Review of Constrction Industry Development Act in Sri Lanka and Its Significance To QS Profession

Lalith Ratnayake
B.Ss (Hons) QS, M.Sc (Proj. Mgt.), FIQS(SL)


It is a cognitive belief that the vibrant construction industry is an indicator of positive economic development of a country. This is evident from the 8.7% contribution of Sri Lanka’s construction industry to GDP with a growth rate of over 14% as stated in the Central Bank Annual Report 2013. It is resplendent to note that Sri Lanka’s construction industry contributed dramatically from Rs. 366 billion in 2009 to more than Rs. 894 billion in 2013 (in current prices) to the GDP while the Gross Domestic Capital Formation climbed from about Rs. 802 billion to Rs. 1631 billion from 2009 to 2013 as per the Central Bank Annual Report 2013.

Partners of the industry attempted many a times to formulate such legislation and my own records include a draft document circulated for formulating Construction Industry Authority in 2003. The process of making legislation may have commenced even before. This long outstanding need to enact legislation for the construction industry development is now fulfilled with the Construction Industry Development Act. The question as to whether this Act will reasonably serve the intended purposes and address all fundamental needs should be answered following a careful study of the Act and how it has been evolving over the period.

Before answering this question, it would be necessary to perceive that the management of construction projects is an enterprise that involves many people with diverse interests, talents and backgrounds. Throughout the project life cycle, from the time the owner first contemplates launching a construction project to that celebrated time, many months or years later, when the completed project is ready for use, the tasks carried out by the various parties vary in type and intensity (Bennett, 2003, p.l). Due to tins unique nature of construction projects, construction process is considered as the most complex undertaking in any industry (Bennett, 1991). The uniqueness and complexity of having numerous parties and tile need to address each sub sector in formulating tins Act have been the reasons to take this enactment almost two decades.

Construction Industry Development Act (CIDASL) has been brought into operation in September 2014. The published CIDASL is cited as the Construction Industry Development Act of 2014 and comprises of twelve sections as shown in Figure 1.1. The purported purpose of CIDASL is to assure a sustainable progress in the development of the construction industry with tile proper policies and establishing an authorised institute to drive and regulate the industry. The CIDASL promulgate mainly on regulating, registering, formalizing and standardizing tile activities of the construction industry, which are described in more detail below:

Part 1. National Policy on Construction and its Implementation

The foremost requirement of CIDASL is the formulation of a nationl policy on construction which wll create a more vibrant, conducive and efficient environment for a sustainable local industry that meets the demand for its services to support economic and social growth objectives. The authority on formulating the national policy is vested in National Advisory Council, which consists of professionals in the construction industry, including the President of Institute of Quantity Surveyors, Sri Lanka. (IQSSL). This policy will be subject to change to incorporate the future developments of the construction industry.

Part 2. National Advisory Council on Construction

The National Advisory Council (NAC) on Construction is mainly consists of twenty two (22) members inclusive of ex-officio members and appointed members.

The Council is a compilation of the construction related ministries and professional bodies, including President of Institute of Quantity Surveyors Sri Lanka. Thus, involving IQSSL in NAC on Construction facilitates the mission to protect and promote the interests, status, welfare, rights and privileges of the profession while safeguarding the public interests. The main objectives of the NAC are directed towards formulating national policy on the construction industry and in achieving sustainable development of the construction industry. Inclusion of IQSSL as one of the key professional institutes has been a result of untiring volunteer services rendered by founders, subsequent Executive Councils and the members.

Part 3. Construction Industry Development Authority

The CIDA (ICTAD to be transformed into CIDA), established to provide for the promotion and implementation of the national policy, consists of twenty members (20) including a member of IQSSL. In reflection to the Authority objectives, it is quite apparent that the objectives are mainly focused on national policy implementation, construction industry stakeholder management and research, dissemination and publication. For better achievement of the objectives, the functions of the Authority are established in a structured manner. These comprehensive functions of the Authority intend to attend to the prevailing key issues and other aspects of the construction industry.

Part 4. Construction Industry Development Fund and Fund Authority

Another major sector, which has been drawing attention to through this Act is Small and Medium Enterprises

(SME), especially SME sector contractors and self-employed registered craftsmen. In Sri Lanka, SME play a key role in the revival of development in the construction industry. The main problem for SME is commonly identified as the existing financial barriers in terms of cash flow, financial regulations in procurement and banking sector. The regulations are apparently same whether the enterprise is big or small in many aspects. In fact, it is more stringent on SME’s when dealing with financial institutions for obtaining bonds, loans and the like.

