Correlates of clients’ payment pattern and construction project performance

Akinsiku, O. E. ; Olubunmi, A.J. (2014-02)

Staff publications

Presentation

Construction projects all over the world are infamous with the occurrence of time overruns and non-performance. The non-performance in this sector of the economy has been a source of concern to stakeholders in the industry. Studies have identified several factors responsible for this. The effects of client's payment pattern on construction project delivery and performance was examined in this study with a view to identifying the various payment patterns utilised in a construction project, discover the major effects imposed on the project by these payment patterns, and the most suitable payment pattern for effective project delivery. To achieve these objectives, a survey was undertaken to obtained data from 120 respondents who practice as project consultants, contractors, project management organisations and financiers. The respondents were selected from construction practitioners in Lagos State, Nigeria, being a core area of construction activities. Six payment patterns were used during the course of the research; cost-reimbursement, incentives, open-book pricing approach, advance payments, milestone payments, and direct payments. Advance payment was found to be the most acknowledged payment while claims and extension of time was established to be the major effects of client's payment patterns on construction project delivery. The study also presents a relationship between client's payment pattern and project performance. Key implication of the study to construction practitioners is that prompt payment by clients to contractors will make the construction industry less litigious and prevents contractors from factoring risks of delayed payment into bids.