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JFMPC
26,2
236
Received 24 May 2020
Revised 22 August 2020
15 October 2020
Accepted 16 November 2020
Journal of Financial Management
of Property and Construction
Vol. 26 No. 2, 2021
pp. 236-256
© Emerald Publishing Limited
1366-4387
DOI 10.1108/JFMPC-05-2020-0041
Streamlining the management of
payment delays: the case of Sri
Lankan Government building
construction projects
B.A.K.S. Perera and Kaveesha Gihani Dewagoda
Department of Building Economics,
University of Moratuwa, Moratuwa, Sri Lanka
Abstract
Purpose – Delayed payments have been long standing, pressing issue in construction projects, especially in
Government-funded construction projects. The root causes and the consequences of delayed payments must
be identified before implementing strategies to mitigate the consequences of such delayed payments.
However, these causes and consequences and the parties responsible for managing the delayed payments
have not been identified so far. Therefore, the purpose of this study is to investigate the management of
payment delays in Government-funded construction projects.
Design/methodology/approach – The study used a mixed approach comprising four case studies and a
questionnaire survey. The empirical data collected from the case studies and the questionnaire survey were
analysed using manual content analysis and mean rating, respectively.
Findings – The study identified the most significant causes and the most significant consequences of
delayed payments that occur in Government-funded construction projects. It also revealed the strategies that
clients, consultants, contractors and other parties can adopt to mitigate the adverse consequences of such
delayed payments.
Originality/value – This study identified the most significant causes of delayed payments in
Government-funded construction projects, the most significant consequences of such delayed payments and
the most suitable strategies the clients, consultants and contractors can adopt to mitigate the consequences of
such delayed payments. Thus, this study supports streamlining the management of payment delays in
Government construction projects and identifies the roles that different parties must play in managing
payment delays in Government building projects, which is an under-researched area.
Keywords Strategies, Causes, Consequences, Delayed payments, Government construction projects
Paper type Research paper
1. Introduction
The success of construction projects depends on the way the payments are handled
(Abotaleb and El-adaway, 2017). Payments are the lifeblood of construction projects (Ali,
2006). Banobi and Jung (2019) argued that effective, well-timed payments determine the
success of construction projects. However, delayed payments and non-payments have
become issues in the construction industry (Mohamad et al., 2018). Payment delays occur in
many countries, including New Zealand (Ramachandra et al., 2013), Ghana (Wuni et al.,
2017), Malaysia (Badroldin et al., 2016; Ye and Rahman, 2010), Palestine (Nasser, 2013), India
(Prasad et al., 2019), Australia (Mccagh, 2015), Hong Kong (Cheng et al., 2010) and Sri Lanka
(Samaraweera et al., 2019). Payment delays are a result of the “cannot” or “would not” pay
attitude of the employers (Francis and Ramachandra, 2014). The consultants’ inefficiencies
can also be another reason (Ye and Rahman, 2010). Even the contractors themselves can be
partly responsible for delayed payments (Nasser, 2013). Delayed payments adversely affect Construction
the supply chain regardless of the party responsible for them, thereby delaying project projects
delivery, leading even to project failure (Banobi and Jung, 2019). According to Tijan and
Ajagbe (2016), delayed payments cause despair to contractors forcing them to pay higher
interests on their loans and can lead to project abandonment or even make the contractors
insolvent.
Construction is the fourth largest sector of Sri Lanka’s national economy, and the
average contribution of construction to the gross domestic product during the last decade 237
remained around 6.7%–8.3% (Central Bank of Sri Lanka [CBSL], 2010; 2019). Sri Lanka,
being a developing country, where a multitude of infrastructure projects are implemented,
the Government is the principal client of the construction industry (CBSL, 2019). According
to CBSL, the Government has initiated several road developments, urban developments and
housing projects. Fernando (2019) found that more than 3,500 contractors in Sri Lanka face
difficulties due to payment delays for which the Government was responsible. The author
further stated that even when the contractors had completed 60% of their projects, which
were all less than US$ 370 mn in value, the Government failed to pay the required 40% of
the payments due to them. As of 31 December 2019, the unpaid claims of contractors in
Government-funded projects were Rs. 35.2 bn in value (Ministry of Finance, Sri Lanka,
2020). The fact that the Sri Lankan Government owes billions of rupees to its contractors
cause severe repercussions in the construction industry (Sirimanna, 2012).
In a complex project environment, delayed payments lead to severe economic losses to
the parties concerned and make stakeholder relationships complex, requiring substantial
investments of public resources (Chen et al., 2018). Delayed payments adversely affect both
direct and indirect stakeholders of a project (Patanakul et al., 2016), and they negatively
impact on the public and on the services offered by the Government, causing waste of public
money (Hassan et al., 2019). Because of the nature of the construction value chains, delayed
payments and non-payments tend to affect all stakeholders, including the main contractors,
subcontractors, suppliers and labour force and the entire society, as they disrupt the
continuity of the project, and thereby the livelihood of workers (Badroldin et al., 2016).
Many past studies have explored delayed payments in general without classifying them
according to the parties responsible for the delays (Enshassi and Abuhamra, 2015; Kumi,
2016; Peters et al., 2019). Some researchers have studied delayed payments concerning
clients and contractors (Ansah, 2011; Badroldin et al., 2016; Mohamad et al., 2018), and only
a few past studies have examined on delayed payments in Government-funded construction
projects, of which the client was the Government (Samaraweera et al., 2019). Using a
qualitative approach, Samaraweera et al. (2019) have identified the factors that cause
payment delays in Government-funded construction projects in Sri Lanka resulting from the
actions of various parties and the strategies that can minimise such delays. However, they
have not ranked them to identify the level of significance of each factor. Therefore, it is
necessary to identify the most significant causes and consequences of delayed payments in
Government-funded construction projects and the strategies of managing the payment
delays and determine the individual roles played by the clients, consultants, contractors and
other parties in delaying the payments.
In this context, this study aims to explore how the management of delayed payments in
Government construction projects can be streamlined by identifying the significance of the
causes and consequences of the delayed payments and the significance of the strategies that
will mitigate the consequences of the delayed payments. These causes, consequences and
strategies were classified under clients, consultants, contractors and the parties other than
the main stakeholders of the project. The study contributes to research by identifying and
JFMPC ranking the causes, consequences and strategies relating to delayed payments that occur in
26,2 Government-funded construction projects, in relation to clients, consultants, contractors and
other parties. It also contributes to practice by identifying the causes and consequences of
delayed payments most relevant to specific situations, so that the best strategies to a given
situation can be selected. The study findings will also help the Government clients to
understand the gravity of delayed payments in Government-funded construction projects
238 and take appropriate actions to mitigate the consequences of such delayed payments in its
future projects.

