THE EFFECTS OF PAYMENT DELAYS ON THE SUCCESSFUL IMPLEMENTATION OF ROAD CONSTRUCTION PROJECTS IN GHANA: CASE STUDY GHANA HIGHWAY AUTHORITY, BRONG-AHAFO REGION

ABSTRACT
Some of the main issues that lead to a successful implementation of a project are when timely payments and well organized practices to contractors on road construction projects are performed. Nonetheless, payment delays still constitute myriad of major setbacks in the successful implementation of road construction projects. The study therefore aimed to identify the effects of payment delays on the successful implementation of road construction projects in Ghana Highway Authority. Literature was extensively reviewed and relevant of it laid the foundation for the development of the questionnaire which was distributed to the key project participants; clients, consultants, and contractors. The study adopted the quantitative method which sprung from the use of the positivists approach to knowledge with which a number of clients and consultants were selected purposively and contractors were also selected simple randomly for the survey. Owing to that, descriptive statistics was used to analyze the demographics whiles Relative Importance Index was used to analyze the subject variables. Results indicated that the main factor causing payment delays on road construction projects is delay in certification. It can be implied that the stakeholder responsible for this cause is the client. Respondents also indicated that the major effect among the effects of payment delays on road construction projects is abandonment of projects which ranked first after analysis. The results testify to the numerous abandoning of road construction projects. Practice of good financial management ranked first among the possible ways to mitigate payment delays. The research concluded that the main factor causing payment delays is delay in certification and it has manifested in the several abandonment of road construction projects in Ghana. The recommendation suggested that proper payment schedules are to be agreed by all the stakeholders before the commencement of the project. Proper communication channels or skills are to be implemented by the stakeholders to aid smooth flow of information and realistic duration and cost must be set for the project.


CHAPTER ONE 
INTRODUCTION 
1.1 Background to the Study
The Construction Industry has been identified as one of the major backbones sustaining the Ghanaian economy since it employs people from all levels of skills attainment ranging from educated, average educated and non-educated. Amankwa (2003) identified that in 2002 2.3% of the active economic population was employed by the construction industry. It adds up an average of 8.5% to the Gross Domestic Product (GDP) of Ghana (Ghana Statistical Service, 2007). Its socio-economic importance is wider. An all-around oversaw and successfully distributed construction projects enhance public services (education, transport and health), business efficiency, (communications, offices and retail) cultural, housing and public spaces. A survey conducted by Ayudhya (2012) stated, client financial problems, major accidents, lengthy period of approving works, substandard workmanship and inaccurate bills of quantities among others were factors in causing delayed payments to the contractor.

Payment delay is one of the major problems faced by road construction project and its successful implementation in the present economic condition. For a project to be successfully implemented, well-organised preparation should be done and payment should be timely released to contractors of road construction projects. The imperativeness of further payment is increased by the way that the road construction contracts generally encompasses long periods to finish projects, a lot of money to spend and the wide utilization of credit payment terms as opposed to payment on delivery in procuring of goods (Ameer, 2005).


Several actors in the road construction industry of Ghana are affected by delayed payment. As such, there is the urgency to identify the effects of the delayed payment and to develop pragmatic measures which could successfully put a stop to the causes of payment delays in our road construction industry in Ghana and its eventual effects on the successful implementation of road constructions.

In road construction contracts, the contractors‟ cardinal obligation is to execute and complete the works in accordance with the terms and conditions of contract on time, whiles that of the employer is to pay the contractor for the works which have been executed to the satisfaction of the supervising agents or consultants. Once the two parties enter into a contract, their respective focus becomes parallel with the contractors‟, hoping and working towards making as much revenue as possible from the client whiles the employer hopes to get the most work for least payment possible. To a great extent, payment becomes the central focus for both of them. It is however poignant that despite the indispensable nature of payment to the successful implementation of road constructions in Ghana, the sector has been bedevilled by delays payments.

