CAUSES AND EFFECTS OF DELAYED PAYMENTS BY CLIENTS ON CONSTRUCTION PROJECTS IN GHANA
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Keywords
delayed payment, construction industry, Ghana
Abstract
Delayed payments of work done by clients on construction projects in the Ghanaian construction industry are considered to be a factor of significant concern. It causes severe cash-flow problems to contractors and this can have a devastating effect down the contractual payment chain. It is not uncommon to find a contractor or sub-contractor who has not been paid what is due to him threatening to suspend work under the contract until the balance due to him is paid in full. The practice of efficient and timely payment in construction projects is a major factor that can contribute to the success of a project. This study was conducted to identify the causes and effects of delayed payments for work done in the Ghanaian construction industry. In order to obtain indicative data for the study, questionnaires were designed and distributed to a randomly selected sample of 210 individuals among contractors, subcontractors and clients in the Ghanaian construction industry. In total, 174 completed questionnaires were returned and then analysed statistically. The Relative Importance Index was used to determine the ranking of the results of the study. Employers’ poor financial management, conflict among parties involved in the contract, and delay in certification are some of the potential causes of delayed payment identified in the study. Withholding or delaying payment creates financial hardship for the construction companies and its impacts are sometimes so harsh that some companies have to close down. To improve the payment situation, the findings of the study suggest that there must be enforcing clauses of delayed payment in contracts, i.e. levying charges on overdue payments and the establishment of a payment department which would be responsible for keeping records of the history of delayed payment and penalties given to those who fail to pay on time as stipulated in the contract.
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References
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