ABSTRACT
Some of the main issues that lead to a successful
implementation of a project are when timely payments and well organized
practices to contractors on road construction projects are performed.
Nonetheless, payment delays still constitute myriad of major setbacks in the
successful implementation of road construction projects. The study therefore
aimed to identify the effects of payment delays on the successful
implementation of road construction projects in Ghana Highway Authority.
Literature was extensively reviewed and relevant of it laid the foundation for
the development of the questionnaire which was distributed to the key project
participants; clients, consultants, and contractors. The study adopted the
quantitative method which sprung from the use of the positivists approach to
knowledge with which a number of clients and consultants were selected
purposively and contractors were also selected simple randomly for the survey.
Owing to that, descriptive statistics was used to analyze the demographics
whiles Relative Importance Index was used to analyze the subject variables.
Results indicated that the main factor causing payment delays on road
construction projects is delay in certification. It can be implied that the
stakeholder responsible for this cause is the client. Respondents also
indicated that the major effect among the effects of payment delays on road
construction projects is abandonment of projects which ranked first after
analysis. The results testify to the numerous abandoning of road construction
projects. Practice of good financial management ranked first among the possible
ways to mitigate payment delays. The research concluded that the main factor
causing payment delays is delay in certification and it has manifested in the
several abandonment of road construction projects in Ghana. The recommendation
suggested that proper payment schedules are to be agreed by all the
stakeholders before the commencement of the project. Proper communication
channels or skills are to be implemented by the stakeholders to aid smooth flow
of information and realistic duration and cost must be set for the project.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The Construction Industry has been identified as one of the
major backbones sustaining the Ghanaian economy since it employs people from
all levels of skills attainment ranging from educated, average educated and non-educated.
Amankwa (2003) identified that in 2002 2.3% of the active economic population
was employed by the construction industry. It adds up an average of 8.5% to the
Gross Domestic Product (GDP) of Ghana (Ghana Statistical Service, 2007). Its
socio-economic importance is wider. An all-around oversaw and successfully
distributed construction projects enhance public services (education, transport
and health), business efficiency, (communications, offices and retail)
cultural, housing and public spaces. A survey conducted by Ayudhya (2012)
stated, client financial problems, major accidents, lengthy period of approving
works, substandard workmanship and inaccurate bills of quantities among others
were factors in causing delayed payments to the contractor.
Payment delay is one of the major problems faced by road
construction project and its successful implementation in the present economic
condition. For a project to be successfully implemented, well-organised
preparation should be done and payment should be timely released to contractors
of road construction projects. The imperativeness of further payment is
increased by the way that the road construction contracts generally encompasses
long periods to finish projects, a lot of money to spend and the wide utilization
of credit payment terms as opposed to payment on delivery in procuring of goods
(Ameer, 2005).
Several actors in the road
construction industry of Ghana are affected by delayed payment. As such, there
is the urgency to identify the effects of the delayed payment and to develop
pragmatic measures which could successfully put a stop to the causes of payment
delays in our road construction industry in Ghana and its eventual effects on
the successful implementation of road constructions.
In road construction contracts, the contractors‟ cardinal
obligation is to execute and complete the works in accordance with the terms
and conditions of contract on time, whiles that of the employer is to pay the
contractor for the works which have been executed to the satisfaction of the
supervising agents or consultants. Once the two parties enter into a contract,
their respective focus becomes parallel with the contractors‟, hoping and
working towards making as much revenue as possible from the client whiles the
employer hopes to get the most work for least payment possible. To a great
extent, payment becomes the central focus for both of them. It is however
poignant that despite the indispensable nature of payment to the successful
implementation of road constructions in Ghana, the sector has been bedevilled
by delays payments.
