An Analysis of Key Factor Contributing to Subcontractor Disputes in The Malaysian Construction Industry
Abstract
4
The Malaysian construction industry is pivotal in the country's economic development, contributing significantly to its GDP and employment. However, the industry is plagued by complex contractual relationships involving subcontractors. This research analyzes court cases related to subcontractor disputes in the Malaysian construction industry from 2014 to 2024, using a qualitative, descriptive approach and doctrinal method. The study examined 30 randomly selected cases to identify key factors contributing to subcontractor-related conflicts. The findings revealed that payment issues were the most prevalent cause of disputes, accounting for 18 out of 30 cases. This was followed by challenges to the Construction Industry Payment and Adjudication Act (CIPAA) in 10 cases. Other significant factors included contractual problems, work delays, quality and workmanship issues, disagreements over contract terms, change orders, and construction defects. The analysis highlights the complex nature of subcontractor relationships in the construction industry, emphasizing the need for clearer contractual frameworks, improved communication, and more efficient payment processes. The study also notes the ongoing debates surrounding the implementation and interpretation of CIPAA in subcontracting arrangements. To address these challenges, the research recommends that construction companies engage clients early, clearly define project scopes, and use plain language in contracts to foster transparency and collaboration. These measures are expected to lead to more successful project outcomes and reduce the frequency and severity of subcontractor-related disputes in the Malaysian construction industry.
References
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Assaf, S. A., & Al-Hejji, S. (2006). Causes of delay in large construction projects. International Journal of Project Management, 24(4), 349–357. https://doi.org/10.1016/J.IJPROMAN.2005.11.010
Benjaoran, V. (2009). A cost control system development: A collaborative approach for small and medium-sized contractors. International Journal of Project Management, 27(3), 270–277. https://doi.org/10.1016/J.IJPROMAN.2008.02.004
Cheung Sai On and Pang, H. Y. (2014). Conceptualising Construction Disputes. In S. O. Cheung (Ed.), Construction Dispute Research: Conceptualisation, Avoidance and Resolution (pp. 19–37). Springer International Publishing. https://doi.org/10.1007/978-3-319-04429-3_2
Choudhry, R. M., Hinze, J. W., Arshad, M., & Gabriel, H. F. (2012). Subcontracting Practices in the Construction Industry of Pakistan. Journal of Construction Engineering and Management, 138(12), 1353–1359. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000562
Debrah, Y. A., & Ofori, G. (1997). Flexibility, labour subcontracting and HRM in the construction industry in Singapore: Can the system be refined?
Defalgn Debelo, E., & Berhane Weldegebriel, Z. (2022). Effect of Contractor – Subcontractor Relationship on the Performance of Construction Project: A Case Study of Dire Dawa Construction Projects. American Journal of Civil Engineering, 10(2), 31. https://doi.org/10.11648/j.ajce.20221002.11
Demirkesen, S., & Bayhan, H. G. (2020). A Lean Implementation Success Model for the Construction Industry. Engineering Management Journal, 32(3), 219–239. https://doi.org/10.1080/10429247.2020.1764834
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Elazouni, A. M., & Metwally, F. G. (2000). D-SUB: Decision Support System for Subcontracting Construction Works. Journal of Construction Engineering and Management, 126(3), 191–200. https://doi.org/10.1061/(asce)0733-9364(2000)126:3(191)
Errasti, A., Beach, R., Oyarbide, A., & Santos, J. (2007). A process for developing partnerships with subcontractors in the construction industry: An empirical study. International Journal of Project Management, 25(3), 250–256. https://doi.org/10.1016/J.IJPROMAN.2006.10.002
Harmon, K. (2003). Effectiveness of Dispute Review Boards. Journal of Construction Engineering and Management-Asce - J CONSTR ENG MANAGE-ASCE, 129. https://doi.org/10.1061/(ASCE)0733-9364(2003)129:6(674)
Haron, R. C., Lutfil, A., & Arazmi, H. (2020). Journal of the Malaysian Institute of Planners (Vol. 18).
Hasmori, M., Ismail, I., & Said, I. (2012, July). Issues of Late and Non-Payment Among Contractors in Malaysia.
Hidzir, N., Jaafar, M., & Dahalan, N. (2015). Preface: A theory of subcontractor bullying in construction industry. Advances in Environmental Biology, 9, 56–59.