The long and bureaucratic nature of issuing payment certificate is considered by the clients, consultants and contractors as one cause of the delay in payment. This system of making payment certificate receive approval from various levels within the government institutions before payment can be effected came about in order to curb the rising corruption that was immerging in the construction industry. In so doing payment certificates will be properly scrutinized by these institutions to ascertain and confirm that work has actually been done to the required standard but this has turned out to be a rather disastrous move for road contractors as unusual lengthy period of time are taken for honouring of payments..

It is an undeniable fact that many road construction projects have either been abandoned, become standstill or moving at a very slow pace as a result of the many hindrances in payment process that contractors, consultants and the respective government institutions encounter.

A failure on the side of the contractor in receiving timely and regular payment could as well be a recipe for reduced profitability, delay in completion of projects and in worst case scenarios, such construction firm may fold up (Judi et al, 2010). The effects of delayed payment to contractor causes a rippling effects on other construction business chain such as banks, sub-Contractors, hirers, suppliers and workers therefore causing everyone to suffer (Judi et al, 2010).

The incidence of the delayed payment is eating deep into the fabric of the true values and virtues of road constructors and it is by this logic that the research then pursues to identify the practical causes and effects of delay payment on the successful implementation of road construction in Ghana and to suggest pragmatic measures to mitigate the menace.

1.2 Statement of the Problem
Honouring payment certificates to contractors for road construction projects in Ghana under the supervision of Ghana Highway Authority really takes a longer time to complete and it affects the successful implementation of the projects. It was established that delays in honouring payment certificates in construction projects to contractors for work executed rank as the number one (1) of the factors causing construction project delay in Ghana, from the viewpoint of Clients, Contractors and Consultants (Fugar & Agyakwah-Baah, 2010).


Despite the supposed interest paid on the delayed payment certificates in a contract with a specific clause on interest on delayed payment, effectively the amount paid to the contractors do not reflect the actual face value of the amount certified if the certificate is honoured beyond the contractual due date. These situations may cause serious cash flow problems to contractors resulting in excessive pressure from their creditors which lead to seizure of the road contractors‟ plants and equipment and going on liquidation. Due to these, most of the road contractors get frustrated and determined the projects which affect the implementation and government not being able to meet infrastructural needs of the people. This is the more reason why there exist a great number of uncompleted or the poorly constructed roads for road projects in the Brong-Ahafo Region

The additional mammoth amount as are result of paying interest on delayed payment certificates, client loses extensive amount of money which could have been used for other meritorious road projects (Donkor, 2011).

Road construction projects is one of the major infrastructure projects in Ghana and are mostly government funded the projects. There are numerous factors that lead to the payment delays in the construction of roads. In some cases, inadequate source of client‟s funding mostly creates financial setbacks for which affect its cash flow and will not be able to pay the contractors on time. Haphazard submissions of valuation for interim payment affect the client cash flow which also contributes to the payment delays. It is therefore crucial to identify these factors causing payment delays and its effects on the successful implementation of road constructions.

In spite of the fact that client and the different participants in the road construction industry keep on complaining on how road contractors are not able to deliver projects, there still remains the fact that payment delays are rampant in the industry and this affect project cost and quality. Many negative effects come with these delay payments as it tends to make some companies liquid, produces unemployment, brings about a huge cost overrun on the project, disputes and delay of the project.

The bureaucratic process involved in honouring certificate causes many problems to the contractors, the beneficiary body and the government itself. All contractors and even consultants admit to the fact that payment issues remain a huge problem in the sector of construction in Ghana. Each year the construction industry records a substantial number of bankruptcies related to delayed payments.

Delayed payment to contractors seriously affects early finish of all construction projects all around the globe. Despite the fact that there has been a push to enhance instalments in the late years by Government of Ghana, issues emerging are more serious as attached to issues in paying contractors. The research looked to unwind the impacts of delayed payments on the successful implementation of road constructions in the Brong-Ahafo Region.

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Item Type: Ghanaian Project Material  |  Attribute: 68 pages  |  Chapters: 1-5
Format: MS Word  |  Price: GH50  |  Delivery: Within 30Mins.
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