The long and bureaucratic nature of issuing payment
certificate is considered by the clients, consultants and contractors as one
cause of the delay in payment. This system of making payment certificate
receive approval from various levels within the government institutions before
payment can be effected came about in order to curb the rising corruption that
was immerging in the construction industry. In so doing payment certificates
will be properly scrutinized by these institutions to ascertain and confirm
that work has actually been done to the required standard but this has turned
out to be a rather disastrous move for road contractors as unusual lengthy
period of time are taken for honouring of payments..
It is an undeniable fact that many
road construction projects have either been abandoned, become standstill or
moving at a very slow pace as a result of the many hindrances in payment
process that contractors, consultants and the respective government
institutions encounter.
A failure on the side of the contractor in receiving timely
and regular payment could as well be a recipe for reduced profitability, delay
in completion of projects and in worst case scenarios, such construction firm
may fold up (Judi et al, 2010). The effects of delayed payment to contractor
causes a rippling effects on other construction business chain such as banks,
sub-Contractors, hirers, suppliers and workers therefore causing everyone to
suffer (Judi et al, 2010).
The incidence of the delayed payment is eating deep into the
fabric of the true values and virtues of road constructors and it is by this
logic that the research then pursues to identify the practical causes and
effects of delay payment on the successful implementation of road construction
in Ghana and to suggest pragmatic measures to mitigate the menace.
1.2 Statement of the Problem
Honouring payment certificates to contractors for road
construction projects in Ghana under the supervision of Ghana Highway Authority
really takes a longer time to complete and it affects the successful
implementation of the projects. It was established that delays in honouring
payment certificates in construction projects to contractors for work executed
rank as the number one (1) of the factors causing construction project delay in
Ghana, from the viewpoint of Clients, Contractors and Consultants (Fugar &
Agyakwah-Baah, 2010).
Despite the supposed interest paid on
the delayed payment certificates in a contract with a specific clause on
interest on delayed payment, effectively the amount paid to the contractors do
not reflect the actual face value of the amount certified if the certificate is
honoured beyond the contractual due date. These situations may cause serious
cash flow problems to contractors resulting in excessive pressure from their
creditors which lead to seizure of the road contractors‟ plants and equipment
and going on liquidation. Due to these, most of the road contractors get
frustrated and determined the projects which affect the implementation and
government not being able to meet infrastructural needs of the people. This is
the more reason why there exist a great number of uncompleted or the poorly
constructed roads for road projects in the Brong-Ahafo Region
The additional mammoth amount as are result of paying
interest on delayed payment certificates, client loses extensive amount of
money which could have been used for other meritorious road projects (Donkor,
2011).
Road construction projects is one of the major infrastructure
projects in Ghana and are mostly government funded the projects. There are
numerous factors that lead to the payment delays in the construction of roads.
In some cases, inadequate source of client‟s funding mostly creates financial
setbacks for which affect its cash flow and will not be able to pay the
contractors on time. Haphazard submissions of valuation for interim payment
affect the client cash flow which also contributes to the payment delays. It is
therefore crucial to identify these factors causing payment delays and its
effects on the successful implementation of road constructions.
In spite of the fact that client and the different participants
in the road construction industry keep on complaining on how road contractors
are not able to deliver projects, there still remains the
fact that payment delays are rampant in the industry and this affect project
cost and quality. Many negative effects come with these delay payments as it
tends to make some companies liquid, produces unemployment, brings about a huge
cost overrun on the project, disputes and delay of the project.
The bureaucratic process involved in honouring certificate
causes many problems to the contractors, the beneficiary body and the
government itself. All contractors and even consultants admit to the fact that
payment issues remain a huge problem in the sector of construction in Ghana.
Each year the construction industry records a substantial number of
bankruptcies related to delayed payments.
Delayed payment to contractors seriously affects early finish
of all construction projects all around the globe. Despite the fact that there
has been a push to enhance instalments in the late years by Government of
Ghana, issues emerging are more serious as attached to issues in paying
contractors. The research looked to unwind the impacts of delayed payments on
the successful implementation of road constructions in the Brong-Ahafo Region.
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