2. Literature review
2.1 Management of delayed payments in government building construction projects by
parties
In a construction project, the client and the contractor are legally bound by the construction
contract, which considers the payments to a party as a reward for the work performed
(Chong et al., 2011). The principal obligation of the client is to make the agreed payment to
the contractor based on performance (Supardi et al., 2010). However, “early delivery and late
payment” has become habitual and routine, especially in the construction industry (Andalib
et al., 2018). Even though payment obligations of the client are expressly stated in the
standard forms of contract, they are usually misunderstood or not followed, thereby
adversely affecting both the project and the contractor (Abotaleb and El-adaway, 2017).
Delayed payments are inherent to the construction industry (Ye and Rahman, 2010),
especially in Government-funded projects (Hasmori et al., 2012). Government projects, which
significantly contribute to the growth of the country, are costly and complicated and require
considerable effort and the involvement of multiple stakeholders (Patanakul et al., 2016).
Nevertheless, according to Badroldin et al. (2016), contractors frequently blame the
Governments for the undue delays experienced in receiving their payments from
Government agencies.
Peters et al. (2019) identified the causes of payment delays experienced by small- and
medium-scale contractors in general, whereas Illangakoon (2017) studied the causes of
payment delays in the construction projects implemented in Sri Lanka. Prasad et al. (2019)
revealed that payment delays in developed countries are caused mainly due to external
factors, such as weather, material prices, permits and labour supply. According to Islam and
Trigunarsyah (2017), in developing countries, delayed payments are caused by contractors
or clients because of financial difficulties, cash flow issues and variation orders.
Bureaucracy in Government entities also causes significant delays in the payments made to
the contractors (Niazi and Painting, 2017).
Ansah (2011), Badroldin et al. (2016) and Peters et al. (2019) identified the consequences of
delayed payments in construction projects in general. Payment delays caused by the clients
are one of the leading causes of cost overruns in construction projects (Niazi and Painting,
2017). Delayed payments trigger conflicts between clients and contractors (Mitkus and
Mitkus, 2014). All parties concerned and the project itself are affected when the client fails to
make the due payments to the main contractor on time (Lessing et al., 2017). This situation
may even cause the entire project to collapse by making the contractor bankrupt and
insolvent (Amoako, 2011), compelling him to abandon the project (Nasser, 2013).
Different sources have proposed various initiatives to mitigate the consequences of
delayed payments encountered in construction projects. Niazi and Painting (2017)
emphasised that Governments, being major construction clients, should develop a
transparent and responsive strategy to accelerate the payment process. Peters et al. (2019)
proposed training programmes on cash flow and financial management and imposition of
fines on overdue payments as two essential strategies that would minimise the Construction
consequences of payment delay. Legislation can also play a significant role in ensuring the projects
security of payments (SOPs) through administrative and legal measures (Cheng et al., 2010).
Mccagh (2015) proposed to incorporate SOP regime through legislative reforms to safeguard
vulnerable contractors from delayed payments.

