Act 520

Act 520 was passed in 1994 to establish the Lembaga Pembangunan Industri Pembinaan Malaysia, also known as the Malaysian Construction Industry Development Board (CIDB), and to provide for its functions relating to the construction industry and for matters connected.

Act 520 main focus encompasses three main areas:

  1. Enhancing construction quality through registration of construction personnel as well as skills and competency certification;
  2. Ensuring quality of building material and compliance with standards; and
  3. Contractors and site managers' responsibility to ensure safety of buildings during or after the construction work.

The amended Act 520 makes it compulsory for construction personnel to be registered with CIDB. This is to allow CIDB to gather sufficient and accurate data on the number of construction personnel available and needed, the relevance of skills training programmes to the nation's need, and to keep tabs on standards of construction workers.

The amendment also requires all construction site supervisors and skilled construction personnel as specified in the Third Schedule of Act 520 to be accredited by CIDB, and to hold a valid CIDB issued certificate according to their respective trades and skills.

This is because construction personnel who have been certified of their skills can produce work of high quality, be competent and highly productive. This in turn will increase the image of the construction workforce and attract more to be involved in this line.

Anyone caught working without proper registration and accreditation papers will be slapped with a fine of not exceeding RM5,000. Likewise, the same penalty will also be imposed on employers of workers who are not accredited to carry out construction work.

The second aspect highlighted in Act 520 amendment is to regulate the quality of construction materials used in the construction industry. CIDB will now certify the construction materials available in the market as specified in the Fourth Schedule of the Act, and in accordance with the standards specified in the same Schedule.

Regulating the standards of the construction materials will also reduce the availability of low quality materials in Malaysia. This will also stop other countries from dumping their cheap and poor quality construction materials in Malaysia. Although Malaysia has anti-dumping laws, there is no legal framework to control and monitor the standards of construction materials.

While the Royal Malaysian Customs, through its Customs (Prohibitions of Imports) Order 1998 under the Customs Act 1967, prohibits the import of construction materials that do no confine to the standards set by CIDB, this provision however does not apply to locally produced construction materials. Due to this different legal standards, the Act 520 amendment is important in ensuring Malaysia does not breach the World Trade Organisation (WTO) agreement by having different prohibitions for imported and local products.

Any person who deals or undertakes to deal with the construction materials specified in the Fourth Schedule without the CIDB certification shall be guilty of an offence and shall be, upon conviction, liable to a fine of not less than RM10,000 but not more than RM500,000.

The amendment also makes it the contractor's duty to ensure the safety of the building and the construction works, whether during or post construction works. This amendment is applicable to all contractors, whether registered or not with CIDB. Likewise any person having the right and power to manage or control any construction site has the duty to ensure that the construction site and the means of entering and leaving the site are safe and not harmful to health.

The amendment provides that in the event of a breach of safety, CIDB is empowered to immediately stop the construction work, to carry out inspection at the site at the contractor's cost, to order for the execution of specified construction works and to demolish the defective building or any defective parts of the building.

Contractors who fail to adhere to the directives issued by CIDB shall be guilty of an offence and on conviction be liable to a fine not exceeding RM500,000, and in respect of a continuing failure to comply, an additional fine of not exceeding RM10,000 for every day or part of a day which the offence continues after conviction.

Any contractor whose breach of duty results in death shall be guilty of an offence, and on conviction, be liable to a fine not exceeding RM500,000 or to imprisonment for a term not exceeding two years, or both.

Apart from that, Act 520 Amendment also imposes higher penalty to contractors who undertake construction works without valid contractor accreditation - from RM10,000 to RM100,000, compared to a maximum penalty of RM10,000 before the amendment. For contractors who do not declare their construction projects, they can be fined up to RM50,000. Contractors who fail to pay levy can be fined up to RM50,000, or four times the amount of such levy payable, whichever is higher.