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HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 1
Inc. Langdon Seah | ARCADIS Project Management | EC Harris I Hyder Consulting
HKIS-AIQS JOINT CONFERENCE 2015
Khoo Sze Boon FSISV, FAIQS, MRICS, MCIArb, FSIArb, SMC Accreditated Adjudicator
Executive Director, Arcadis / Langdon & Seah Singapore Pte Ltd
1st Vice President, QS Division – Singapore Institute of Surveyors & Valuers (SISV)
SECURITY OF PAYMENT ACTWHO MAKES THE BEST ADJUDICATOR?
Contents
� Background
� Growing Band of Adjudication
� Overview of SOP Regime in Singapore
� Adjudicator – Qualification & Training
� Challenges Faced by The Adjudicators
� Who Makes the Best Adjudicator
� Conclusion
2
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 2
Background
Security of Payment Act
� Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Revised Edition)
Enacted in 2004 but came into force on 1 April 2005
� Building and Construction Industry Security of Payment Regulations (Cap 30B, Regulation 1, 2006 Revised Edition)
Made by the Minister for National Development in January 2005 under Section 41 of the Act
4
Legislative Framework
Building & Construction Security of Payment Act (Cap 30B)
Building & Construction Security of Payment Regulation (Cap 30B, Regulation 1)
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 3
Security of Payment Act
� Enacted to regulate payment disputes
� Introduces adjudication as a means of dispute resolution
� Seeks to improve cash-flow in the construction industry
� Gives parties the right to seek payment for work done and goods supplied
� Provides fast and low-cost adjudication to resolve payment disputes.
5
SOP Act
Security of Payment Act
6
Legislative Framework
Introduce adjudication as mean of
dispute resolution
More favorable results – leverage Contractor’s expertise area
Regulate payment disputes
Fast and Low-Cost
Adjudication to resolve payment dispute
Improve cash-flow in construction
industry
Gives parties right
to seek payment for work done and goods supplied
Interim Finality – Pay First & Argue
Later
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 4
Background of SOP Act
� To redress some of the payment issues which have confronted the industry for a long time
� Effort around the same time when a number of highly publicized financial failures of main contractors spectacularly grounded several huge housing projects to a halt.
� Unleashed a torrent of financial insolvencies down the construction process – wiping out sub-contractors, sub-subcontractors, suppliers and other parties at the end of the supply chain
� The issue with delayed payments for work done and cash-flow is not new.
7
Background
8
Built Environment Sector
“BCA is expecting construction output to remain strong at S$35 billion-S$37 billion this year, though a high base effect from a record 2014 (estimated S$36 billion) will result in muted year-on-year comparisons. A decade-long expansion of the sector has seen construction output surge 200 per cent in nominal value from 2005's S$12 billion”
BCA 2015, Built Environment Prospect 2015
“BCA is expecting construction output to remain strong at S$35 billion-S$37 billion this year, though a high base effect from a record 2014 (estimated S$36 billion) will result in muted year-on-year comparisons. A decade-long expansion of the sector has seen construction output surge 200 per cent in nominal value from 2005's S$12 billion”
BCA 2015, Built Environment Prospect 2015
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 5
Growing Band of Adjudication
Introduction of Adjudication
� Following the recommendations of the Latham Report, the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) came into effect for contracts entered into from May 1998, being the first jurisdiction to introduce the right to adjudication.
10
Growing Band of Adjudication
The Latham ReportChapter 9 – Dispute ResolutionIn Sir Michael Latham’s Report
“Cash Flow crunch arising from disputes hinders construction
productivity”
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 6
11
Growing Band of Adjudication
United Kingdom
HGCRA 1996
HGCRA 1996 – Housing Grants, Construction and Regeneration Act 1996
NZ CCA 2002 – Construction Contracts Act 2002
CIPAA 2012 – Construction Industry Payment and Adjudication Act 2012
SOPL 2015 – Security of Payment Legislation (Proposed) 2015
New South Wales SOP Act 1999
New Zealand
CCA 2002
Victoria SOP Act
2002
Singapore SOP Act 2004
Queensland SOP Act 2004
North Territory
SOP Act 2004
Western Australia
SOP Act 2004
TasminiaSOP Act 2009
Australian Capital Territory
SOP Act 2009
South Australia
SOP Act 2009
Malaysia CIPAA 2012
La
tha
m R
ep
ort
19
94
Hong KongSOPL 2015(Proposed)
Hong Kong –Proposed Security of Payment Legislation for the Construction Industry
� Detailed industry wide survey was conducted in 2011 by the Government and the Construction Industry Council.