2.2 Need for/significance of the study

The Government of Sri Lanka, who is the client of most of the construction projects executed
239
in the country, is currently involved in several major road developments, urban
developments and housing projects (Central Bank of Sri Lanka, 2019, [CBSL]). These
projects offer a wide range of opportunities for the growth of the construction industry.
According to Francis and Ramachandra (2014), payment delays are common in Government
construction projects in Sri Lanka, but these payment delays do not depend on the agency
that funds the project (National Construction Association of Sri Lanka, 2008). Therefore,
attention has already been drawn to the importance of policies that will guarantee timely
payments in Government-funded projects in Sri Lanka (Jayasuriya, 2019).
Disputes have a massive impact on construction projects, especially on large-scale
projects, such as those funded by the Government, because of the inherent complexity of
those projects. Furthermore, small- and medium-scale contractors of a developing country,
who are the backbone of the country, are considerably affected by payment delays,
ultimately retarding the country’s development (Tadele, 2017). Even though delayed
payments and non-payments have become habitual and routine, they must be avoided to
promote businesses, generate jobs and increase project productivity (Badroldin et al., 2016).
Undoubtedly, payment is one of the most critical determinants of construction projects,
directly contributing to the success or failure of the projects (Abotaleb and El-adaway, 2017).
Sound payment practices foster the advancement of the construction industry (Cheng et al.,
2010) and payments made on time enhance the performance and efficiency of the
construction supply chain (Motawa and Kaka, 2009).
El-Sayegh (2008) contemplated that the risks associated with delayed payments should
be allotted and shared among the clients and the contractors. Nevertheless, the causes and
consequences of payment delays and the strategies that can manage the delays are not
clearly mentioned in the extant literature (Enshassi and Abuhamra, 2015; Kumi, 2016; Peters
et al., 2019). Even the studies that have classified the payment delays according to the
parties responsible for the delays have considered only the clients and contractors in general
(Ansah, 2011; Badroldin et al., 2016; Mohamad et al., 2018).
To streamline the management of payment delays in Government construction projects,
the significance of the consequences of such payment delays on the clients, consultants and
contractors must be understood to perceive the gravity of delaying payments in
Government-funded construction projects.

3. Research methodology
The increased adoption of the mixed research method has confirmed its benefits (McKim,
2017). The complexity of its research question prompted this study to use the mixed
research method with case studies and a questionnaire survey (Lund, 2012). At the outset, a
literature review was conducted to identify the causes and consequences of delayed
payments and the management strategies that can mitigate the consequences of such
delays. Because of the predictive nature of the study, a qualitative approach was adopted at
the beginning by conducting case studies to refine the literature findings and compile a
comprehensive list of causes, consequences and management strategies related to payment
JFMPC delays in government-funded construction projects. A case study intends to obtain a
26,2 comprehensive and authentic understanding of the case (Cronin, 2014), and it also allows
identifying the general causes, consequences and management strategies and specifics of
that case (Hyett, Kenny and Dickson-Swift, 2014). Case studies were conducted, to collect the
required data for this study, on four government-funded projects that got affected by
payment delays for more than six months. The number of cases was limited to four to avoid
240 data saturation as in when any new data collected contained already available data
(Saunders et al., 2009). Table 1 presents the details of the cases studied.
In each case study, three face-to-face semi-structured interviews were conducted for 45–
60 min using the interview guidelines prepared using the literature review findings. A
document review was also conducted to verify the empirical data collected from the
interviews. The case studies were used to identify the causes, consequences and
management strategies specific to government-funded construction projects from among
those that were identified from the literature in general. The collected data were manually
analysed using directed content analysis as content analysis reduces the volume of data to
be handled while facilitating data categorisation by improving the contextual meaning of
the data (Bengtsson, 2016). Manual coding enhances the focus on the data sets (Saldana,
2013) and minimises the differences between the contextual meanings of the data and the
analytical process (Cope, 2014).
The questionnaire used in the questionnaire survey was prepared using the semi-
structured interview findings to facilitate the ranking of the causes, consequences and
management strategies. Purposive sampling was used to select the questionnaire survey
participants based on their knowledge and working experience (more than five years) in at
least three government construction projects, their availability and willingness to
participate in the survey and their ability to communicate (Etikan et al., 2016). The

Type of Experience in
Case Code Designation organisation years Documents reviewed

A 1A Chief quantity Client 25
Contract documents

surveyor
Documents related to variation
2A Project quantity Consultant 30
Documents related to interim payment
surveyor certificate (IPC)
3A Construction Contractor 28
IPC approval procedure
manager
Project correspondence
B 1B Deputy project Client 35
Contract documents
director
Documents related to IPC
2B Project quantity Consultant 24
Project correspondence
surveyor
Documents related to claims
3B Chief quantity Contractor 23
surveyor
C 1C Assistant director Client 29
Contract documents
2C Managing director Consultant 28
Letter of award
3C Senior quantity Contractor 21
Final payment certificate
surveyor
Statement at completion

