Sources of contractor's payment risks and cash flow problems in the New Zealand construction industry: Project team's perceptions of the risks and mitigation measures

Research output: Contribution to journalArticleResearchpeer-review

13 Citations (Scopus)

Abstract

Little research is focused on payment risks which constitute the biggest obstacle to adequate cash flow and the contractor's ability to successfully complete a project and maintain a viable business. To minimize risks and improve net cash flow in a project, the various ways in which the key stakeholders could contribute to the contractor's payment risks and cash flow problems (the 'problems') were investigated along with the mitigation measures. Using a two-stage descriptive survey method, pilot interviews were conducted with contractors, subcontractors, project managers, designers and quantity surveyors (the 'group'). A questionnaire was designed based on the constructs generated during unstructured pilot interviews and used to obtain feedback from 120 members of the 'group' through structured interviews. The feedback was analysed for risks using the multi-factor analytical technique. Results showed that employers were the most risky sources contributing 24% of the contractor's 'problems' in a project. The contractors and subcontractors were evaluated as being 'high' risk sources contributing 19% and 17%, respectively. The consultants and suppliers were evaluated as 'moderate' and 'very low' risk sources, respectively, with overall 37% contribution. Ensuring valid payment and variation claims that are supported with well-documented evidence was a key mitigation measure suggested for addressing the critical risk factors attributed to the 'group'. The findings could guide the project team's risk management efforts, especially on how to efficiently allocate the available resources to address the risk factors with a view to achieving more satisfactory outcomes and profitability in a project.

Original languageEnglish
Pages (from-to)1027-1041
Number of pages15
JournalConstruction Management and Economics
Volume29
Issue number10
DOIs
Publication statusPublished - 2011
Externally publishedYes

Fingerprint

Construction industry
Contractors
Feedback
Cash flow
New Zealand
Payment
Mitigation
Project teams
Project management
Risk management
Profitability
Managers

Cite this

@article{bc46b942b6b5424f8d79cb0e0b9fdbd6,
title = "Sources of contractor's payment risks and cash flow problems in the New Zealand construction industry: Project team's perceptions of the risks and mitigation measures",
abstract = "Little research is focused on payment risks which constitute the biggest obstacle to adequate cash flow and the contractor's ability to successfully complete a project and maintain a viable business. To minimize risks and improve net cash flow in a project, the various ways in which the key stakeholders could contribute to the contractor's payment risks and cash flow problems (the 'problems') were investigated along with the mitigation measures. Using a two-stage descriptive survey method, pilot interviews were conducted with contractors, subcontractors, project managers, designers and quantity surveyors (the 'group'). A questionnaire was designed based on the constructs generated during unstructured pilot interviews and used to obtain feedback from 120 members of the 'group' through structured interviews. The feedback was analysed for risks using the multi-factor analytical technique. Results showed that employers were the most risky sources contributing 24{\%} of the contractor's 'problems' in a project. The contractors and subcontractors were evaluated as being 'high' risk sources contributing 19{\%} and 17{\%}, respectively. The consultants and suppliers were evaluated as 'moderate' and 'very low' risk sources, respectively, with overall 37{\%} contribution. Ensuring valid payment and variation claims that are supported with well-documented evidence was a key mitigation measure suggested for addressing the critical risk factors attributed to the 'group'. The findings could guide the project team's risk management efforts, especially on how to efficiently allocate the available resources to address the risk factors with a view to achieving more satisfactory outcomes and profitability in a project.",
author = "Jasper Mbachu",
year = "2011",
doi = "10.1080/01446193.2011.623708",
language = "English",
volume = "29",
pages = "1027--1041",
journal = "Construction Management and Economics",
issn = "0144-6193",
publisher = "Routledge",
number = "10",

}

TY - JOUR

T1 - Sources of contractor's payment risks and cash flow problems in the New Zealand construction industry

T2 - Project team's perceptions of the risks and mitigation measures

AU - Mbachu, Jasper

PY - 2011

Y1 - 2011

N2 - Little research is focused on payment risks which constitute the biggest obstacle to adequate cash flow and the contractor's ability to successfully complete a project and maintain a viable business. To minimize risks and improve net cash flow in a project, the various ways in which the key stakeholders could contribute to the contractor's payment risks and cash flow problems (the 'problems') were investigated along with the mitigation measures. Using a two-stage descriptive survey method, pilot interviews were conducted with contractors, subcontractors, project managers, designers and quantity surveyors (the 'group'). A questionnaire was designed based on the constructs generated during unstructured pilot interviews and used to obtain feedback from 120 members of the 'group' through structured interviews. The feedback was analysed for risks using the multi-factor analytical technique. Results showed that employers were the most risky sources contributing 24% of the contractor's 'problems' in a project. The contractors and subcontractors were evaluated as being 'high' risk sources contributing 19% and 17%, respectively. The consultants and suppliers were evaluated as 'moderate' and 'very low' risk sources, respectively, with overall 37% contribution. Ensuring valid payment and variation claims that are supported with well-documented evidence was a key mitigation measure suggested for addressing the critical risk factors attributed to the 'group'. The findings could guide the project team's risk management efforts, especially on how to efficiently allocate the available resources to address the risk factors with a view to achieving more satisfactory outcomes and profitability in a project.

AB - Little research is focused on payment risks which constitute the biggest obstacle to adequate cash flow and the contractor's ability to successfully complete a project and maintain a viable business. To minimize risks and improve net cash flow in a project, the various ways in which the key stakeholders could contribute to the contractor's payment risks and cash flow problems (the 'problems') were investigated along with the mitigation measures. Using a two-stage descriptive survey method, pilot interviews were conducted with contractors, subcontractors, project managers, designers and quantity surveyors (the 'group'). A questionnaire was designed based on the constructs generated during unstructured pilot interviews and used to obtain feedback from 120 members of the 'group' through structured interviews. The feedback was analysed for risks using the multi-factor analytical technique. Results showed that employers were the most risky sources contributing 24% of the contractor's 'problems' in a project. The contractors and subcontractors were evaluated as being 'high' risk sources contributing 19% and 17%, respectively. The consultants and suppliers were evaluated as 'moderate' and 'very low' risk sources, respectively, with overall 37% contribution. Ensuring valid payment and variation claims that are supported with well-documented evidence was a key mitigation measure suggested for addressing the critical risk factors attributed to the 'group'. The findings could guide the project team's risk management efforts, especially on how to efficiently allocate the available resources to address the risk factors with a view to achieving more satisfactory outcomes and profitability in a project.

UR - http://www.scopus.com/inward/record.url?scp=84856017889&partnerID=8YFLogxK

U2 - 10.1080/01446193.2011.623708

DO - 10.1080/01446193.2011.623708

M3 - Article

VL - 29

SP - 1027

EP - 1041

JO - Construction Management and Economics

JF - Construction Management and Economics

SN - 0144-6193

IS - 10

ER -