Essay Sample on Delayed Payments

Introduction

Recently, there has been a high number of cases involving the delays of the completion of construction projects in the developing countries. Among the significant reasons that have been listed to cause such delays, delayed payment of the contractors and or the project stakeholders is a considerable challenge that leads to the delay in such projects. When a delay occurs in a project, there is frustration caused to the overall project team, and besides, when a project delays, the cost also increases due to the overruns, loss of revenue and capital, increase in the price of material, delay in production, and lack of efficiency. Since delayed payment is a significant cause of the project construction delays in the developing countries, there is importance in studying the major project causes of late payment so that there can be measures of mitigation put across in ensuring that there is control of such challenges. By definition, payment delay refers to when there is a failure by the project sponsor to pay within the timeframes indicated in the contract. Delay in the payment of a project could be caused by any of the responsible stakeholders in a such as a contractor, engineer, the client, architect, banker, quantity surveyor, supplier, and any other player in the construction project.

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Research Methodology

For this study, the primary method used in the collection of information was secondary sources from the internet and other books. The research aims to present the payment causes of delay in payment on construction projects; the effect that such delays causes, and to come up with appropriate solutions that would help in the mitigation of such impacts and risks caused by delayed payment in construction projects in the developing countries. Another objective would be to come up with an evaluation report to see if there are any significant differences in the factors that cause payments to delay in the developing countries as compared to the developed countries. The study also aims towards creating an understanding of the impacts that such delays in the payment could have.

For construction a project to have a successful execution and remain within the stipulated time and cost, there should be a methodology requiring sound engineering judgment. When there is a delay in the payment process, then the project will probably delay regarding completion, safety problems, nonconformance, and bankruptcy. From the methodology, one can quickly identify how the achievement of the objectives of this study occurs. Some of the goals in the study include the identification of the causes of delayed payment in projects; identifying some of the effects associated with the delayed payment in the construction projects; investigation on how such effects associated with the delays in payment projects can get mitigated in the construction projects. The basis of the methodology was on subjective data, and such data were qualitative, and their base was on sources used as a secondary reference or rather sources for the data.

Factors Contributing to the Delayed Payment

In this section, the major focus is the identification of some of the primary factors that results in to the delay in the payment of such projects in the developing countries. The arrival at this information was done through the asking of the respondents to list some of the causes that they think are the major in causing a delay in the payment of these developing countries construction projects - The ranking of such purposes based on the frequencies in which they occurred or instead how often such a cause led to the delay in a construction project. Such information got provided by the respondents based on their working experiences and or judgments.

The Effects and Risks of Payment Delay

The objective of this section is the identification of the risks and results otherwise referred to as frequent and which leads to the delay in construction projects. After that, the respondents got subjected to another battery of questions including to rank such effects. The grouping of this section comes in four major groups which are; effects on the project characteristics, effects on the owner of the projects, effects on consultant, and effects on the contractor.

The most effective remedy for the delay in payment

In this section, it is where the identification of the effective remedy for the delays in cash gets made.

Questions for the Interview

1. How long have you been working as a contractor?
2. What kind of clients or employers have you always encountered? The government or private sector?
3. Which one among them do you prefer to the other?
4. What is your rate of successful payment from the clients?
5. How many court petitions have you ever filed as a result of failure by your client to pay you?
6. What recommendations would you give so that such incidences could get avoided in the future?

Results

The section entails all of the outcomes of the finding from the study. The results get discussed in this section and it present general information concerning the respondents. For the objectives, its focus is the study of how the delay in the payment of projects has effects on the various elements discussed above.

Causes of Delayed Payment

After the analysis of the respondents, each of all these classes got analyzed, and the results are as will be discussed below. Several factors are listed and stated to be causing delayed payment in the construction projects mostly in the developing countries (Alinaitwe, Apolot & Tindiwensi, 2013). As a result, there is a need for these contributing factors leading to delayed payment to get identified. Some of the factors identified as the possible cause of late remuneration include the following:

Poor management of finances by the employer: When an employer has a poor strategy of managing funds, then this habit could lead to such an employer running out of working funds in the even that they are the ones responsible for paying the payees. In the construction industry, payment is considered as the lifeblood since projects in the construction industry in most cases entail large sums of capital outlay (Ansah 2011).

The employer is withholding the payment: As many standard contract forms provide, there are a variety of reasons for why the employer could hold payment for the contractor or subcontractor. Some of these reasons include things such as disputed work, defective construction work, and failure of compliance by the contractor to the material provision of the contract, claims filed by a third party or any reasonable evidence that there are chances that a claim will be presented (Azmana et al. 2014). Another reason is the failure by the contractor to make timely payment for project resources. As a result of any of these reasons, the employer could refuse to make payments leading into delayed payments.

Conflict among parties: In most cases, debt has always been a reason for chaos and or disputes. There is a study proving that if a battle does not get settled, it could amount into a disagreement and such a situation could cause delays in the payment.

In subcontracts, the use of the term 'pay when paid' has also been a reason for the delayed payment in some projects (Alinaitwe, Apolot & Tindiwensi, 2013).

Local culture or attitude: the developing countries have customs and beliefs which in most cases affects the payment of projects. Such cultures include the culture of late payment by most of the African whereby you find that in a country such as Kenya, lateness by up to two months in a common thing to them and they do not see an effect in that.

Other causes of delay could include certification delays and disagreement on the valuation of work.

Delayed Payments Caused by Contractors

In most cases, blames would be placed on the clients by the contractors when they receive late payment. However, this is a situation that even the contractors themselves contribute. According to Reeves (2013), the presence of errors in the submission of claims is one of the major causes of delayed payments (Reeves 2013). Such applications include claims lacking adequate supporting documents, applications submitted without following the correct procedures, and wrongly calculated claims. In such cases, the contractor should resubmit these claims after having made the required changes.

Table 1: Causes of delay in projects, the frequencies, mean and standard deviation.

Delayed Payment Caused by Clients

According to Reeves (2013), clients mostly contribute to a late fee when they take an abnormally long time to verify the claims once submitted by the contractor (Reeves 2013). The main reasons that could lead to such scenarios are when the clients have increasingly become subject to claims that arise, and they feel such claims should be out of their design. There are also cases where you find the client wrongfully withholds the payments. In most cases, the primary intention of such clients is to get some gifts from the contractor once they release such payments. As a result, you find that the contractors often tolerate such actions so that they can have their payments secured and this should not be the case (Alinaitwe 2008).

Delayed Payment Caused by Contractual Matters

In some cases, the agreements in the contract do not bring justice both to the subcontractors and the main contractor. The use of the term 'pay-when-paid' often used between main contractors and subcontractors never bring truth to the second parties. In most cases, you find that there is a delay in the payment of the second parties or even no payment at all. However, the bitter fact is that such a rule still exists in the industry and it is a major cause of delayed payment by the main contractors to the subcontractors (Alinaitwe 2008)...