What is the SOP Act?
The Building and Construction Industry Security of Payment (SOP) Act came into operation on 1 April 2005. The Act aims to improve cash-flow in the built environment sector by giving parties the right to seek progress payment for work done. It also provides a fast and low-cost adjudication mechanism to resolve payment disputes.
The SOP Act benefits firms in the built environment sector by:
- Ensuring parties carrying out work or supplying goods and services for all construction projects in Singapore have a right to payment
- Barring any “pay when paid” and “pay if paid” clauses in any contract
- Providing default (i.e. statutory) payment periods if there are no contractual provisions on terms of payment
- Providing for the right to apply for adjudication if a claimant does not receive any payment response or the full amount claimed
- Entitling the claimant to suspend work or supply if the respondent fails to pay the adjudicated amount
- Allowing other recourses to the claimant such as the right to exercise lien on goods and enforcement of an adjudication determination as a judgment debt.
Who does it benefit?
The SOP Act benefits the following parties:
- Main contractors and subcontractors
- Suppliers supplying construction related goods to a specific construction project in Singapore
- Consultants providing consultancy services for a specific construction project in Singapore
- Developers and homeowners
How should a claimant (e.g. contractor, subcontractor, supplier or consultant) serve a valid payment claim?
Make sure your payment claim has been served in accordance to the provisions in the contract and the Act. You are entitled to serve a payment claim according to the contractual terms. If there are no terms provided in the contract, a payment claim must be served by the last day of the month following the month in which the contract is made or any subsequent month. You can refer to the sample payment claim provided in “Downloadable Sample Forms” below to understand what needs to be included in a payment claim.
What should the respondent (e.g. developer, homeowner, contractor, subcontractor) do upon receipt of a payment claim?
Once a payment claim is received, you need to provide a payment response to the claimant whether or not you intend to dispute the claim.
If you do not dispute the claim:
- Issue a payment response according to the contractual terms (21 days max) or statutory timeline (14 days) (whichever is applicable – the statutory timeline is meant to take effect when there are no contractual terms)
- Make payment to the claimant before the deadline according to contractual or statutory timelines.
If you dispute the claim:
- Issue a payment response stating the reasons for disputing the claim, according to the contractual terms or statutory timeline
- Attempt to settle the dispute within the Dispute Settlement Period (The Dispute Settlement Period refers to a period of 7 days immediately after the payment response is required to be provided by the respondent)
You can refer to the sample payment response provided in “Downloadable Sample Forms” below to understand what needs to be included in a payment response.
You may wish to seek professional advice if you are in doubt of the procedures above.
What should I do if I still have not received my payment? How should I apply for an adjudication?
The SOP Act allows a claimant to apply for adjudication through an Authorised Nominating Body (currently the Singapore Mediation Centre, or SMC), if he disagrees with the response amount or fails to receive payment stated in the payment response. Parties can only apply for adjudication during a certain time period, and any application falling outside of the period will be rejected. This is to ensure that payment disputes can be resolved speedily.
To rely on adjudication to resolve your payment dispute, you would need to wait for the respondent to serve a payment response according to the contractual terms (21 days max) or statutory timeline (7 days):
- If the other party has issued a payment response to dispute your claim, make sure the 7-day Dispute Settlement Period has passed before you submit your adjudication application to the SMC. You have 7 days after the end of Dispute Settlement Period to notify the respondent of your intent and make your application to SMC. Late or pre-mature submissions to SMC will be rejected.
- If the other party does not issue any payment response, make sure the 7-day Dispute Settlement Period has passed before you submit your adjudication application to the SMC. You have 7 days after the end of the Dispute Settlement Period to notify the respondent of your intent and make your application to SMC. Late or pre-mature submissions to SMC will be rejected.
- If the other party has issued a payment response to confirm your claim but fails to pay by the deadline, you can notify the respondent of your intent and submit your adjudication application to the Singapore Mediation Centre within 7 days after the payment due date (according to the contractual terms or statutory timelines). Late or pre-mature submissions to SMC will be rejected.
Adjudication is a fast and low cost dispute resolution mechanism. An independent adjudicator appointed by the SMC will make a determination on the amount payable for a claim made under the SOP Act.
A main contractor, subcontractor, supplier or consultant can initiate adjudication under the Act. The adjudication determination is binding on the parties unless or until the dispute is finally determined by court proceedings, arbitration, or by an agreement of the parties.
What is the Authorised Nominating Body?
The Authorised Nominating Body (ANB) is an organisation authorised by the Minister for National Development (or an appointing authority exercising powers delegated by the Minister) to facilitate the adjudication process. Adjudication Applications are submitted to and administered by the ANB.
The ANB is responsible for establishing and maintaining a register of adjudicators, establishing and administering the codes of conduct for adjudicators, and training and accrediting adjudicators. The ANB will appoint the adjudicator and notify the claimant, respondent, principal (if known) and owner concerned accordingly. The current appointed ANB is the Singapore Mediation Centre (SMC), a not-for-profit organisation under the Singapore Academy of Law (SAL), providing commercial mediation services. The SMC was launched on 16 August 1997 by the then Chief Justice Yong Pung How.
For the full legislation, see the following:
Amendments to the Building and Construction Industry Security of Payment (SOP) Act
The Building and Construction Industry Security of Payment (Amendment) Act 2018 and the Building and Construction Industry Security of Payment (Amendment) Regulations 2019 have commenced since 15 December 2019. Please refer to the circular issued by BCA on 26 November 2019 and the briefing materials for more information on the amendments.
- Expanding and clarifying the scope of the application of the Act
- Expand the SOP Act to cover contracts relating to prefabrication of components
- Clarify that claims for work done or goods supplied before contract termination are valid
- Clarify that adjudicators are to consider claims on damages, losses, and expenses only when the quantum of such claims can be supported by documents
- Enhancing requirements on handling of payment claims and responses
- Prescribe a shorter time limit for service of payment claims
- Clarify a payment claim will be valid even if it is served before the date or period specified in the contract
- Allow unpaid payment claims to be repeated under the Act
- Clarify the default timeline for payment claim and definition of a month
- Improving the adjudication process
- Allow claimants (and not just respondents) to apply for adjudication review
- Allow adjudicators to disregard specific circumstances where claimants have failed to provide certain documents or information in adjudication applications, so long as the respondents were not materially prejudiced
- Clarify that any objections by respondents not included in payment responses will be disregarded by adjudicators or the Courts, unless respondents can prove that their objections could not have been made known earlier
- Other revisions to improve the operation of the Act and Regulations
- Revising minimum interest rate for late payment
- Specifying a non-exhaustive list of grounds on which parties can commence proceedings to set aside the adjudication determination
- Allowing documents to be served through email, and instant messaging platforms in an agreed file format