Hinze, J., & Tracey, A. (1994). The Contractor‐Subcontractor Relationship: The Subcontractor’s View. Journal of Construction Engineering and Management-Asce, 120, 274–287. https://api.semanticscholar.org/CorpusID:110565583
Karim, K., Marosszeky, M., & Davis, S. (2006). Managing subcontractor supply chain for quality in construction. Engineering, Construction and Architectural Management, 13(1), 27–42. https://doi.org/10.1108/09699980610646485
Kshaf, D. A., Mohamed, M. A., & El-Dash, K. M. (2022). The major problems between main contractors and subcontractors in construction projects in Egypt. In Ain Shams Engineering Journal (Vol. 13, Issue 6). Ain Shams University. https://doi.org/10.1016/j.asej.2022.101813
Kumaraswamy, M., & Matthews, J. (2000). Improved Subcontractor Selection Employing Partnering Principles. Journal of Management in Engineering - J MANAGE ENG, 16. https://doi.org/10.1061/(ASCE)0742-597X(2000)16:3(47)
Laryea, S. (2009). Subcontract and supply enquiries in the tender process of contractors. Construction Management and Economics, 27(12), 1219–1230. https://doi.org/10.1080/01446190903394533
Mahmoudi, A., & Javed, S. A. (2022). Performance Evaluation of Construction Sub‐contractors using Ordinal Priority Approach. Evaluation and Program Planning, 91, 102022. https://doi.org/10.1016/J.EVALPROGPLAN.2021.102022
Mitkus, S., & Mitkus, T. (2014). Causes of Conflicts in a Construction Industry: A Communicational Approach. Procedia - Social and Behavioral Sciences, 110, 777–786. https://doi.org/10.1016/J.SBSPRO.2013.12.922
Mnookin, R. (1998). Alternative Dispute Resolution. Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series.
Ng, S. T., Rose, T. M., Mak, M., & Chen, S. E. (2002). Problematic issues associated with project partnering — the contractor perspective. International Journal of Project Management, 20(6), 437–449. https://doi.org/10.1016/S0263-7863(01)00025-4
Peter Hoonakker, P. C., & Loushine, T. (2010). Barriers and benefits of quality management in the construction industry: An empirical study. Total Quality Management & Business Excellence, 21(9), 953–969. https://doi.org/10.1080/14783363.2010.487673
Reeves, K. (2003). Pay up. JUBM Construction News and Views, 1/2003: 4-6.
Silva, P. M., Domingo, N., & Ameer Ali, N. A. N. (2024). Causes of disputes in the construction industry – a systematic literature review. Journal of Financial Management of Property and Construction, 29(2), 193–210. https://doi.org/10.1108/JFMPC-03-2023-0012
Suzana P. Magazi, & Geraldine J. Kikwasi. (2022). Conflicts between Main Contractor and Domestic Sub-Contractors in the Building Projects in Tanzania; Experiences and Causes. International Journal of Engineering and Management Research, 12(3), 40–60. https://doi.org/10.31033/ijemr.12.3.6
Utusan Malaysia (2006) Kerajaan Lantik Terus Subkontraktor Atasi Masalah Pembayaran Lewat. Malaysia.
Yang, J.-B., Yang, C.-C., & Kao, C.-K. (2010). Evaluating schedule delay causes for private participating public construction works under the Build-Operate-Transfer model. International Journal of Project Management, 28, 569–579. https://doi.org/10.1016/j.ijproman.2009.10.005
Yates, J., & Epstein, A. (2006). Avoiding and Minimizing Construction Delay Claim Disputes in Relational Contracting. Journal of Professional Issues in Engineering Education and Practice - J PROF ISSUE ENG EDUC PRACT, 132. https://doi.org/10.1061/(ASCE)1052-3928(2006)132:2(168)
Ye, K. M., & Rahman, H. A. (2010). Risk of late payment in the Malaysian construction industry. World Academy of Science, Engineering and Technology, 65, 538–546.
