Contractors and suppliers can apply for adjudication proceedings, an expedited process to recover sums owed from their employer/principal or main contractors. The Building and Construction Industry Security of Payment Act 2004 (Cap 30B) governs adjudication proceedings and was amended in October 2018, with changes effective on 15 December 2019.
An adjudication proceeding is intended to provide an interim method for subcontractors to obtain payment pending final determination of their claims. It is a fast and low-cost mechanism to deal with payment disputes. Any award made in the adjudication proceeding is an interim, temporary decision. Parties would still be entitled to obtain a finality on merits of their claim or counterclaim via arbitration or court-based litigation.
The key amendments that came into force are as follows:
- The period for filing a claim has been shortened to 30 months to file a claim from the date of completion. Previously, parties could wait up to six years. The reason for the change is that parties could still avail themselves to the arbitration or court proceedings after the 30 months timeline. As such, a reduction in the period for filing an adjudication claim, which is only an interim measure, is not prejudicial to parties and further in line with the timeframes in Australia and other jurisdictions.
- Prefabrication work done in or outside of Singapore can be claimed under the law. Previously, it only allowed claims for construction activities or supplies within Singapore. Singapore has started offshoring its prefabrication production due to lack of land within Singapore and as such, to protect and incentivize the prefabrication industry, they have allowed adjudication claims when materials are prefabricated outside Singapore.
- Complicated claims involving loss, expense and damage claims that would often require expert analysis are now disallowed. This is to prevent the adjudication proceedings from being onerous to parties and the adjudicator, and to maintain the role of adjudication proceedings as a fast and quick resolution mechanism.
- All objections to claims by the subcontractors must be specified in the payment response by the contractor; if not, the adjudicator will disallow the objection. This ensures that a claimant is not caught by surprise after commencing the adjudication proceedings and is aware of all the facts before any adjudication proceedings begin.
- Various procedural timeline amendments were made to allow parties sufficient time to prepare and file their claims and responses.
It should be noted that the changes seek to address and codify the principles enunciated in various cases addressing the lacuna in the previous act. The law has been developed to provide a lifeline for small contractors to have sufficient cash flow, and the recent changes have provided clarity on issues that previously proceeded for judicial review after the adjudication proceedings.