� Security of Payment Legislation was subsequently proposed for the Construction Industry
� Consultation Document published by the Development Bureau of the Government of Hong Kong Special Administrative Region in June 2015
12
Growing Band of Adjudication
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 7
Overview of Security of Payment Regime in Singapore
Building & Construction Industry Security of Payment Act 2004 (Cap 30B)
� Closer to the New South Wales Building & Construction Industry Security of Payment Act 1999
� Retains some elements from the UK Housing Grants Construction and Regeneration Act 1996
14
Singapore Regime
� UK HGCRA 1996 – adjudication is treated as contractual process
� NSW Act and Singapore Act – whole adjudication process is statutorily prescribed
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 8
Security of Payment Act
15
Singapore Regime
Statutory right to payment (work done & good supplied for construction contract)
Time limits to make payment
Improve Cashflow
Fast Track Adjudication Process to resolve payment disputes
Right to suspend work amongst other remedies when adjudicated amount not paid
The SOP Act rests on three main pillars
OVERVIEW OF THE SECURITY OF PAYMENT REGIME IN SINGAPORE
Entitlement to Payment
Payment Rights
Anti-Avoidance Provisions
No contracting out
Void “Pay when Paid”
Adjudication Machinery Taking advantage of Cost and Speed of Resolution
Singapore Regime
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 9
Security of Payment Act
� Any person who have carried out construction works, or supplied any goods or services under a contract is entitled to a progress payment.
� Only claimant may invoke the Act.
� Entitlement to progress payment crystallises as soon as work is done.
� The onus is on the respondent to show that claimant is to be denied the sum claimed.
� Act renders void “pay when paid” provisions
� No contracting out of the Act
17
Singapore Regime
18
Key SOP Timeline
Payment ClaimPayment Claim Payment RespPayment Resp Payment Due DatePayment Due Date
Post SOP
� As in contract; or
� 21 days (max)
� 7 days (if contract silent)
� As in contract
� 35 days after invoice (max); or
� 35 days after response date[if non-taxable]T
imeline 1
Silent
Pre SOP
C’s ApplicationC’s Application A’s CertificateA’s Certificate Owner paysOwner paysQS
ValuationQS
Valuation
� 7 (or 14) days � 14, 21 or 28 days� 7 days
Tax InvoiceTax
Invoice
Tim
eline 2
� 7 days� 14 days
� As in contract
� 35 days (max) after invoice; or
� 35 days after response
date [if non-taxable]
By Employer
??
Post SOP Payment RespPayment Resp Payment Due DatePayment Due DatePayment ClaimPayment Claim A’s
CertificateA’s
CertificateTax
InvoiceTax
Invoice
QS Valuation
QS Valuation
QS Valuation
QS Valuation
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 10
Process leading to the Determination
Source : CHOW KF (2012)
Payment Claim
Payment Response
Disp
ute Settle
ment P
erio
d
Adjudication Notice
AdjudicationApplication
Appointment of Adjudicator
Adjudication Response
AdjudicationDetermination
Adjudica
tion Process
Regime
requires
scrupulous
procedural
compliance
Security of Payment Act
20
Key Features
Adjudication Notice &
Application within 7 days
(served only after 7 days DSP)
More favorable results – leverage Contractor’s expertise area
Maximum period for Payment Response 21 days
(contract silence 7 days)
Appointment of adjudicator by
AuthorisedNominating Body (ANB)
Second Opportunity to serve / amend
Payment Response
(during 7 days DSP)
Adjudication Determination within 7 days
(no payment response or fail to
pay); otherwise 14 days
Review of Adjudication
Determination can be applied by aggrieved respondent
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 11
21
Adjudication Applications
999Adjudication Applications as at Dec 2013
Between
2006 & 2009Adjudication Application filed
Doubled
2009Adjudication Application stablised
around 170applications
400Adjudication Cases estimated in 2014
2013Adjudication cases load doubled to
228
Dropped to
135 Cases2011 & 2012
ADJUDICATORS –QUALIFICATION AND TRAINING
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 12
BCISOP Act Accredited Adjudicators
� Trained & accredited by the Construction Adjudicator Accreditation Committee (CAAC) of the Singapore Mediation Centre (SMC).
� Equipped with in-depth understanding of the adjudication regime of SOP Act.
� Term of appointment is 2 years renewable upon Adjudicators meeting requirements.
