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

The government plans to introduce a minimum three-year defect liability period for major public-sector construction projects, requiring contractors to remain responsible for defects for a longer period, with the measure to be extended to smaller projects in phases.

The development came during a meeting chaired by Federal Minister for Economic Affairs and Establishment Division Senator Ahad Cheema to discuss reforms aimed at strengthening Pakistan’s construction sector, improving project delivery and addressing key issues faced by the industry, read a statement on Wednesday.

During the meeting, Cheema directed the Pakistan Public Procurement Regulatory Authority (PPRA) to begin work on introducing at least three-year or more defect liability period for major projects, with the measure to be extended to smaller projects in phases.

The meeting also discussed the proposed Construction Industry Development Authority (CIDA) Bill.

Cheema emphasized that the bill required detailed consideration, including whether to establish a single body for the construction sector or two separate entities: one to regulate the sector and another to promote the construction industry and handle related matters.

He asked the relevant officials, Minister of State for Finance Bilal Azhar Kayani and representatives of the Constructors Association of Pakistan (CAP) to consult further on the proposed institutional structure.

The retention money deposited by contractors during the defect liability period was also discussed.

The meeting considered a proposal to place these funds in accounts that earn a return, with the principal amount and interest paid back to contractors after the stipulated period.

The minister called for further consultation to develop a workable mechanism.

The meeting considered applying the existing Dispute Avoidance/Adjudication Board (DAAB) mechanism to government projects. The Board would monitor project implementation and help prevent or resolve disputes as they arise.

CAP proposed applying the mechanism to projects valued at Rs20 billion and above. Cheema called for the proposed threshold to be lowered and further consultation among relevant stakeholders to determine an appropriate limit.