Govt considering creation of 2 regulatory authorities for construction industry, 3-year liability period for projects

The Pakistani government is contemplating the creation of up to two regulatory bodies for the construction industry, alongside a three-year defect liability period for significant projects. Private sector representatives and officials, including Economic Affairs Minister Ahad Cheema, engaged in an exploratory meeting to discuss these proposals.

They diverged on the financial threshold for the defect liability period, with the industry pushing for a minimum of Rs20 billion and the government advocating for a lower amount. The meeting, chaired by Cheema, also reviewed the proposed Construction Industry Development Authority (CIDA) Bill, debating whether to establish a single entity or two separate bodies—one to regulate the sector and another to promote it.

They agreed to refine the institutional structure through further stakeholder consultations. A proposal was also tabled to deposit retention money from contractors during the liability period into accounts that accrue returns, ensuring repayment of principal and interest post the period. The possibility of applying the Dispute Avoidance and Adjudication Board (DAAB) mechanism to government projects, particularly those valued at Rs20 billion and above, was also considered, with Cheema advocating for a lower threshold.

The framework for the construction sector will incorporate rules and standards from the International Federation of Consulting Engineers (FIDIC). The government aims to implement a three-year defect liability period for major projects, extending it to smaller projects in stages.