Documents related to IPC
D 1D Project director Client 32
Contract document
2D Chief engineer Consultant 27
Final payment certificate
Table 1. 3D Assistant general Contractor 26
Variation procedure
Details of the case manager
Project correspondence
studies
Documents related to IPC
questionnaires were distributed via electronic mail (followed up with telephone calls) among Construction
270 prospective participants selected from a total population of approximately 500 to projects
represent clients, contractors and consultants in equal proportions. The sample size was
determined based on the time available for the study. Out of the 270 prospective
participants, 147 responded by returning the filled-in questionnaires. However, eight of
those questionnaires were incomplete, and thus, only 139 (51.5%) questionnaires that
represented approximately 85 projects, could be considered for the analysis. Table 2
presents the details of the respondents. 241
The respondents were required to rank, based on their practical experience, each of the
causes, consequences and management strategies coming under the respective client,
contractor and consultant, using a five-point Likert scale, where 5 represented “highly
significant” and 1 represented “not significant.” The collected data were analysed using
descriptive statistics and the mean rating (MR) was calculated using equation (1):
Xn
Xi wi
x¼ i
(1)
n

where xi – Individual value, x – MR, wi – Rating and n – Sample size.

MR was used in the study because, while being simple, it can provide a comprehensive
perspective of the results representing all review ratings, with the ability to stabilise once it
reaches a minimum number of reviews (Tay et al., 2019). The results were further analysed
using pattern matching, in which the observed pattern was compared with the theoretical
pattern to improve the quality of the study in terms of “conceptualisation, construct
definition and operationalisation” (Sinkovics, 2018, p. 482).
Cronbach’s alpha is an index used to measure the reliability of a test (Tavakol and
Dennick, 2011). According to Nunnally (1978), a data set will become reliable if the
Cronbach’s alpha is above 0.7. The Cronbach’s alpha value obtained for the data set of the
study using the Statistical Package for Social Sciences (SPSS 24) was 0.74 and thus was
acceptable.

4. Findings and analysis

The causes and consequences of payment delays in construction projects and the strategies
that will mitigate the consequences of such delays identified from the case studies are

Work experience 6–11 11–15 16–20 21–25 Above 25

(years)
Designation A B C A B C A B C A B C A B C Total

Engineer/ quantity surveyor 02 03 03 04 04 04 – – – – – – – – – 20

Senior engineer/quantity surveyor – – – 03 04 04 04 05 04 – – – – – – 24
Chief engineer/quantity surveyor – – – – – – 04 04 04 02 03 03 – – – 20
Cost controller – – – – – – 04 05 05 – – – – – – 14
Commercial manager – – – 01 02 02 03 04 04 02 03 02 – – – 23
Assistant general manager – – – – – – 04 05 05 02 02 01 02 01 01 23
Managing director – – – – – – 03 02 01 02 01 01 02 02 01 15
Table 2.
Total 08 28 70 24 09 139 Details of the
questionnaire survey
Notes: A = Client; B = Contractor; and C = Consultant respondents
JFMPC highlighted in blue in Tables 3, 4 and 5, respectively. These causes, consequences and
26,2 strategies were classified under client, consultant, contractor and other parties and ranked
according to their levels of significance using the questionnaire survey findings. The causes,
consequences and strategies that were not mentioned in the literature but identified by the
interviewees as being unique to Sri Lankan Government projects are presented in the
highlighted cells of Tables 3, 4 and 5.
242
4.1 Significant factors causing delayed payments
Table 3 presents the level of significance of the causes of delayed payments attributable to
clients, consultants, contractors and other parties.
4.1.1 Significance of the causes of delayed payments attributable to clients. The issue
associated with the “budgetary provisions made by the treasury (MR = 4.306)” is the most
significant cause of delayed payments attributable to clients. Illangakoon (2017) discovered
that the clients” internal systems predominantly contributed to delayed payments.
Accordingly, the study further analysed the issues pertaining to the internal systems of the
clients. “Delay in giving approvals by internal departments due to the lengthiness of the
procedures involved (MR = 4.020)” is the second most significant cause of the delayed
payments for which clients are responsible. This cause is inter-related to and interconnected
with the third significant cause, “bureaucracy in government departments (MR = 3.980).”
Irfan (2016) pointed out that bureaucracy in Sri Lanka has caused inefficient and ineffective
public service delivery in the country. The author further emphasised that Sri Lanka is
heavily burdened with red-tape, which adversely affects the speed and efficiency of the
government. In Sri Lanka, payments made to the contractors of construction projects
are processed in stages requiring the consent of several internal parties. Even though the
process ensures transparency and impartiality of the government, it impedes the entire
process. Niazi and Painting (2017) also confirmed that the bureaucracy in government
departments retards the payment process.
4.1.2 Significance of the causes of delayed payments attributable to consultants. Even
though project consultants are expected to improve the efficiency and effectiveness of the
overall project structure, they are reported to be causing payment delays. The study
identified the “slow processing of payments by the consultants (MR = 3.723)” as the most
prominent cause of delayed payments attributable to consultants. Peters et al. (2019) found
that the long-time taken by consultants to approve variations is the second most significant
factor that contributes to delayed payments in general. According to this study, the second
most significant cause of payment delays attributable to consultants is the “absence of
efficient quantity surveyor management systems (MR = 3.729).” “Delays in the certification
of payment applications (MR = 3.723)” is ranked as the third most significant cause of
delayed payments attributable to consultants. Several factors cause delays in the
certification of payment applications. Kumi (2016) ranked the delay in the certification of
payment applications first among the factors causing delayed payments by consultants.
This difference in the rankings can be because the focus of Kumi (2016) was explicitly on the
causes of delayed payments in road construction projects in Ghana. Manuja (2018) observed
that late certifications and non-certification negatively affect the Sri Lankan construction
industry.
4.1.3 Significance of the causes of delayed payments attributable to contractors.
Contractors themselves contribute to delayed payments because of “insufficient
documentation and information provided for valuation (MR = 4.167)”, which is the most
significant cause of delayed payments attributable to contractors. This situation arises
when the contractor fails to maintain appropriate records. “Submission of claims with errors
 Causes related Causes related Causes related Causes related
Ranking to clients MR to consultants MR to contractors MR to Other Parties MR

