DELAYED PAYMENT OF CONTRACTORS ON CONSTRUCTION PROJECT DELIVERY IN KUWAIT

IMPACT OF DELAYED PAYMENT OF CONTRACTORS ON CONSTRUCTION PROJECT DELIVERY IN MIDDLE EAST / KUWAIT

Instructions:-

Effect of Delayed Payment of Contractors on Construction Project Delivery in Middle east / Kuwait

Solution

IMPACT OF DELAYED PAYMENT OF CONTRACTORS ON CONSTRUCTION PROJECT DELIVERY IN MIDDLE EAST / KUWAIT

Abstract

Delays regarding payment of construction constructors have over the past years had a negative impact on constructors. The effectiveness of constructors has greatly deteriorated. This has in turn affected schedules that have been put in place for delivery and completion of various projects. Failure to offer constructors their genuine payment for construction work that has successfully been completed is generally inhuman. Affected construction firms are likely to be declared insolvent (Ansah, 2011, p. 33). They would not have the much needed capital muscle to continue undertaking their construction duties. This paper provides a dissertation research proposal on effects of delayed payment of constructors on construction project delivery in Middle East/ Kuwait. The aim of the research project is to critically investigate the effects that come about as a result of delayed payment of constructors on construction project delivery.

 The study would be carried out among a population that comprises constructors, clients, consultants and other stakeholders in the construction industry. This is a qualitative type of research that would incorporate research survey. Descriptive research design as well as explanatory type of research design would be largely used. Use of questionnaire would be the main method of data collection that is intended to be used. Past research has discovered that use of questionnaire has a relatively higher response rate compared to other methods of data collection (El-Razek, 2008, p. 240). However, other methods of data collection such as interview and random sampling would also be used. There are some added advantages that the other types of data collection have over use of questionnaire. The sample population would be chosen through random sampling method. The method would provide all the clients, constructors and shareholders in the construction industry in Middle East/ Kuwait with equal chance of being selected for the research purposes. The collected information data would then be analysed by the use of SPSS via descriptive statistics.

There are several causes that have been raised by people in Middle East as the causes of delayed payment. Some of the mentioned causes so far are problems regarding cash flow, disagreements regarding work valuations between constructors and clients, financial problems and errors arising from payment claims (Kazaz & Ulubeyli, 2012). Despite all these information being in the public domain, they cannot be assumed to be gospel truth. A scientific research has never been carried out to establish their authenticity. This project research would therefore provide a chance for people to understand the actual causes of delayed payments in construction projects in Middle East/ Kuwait.

Introduction

The effectiveness of constructors has greatly deteriorated. This has in turn affected schedules that have been put in place for delivery and completion of various projects. Failure to offer constructors their genuine payment for construction work that has successfully been completed is generally inhuman. Delayed payment to constructors is not news anymore. It is an issue that the world construction industry has lived with for a long time. Constructors world over are grappling with the problem (Ansah, 2011). Their hope is that there would be one time that their payment would be made in time so that their budgets and plans are not affected as has been the common trend.

Statement of the problem

Many construction companies in Middle East have been declared bankrupt in the past years. The collapse of the companies has been the order of day.  Research carried out by government urgencies and non-governmental organisations have pointed out that delayed payments have been the major cause of the problem. There is hence need for a research to be carried out to access the effects of the delayed payments in the construction industry (Huse, 2012, p. 34).

Purpose of study

The research study is intended to critically identify the effects/ impacts of delayed payment of constructors on constructions Project delivery in Middle East /Kuwait. This area is very important because there is an urgent need for the people of Middle East to address the issue of delayed payment of contractors. However, the issues will only be addressed if the people of Middle East have a good understanding of the effects of delayed payments for contractors. Appropriate measures would then be put in place to ensure that the delays are minimised as much as possible (Robinson, 2011, p. 65). Observation studies as well as self-report surveys would be used to carry out all the research.

Research Question/ Hypothesis

The questions below are intended for the purpose of the research study.

