What is the proposed change to payment milestones for consultancy fees?

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The Institution of Engineers Malaysia proposes an 80 per cent payment of consultancy fees by the tender stage.

The Institution of Engineers Malaysia (IEM) has recommended a significant restructuring of payment schedules for engineering consultancy fees. Their proposed changes aim to better align fee payments with project progression and improve cash flow for engineering firms.
Payment Milestone Restructuring

IEM suggests that a substantial portion, specifically 80 per cent, of the total consultancy fees should be disbursed by the time a project reaches the tender stage. This recommendation is part of a broader effort to address the stagnation of engineering consultancy fees, which have seen minimal increases since 1983 despite escalating project complexities and workloads.
Rationale for Fee Adjustments

The proposal to alter payment milestones is closely linked to IEM's broader call for a 40 to 50 per cent increase in overall consultancy fees. This suggested hike is intended to account for current compliance requirements, increased operational costs, and the professional liabilities faced by engineers. The survey conducted by IEM indicated that workload has increased approximately tenfold over the last 24 years, while fee scales have remained largely unchanged since 1998.
Impact on Cash Flow and Investment

By shifting a larger proportion of payments to earlier project phases, IEM aims to improve the immediate cash flow for engineering consultancies. This is particularly important as the survey revealed that 81.30 per cent of companies reported salary adjustments as the first area affected by low fees. Furthermore, 52.5 per cent of surveyed firms have had to reduce investment in upskilling their workforce, highlighting the financial strain caused by the current fee structure.
Broader Industry Concerns

The proposed payment milestone change is one of several recommendations put forth by IEM to ensure the long-term viability and quality of the engineering consultancy sector in Malaysia. Other suggestions include reducing retention sums during construction to 15 per cent and favouring quality-based selection over the lowest-price criteria in procurement. These collective proposals underscore a strong agreement among 96.71 per cent of respondents that constructive changes are necessary for the sector's future.

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What is the proposed change to payment milestones for consultancy fees?

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