1 Budgetary provisions made by the
treasury
2 Delay in giving approvals by internal
departments due to the lengthiness of
the procedures involved
3 Bureaucracy in Government
departments
4 Delay in making the payments even
after their certification
5 Poor financial and business
management
6 Delays in certifying the payments
7 Involvement of too many parties in the
certification of the payments
8 Paying for variations and extra works
only after making the final payment
9 Underpayment or non-payment of the
certified amount
10 Ignoring of the Liability Act by the
client’s representatives
11 Lengthiness of the internal audit
procedures
12 Withholding of the payments
13 Delayed issuance/non-punctuality in
issuing taking-over certificates
14 Hidden agendas related to
malpractices in work
4.306 Slow processing of payment
applications by the consultants
4.020 Absence of efficient quantity
surveyor management systems
3.980 Delays in the certification of
payment applications
3.935 Inaccurate bills of quantities
3.833 Frequent design changes
3.694 Disputes over payments for claims
and responses
3.673 Poor coordination between
consultants and clients
3.469 Disputes over the quality of work
3.404 Poor quality of the quantity
surveyor management system
3.356 Lack of technical and managerial
skills in consultants’ staff
3.347 Poor preliminary estimates
3.304 Underpaid claims
3.298 Malpractices of the consultants
3.128
3.936 Insufficient documentation and 4.167 Legislative procedures 4.500
information provided for
valuation
3.729 Submission of claims with errors 3.809 Haphazard project initiation 3.896
to satisfy the private
objectives of politicians
3.723 Failure to follow the contractual 3.729 Political/, andy changes 3.667
procedures in claims
3.660 Lack of qualified staff at the site 3.667 Financial market instability 3.646
3.511 Poor communication among 3.542 Delays in obtaining 3.646
parties approvals from external
authorities
3.468 Delays in submitting claims 3.479 Local payment culture/ 3.375
attitude
3.458 Failure to agree with the 3.458 Highly competitive market 3.191
valuation of the work conditions
3.429 Improper payment applications 3.417 Frequency of exchange rate 3.188
of currencies
3.426 Lack of knowledge and 3.354 Lack of resources such as 3.083
experience in the field labour and materials
3.406 Willingness to accept onerous 3.333
payment terms of the clients to
secure the contract
3.404 Cost overruns and contract 3.293
failures
3.340 Contractor’s invalid claims 3.292
3.298 Delaying payments to sub- 3.271
contractors until the receipt of the
certified interim payments
3.283 3.250

(continued)

parties
attributable to
Table 3.

contractors and other

clients, consultants,
payments
causes of delayed
Significance of the
243
projects
Construction
 26,2