Part 5. Qualified Persons

Professionals have been very concerned on the registration of Qualified Persons by the Authority, as the respective professional institutions have the mandate to enroll qualified members to appropriate practice fields. Thus, many suggestions and amendments brought to the Act by them in this regard and the Minister of Construction Engineering Services, Housing and Common Amenities, Honourable Minister, who managed this unprecedentedly delayed task of forming legislation, agreed to most of the suggested amendments even at the last moment. However, this Act enables the registration of qualified persons who are not members of any professional body through a recommendation by the Credential Committee in CIDA. Thus the Act facilitates the technically qualified personnel to be registered under the Authority as qualified persons who are recommended by the Credential Committees. The majority of this committee shall consist of nominated members of professional institutions as finally amended, following representations from IQSSL and other professional institutions. The register of qualified persons is to be maintained for the disciplines such as Quantity Surveying, Engineering, Architecture, Environmental and Public Health Engineering and the like. Hence, it is yet to see whether a non-member of any professional institution could be recognized as a qualified person and how such person would be bound by the ethics and practice standards in terms of public safety and liability.

Part 6. Registration of Contractors and Property Developers

Register of contractors is to be developed and maintained by the Authority under the Act. Under this, the qualified contractors are to be registered and registration number and certificate of registration are to be issued. In a situation where foreign contractors are to be engaged, they should obtain a temporary registration as a contractor. It should be noted that for execution of identifying construction work, it is mandatory to involve not only “Qualified Persons” who are registered under the Authority, but also registered contractors or temporary registered foreign contractors. In contrast, a foreign contractor who has entered into an agreement with the GOSL to engage in any identified construction work is not subject to above proceedings. Functions of the authority will include maintaining registers of property developers, directory of importers, manufacturers and suppliers of construction materials and components and directory of heavy construction machinery and equipment. When needed, the CIDA has the authority to conduct technical auditing for any construction work exceeding Rs. 10 million, which are identified as construction work. In this auditing process, auditing is conducted throughout construction to completion of the works, including examination of contract documentation and compliance to CIDASL.

Part 8. Standard Document and Human Resource Development

The standardization of the documents used by the qualified persons in the construction industry is aimed through this section of the Act. Furthermore, it is intended to develop the skills of the qualified construction personnel to meet the future demands and for career development while encouraging emerging trades and careers. Moreover, registered skilled persons are to be issued with an identity card to emphasize their recognition and with the approval of cabinet ministers, long term insurance policy and pension scheme may be arranged for them. In addition, a register of skilled construction workers, construction site supervisors and middle level technical officers is to be maintained by CIDA.

Part 9. Settlement of Disputes

In a situation where a construction contract does not provide for any dispute resolution mechanism, in the event of a dispute, the CIDA follows the dispute resolution process as shown in Figure 1.2. The CIDA shall maintain a register of competent adjudicators relating to construction contracts. The procedure and rules of adjudication may be determined by the CIDA.

Part 10. Appeals Board

The Appeals Board CAB) was established under CIDASL to resolve appeals made by aggrieved parties by a decision of the CIDA. The AB has the authority to hear and make determinations of the appeals made. If a party does not satisfy with the decision of AB, the party has the right to appeal against such decision to the Court of Appeal within thirty days from the date of decision of AB

Part 11. Collection, Processing and Distribution of Information in the Construction Industry

The CIDA has the responsibility to maintain an updated national database on construction and publish the annual report on the construction industry in the country. The database mainly will consist information on financial facilities granted to construction industry from banks, National Housing Development Authority and other government and voluntary organizations, values of imports and exports of construction material, statistics related to river and sea sand supplied to the market by license holders for sand mining, construction works completed, training programs related to construction industry and granted permits and license for construction works.

Part 12.General

In this section of the Act, it addresses other major areas such as offences under CIDASL, making of rules and regulations under the Act, power to enter any land or premises, repeals and savings and interpretation.

If any person or body of persons is charged guilty of offence under CIDASL, shall, upon conviction after summary trial before a Magistrate, be liable to a fine not exceeding rupees one hundred thousand (Rs. 100,000/-)

or to imprisonment for a period not exceeding two years or to both such fine and imprisonment.