23
Adjudicators
Accredited Adjudicators By Profession
� Based on the Register of Adjudicators under SMC, there are currently 118 Accredited Adjudicators1.
� The 3 main professions are Lawyers, Engineers and Quantity Surveyors.
24
Adjudicators
1 Source : SMC Website www.mediation.com.sg
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 13
Admission Requirements
25
Adjudicators
Working Experience
• Senior Position in any firm, company or professional body
• At least 15 years working experience in building and construction industry in Singapore
Qualification
• Degree or Diploma in architectural, building studies, engineering, environmental studies, law, planning, real estate or urban design
Good Character
• Not been convicted of any offence and must not be an undischarged bankrupt
Source : SMC Adjudication Accreditation Requirements 2015
Applicants have to fulfil three (3) parts :-
26
Adjudicators
• Attended a course on Law Related to Construction Contracts; and
• Pass an assessment on Law Related to Construction Contracts
Part A – Law Related to Construction Contracts
(unless exempted)
• Attended a course on Statutory Adjudication; and
• Pass an assessment on Statutory Adjudication
Part B – Statutory Adjudication
• Satisfy SMC of their suitability to be accredited to the SMC Register of Adjudicators through an interview and/or other requirements
Professional Interview
Source : SMC Adjudication Accreditation Requirements 2015
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 14
Part A – Law Related Construction Contracts
Candidates who hold one of the following qualifications, exemption are granted :-
� Admitted to the roll of advocates and solicitors of Singapore
� MSc (Construction Law and Arbitration) from National University of Singapore
� Such other qualification as SMC’s Construction Adjudicator Accreditation Committee may approves
27
Adjudicators
Source : SMC Adjudication Accreditation Requirements 2015
28
Adjudicators
Part 2 Statutory Adjudication
(3 Days)*
Part 1Law Relating to Construction Contracts
(1 Day)*
• Tenders and Award of Contract• Redress for Breach of Contract• Variations• Payment and Certification• Time
• Objectives and Broad Scheme of the SOP Act
• Rights to Progress Payment• Payment Claims and Response• Adjudication of Payment Claim Disputes• Enforcement of Payment of Adjudicated
Amount• Conducting the Adjudication• Writing the Adjudication Determinaiton
Adjudicator Accreditation Course
* Duration of the Course excludes assessment
Source : SMC Adjudication Accreditation Requirements 2015
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 15
CHALLENGES FACED BY THE ADJUDICATORS
SOP Act and Procedures
Knowledge on Construction
Law
Construction Contract & Practices
Technical Knowledge
Key Challenges Faced
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 16
Adjudicator has to be familiar with :-
� Overall regime of SOP Act which overlays progress payment claims have to be served and payment responses have to be made and the timelines.
� Entire adjudication procedure –adjudication application, response, determination and review process
SOP Act and
Procedures
Source : CHOW KF (2012)
Source : CHOW KF (2012)
AppointmentAdjudicator has to be begin by ensuring that he has been properly appointed under the Act
Contract in WritingExisting of contract in accordance with principles of contract formation and definition of “contract made in writing” in section 4(3)
Nature of ContractContract falls within the meaning of a “construction contract” or a “supply contract” under the Act
Territorial ReachContract relates to work carried in Singapore or goods or services supplied to work carried out in Singapore
Procedural ComplianceWhether the payment claim was served prematurely, compliance with requirements of DSP and Adjudication Notice
� Adjudicator is also often confronted with jurisdiction issues :- SOP Act and
Procedures
Challenges
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 17
Construction Contract & Practices
EOTExtension of Time
Release of
RetentionMonies
PaymentTerms
VariationDeductions &
Counter Claims
Loss & Expenses andExtended Prelims
� Adjudicator has to be proficient in construction contract and practice
Knowledge on Construction
Law
� Adjudicator may face issues on the point of law being raised in an adjudication matter
� To have relevant construction law knowledge
� To be well aware of the latest development of construction law
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 18
Knowledge on Construction
Law
Chua Say Eng [CSE] v Lee Wee Lick Terence [TL] (CA No. 46 of 2011)
On 2 Jun 2010, CSE served a document “Payment Claim No. 6” (PC 6) for work done Jun 2009 to Apr 2010.
TL did not serve payment response within 7 days as required by s. 11(1)(b)
CSE filed adjudication application and TL did not file an adjudication response.