244

Table 3.
JFMPC

Causes related Causes related Causes related Causes related

Ranking to clients MR to consultants MR to contractors MR to Other Parties MR

Heavy work load that has to be Capital lock up/cash flow

15 Failure to agree with the valuation of
the work
16 Further evaluation of the contractor’s
claims
17 Failure to return the retention money
18 Misleading payment procedure
according to privity/ terms of contract
19 Procurement systems
20 Clients’ assumption that the
contractors would finance the projects
if the payments get delayed
21 Lack of comprehensiveness in the
contracts with regard to payments
22 Contracts that are too complicated to
be understood by both parties
23 Liquidated damages claimed by the
client
borne by the consultants when
evaluating the work done
3.122 Inaccurate/erroneous tender
documents
3.061 Low number of periodical
meetings held to address work
problems
3.043 Consultants’ misinterpretation of
clients’ requirements on variation
orders
3.000 Disproportionate certification of
percentage payments with regard
to the actual work done
2.939 Internal conflicts/disputes within
the consultants’ teams
2.771 Ignoring of the Liability Act by the
client’s representatives
2.755
2.347
2.292
difficulties due to lack of start up
capital
3.167 Delays in submitting interim 3.229
payment applications
3.149 Poor quality of work 3.127
3.130 Contractor’s misinterpretation of 3.125
the client’s requirement for
variation orders
3.083 Non-payment to sub-contractors 3.083
by the main contractor
3.021 Improper supervision and 3.063
financial control
2.913 Failure to understand the contract 3.042
agreement
Sub-contractor nomination 3.000
without considering quality/past
experience
Low labour productivity 2.646
(MR = 3.809)” was ranked the second most prominent cause of delayed payments for which Construction
contractors are responsible. Errors made purposely or due to negligence extend the time projects
required by the consultants for evaluation, which in turn delays the payments. Abdul-
Rahman et al. (2014) found that the contractors” delays in submitting claims cause payment
delays and Ansah (2011) revealed that in the Ghanaian construction industry, delayed
claims, erroneous claims and claims submitted without adequate supporting documents
ranked first, second and third, respectively, among the causes of payment delays
attributable to contractors. “Failure to follow the contractual procedures in claims (MR = 245
3.729)” was ranked the third most prominent cause of delayed payments. Illankoon et al.
(2019) highlighted that poorly drafted or incomplete and unsubstantiated claims made by
contractors lead to disputes and conflicts.
4.1.4 Significance of the causes of delayed payments attributable to other parties.
“Legislative procedures (MR = 4.500)” is the most significant cause of delayed payments
among the causes that cannot be attributed to clients, consultants or contractors. Legislative
procedures and laws of the country play a significant role in the decisions made on
contractor payments. Bowyer (2018) highlighted the improved security assured by payment
legislation, namely, SOP legislation, for effectively addressing payment-related issues in the
construction industry. “Haphazard project initiation to satisfy the private objectives of
politicians (MR = 3.896)” is the second most significant cause of payment delays that comes
under this category. “Political/policy changes (MR = 3.667)” due to the absence of a long-
term political vision/policies was ranked the third most significant cause attributable to
other parties. The study identified that haphazard commencement of works to suit the
whims and fancies of politicians causes payment delays, especially in government projects.

4.2 Significance of the consequences of delayed payments

Table 4 presents the significance of the consequences of delayed payments that affect
clients, consultants, contractors and other parties. The bolded and italicised consequences
are common to more than one stakeholder.
4.2.1 Significance of the consequences of delayed payments affecting clients. “Delays in
completing the project (MR = 4.449)” was ranked the most significant consequence of
delayed payments on clients, whereas delays in receiving the expected benefits of the project
ranked the second. According to Ansah (2011), time overruns rank third in significance as
far as clients are concerned. This study identified that delayed payments cause “delays in
reaping the expected benefits of the project (MR = 4.180).” Conditions of contracts of
construction projects make contractors eligible to receive delay damages if a payment due to
them is delayed. Accordingly, “interest payment on delayed payments (MR = 3.857)” was
ranked the third most significant consequence of delayed payments to the clients.
4.2.2 Significance of the consequences of delayed payments affecting consultants. If
contractor payments are delayed, consultants would have to spend a longer time on the
projects than expected and thus, “longer time required to spend on the project than what
was planned (MR = 3.979)” was ranked the most significant consequence of delayed
payments on consultants. “Increased cost of consultancy services (MR = 3.854)” was ranked
the second most significant consequence of delayed payments and “Slow progress of the
works (MR = 3.479)” is the third most significant consequence of delayed payments
experienced by consultants.
4.2.3 Significance of the consequences of delayed payments affecting contractors. Among
all stakeholders, contractors are the most vulnerable party to the consequences of delayed
payments. “Cash flow problems (MR = 4.708)” is the most prominent consequence of
delayed payments on contractors because it determines project success and organisational
 26,2

246

parties
Table 4.
JFMPC

consultants,
consequences of

affecting clients,
delayed payments
Significance of the

contractors and other

Consequences
Consequences Consequences Consequences affecting other
Ranking affecting clients MR affecting consultants MR affecting contractors MR Parties MR

1 Delays in completing the project 4.449 Longer time required to 3.979 Cash flow problems 4.708 Retardation of the 3.854
spend on the project than development of the
what was planned country
2 Delays in reaping the expected benefits of 4.180 Increased cost of 3.854 Delays in completing the 4.333 Negative social 3.532
the project consultancy services project impacts
3 Interest payments on delayed payments 3.857 Slow progress of the 3.479 Cost overruns 4.229 Reduced job 3.489
works opportunities
4 Cost overruns 3.840 Extra documentation cost 3.396 Increased creditability/ high 4.085 Negative chain 3.417
involved in terminating interest rate of loans consequences
the project affecting other
parties
5 Failure to comply with the project schedule 3.612 Poor reputation 3.383 Damaged relationship with 4.042 Disputes that occur 3.234
the client among external
parties
6 Failure to realise the expected profitability 3.592 Disputes relating to the 3.277 Slow progress of the work till 4.000 Environmental and 3.188
of the project works the payment is received health hazards
7 Poor reputation 3.540 Inefficiencies in giving 3.251 Difficulties faced in procuring 3.958
instructions materials and services
8 Contract termination 3.460 Lack of quality control 3.250 Late payment of salaries 3.877
9 Contract modifications (replacement and 3.449 Idling staff struggling to 3.249 Inability to retain qualified 3.875
addition of new work to the project and run the business staff
changes made to specifications)
10 Refunding of the funds received through 3.396 Absence of site staff 3.230 Disputes 3.842
loan agreements, to the treasury
11 Additional cost of re-tendering at the 3.388 Long time taken to 3.229 Being forced to borrow from 3.838
termination of the project approve sample sizes financial institutions
12 High tender price due to risks 3.224 Drastic reduction of 3.125 Continued submission of 3.833
consultants’ activities claims
13 Poor quality 3.163 Extra cost involved in the 3.813
termination the project
(continued)
 Consequences
Consequences Consequences Consequences affecting other
Ranking affecting clients MR affecting consultants MR affecting contractors MR Parties MR

