Challenges on bonds and guarantees under the payment security regime in the construction industry of Sri Lanka.

Abstract

The construction industry is a significant contributor to the national economy. Since construction has been facing risk management issue, bonds and guarantees have become a feasible solution, as a management too and mechanism. Professionals will have to undertake consequential responsibilities in managing bonds and guarantees. However, no significant efforts have been taken to identify how bonds and guarantees affect the construction industry of Sri Lanka. This research aims to explore the challenges and problems in bonds and guarantees, which are used in Sri Lankan construction projects, and to make recommendations to projects in the Sri Lankan context. Initially, a literature review has been carried out on different bonds and guarantees. Consequently, a mixed research approach has been used, which included expert interviews and a questionnaire survey. The collected data from expert interviews were analysed using content analysis that supported the design of the questionnaire. To achieve the study's aim, the bonds and guarantees were ranked against merits, demerits, issues, and suggestions in questionnaires using a Likert scale, considering the significance of those competencies in bonds and construction guarantees. The collected data were also analysed using the Relative Importance Index The research findings are revealed that there are several suggestions to overcome the barriers in bonds, guarantees and payment securities in Sri Lanka. Additionally, contractors' requirement to set up a special guarantee fund to protect business practices and it was identified as new suggestions that would aid the challenges and problems in line with bonds and guarantees in Sri Lankan construction projects.