An Investigation of Late and Non-Payment Issues in the Nigerian Construction Industry-contractors’ Perspective in Akwa Ibom State
Chapter One
Objective of study
The following are the objectives of this study;
- To identify the causes of late and non-payment of construction projects.
- To establish the common reactions by contractors in managing the problems
- To examine the effects on the contractors and ways to mitigate the problems
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.
CONCEPTUAL FRAMEWORK
Construction Industry
The building sector is the most complicated of all the industries in the economy. The reason for this is due to the fact that all other industries and sectors of the socio-economic system depend on it for the environment in which they are able to function. To all intents and purposes, the building sector is open to participation from everyone and everyone with a requisite skill devoid of certification. Chinwokwu (2020) opine that it is an industry that makes use of a wide variety of local and imported materials, personnel, and pieces of equipment in order to produce structures of a high quality that meet or exceed industry standards. Due to the scale and complexity of the business, the construction sector plays a vital part in the process of achieving sustainable economic growth and development in any nation. This is a function that is both crucial and dynamic. It is important to note that as determined by looking at previous budgets for the country, up to one sixth of the total sum that is allotted to construction projects by the governments of Nigeria takes the shape of actual buildings.
According to Chinwokwu (2020), the most precious assets that mankind possesses are the buildings that can be found all over the world. This is true whether a nation is still in the process of growing, as is the case with Nigeria, or if it is fully developed, as is the case with Britain. In addition, not only do these structures give mankind access to a wide range of living quarters in the shape of dwellings, mosques, churches, offices, schools, industries, hospitals, stadia, ports, hotels, and so on, but they also create work opportunities for both skilled and unskilled individuals.
Due to the scale and complexity of the business, the construction sector plays a vital part in the process of achieving sustainable economic growth and development in any nation. This is a function that is both crucial and dynamic. It is important to note that as much as one-sixth of the total sum given to construction projects by the governments of Nigeria takes the form of building, as shown in previous budgets of the country’s construction projects. The goal of the construction industry is to meet the housing needs of the whole community with dwellings that are fit for habitation, of a quality that can be valued by the community, at a price that the community is able to pay, in the amount of time specified by the community, and within the capabilities of the construction industry. However, it is possible to deduce that the ultimate goal for any building projects is for such projects to be delivered in the shortest amount of time possible, at the lowest amount of cost possible, and within the highest quality possible so as to minimize the problem and the burden of future maintenance and building collapse (Roddis 2015).
Mogbo (2004) stated that, construction is being used to control the economies of nations; it is always strongly related to politics, economics, sociology and the legal framework. Political contribution in construction planning is obligatory in the current world democracies. Construction cannot grow in a weak and docile economy. Construction cannot feature where there is social distress and social instability, (Mogbo, 1998). Hillebrandt, (1985) stated that in developed counties construction is considered unique hence it can stimulate the growth of other industrial sectors. However looking at the growth of the construction industry in terms of its contribution to GDP in isolation is somewhat misleading because of the crucial roles played by the construction industry. Therefore, improving construction efficiency by means of cost effectiveness and timeliness would certainly contribute to cost saving for the country as a whole. Effort directed to cost and time effectiveness were associated with managing time and cost, which this study aimed at via investigating causes of delay at construction projects in Nigeria. Like other developing countries, such as Saudi Arabia (Assaf et al., 1995) Libya (Saleh, 2009) and Malaysia (Yong, 1988). Nigeria construction industry has suffered many setbacks in term of completion of the project at stipulated period within the predetermine sum. Majority of the construction project in Nigeria experience time and cost overrun which in turn lead to the abandonment of project.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried out to evaluate improving productivity in the construction industry through human resource development. using Sintax Construction industry using Anambra State as case study. Hence, the population of the study comprises but limited to staff in the finance/accounting department of the organization.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of thirty five (35) questionnaires were administered to respondents of which thirty (30) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 30 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION, RECOMMENDATION
SUMMARY
This study focuses on investigating of late and non payment issues in the Nigerian construction industry-contractors perspective, with the specific aim of identifying the causes of late and non-payment of construction projects, establishing the common reactions by contractors in managing the problems and examining the effects on the contractors and ways to mitigate the problems. The study will therefore be delimited to Ideal contractors limited, Akwa ibom state.
