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

The Pakistani government is contemplating the creation of two regulatory authorities for the construction industry and a three-year defect liability period for major projects in the country. Private sector representatives and government officials debated the financial threshold for applying this liability period, with industry stakeholders seeking a minimum of Rs20 billion, while the government favored lower amounts.

The discussions took place during an exploratory meeting chaired by Economic Affairs Minister Ahad Cheema, who emphasized the need for detailed consideration of the Construction Industry Development Authority (CIDA) Bill. The meeting also decided to continue stakeholder engagements and fine-tune the proposed institutional structure.

Retention money held by contractors during the defect liability period was a key point of discussion, with a suggestion to place these funds in accounts earning a return, with the principal and interest refunded to contractors after the period. The government is also considering applying the existing Dispute Avoidance and Adjudication Board (DAAB) mechanism to government projects, with a proposal to lower the Rs20 billion threshold for its application.

The framework for the construction sector will incorporate rules and standards set by the International Federation of Consulting Engineers (FIDIC). Additionally, the Pakistan Public Procurement Regulatory Authority (PPRA) is tasked with implementing a defect liability period for major projects lasting three years or more, eventually extending this measure to smaller projects in phases.