Government plans minimum three-year defect liability period for major projects

Federal Minister for Economic Affairs and Establishment Senator Ahad Cheema led a meeting to discuss reforms for Pakistan's construction sector, focusing on extending the defect liability period for major projects. The aim is to ensure contractors remain responsible for defects for at least three years, with the rule gradually applying to smaller projects.

This comes as part of efforts to strengthen the country's construction industry, improve project delivery, and tackle challenges faced by the sector. During the meeting, Cheema instructed the Pakistan Public Procurement Regulatory Authority (PPRA) to initiate work on implementing the extended defect liability period. He also emphasized the need for thorough examination of the proposed Construction Industry Development Authority (CIDA) Bill, which could either establish a single body overseeing the sector or two separate entities - one for regulation and the other for promotion.

The retention money deposited by contractors during the defect liability period was also considered, with a proposal to place these funds in accounts earning returns, with the principal and interest paid back upon the end of the period. The minister suggested further consultation to establish a viable system. The meeting also touched upon applying the Dispute Avoidance/Adjudication Board (DAAB) mechanism to government projects, with the board tasked to monitor implementation and mediate disputes.

Cheema proposed lowering the threshold for applying the mechanism to projects valued at Rs20 billion and above, but called for further discussions among stakeholders to determine a suitable limit.