Commenced in January 2007
Paper Count: 30172
Risk of Late Payment in the Malaysian Construction Industry
Abstract:The purpose of this study is to identify the underlying causes of late payment from the contractors- perspective in the Malaysian construction industry and to recommend effective solutions to mitigate late payment problems. The target groups of respondents in this study were Grades G3, G5, G6 and G7 contractors with specialization in building works and civil engineering works registered with the Construction Industry Development Board (CIDB) in Malaysia. Results from this study were analyzed with Statistical Package for the Social Science (SPSS 15.0). From this study, it was found that respondents have highest ranked five significant variables out of a total of forty-one variables which can caused late payment problems: a) cash flow problems due to deficiencies in client-s management capacity (mean = 3.96); b) client-s ineffective utilization of funds (mean = 3.88); c) scarcity of capital to finance the project (mean = 3.81); d) clients failure to generate income from bank when sales of houses do not hit the targeted amount (mean=3.72); and e) poor cash flow because of lack of proper process implementation, delay in releasing of the retention monies to contractor and delay in the evaluation and certification of interim and final payment (mean = 3.66).
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1329721Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 5743
 Abdul Kadir, M.R., Lee, W.P., Jaafar, M.S., Sapuan, S.M., and Ali, A.A.A, "Factors affecting construction labour productivity for malaysian residential projects," Structural Survey, 2005, 23(1), pp. 42-54.
 Adams, F.K, The management of risks in international infrastructural projects, PhD Thesis. Edinburgh, United Kingdom: The University of Edinburgh, 2004.
 Al-Khalil, M.I., and AL-Ghafly, M.A, "Delay in public utility projects in saudi arabia," International Journal of Project Management, 1999, 17(2), pp. 101-106.
 Ameer Ali, N.A, "A Construction Industry Payment and Adjudication Act: Reducing Payment Default and Increasing Dispute Resolution Efficiency in Construction," Master Builders, 3rd Quarter, 2006, pp. 1 -13.
 Arditi, D., and Chotibhongs, R., "Issues in subcontracting practice," Journal of Construction Engineering and Management, ASCE, 2005, 131(8), pp. 866-876.
 Assaf, S.A., and Al-Hejji, S, "Causes of delay in large construction projects," International Journal of Project Management, 2006, 24, pp. 349-357.
 Awad, H.A, Contractor-s approach to offset the consequences of interim payments disruptions caused by the owner, Master Thesis, Centre for Building Studies, Concordia University (Canada), 1993.
 Baloi, D., and Price, A.D.F, "Modeling global risk factors affecting construction cost performance," International Journal of Project Management, 2003, 21, pp. 261-269.
 Barbosa, P.S., and Pimentel, P.R, "Linear programming model for cash flow management in the brazilian construction industry," Construction Management and Economics, 2001, 19, pp. 469 - 479.
 Blaikie, N, Analyzing quantitative data. London: Sage Publications, 2004.
 Coakes, S.J., and Steed, L.G, SPSS analysis without anguish, version 11.0 for windows. Australia: John Wiley & Sons, 2003.
 Cotter, P, Late payment: why it pays to know your customers, Experian-s Business Information division, 2005.
 Davis, R, Construction insolvency, 2nd Ed., Great Britain: Palladian Law, 1999.
 Frimpong, Y., Oluwoye, J., and Crawford, L, "Causes of delay and cost overruns in construction of groundwater projects in a developing countries; ghana as a case study," International Journal of Project Management, 2003, 21, pp. 321-326.
 Gregory, D, Debunking the Top 10 Myths, Business Credit, 21, 2007.
 Harris, F.C., and McCaffer, R, Modern construction management, 5th Ed. United Kingdom: Blackwell Science Ltd., 2003.
 Heron, R., and Lie, E, "Operating performance and the method of payment in takeovers," Journal of Financial Quantitative Analysis, 2002, 37(1), pp. 137-155.
 Hunter, S.T, Hell-s Angels: Hoodlum Circus and Statutory Rape of Bass Lake, In Observations of Deviance. Jack, D.D. (Ed.), 1970, pp. 131-145. New York: Random House.
 Hyung, K.P., Seung, H.H., and Jeffrey, S.R, "Cash flow forecasting model for general contractors using moving weights of cost categories," Journal of Management in Engineering, 2005, 21(4), pp. 164-172.
 Jackson, I.J., and Gilliam, M.H. Financial management for contractors, 3rd Ed. U.S.A: FMI, 1999.
 Kaka, A.P., and Price, A.D.F, "Net Cash Flow Models: Are They Reliable?" Construction Management and Economics, 1991, 9, pp. 292-308.
 Kish, L, Survey Sampling. New York: Wiley, 1965.
 Mansfield, N.R., Ugwu, O.O., and Doran, T, "Causes of delay and cost overruns in nigeria construction projects," International Journal of Project Management, 1994, 12(4), 254-260.
 McCoy, W. DOD payments to small businesses: implementation and effective utilization of electronic invoicing could further reduce late payments, GAO: Report to Congressional Committees, 2006.
 Nachmias, D., and Frankfort-Nachmias, C, Research methods in the social sciences. United Kingdom: Edward Arnold, 1976.
 Odeyinka, H.A. and Yusif, A, "The causes and effects of construction delays on completion cost of housing projects in Nigeria," Journal of Financial Management of Property and Construction, 1998, 2(3), 31-44.
 Oztas, A., and Okmen, O, "Risk analysis in fixed-price design-build construction projects," Building and Environment, 2004, 39, pp. 229-237.
 Pettigrew, R, The need for payment controls in the construction industry - an overview. London: Thomas Telford, 2003.
 Sambasiwan, M., and Yau, W.S, "Causes and effects of delays in malaysian construction industry," International Journal of Project Management, Article in Press, 2006.
 Sanders, W.B., and Pinhey, T.K, The conduct of social research. Canada: Rinehart Winston, 1983.
 Shash, A.A, "Subcontractors- bidding decisions," Journal of Construction Engineering and Management, 1998, 124(2), pp. 101-106.
 Smith, G.R., and Bohn, G.M, "Small to Medium Contractor Contingency and Assumption Risk of Risk," Journal of Construction Engineering and Management, 1999, 125(2), pp. 101 - 108.
 Strischek, D, "Cash flow projections for contractors revisited," Journal Commercial Lending, 1995, 77(10), pp. 17-37.
 Thevendran, V., and Mawdesley, M.J, "Perception of human risk factors in construction projects: an exploratory study," International Journal on Project Management, 2004, 22, pp. 131-137.
 Turkoglu, Y., and Egemen, E, "Court decisions on public works litigation," Olgac Malbaasi, Ankara, 1980.
 Wilder, J, "Guard yourself against construction risk," Hotel & Hotel Management, 2007, 222(21), pp. 12.
 Wong, J.T.Y., and Hui, E.C.M, "Construction project risks: further considerations for constructor-s pricing in hong kong," Construction Management and Economics, 2006, 24, pp. 425-438.
 Xenidis, Y., and Angelides, D, "The financial risks in build-operate-transfer projects," Construction Management and Economics, 2005, 23, pp. 431-441.
 Zou, P.X.W., Zhang, G., and Wang, J, "Understanding the key risk in construction projects in china," International Journal of Project Management, Article in Press, 2007, pp. 1-14.