Government weighs two construction regulators and three-year defect liability

ISLAMABAD: The federal government is considering establishing one or two regulatory authorities for the construction industry and requiring contractors on major public-sector projects to remain liable for defects for at least three years, according to statements issued after a meeting chaired by Economic Affairs Minister Ahad Cheema.

At the meeting, Cheema directed the Pakistan Public Procurement Regulatory Authority (PPRA) to begin work on introducing a defect liability period of at least three years, or longer, for major projects, with the measure to be extended to smaller projects in phases, Business Recorder reported, citing a statement issued on Wednesday. The meeting was held to discuss reforms aimed at strengthening the construction sector and improving project delivery.

The gathering also took up the proposed Construction Industry Development Authority Bill. Cheema said the bill required detailed consideration, including whether the sector should have a single body or two separate entities: one to regulate construction and another to promote the industry and handle related matters. He asked Minister of State for Finance Bilal Azhar Kayani and representatives of the Constructors Association of Pakistan to consult further on the proposed institutional structure.

Dawn reported that up to two regulatory authorities were under consideration, and that the government and private-sector figures differed over the financial size at which a defect liability period would apply. According to Dawn, the construction industry sought a minimum threshold of Rs20 billion while the government pushed for lower amounts.

Business Recorder placed the Rs20 billion figure in connection with a separate proposal: applying the existing Dispute Avoidance/Adjudication Board mechanism to government projects, with the board monitoring implementation and helping prevent or resolve disputes as they arise. The outlet reported that the Constructors Association of Pakistan proposed applying the mechanism to projects valued at Rs20 billion and above, and that Cheema called for the threshold to be lowered, with further consultation among stakeholders to settle an appropriate limit.

The meeting also discussed the retention money deposited by contractors during the defect liability period, and considered a proposal to place those funds in accounts that earn a return, with the principal amount and profit paid back to contractors after the stipulated period. The minister asked for further consultation to develop a workable mechanism.

No final decision on the bill, the liability period or the threshold was announced. Officials are to continue consultations before proposals return to the minister.