Financial management of infrastructure construction projects in Sri Lanka

Abstract

Infrastructure construction as a market segment has always attracted the attention of the society since it is connected with the alleviation of the living standards of the people. But often the infrastructure construction projects encounter financial blunders which are due to various reasons such as complexity, advance technology, external influences, high resource requirements and poor managements. The performance of the infrastructure construction projects is important in retaining and attracting the investment on the infrastructure construction. Since government reserves are limited the private investments are required in the infrastructure developments. In this context a look at the financial performance of the investment in infrastructure is important. The client of an infrastructure development who is at the high end of the disbursement of the investment and who is often responsible for the payback of the investment, should have the optimum performance out of the project. But the proper use of this investment is also dependent on the proper financial management of the construction organization who sits at the low end of the investment project. Out of the many stakeholders of the construction sector the survival of the construction organization is important in the continuity of the construction industry. The capability of the construction organization to handle large projects with success is important in the survival of the organization. This study has undertaken the task of studying how financial management is carried out with the execution of the infrastructure projects by a construction organization. Altogether ten numbers of infrastructure projects have been chosen to study with their cash flows and other financial details and along with the quantitative details qualitative details have also been studied regarding the project management and structure in order to strengthen the quantitative data analysis. The study revealed that the outcome of each project differed along with the project management structure and the project management structure was similar for similarly characterized projects which produced similar achievements. The study also revealed that the construction organization adopts different management methods for the large scale projects even if they are similar in characteristics for other small scale projects. The results have concluded that the financial management differs with the experience the contractor has gained in the particular sector and a major contribution can be from the reason that the contractor has achieved maturity regarding the types of risk he can face in the sector and has developed risk management mechanisms accordingly.