Measures to mitigate termination of construction contracts in Sri Lanka

Abstract

Termination of construction contracts has significant impact on the construction industry. But none of the past literature has addressed on how termination can be managed effectively specific to Sri Lankan context given the unique cultural, economic, and legal contexts of Sri Lanka. Therefore, this research aims to investigate and provide practical strategies for managing the termination of construction contracts. Initially, the literature review provided an understanding of contract termination. Subsequently, this study used qualitative approach involving case study and expert opinion. Under the case study, the documentary review was conducted that focus on fifteen terminated building projects in Sri Lanka over the past five years to understand the termination phenomenon in Sri Lankan context. Finally, an expert opinion was obtained to gain deeper understanding of the findings. The collected data was structured through manual content analysis and descriptive analysis. The study found that Western and Northern provinces of Sri Lanka have higher termination rates due to urbanisation, and economic development. Complex approval processes, and bureaucratic inefficiencies are the common reasons for contract termination in commercial and residential building projects. Public projects are more vulnerable to termination due to political considerations. Employers are more likely to terminate contracts than contractors, possibly due to financial instability and higher quality expectations. Finally, combination of mitigation strategies should be customised to minimise the risk of termination. These strategies can be implemented with modifications to fit the local context, but challenges such as lack of awareness, bureaucracy, and resistance to change may arise.