14 Splitting the contract for the remaining 3.146 Negative chain of 3.809
work consequences on other parties
15 Project abandonment 3.122 Sub-contractors’ refusal to 3.792
continue with the work on the
project
16 Bankruptcy or liquidation 3.708
17 Impact on the program 3.702
schedule
18 Disputes created over the 3.625
termination of the project
19 Work suspension until 3.604
payment is received
20 Need to interpret contract 3.604
clauses related to payments
and to seek legal advice
21 Contract termination 3.583
22 Poor reputation 3.563
23 Poor labour productivity 3.542
24 Difficulties in maintaining 3.521
equipment
25 Project abandonment 3.458
26 Difficulties faced when 3.104
tendering for new projects

Table 4.
247
projects
Construction
JFMPC running. The adverse consequences on the cash flow will cause detrimental secondary
26,2 consequences on contractors. Peters et al. (2019) ranked cash flow problems, which have
several secondary consequences, as the most devastating consequence on the contractors.
Francis et al. (2016) accepted that the most critical consequence of delayed payments in Sri
Lanka is the contractors’ cash-flow difficulties. Furthermore, the reliance of Sri Lankan
subcontractors on the progressive payments made by the main contractors also delays
248 project completion. “Delays in completing the project (MR = 4.333)” and “cost overruns
(MR = 4.229)” are the second and third most significant consequences, respectively, of
delayed payments on contractors. Time overruns will prevent a contractor from
undertaking a new project as they constrain the contractor’s resources and efforts.
Badroldin et al. (2016) recognised delays in project completion as the second most significant
consequence of payment delays encountered by contractors, especially the small- and
medium-scale contractors of government-funded construction projects.
4.2.4 Significance of the consequences of delayed payments affecting other parties.
Because the government is the client of most construction projects in Sri Lanka, the
“retardation of the development of the country (MR = 3.854)” was identified as the most
significant consequence of delayed payments on other parties. Often the financial burdens
experienced by contractors reach subcontractors and suppliers through the supply chain,
thereby compounding the situation (El-adaway et al., 2017) and ultimately retarding the
development of the country (Tadele, 2017). “Negative social impacts (MR = 3.532)” was
ranked the second most significant consequence of delayed payments on other parties, the
non-stakeholders of the project. This situation can even cause the entire project to fail by
making the contractors bankrupt and insolvent (Amoako, 2011) and compelling them to
abandon the projects (Olusegun and Michael, 2001). Besides, payment delays generate
unnecessary and long-standing disputes that considerably damage the reputation of the
construction industry (Hassan et al., 2019). “Reduced job opportunities (MR = 3.489)” is the
third most significant consequence of delayed payments on non-stakeholders.
The “delays in completing the project” is a significant consequence of delayed payments
faced by both clients (MR = 4.449 and Ranking-1) and contractors (MR = 4.333 and
Ranking-2). “Cost overruns” is another significant consequence faced by both clients (MR =
3.840 and Ranking-4) and contractors (MR = 4.229 and Ranking-3). Even though “project
abandonment” was common to both clients (MR = 3.122 and Ranking-15) and contractors
(MR = 3.458 and Ranking-25), the consequences of project abandonment had a lower
ranking because the abandonment of projects is not common. Kumi (2016) identified the
abandonment of projects as the most significant consequence of delayed payments and cost
overruns of the project and delays in the completion of the project ranked second and third,
respectively, regarding the significance. “Poor reputation” seemed to be affecting all the
three stakeholders, namely, clients (MR = 3.540 and Ranking-7), consultants (MR = 3.383
and Ranking-5) and contractors (MR = 3.563 and Ranking-22), regardless of their roles,
which are at different scales in the project.