Court of Appeal
• CSE appealed to CA• CA allowed appeal• CA disagreed with High
Court Judge’s interpretation that s 10(2) of the Act read with reg. 5(1) created limitation period
• i.e. no time bar and PC6 was not out of time
High Court
• TL appealed to High Court• High Court Judge allowed
TL’s appeal.• Held that s. 10(2) of Act
read with reg. 5(1) did create a limitation period.
• PC6 was served out of time.
Adjudication Proceedings
• Adjudicator determined PC6 was not served out of time
• Awarded a sum in favour of CSE (Claimant)
Technical Knowledge Proficiency in Construction Technical Knowledge
� Adjudicator shall be proficient in construction technical knowledge.
� Some of the matter may be technically challenging –e.g. Piling Works, Basement Work, Temporary Works.
� Understanding technical issues (e.g. Piling Work) coupled with the basis of contract (e.g. lump sum or re-measurement contract)
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 19
WHO MAKES THE BEST ADJUDICATOR?
38
Who’s the Best
An adjudicator shall –(a) Act independently, impartially and in a timely
manner;(b) Avoid incurring unnecessary expense; and(c) Comply with the principles of natural justice
An adjudicator shall –(a) Act independently, impartially and in a timely
manner;(b) Avoid incurring unnecessary expense; and(c) Comply with the principles of natural justice
Duties of an adjudicator
� The duties of an adjudicator are encapsulated under section 16(3) of the SOP Act which provides
Vast experience and competenciesrequired
SOP Case deals
with multi-front issues
Multi-facetedProficiency & Competency
“Hence, it warrant
a stringent pre-
requisite
requirements for
adjudicator
application…
holding senior
position with
minimum 15 years
experience”
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 20
39
Who’s the Best
Engineer
Lawyer
Quantity Surveyor
Project Manager
Contractor
Architect
40
Which Profession?
Who Makes the Best Adjudicator
� Experienced QS practitioners who are proficient in construction contract, practice and procedure may have added advantage.
� Architects with strong contract administration background would have similar advantage.
� Other essential knowledge in construction law and technical / engineering – lawyers and engineers would be in a good position.
� Different professional background will have advantages in their respective areas of strength – depends on nature of dispute.
� It is not the profession of the adjudicator – but more the individual experience and competency on the 4 areas of proficiency.
� Apart from strong knowledge in these areas, importantly – Adjudicator must also be able to act independently and impartially.
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 21
CONCLUSION
42
Conclusion
New Opportunities for QS
� Experienced QS practitioners who meet the requirements – may be registered as Accredited Adjudicator.
� QS could take the lead on the following :-
� establishing and managing the strict procedures and timeline for the entire payment regime imposed by the Act
� Streamlining payment process including timeline and templates
� Strengthening the contract documentation and introduce templates for project adoption.
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 22
43
Payment Claim Templates
Overview of SOP Regime
44
Contents of Payment Claim – s(10(3) r5(2)
� Addressed to
Respondent
� Identify Contract:
- Contract title
- Contract date
� Period of
Claim
� Identify
Claimant
� Date of
Claim
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 23
45
Payment Response Templates … 1
� Response amount
- Amount to pay Claimant
� Addressed to Claimant
� Identify payment claim:
- Project name
- Payment claim date
- Parties
Overview of SOP Regime
46
Payment Response Sample Template
Overview of SOP Regime
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 24
47
Reasons for differences
between claimed amount and
response amount
Reasoned Response – Examples … 2
Particulars supporting
valuation of variations
Overview of SOP Regime
48
Conclusion
� No single profession will make the best adjudicator.
� It is more the individual experience in the 4 key areas of proficiency.
� Having a panel of accredited adjudicators with different professional background will come in useful to deal with different nature of dispute.
� Important that adjudicators consistently keep themselves abreast of the latest development in the construction law and matters on SOP Act – through Continuous Professional Development programme.
HKIS-AIQS Joint Conference 2015 | 14 Nov
2015 | Security of Payment Act - Who
Makes The Best Adjudicators?
© Khoo Sze Boon 2015 25
Imagine the result
www.arcadis.com
Thank You
contact
Inc. Langdon & Seah I ARCADIS Project Management I EC Harris | Hyder Consulting
Khoo Sze Boon FSISV, FAIQS, MRICS, FSIArb, MCIArb
Executive Director, Arcadis / Langdon & Seah Singapore Pte Ltd
1st Vice President, QS Division – Singapore Institute of Surveyors & Valuers
t +65 6239 8232
www.arcadis.com