PROPOSED IMPROVEMENTS TO BUILDING AND CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ACT: A STUDY OF ITS COMMON PROBLEMS AND COMPARISON WITH OTHER JURISDICTIONS

Abstract

This dissertation aims to propose recommendations to the existing Building and Construction Industry Security of Payment Act 2014 (SOPA) in the areas of timelines, payment claims, payment responses and adjudication application. Recommendations proposed were through the study of the common issues that arose in adjudications that were not addressed in the recent 2018 amendment bill and through a comparative analysis of SG’s Act with UK and Malaysia acts. Before the SOPA was introduced, Singapore’s construction industry was facing cashflow issues, which led to downstream players (i.e. sub-contractors, suppliers and main contractors) not getting paid, affecting the continuity of construction projects. After the SOPA was introduced, adoption of adjudication had increased by 220% from 2009 to 2014. However, among these cases, 30% of them turned on jurisdictional which was an indication that the SOPA had gaps and improvements had to be made.

Common issues found to the SOPA were separated into the four categories: timelines, payment claims, payment responses and adjudication application. However, some of the issues were addressed in the 2018 Amendment Bill. Issues that were not addressed would be considered as potential improvements to the SOPA. They are: (1) reducing the multiplicity of timelines, (2) reference period should be a strict requirement of a payment claim, and (3) a supply contract should include a payment response.

UK and Malaysia Act were case studies chosen to be compared with SG’s SOPA as UK is the oldest legislation and followed a different regime from the SG SOPA. Thus, it would have gone through much amendments through many lessons learnt. Malaysia, on the other hand, is the newest member to introduce the SOP legislation, which have gone through much studies before the enaction. Through the study, differences found that might be adaptable to the SG Act includes: (1) lesser number of timelines for progress payments, (2) lesser number of timelines prior to adjudication application through abolishing the dispute settlement period, (3) lesser number of timelines for adjudication determination, (4) requirement of the payment claim to be “made under the act”, (5) new defences could be raised and accepted in the adjudication response, and (6) adjudication initiation to be initiated by both parties.

The common issues that were not addressed in the amendment bill, together with the differences found which were potentially adaptable to SG’s SOPA formed the hypothesis for the research. These hypotheses went through a validation process through face to face interviews with 12 industry professionals (34.29% response rate), which was the main research method utilized in this study. Results were analyzed through the qualitative approach.

Lastly, the dissertation concludes with the recommendations proposed to SOPA through the five hypotheses that were validated. They are: (1) standardization of timelines prior to adjudication application, (2) abolishing the dispute settlement period, (3) payment claim to state that it has to be “made under the act”, (4) payment claim to precisely state the reference period, and (5) payment response to be included for supply contracts. This would bring about the benefit of having lesser timelines prior to the application of adjudication, reducing the chances of premature adjudication application. Furthermore, it allows for a shorter adjudication process. Additionally, the recommendations aim to make it clearer to both the respondent and claimants that the document is a payment claim, and the claimed amount is justified through the reference period stated. It also provides higher clarity in a supply contract where the amount claimed and paid would be clear.