Yik, F. W. H., Lai, J. H. K., Chan, K. T., & Yiu, E. C. Y. (2006). Problems with specialist subcontracting in the construction industry. Building Services Engineering Research and Technology, 27(3), 183–193. https://doi.org/10.1191/0143624406bse160oa
Abdul-Rahman, H., Kho, M., & Wang, C. (2014). Late Payment and Nonpayment Encountered by Contracting Firms in a Fast-Developing Economy. Journal of Professional Issues in Engineering Education and Practice, 140(2), 4013013. https://doi.org/10.1061/(ASCE)EI.1943-5541.0000189
Adeyekun, A. J. (2019). International Conference on Architecture and Civil Engineering 2019 An Assessment of Poor Communication between the Contractor and Subcontractor. www.coreconferences.com
Albino, V., & Garavelli, A. C. (1998). A neural network application to subcontractor rating in construction firms. International Journal of Project Management, 16(1), 9–14. https://doi.org/10.1016/S0263-7863(97)00007-0
Arditi, D., & Chotibhongs, R. (2005). Issues in Subcontracting Practice. Journal of Construction Engineering and Management-Asce - J CONSTR ENG MANAGE-ASCE, 131. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:8(866)
Assaf, S. A., & Al-Hejji, S. (2006). Causes of delay in large construction projects. International Journal of Project Management, 24(4), 349–357. https://doi.org/10.1016/J.IJPROMAN.2005.11.010
Benjaoran, V. (2009). A cost control system development: A collaborative approach for small and medium-sized contractors. International Journal of Project Management, 27(3), 270–277. https://doi.org/10.1016/J.IJPROMAN.2008.02.004
Cheung Sai On and Pang, H. Y. (2014). Conceptualising Construction Disputes. In S. O. Cheung (Ed.), Construction Dispute Research: Conceptualisation, Avoidance and Resolution (pp. 19–37). Springer International Publishing. https://doi.org/10.1007/978-3-319-04429-3_2
Choudhry, R. M., Hinze, J. W., Arshad, M., & Gabriel, H. F. (2012). Subcontracting Practices in the Construction Industry of Pakistan. Journal of Construction Engineering and Management, 138(12), 1353–1359. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000562
Debrah, Y. A., & Ofori, G. (1997). Flexibility, labour subcontracting and HRM in the construction industry in Singapore: Can the system be refined?
Defalgn Debelo, E., & Berhane Weldegebriel, Z. (2022). Effect of Contractor – Subcontractor Relationship on the Performance of Construction Project: A Case Study of Dire Dawa Construction Projects. American Journal of Civil Engineering, 10(2), 31. https://doi.org/10.11648/j.ajce.20221002.11
Demirkesen, S., & Bayhan, H. G. (2020). A Lean Implementation Success Model for the Construction Industry. Engineering Management Journal, 32(3), 219–239. https://doi.org/10.1080/10429247.2020.1764834
EGAN, S. I. R. J., & WILLIAMS, D. (1998). [SUMMARY OF] “‘RETHINKING CONSTRUCTION’” - THE REPORT OF THE CONSTRUCTION TASK FORCE. ICE BRIEFING SHEET. Proceedings of the Institution of Civil Engineers - Municipal Engineer, 127(4), 199–203. https://doi.org/10.1680/imuen.1998.31312
Elazouni, A. M., & Metwally, F. G. (2000). D-SUB: Decision Support System for Subcontracting Construction Works. Journal of Construction Engineering and Management, 126(3), 191–200. https://doi.org/10.1061/(asce)0733-9364(2000)126:3(191)
Errasti, A., Beach, R., Oyarbide, A., & Santos, J. (2007). A process for developing partnerships with subcontractors in the construction industry: An empirical study. International Journal of Project Management, 25(3), 250–256. https://doi.org/10.1016/J.IJPROMAN.2006.10.002
Harmon, K. (2003). Effectiveness of Dispute Review Boards. Journal of Construction Engineering and Management-Asce - J CONSTR ENG MANAGE-ASCE, 129. https://doi.org/10.1061/(ASCE)0733-9364(2003)129:6(674)
Haron, R. C., Lutfil, A., & Arazmi, H. (2020). Journal of the Malaysian Institute of Planners (Vol. 18).
Hasmori, M., Ismail, I., & Said, I. (2012, July). Issues of Late and Non-Payment Among Contractors in Malaysia.
Hidzir, N., Jaafar, M., & Dahalan, N. (2015). Preface: A theory of subcontractor bullying in construction industry. Advances in Environmental Biology, 9, 56–59.
