A Study on specialized subcontractors' payment practices in Sri Lanka

Abstract

The construction industry in Sri Lankan plays a vital role in the country development. There are several factors determining the efficiency of the construction industries. One of the important factors impair the efficiency of the industry is the payment delays experienced by the specialists small-scale sub-contractors, who implement the project activities at grass-root level. As a consequence, the construction project targets cannot be achieved. The aim of this paper is investigate the specialized subcontractors‟ payment practices in Sri Lanka. In order to ascertain the payment delays period, causes for the delays and the challenges faced by the small scale specialized sub-contractors, information was collected through structured questionnaire surveys. Two separate surveys (Survey-one and Survey-two) were conducted with respondents. In Survey-one, the interim payment application provided by the respondents was carefully examined and the relevant data extracted and recorded in the questionnaires. The data collected in both the studies were analyzed using standard statistical procedures. The results of Survey-1 revealed that the majority of the specialized sub-contractors experienced payment delays of 1-2 weeks and the average payment delay was 11 days. Majority of interim payments application took 2-3 weeks for certification and the average was 14 days. Further, majority of certified interim payment application are paid in 1-2 weeks and average certified interim application payment done in 12 days. In Survey-two The collected data were analyzed by using frequency distribution and relative important index (RII).Revealed that the top five causes of delay payment in the descending order of importance are contracting practices, lack of security of payment, delay in certification, employer‟s poor financial management and local culture. The Study-two also revealed that the top five challenges faced by specialized sub-contractors in delay payments in the descending order of importance are cash flow, delay in completion of project, insolvency, financial resource and market challenges. Appropriate mitigation strategies have been recommended to contain the sub-contractors payment delays for the successful implantation of construction industries to achieve the desired project targets.