The Pakistan Public Procurement Regulatory Authority (PPRA) has been directed to introduce a three-year defect liability period for major projects, with the period set at three years or more. The rule will extend to smaller projects in phases.
Federal Minister for Economic Affairs and Establishment Division Senator Ahad Cheema issued the direction at a meeting on reforms for the construction sector. The meeting looked at project delivery, the problems faced by the industry and the proposed Construction Industry Development Authority (CIDA) Bill.
Cheema said the Bill needed detailed consideration. One open question is whether the sector should have a single body or two separate entities, one to regulate construction and another to promote the industry and handle related matters. He asked Minister of State for Finance Bilal Azhar Kayani and representatives of the Constructors Association of Pakistan (CAP) to consult further on the structure.
Three-year defect liability: what it means for contractors
A defect liability period runs after a project is completed and handed over. During that period, the contractor must put right defects that appear, at its own cost, within the terms of the contract. The period protects the client against poor work that only shows up after completion, from faulty finishes to failures in systems that were not tested under full use.
Retention money sits beside that duty. Clients usually hold back a share of each payment during construction and release it after the defect period ends. The money gives the client cover if the contractor fails to return to fix defects. It also ties up contractor cash, which is why the meeting discussed where that money should sit while it is held.
The meeting considered a proposal to place retention money in accounts that earn a return. Under that idea, the principal amount plus interest would go back to contractors after the set period. Cheema called for further consultation to develop a workable mechanism, so the proposal is not yet a final rule.
Disputes, thresholds and international standards
The meeting also considered applying the existing Dispute Avoidance/Adjudication Board (DAAB) mechanism to government projects. Under that system, a board follows project work as it proceeds and helps prevent or resolve disputes as they arise, rather than leaving every disagreement to the end of the job.
CAP proposed applying the mechanism to projects valued at Rs20 billion and above. Cheema called for the threshold to be lowered and for further consultation among stakeholders to settle an appropriate limit. A lower threshold would bring more projects under the board system, but it would also need more boards and more trained members.
The coming framework for the construction sector will also draw on the rules and standards of the International Federation of Consulting Engineers (FIDIC), which Cheema described as a key reference. FIDIC contract forms are widely used on large infrastructure work, and they set out how defects, payments and disputes are handled.
The meeting was attended by Kayani, Housing Secretary Captain (retired) Muhammad Mahmood, a member of the Planning Commission, the PPRA managing director, CAP representatives and other senior officials.
Why the construction sector is under review
Construction work touches almost every part of public spending, from roads and schools to water and housing. When projects run late or defects appear early, the cost lands on the public purse twice, once for the original work and again for repairs.
That context is visible in recent project news. The Sambrial-Kharian motorway is heading for an early finish, as reported here: Sambrial-Kharian Motorway Early Finish. In Punjab, the planning board cleared schemes worth Rs60 billion in a single round, as reported here: Punjab PDWP Clears Rs60 Billion Schemes. A longer defect period and a clearer dispute system would apply to the same kind of public work.
What happens next
PPRA must now turn the direction into a phased rule, starting with major projects and moving to smaller ones. The CIDA Bill structure, the retention money mechanism and the DAAB threshold all remain open for consultation, so contractors and officials will watch the next round of talks for firm dates and limits.
For now, the clear decision is the period itself: at least three years for major projects. The details that decide how fairly it works, for clients and contractors alike, are still to be settled.
