The government is considering establishing a dedicated regulatory framework for Pakistan’s construction industry, with discussions underway on project oversight, dispute resolution and reforms aimed at improving the sector’s performance.
However, differences have emerged between government officials and private-sector representatives over the minimum project value at which a defect liability period should apply. The construction industry has proposed a threshold of Rs20 billion, while the government is advocating a lower limit.
The proposals were discussed at an exploratory meeting chaired by Economic Affairs Minister Ahad Cheema to review reforms aimed at improving project delivery and addressing longstanding challenges faced by the construction sector.
Minister of State for Finance Bilal Azhar Kayani, Housing Secretary retired Captain Muhammad Mahmood and other senior officials also attended the meeting.
Participants reviewed the proposed Construction Industry Development Authority (CIDA) Bill. Cheema stressed the need for a detailed assessment of the proposal, including whether a single institution should oversee both regulation and industry development or whether separate bodies should be established for these responsibilities.
The meeting agreed to continue consultations with relevant stakeholders, including government agencies led by Kayani and representatives of the Constructors Association of Pakistan (CAP), to refine the proposed institutional structure.
The meeting also examined the issue of retention money withheld from contractors during the defect liability period. One proposal suggested placing these funds in interest-bearing accounts so contractors could receive both the principal amount and the accrued return once the stipulated period ends.
Cheema called for further consultations to develop a practical mechanism for implementing the proposal.
Participants also considered extending the existing Dispute Avoidance and Adjudication Board (DAAB) mechanism to government-funded projects. The system is designed to monitor project implementation and help prevent or resolve disputes before they escalate.
CAP proposed applying the mechanism to projects worth Rs20 billion or more. However, Cheema called for a lower threshold and further discussions to determine an appropriate project value.
The proposed construction-sector framework is expected to draw on the rules and standards of the International Federation of Consulting Engineers (FIDIC). Cheema highlighted the importance of using internationally recognised practices as a reference for developing the framework.
The meeting also directed the Pakistan Public Procurement Regulatory Authority (PPRA) to begin work on introducing a defect liability period of at least three years for major projects. The measure would subsequently be extended to smaller projects in phases.
A defect liability period generally requires contractors to address qualifying defects identified after a project’s completion within the period specified in the contract.
The latest discussions follow earlier government deliberations on a comprehensive package intended to revitalise Pakistan’s construction industry by simplifying regulations, attracting investment and strengthening institutional support.
The proposed measures included establishing a Construction Industry Development Board (CIDB), examining the feasibility of a dedicated Construction Development Bank (CDB), reviewing import and export policies, and introducing targeted tax reforms for the sector.
The government’s ongoing consultations are aimed at shaping an institutional and regulatory framework that could improve project execution, strengthen accountability and address concerns raised by construction industry stakeholders.