1. What are the actual effects/impacts of delayed payments of constructors in the construction projects?
2. Are the effects/impacts of delayed payment of contractors in Middle East/ Kuwait the same as in other parts of the world?
3. Can the effects of delayed payment for constructors be addressed by the people of Middle East/Kuwait?
4. How have the effects of delayed payments impacted on contractors?

Research Objectives

The main objective of the study is to investigate the Impact / Effect of delayed payment of Contractors with the Construction Project Delivery in Middle East / Kuwait as a case study.

The specific research objectives are;

1. To examine the actual effects/impacts of delayed payments of constructors in the construction projects.
2. To investigate whether or not the effects/impacts of delayed payment of contractors in Middle East/ Kuwait the same as in other parts of the world.
3. To evaluate whether or not the effects of delayed payment for constructors can be addressed by the people of Middle East/Kuwait.
4. To establish how the effects of delayed payments have impacted the contractors.

Definition of terms

• Contractors- These are individual people who are involved in the construction of projects. They are the ones who are in charge and equally oversee the construction processes.
• Clients- These are the customers or people who have construction projects that they would like to have constructed.
•  Consultants-These are individuals who provide useful and beneficial advices in the construction industry.

Literature review and Theoretical Framework

Most of the literature that has been written by other people on the effects of delayed payment of contractors on construction projects has never based their arguments on the existing situations in Middle East/ Kuwait. The main cause of delayed payment of contractors in most parts of the world for example in Africa, South America and majority of Asia has been as a result of financial constraints. The situation of Middle East/ Kuwait is completely different. Middle East / Kuwait is rich in oil minerals, but then there are still numerous cases of delayed payments for contractors.

It is beyond doubt that there are some factors that contribute to the delayed payments of constructors across the world. Since the situation is the same in Middle East/ Kuwait, the research proposal is aimed at identifying the effects of delayed payments. The research study is therefore very important and necessary. There are many contractors in the contraction industry in Middle East/ Kuwait who are literary confused at the moment. They have undergone serious problems arising from the effects of the delayed payments (Wilson, 2004, p. 67). The contractors lack the avenue through which they can air their plight. Through this research work, people world over will be informed about the effects of delayed payments of constructors on construction projects. Many clients in the construction industry have never paid close attention towards the impacts that delayed payments have on contractors. The country of Kuwait has a clause that somehow contributes towards delay in payments. It states that payments for contractors can be made as late as after a period of 3 months upon the signing of an agreement. The clause points out that there may be some issues to do with errors during the submission of claims. It further states that there have been cases whereby some supporting documents are not attached by constructors so that their payments can be made within the shortest time possible. In contrast, the clause has failed to look in to the effects that such delays would have on the contractors themselves.

Johnston survey of 1999 has shown in the past that there is a culture of late payment of contractors in the world (UN-HABITAT, 2006). The culture of late payments of contractors has become very common to an extent that some people think that the payment should not be made expectedly. The unexpected payments have hence been the major dispute subject. There is anticipation that there would be more conflicts involving contractors and their clients if the issue of late payments is not resolved amicably. However, no solution can be discussed by the involved persons if the causes of delayed payments have not been identified in the first case.

For a very long time, it has been acknowledged that delayed payments are the most costly, common and complex problem that people in the construction industry were faced with. The delayed payments have further contributed to other issues such as inflated cost of project construction, disputes and wastage of time. The culture of late payment has become very prone in the construction industry. Theoretically, any contractor who has successfully accomplished the construction of any project should be paid his or her dues within the shortest time possible ( Keane & Caletka , 2009, p. 56). However, the provision is currently not in existence in the Asian country of Kuwait.

Most of the constructors have quite been apprehensive on the actions that they should take to ensure that they remain operational. The constructors are trying by all means to ensure that they are not cash trapped when there are delays in payments (Aibinu & Jagboro, 2002). That is the only way that they can remain profitable in the market. Issues to do with cash flow during the undertaking of a project can greatly affect the operations of constructors that are involved in the given project (Robert Frank Cushman, et al., 2010).

