ISLAMABAD: The government is considering establishing two new bodies — a regulatory authority and a marketing entity — for the construction industry along with a three-year defect liability period for major construction projects in the country.
Private sector figures in construction and the government, however, differ over the financial size for the application of a defect liability period, with the construction industry seeking a minimum threshold of Rs20 billion and the government pushing for lower amounts.
These issues were discussed at an exploratory meeting, chaired by Economic Affairs Minister Ahad Cheema, on introducing reforms for the country’s construction sector, improving project delivery and addressing key issues faced by the industry.
Minister of State for Finance Bilal Azhar Kayani, Secretary Housing retired captain Muhammad Mahmood and other senior officials also attended the meeting.
The meeting discussed the proposed Construction Industry Development Authority (CIDA) Bill, with Cheema stressing that it required detailed consideration, including whether to establish a single body for the construction sector or two separate entities — one to regulate the sector and another to promote the construction industry and handle related matters.
The participants decided to continue engagements with stakeholders, including the relevant agencies led by Kayani and representatives of the Constructors Association of Pakistan (CAP), and to fine-tune the proposed institutional structure.
Retention money deposited by contractors during the defect liability period was also discussed, with a proposal considered to place these funds in accounts that earn a return, with the principal amount and interest paid back to contractors after the stipulated period.
Cheema called for further consultation to develop a workable mechanism.
Additionally, the meeting considered applying the existing Dispute Avoidance and Adjudication Board (DAAB) mechanism to government projects. DAAB would monitor project implementation and help prevent or resolve disputes as they arise, while CAP proposed applying the mechanism to projects valued at Rs20bn and above.
However, Cheema called for the proposed threshold to be lowered and further consultation among relevant stakeholders to determine an appropriate limit.
The forthcoming framework for the construction sector will also draw on the rules and standards of the International Federation of Consulting Engineers (FIDIC). Cheema underscored the importance of using these international standards as a key reference.
The meeting also directed the Pakistan Public Procurement Regulatory Authority (PPRA) to begin work on introducing a defect liability period for major projects of at least three years or more, with the measure to be extended to smaller projects in phases.
In August, it emerged that the government was contemplating a comprehensive package to invigorate the construction industry, aiming to simplify regulations, attract investment, and bolster institutional support.
The package envisaged a series of measures, including the establishment of a Construction Industry Development Board (CIDB), the evaluation of a dedicated Construction Development Bank (CDB), the rationalisation of import and export policies, and targeted tax reforms for the construction sector.
Correction: A previous version of this story stated that the government was considering the establishment of two regulatory authorities for the construction industry. The error is regretted.
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