COMPARATIVE ANALYSIS OF THE IMPACTS OF RISKS ON BONDED AND UNBONDED CONSTRUCTION PROJECTS
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Keywords
Construction stakeholders, Construction bond, Guarantor, Principal, Surety
Abstract
Despite the introduction and adoption of various techniques and innovative practices geared towards improving the delivery of construction projects, some notable problems of cost overrun, time delay, low quality, dissatisfied clients, etc. still persist. One of the notable practices in the construction industry is the use of bonds and guarantees. Construction bond was introduced as an instrument to protect or indemnify its recipients against risks and problems associated with construction projects but the challenge over the years lies in the practical enforcement of bonding conditions and its overall benefits to the construction industry. This research therefore evaluate the risks that are associated with bonded and
unbonded projects with a view to ascertaining their effects on overall construction projects success. Primary data were collected through administration of questionnaires on identified construction bond stakeholders namely: clients of public projects: quantity surveying and architectural firms; and construction firms. Questionnaires were administered on 337 respondents out of which 242 were returned while 236 were certified fit for analysis. Mean item score was used for ranking the identified factors while Kruskal-Wallis and Mann- Whitney tests were employed to examine relationship and differences in sample means of different groups of respondents respectively. The study revealed that financial soundness of the issuer also known as credit risk has major effect on projects with bond while for projects without bond, liquidity risk requires the most attention. The identified bond risks are more inherent in bonded projects except for liquidity and volatility risk. In view of this, special attention should be accorded the activities of guarantors, that is banks and insurance companies, shouldered with the responsibilities of issuing bonds in an attempt to reduce their influence on construction bond process. This will enhance value for money for contractors seeking the bonds and eventually lead to success of construction project.
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