Constructors would at times be prompted to seek for other financing avenues following delayed payments. In the final end, there is a high likelihood that constructors would not benefit from any meaningful profits from such project. Project success is hugely determined by the pace at which construction payment are made. Timely payments make it possible for constructors to order for quality construction materials. They would otherwise not be in a position to acquire such materials if they lack the necessary capital resulting from delayed payments. In addition, constructors would not be able to pay their workers in time, hence demotivating them in the process.

It has been established that many of the construction companies in Middle East/ Kuwait that have been declared bankrupt were profitable and effectively operational at the time that they became bankrupt. Many of the companies ended up with negative balances upon completion of some construction projects. The construction companies experienced problems such as inability to access credit services, under-capitalisation and additional interest costs that arises as a result of being financed by financial institutions. It is therefore very important for every construction firm to critically plan and analyse issues to do with cash flow before they undertake any construction project. The success of such projects is purely based on cash flow. The need for timely payment is further promoted by the fact that huge capital investment is necessary in any construction project. It is therefore unacceptable when delayed payments are made to constructors.

Methodology

There are many people in Middle East/ Kuwait who are fed up with incidences of delayed payment of constructors. In order to test the presented hypothesis, the researcher intends to identify all the parties who are involved in the construction industry. Respondents would then be selected such that every person in the construction industry is given an equal chance to express him or herself (Chudley & Greeno, 2016). No one should have the feeling that there is some kind of biasness during the sampling process. All the identified people in the construction industry in Kuwait would be briefed about the research proposal that is to be carried out.  Thereafter, the parties who are involved in the data collection process would be assured about the security of the information that they would present. They would also be informed about the reasons why there is need for such a research to be conducted. Data collection methods that include the use of questionnaires and interview would be used.

Research design

The research design of the proposed research study is a survey that would be carried out in the entire Middle East/ Kuwait. The design intends to use questionnaires to collect data from correspondents across the country of Kuwait. The questionnaires would not be administered to every person in the country. Client and contractors would first be identified. Sampling method would then be used to obtain a manageable sample size that would effectively be interviews.  Since one-on-one interviews are time consuming, majority of the respondents would be provided with questionnaires. The questionnaires would have questions that the people would respond to over a period of time. The questionnaires would then be collected and the data analysed according (Fellow & Liu, 2015, p. 77).

Sampling

The research study is to be carried out among the population of Kuwait which is about 9 million. Out of this population, there are only about 400,000 people who are deeply involved in the construction industry. Participants would be selected from the population of people who are directly involved in the construction industry. Simple random sampling method would be used in the selection of the participants. Two third of the sample population will be males while a third will be females. Males would be more than females because there are generally more males in the construction industry in Middle East compared to females. The sample will also consist of people of varying ages ranging from the ages of 18 years to 65 years of age (Kazaz & Ulubeyli, 2012, p. 66). There would also be clients, contractors, labours and financiers of construction projects among others.

Instrumentation

Instruments such as surveys, observation grids and interviews would be used in the research study.

• Interviews

Interviews have some additional advantage over other methods of data collection in that it provides an opportunity for the interviewer to gauge the responses that are provided by the respondent. It is there possible to tell whether the interviewee is providing right answers or not. In addition, it provides an opportunity for one to seek for clarification in case there is an ambiguous response. Finally, interview provides first-hand information (Denscombe, 2014, p. 111).

• Observation grids– The grids would be used to enter feedback from respondents. The respondents’ feedback would hence appear in a tabular form. Observation grids make the recorded feedback appealing.

Data collection and Analysis Procedures

The following methods of data collection would be used in the process. There would be use of survey, observation procedures and interview methods (Denscombe, 2014, p. 112).

