KUALA LUMPUR (Dec 7): The latest CIDB Standard Form of Contract (SFOC) represents a significant leap forward from its predecessor, and that it aims to foster a culture of cooperation, shared risks and rewards among project participants, according to Construction Industry Development Board (CIDB) Malaysia CEO Datuk Mohd Zaid Zakaria.

"Collaboration is the cornerstone of success in the construction industry. A collaborative contract aligns the goals of diverse stakeholders and encourages collective responsibility," he said in his opening address at the Master Builders Association Malaysia (MBAM) Conference on "CIDB Standard Form of Contract for Building Works 2022 and Mediation for Construction Disputes" on Thursday at the Nippon Paint Expo Centre, Shah Alam. The conference is organised by CIDB and MBAM, and sponsored by Nippon Paint Malaysia and Gamuda Bhd.

The new SFOC integrates mediation for construction disputes, signifying a shift towards more effective conflict resolution mechanisms. 

Mohd Zaid added, "We hope more industry players will adopt the new SFOC for the betterment of the Malaysian construction industry."

In his welcome remarks, Nippon Paint general manager Tay Sze Tuck noted the construction industry has faced various challenges after the pandemic, including a persistent supply chain disruption stemming from the Russian-Ukraine war that has since resulted in inflation and a notable spike in raw material prices.

"Consequently, many projects are delayed which, in turn, affect other aspects of business operations including distribution and logistics management. This prolonged supply chain disruption can have broader economic implications, potentially impacting overall economic growth and stability. In the face of these challenges, collaboration and innovative thinking are essential to protect and strengthen our industry," he said, adding that therefore, Nippon Paint pledges its commitment to the revival and sustainability of the industry with its products through its Total Coating and Construction Solutions.

In his welcome note, MBAM president Oliver HC Wee added that other challenges including increased interest rate globally also led to extra cost to the common business operations. Therefore, timely payment made for work done is of the utmost importance.

"Additionally, in recent years, it has been observed that disputes arising from construction contracts increase tremendously, and obviously the sustainability of the industry practice is questionable," he said.

"The ultimate result of any of these failures would cause the project to be retendered at a higher cost. Or worse, the project being abandoned, contractors and suppliers bankrupted, as well as unemployment issues. Most of all, the purchasers would not be able to receive their property in time and subsequently upset their financial plans... It is a ripple effect that most of us don't see as we are fortunate enough to not experience it."

In her keynote address, Federal Court judge Datuk Mary Lim Thiam Suan said that SFOC reflects maturity and professionalism. 

"They are your foundational platforms to ensure that there is uniformity, consistency and confidence in your contract terms, its application and appreciation and most importantly, when disputes arise, in the interpretation of those terms," she explained.

"Standard forms must be regularly updated and improved... Today’s standard form of contract for buildings is an update from the 2000 issue. CIDB, responsible for its formulation and update is to be commended for taking such critical initiatives. Equally, Master Builders Association of Malaysia, for wanting that update."

She noted that mediation is another favoured choice more appropriate to litigation in Court. "It makes no sense to come up with standard forms of contract and then end up in Court arguing days on end on its interpretation... In mediation, you make your points, your persuasion and your limits of compromise. You are or you return to control mode, just like when you prepared yourself to use these standard forms of contract. Why would you want less?

"As you build foundations and platforms for your contracted works where these are all intended to stand time and all conditions, you should not allow the foundational contract that you have so carefully and wisely chosen to falter. When you dispute, and it has been said that construction contracts, by their very character and nature, generate disputes, you will want to remain in charge, that the contract you so carefully negotiated retains its intent and purpose; and that any ambiguity is resolved through a mediated medium, dictated by negotiated settlement," she added.