Hinze, J., & Tracey, A. (1994). The Contractor‐Subcontractor Relationship: The Subcontractor’s View. Journal of Construction Engineering and Management-Asce, 120, 274–287. https://api.semanticscholar.org/CorpusID:110565583
Karim, K., Marosszeky, M., & Davis, S. (2006). Managing subcontractor supply chain for quality in construction. Engineering, Construction and Architectural Management, 13(1), 27–42. https://doi.org/10.1108/09699980610646485
Kshaf, D. A., Mohamed, M. A., & El-Dash, K. M. (2022). The major problems between main contractors and subcontractors in construction projects in Egypt. In Ain Shams Engineering Journal (Vol. 13, Issue 6). Ain Shams University. https://doi.org/10.1016/j.asej.2022.101813
Kumaraswamy, M., & Matthews, J. (2000). Improved Subcontractor Selection Employing Partnering Principles. Journal of Management in Engineering - J MANAGE ENG, 16. https://doi.org/10.1061/(ASCE)0742-597X(2000)16:3(47)
Laryea, S. (2009). Subcontract and supply enquiries in the tender process of contractors. Construction Management and Economics, 27(12), 1219–1230. https://doi.org/10.1080/01446190903394533
Mahmoudi, A., & Javed, S. A. (2022). Performance Evaluation of Construction Sub‐contractors using Ordinal Priority Approach. Evaluation and Program Planning, 91, 102022. https://doi.org/10.1016/J.EVALPROGPLAN.2021.102022
Mitkus, S., & Mitkus, T. (2014). Causes of Conflicts in a Construction Industry: A Communicational Approach. Procedia - Social and Behavioral Sciences, 110, 777–786. https://doi.org/10.1016/J.SBSPRO.2013.12.922
Mnookin, R. (1998). Alternative Dispute Resolution. Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series.
Ng, S. T., Rose, T. M., Mak, M., & Chen, S. E. (2002). Problematic issues associated with project partnering — the contractor perspective. International Journal of Project Management, 20(6), 437–449. https://doi.org/10.1016/S0263-7863(01)00025-4
Peter Hoonakker, P. C., & Loushine, T. (2010). Barriers and benefits of quality management in the construction industry: An empirical study. Total Quality Management & Business Excellence, 21(9), 953–969. https://doi.org/10.1080/14783363.2010.487673
Reeves, K. (2003). Pay up. JUBM Construction News and Views, 1/2003: 4-6.
Silva, P. M., Domingo, N., & Ameer Ali, N. A. N. (2024). Causes of disputes in the construction industry – a systematic literature review. Journal of Financial Management of Property and Construction, 29(2), 193–210. https://doi.org/10.1108/JFMPC-03-2023-0012
Suzana P. Magazi, & Geraldine J. Kikwasi. (2022). Conflicts between Main Contractor and Domestic Sub-Contractors in the Building Projects in Tanzania; Experiences and Causes. International Journal of Engineering and Management Research, 12(3), 40–60. https://doi.org/10.31033/ijemr.12.3.6
Utusan Malaysia (2006) Kerajaan Lantik Terus Subkontraktor Atasi Masalah Pembayaran Lewat. Malaysia.
Yang, J.-B., Yang, C.-C., & Kao, C.-K. (2010). Evaluating schedule delay causes for private participating public construction works under the Build-Operate-Transfer model. International Journal of Project Management, 28, 569–579. https://doi.org/10.1016/j.ijproman.2009.10.005
Yates, J., & Epstein, A. (2006). Avoiding and Minimizing Construction Delay Claim Disputes in Relational Contracting. Journal of Professional Issues in Engineering Education and Practice - J PROF ISSUE ENG EDUC PRACT, 132. https://doi.org/10.1061/(ASCE)1052-3928(2006)132:2(168)
Ye, K. M., & Rahman, H. A. (2010). Risk of late payment in the Malaysian construction industry. World Academy of Science, Engineering and Technology, 65, 538–546.
Yik, F. W. H., Lai, J. H. K., Chan, K. T., & Yiu, E. C. Y. (2006). Problems with specialist subcontracting in the construction industry. Building Services Engineering Research and Technology, 27(3), 183–193. https://doi.org/10.1191/0143624406bse160oa
Published
2024-09-30
How to Cite
HAKIMI, Muhammad Hazmin; MOHD AHNUAR, Ezlina.
An Analysis of Key Factor Contributing to Subcontractor Disputes in The Malaysian Construction Industry.
International Journal of Business and Technology Management, [S.l.], v. 6, n. S1, p. 41-51, sep. 2024.
ISSN 2682-7646.
Available at: <https://myjms.mohe.gov.my/index.php/ijbtm/article/view/27667>. Date accessed: 09 july 2025.
Section
English Section