It should be noted that CIDA has the authority to make rules while power of making regulations is vested in the Minister. All the rules and regulations should be published in the Gazette while regulations should come into operation on the date of publication or a later date specified. Another fact to be considered is that CIDA has the power to enter any land or premises of identifying construction work for the inquiry of any complaint received by the Authority. If the owner or occupier resists such entrance, CIDA has the authority to obtain a search warrant from the Magistrate’s Court.

Under subsection repeals and savings, it is pointed out that the Minister has the right to cancel the Gazette

Extraordinary No. 718/15 of June 10, 1992 issued under the State Industrial Corporation Act, No. 49 of 1957 by

an Order published in the Gazette. Thereby, all the employees, movable and immovable properties, contracts

and agreements, suits, actions and other legal proceedings, rights, liabilities and obligations and all of the Institute of Construction Training and Development (ICTAD) shall come under CIDA.

For the purpose of CIDASL, the term construction work, construction contract, contractor, constructor, consulting, documentation, externally funded projects, identified construction works, completed identified construction works, Minister, property developer, qualified person and supervision are defined in the concluding section of the Act.

Other Observations

Among the other Acts related to construction, development published worldwide, Construction Contracts Act

2002 in New Zealand and Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994 can be good references.

Acts of United Kingdom (UK) are more time tested with their legal system and may be referred in development of the Act further. Housing Grants, Construction and Regeneration Act 1996 and Local Democracy, Economic Development and Construction Act 2009 are example of Acts in UK Though the purposes of the Acts seems to

be similar to some extent, The UK Acts and Construction Contracts Act 2002 in New Zealand focuses on facilitating regular and timely payments between the parties to a construction contract and providing remedies for the recovery of payments under a construction contract. In UK Acts has gone to the extent ensuring that payment provisions within a construction contract cannot be linked to provisions under another contract. The outlawing of ‘pay-when-paid’ is a salient aspect in UK Acts where sub-contractors payments cannot be unreasonably withheld.

In addition, Contracts Act 2002 in New Zealand (CANZ) and Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994 (LPIPM) provides interpretations related to the construction industry. According to LPIPM “construction industry” means the industry concerning construction works while in CANZ “commercial construction contract” means a contract for carrying out construction work in which none of the parties is a residential occupier of the premises that are the subject of the contract. The nature of the construction industry and construction contracts tends to have different characteristics in the world.

In CANZ, a major section is dedicated in ensuring the payments certified in construction contracts. Through

this act, conditional payments are prohibited where “paid when paid” or “paid if paid” clauses are not enforceable and cannot be used as a basis for withholding any payment due in the construction contract. Further, the Act provides for the default provisions for progress payments. These provisions have been introduced in CANZ to include legal enforcement of payments in construction contracts.

It is necessary to include similar payment guarantee clauses in CIDASL to enable legal enforceability in payments in construction contracts in Sri Lanka too. However, there are many obstacles to go to that extent at present as it needs clearance of public finance institutions. The dispute resolution in adjudication is also an area to be further improved in the CIDASL taking examples from other parts of the world.

It was also suggested that practice of Standard Documents published by ICTAD (to be changed to CIDA) to be mandatory at the initial stages, such as Standard Method of Measurement, but such provisions are not included in this Act. Yet again, there are practical issues in implementation without making adequate awareness on the same.

Quality of construction and professional services also are concerns to be addressed in particular for public safety, environment protection, sustainability and accountability. Promoting such aspects would be necessary, though there are no express provisions to that effect in the Act. Another, major area to be focused is the research and development.

The technology used in the industry is apparently same whether it is a residential building or a medium rise building. Roads, bridges and water supply also not an exception from searching for new knowledge in technology for the benefit of the public and to minimize ecological and social impacts.

This Construction Industry Development Act will not be the end of the road but the beginning of a new path. Now that there is legislation in motion, let us contribute to the development of the industry and further improvements necessary taking this Act as a launching platform.


  • Bennett, F. (2003). The management of construction. Amsterdam: Butterworth-Heinemann.
  • Bennett, J. (1991). International construction project management. Oxford: Butterworth Heinemann.
  • Central Bank of Sri Lanka (2013) Annual report, Colombo, Sri Lanka: Author.
  • Construction Industry Development Act 2014.
  • Inland Revenue Act 2006.
  • Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994
  • Nafeel, N. (2014, September 23). Construction industry development draft act before house – Wimal. Daily News