• Survey

Standardized questionnaires would be administered to the selected sample of people. The respondents would have a period of one week over which they would feel in the questionnaires. The questionnaires would then later be collected so that they can be analysed. The method would make it possible to obtain the opinion of relatively large number of people (Tim, 2011).

• Observation procedures

A physical tour to the construction sites would be carried out to have a first-hand feeling of the construction sites, the nature and the type of work that are carried out at the sites. It would hence be possible to observe some of the effects of delayed payments of constructors.

• Interview method

There would be interviewing of some of the people who work in the construction industry. The people would be in a better position to provide information regarding the effects of delayed payments. The interview process would provide the interviewer with an opportunity to read the body language of the respondent. It would hence be easy to tell whether the respondent is telling the right story or not.

All the collected information data would then be analyzed by the use of analytical tools such as ANOVA and SPSS where applicable (Tim, 2011, p. 76)

Significance of the study

The proposed research study would have several implications on future research. The research would form the basis of argument on which future projects would be done. Since the research looks at the effects of delayed payments for constructors, it is likely to influence the policies that would be put in place by the governments of Middle East and the rest of the world. Future research theory would also be aligned according to the findings that would be established by the research. There are many people who have never realized the problems that the people in the construction industry undergo when their payments are delayed. The research would provide an insight of the effects of the delayed payments. Contractors and all the people who are involved in the construction industry would have the rare chance to express their concerns in regard to delayed payments. The study is likely to prompt some changes that would ensure that constructors are treated with the respect that they deserve once they are through with the construction of a given structure or a project (Senior & Halpin, 2011). The research work would enable clients to make changes in their engagement terms with contractors such that contractors would no longer have wait for a long time before their payments are made  Upon reading the report, everyone would be in a position to understand the effects that are brought about by the failure to effect faster payment for workers.

Time Work Plan

The Time Work Plan section addresses the research schedule from the formulation and approval of the topic of the study to the final submission of the proposal. The whole process has been segregated into different activities as shown in the work plan below;

Reference list

Keane, J. P. & Caletka , A. F., 2009. Delay Analysis in Construction Contracts. s.l.:John Wiley & Sons,.

Aibinu, A. & Jagboro, B. A., 2002. The effects of construction delays on project delivery in Nigerian construction Industry. International journal of project management, pp. 503-534.

Ansah, S., 2011. Causes and effects of delayed payments byclients on contruction projects in Ghana. Journal of construction project management and innovation, pp. 25-31.

Chudley, R. & Greeno, R., 2016. Building Construction Handbook. New York: Routledge.

Denscombe, M., 2014. The Good Research Guide: For Small-Scale Social Research Projects. s.l.:McGraw-Hill Education (UK).

El-Razek, Bassioni HA & Mobarak A.M, 2008. Causes of delay in building construction projects in Egypt. Journal of Construction Engineering and management, pp. 232-243.

Fellow, R. & Liu, A., 2015. Research methods for construction. s.l.:TAPX.

Huse, J. A., 2012. Understanding and Negotiating Turnkey and EPC Contracts. s.l.:Sweet & Maxwel.

Kazaz , A. & Ulubeyli, T. N., 2012. Causes of delays on construction projects in Turkey. Journal of Civil Engineering and management, pp. 112-132.

Robert Frank Cushman, Esq Cushman & John D. Carter, 2010. Proving and Pricing Construction Claims. s.l.:Aspen Publishers Online.

Robinson, M. D., 2011. A Contractor’s Guide to the FIDIC Conditions of Contract. s.l.:John Wiley & Sons.

Senior, B. A. & Halpin, D. W., 2011. Financial Management and Accounting Fundamentals for Construction. s.l.:John Wiley & Sons.

Tim, M., 2011. Social Research: Issues, Methods and Research. s.l.:McGraw-Hill Education (UK.

UN-HABITAT, 2006. Policies and Measures for Small-contractor Development in the Construction Industry, s.l.: UN-HABITAT.

Wilson, P. W., 2004. Saudi Arabia: The Coming Storm. s.l.:M.E. Sharpe.