Survey research design was adopted for the study and with the aid of convenient sampling method, participant who are Ideal contractors limited, Akwa ibom state as the respondent of the study. Well structured questionnaire was issued to the thirty five (35) questionnaires were administered to respondents of which thirty (30) were returned and validated. Data was analyzed in frequencies and tables using simple percentage.
Conclusion
The construction sector represents one of the most dynamic and complex industrial environments where conflicts among builders and owners are very common particularly in a bidding or claiming situation where owners, builders and contractors pursue their own interests at the expense of the others, leading to conflict or cooperation. The time required to complete the project is usually greater than the time specified in the contract and, because of the overriding importance of time for both the owner and the contractor, delays are the source of frequent disputes and claims among owners, clients and consultants, leading to lawsuits.
The result of the study indicates that all the factors causing late and nonpayment are all rated above average by the respondents thereby under caring the seriousness of the problem to the construction industry. There are several effects of late and non-payment, which were identified in the survey. The gravest effects include; creates cash flow problem, leads to high cost of project; leads to project abandonment. All the respondents agree that a mechanism for reducing the problem of late and non-payment need to be taken in the form of statutory and contractual rights. They also agree that promptness of submitting, processing, issuing interim payment certificates and honoring certificates are important issues in relation to progress payment claims. Perhaps increased sense of professionalism in the construction industry could help overcome some of the problems relating to late and non-payment issues.
Recommendation
Nigerian construction industry is prone to late and non-payment culture. Contractor’s failure to receive payment in timely manner, exposes him to greater risks, which include failure to complete project on schedule. The author feels that it is necessary for the employer’s financial capacity and credit rating be made transparent to the contractors during tendering so as to facilitate contractor’s choice. As all the respondents feel that local culture/attitude is one of the most frequent causes of late and non-payment, it is suggested that contractors consider this problem as a major risk that has high probability of occurrence and include for it when completing estimates for tender. As indicated previously, there are various avenues available to improve late and nonpayment problems in the construction industry. Specifically, four key areas for all action are suggested.
- The development of principle of modern construction contract.
- The greater use of trust funds.
- The abolition of cash retentions
- The proposal for legislation to out-law unfair contract conditions.
To achieve this vision in the Nigerian construction sector it is recommended that:
- A fundamental change in the mindset towards timely payment as part of the industry’s corporate culture is necessary.
- Nigerian should consider introducing its own legislation on construction payment and adjudication Act.
- This however may not be regarded as a panacea for all the ills, rather it must be regarded as a means to an end.
- In the main, the professional bodies and relevant agencies concerned, should study and amend the existing standard form of contract to provide protection and promote balanced allocation of risks and fair contract to all related parties, so as to smoothen cash flow supplies down the payment chain.
REFERENCES
- Ameer Ali (2005): Payment in the construction industry – towards zero default; QS National convention 2005, 10-11 August 2005 Histon kuala lumpur.
- Ameer Ali (2006): Construction industry working group on payment (WG 10), construction industry payment and Adjudication Act, Malaysia.
- Banwell H. (1964): The placing and management of contracts for building and civil engineering work. The Banwell Report, London: HMSO
- Bayley, G. (2006): The New Zealand Experience, the New Zealand construction contracts Act 2002. Adjudication Seminar: An end to cash flow problems in the construction industry. Kuala Lumpur. CIDB.
- Bob, G. (2005): Construction industry payment and Adjudication act, Australian perspective, International forum on construction payment Act, Kuala Lumpur, Malaysia.
- CIOB (2004): Construction Act-construction “improving payment practices” 14 October 2004 (Retrieved Nov. 2010).
- Cooke (1981): Contract planning and contractual procedure. The machivian press ltd London.
- Davis Langdon & Search consultancy (2003): Construction payment blues – why that ‘Domino’ effect, Executive summaries for the practitioner vol. 3 issue 3, September 2003, Singapore.