting for the completion of the project to file their claims. An adjudicator is required to provide a decision on a dispute within 14 days from the commencement of the adjudication unless the parties agree to extend time. As at end of August 2011, a total of 601 adjudication applications have been filed with SMC.

Singapore is the fourth country in the world to have in place this radical regime to assist contractors and subcontractors with their cash flow problems.  The first of the countries to have this in place was the United Kingdom (1996), followed by Australia and then New Zealand.

The conference today is attended by more than 150 industry professionals from the construction industry including architects, developers and project managers in the private and public sector. They will discuss and reflect on the usefulness of the SOP Act and how they can benefit from it. The delegates at the conference will also see a simulation of an Adjudication Conference.

 

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About Singapore Mediation Centre (‘SMC’)

Singapore Mediation Centre (SMC) is a non-profit organisation established in 1997 to provide commercial mediation services.  It is structured as a company limited by guarantee of the Singapore Academy of Law (SAL). In 2005, SMC was appointed as the Authorised Nominating Body (ANB) under the Building and Construction Industry Security of Payments (SOP) Act. As an ANB, SMC’s role is to administer the adjudication process, train, certify and maintain a register of adjudicators. SMC has 136 adjudicators on its panel comprising construction and legal professionals. For more information on SMC, please visit www.mediation.com.sg.

Media Contact:

Foo Kim Leng (Ms)
Assistant Director, Corporate Communications 
Tel:  +65 63325365/96358850
Email: foo_kim_leng@sal.org.sg