4.3 Significance of the strategies that will mitigate the consequences of delayed payments
Table 5 presents the strategies that can be adopted by clients, consultants, contractors and
other parties to mitigate the consequences of delayed payments. The strategies given in the
bold and italic text are those common to two or more parties.
4.3.1 Significance of the strategies that clients can adopt to mitigate the consequences of
delayed payments. “Obtaining budgetary allocations in advance and prompt updating of the
budget when variations/valuations occur (MR = 4.080)” is the most critical strategy that the
clients can adopt to mitigate the consequences of delayed payments. The next important
Ranking Strategies for clients
1 Obtaining budgetary
allocations in advance and
prompt updating of the budget
when variations/valuations
occur
2 Working within the budget
3 Understanding the payment
requirements of the project
4 Having an advisory team in the
case of major contracts
5 Getting the internal audit to
understand the payment terms
well
6 Negotiating the payment terms
with the contractor to ensure a
healthy cash flow
7 Obtaining the required
approvals from the relevant
authorities at the beginning of
the project itself
8 Releasing a part payment as
an interim payment when the
payment gets delayed
consequences of
Table 5.
consultants,
delayed payments
others to mitigate the
contractors and
adopted by clients,
strategies that can be
Significance of the
MR Strategies for consultants MR Strategies for contractors MR Strategies for Others MR
4.080 Defining a time frame 4.167 Submitting timely and 4.479 Introducing payment-related 4.083
for the payments accurate invoices complete legislation
with all required
documentation
4.005 Complying with the 4.083 Charging interest on delayed 4.167 Getting professional bodies 4.042
conditions of contract payments and Government agencies to
when issuing drawings, take required actions
approvals, instructions ,
etc.
4.000 Obtaining periodic 4.025 Defining time frames 4.104 Solving disputes regarding 3.745
budgetary allocations from for the payments the methods of
the client measurements
3.980 Ensuring punctuality and 4.021 Providing timely 4.043 Publishing poor payment 3.563
impartiality notifications to the practices of the clients for
consultant about additional the information of the public
works and lack of details
3.800 Implementing speedy 4.000 Negotiating payment terms 3.688 Incorporating sub- 3.542
dispute resolution with the consultant to contractor’s conditions of
mechanisms facilitate a healthy cash flow contract into the main
contractor”s conditions of
contract
3.762 Allowing flexibility for the 3.813 Making provision to refer to 3.563
minimum payment when client”s financial
payments tend to get arrangements
delayed
3.760 Removing the “Pay 3.638 Opening Escrow Accounts 3.478
when Paid” clause for the project to enable
transactions between the
client and the contractor
3.708 Defining the level of work 3.521 Increasing the interest rate 3.375
done for the delayed payments
(continued)
249
projects
Construction
 26,2

250

Table 5.
JFMPC

Ranking Strategies for clients MR Strategies for consultants MR Strategies for contractors MR Strategies for Others MR

9 Ensuring appropriate security 3.540 Allowing flexibility in 3.333 Creating a mandatory trust 3.340
measures by having a payment advance payment recovery account or retention sums
bond when payments tend to get
delayed
10 Requiring the owner to provide 3.480 Providing for overdraft 2.915 Using on-account 3.292
the client’s payment guarantee facilities within the payments
or the bond consultant organization
11 Ensuring that the client’s 3.347 Applying term loans from a 3.271
requirements remain unchanged bank to overcome the effects
or minimising the changes of the consequences of
delayed payments
12 Avoiding bureaucracy 3.327 Monitoring sub-contractor’s 3.167
cash flow
13 Using stage payments to 3.313 Removing the “Pay 3.106
simplify the payment procedures when Paid’ clause
14 Using on-account payments 3.300 Releasing pending 3.064
payments by getting a bond
15 Requesting credit facilities from 3.167 Complying with the right to 3.063
the contractor suspend the work until
payment is received
16 Making an additional advance 3.102 Chasing due payments 2.979
payment when needed relentlessly
17 Minimizing the provisional sum 3.061 Complying with the right to 2.958
allowed in the contract slow down the work until
payment is received
18 Sending the notice letter 2.500
through the contractor’s
lawyers
19 Transferring funds from 2.489
other projects
strategy for the clients is “working within the budget (MR = 4.005).” Here, the government, Construction
as the client, will not require to obtain additional funds for the project. The strategy of projects
“understanding the payment requirements of the project (MR = 4.000)” was ranked third. Ye
and Rahman (2010) ranked the strategy of understanding and studying the payment
requirement of an individual project, as the fifth. However, Mohamad et al. (2018) stipulated
that both the client and the contractor should understand the terms or clauses related to
project payments. 251
4.3.2 Significance of the strategies that consultants can adopt to mitigate the consequen-
ces of delayed payments. “Defining a time frame for the payments (MR = 4.167)” was
recognised as the most significant strategy adopted by consultants to mitigate the
consequences of payment delays. The consultants can stipulate a defined time frame for the
payments in the contract conditions. “Complying with the conditions of contract when
issuing drawings, approvals, instructions, etc. (MR = 4.083)” was ranked the second most
suitable approach for consultants to mitigate the consequences of payment delays. Thirdly,
“obtaining periodic budgetary allocations from the client (MR = 4.025)” will also ensure that
the contractors” payments will not get delayed. Furthermore, such a strategy will guarantee
that the client has funds to make any future payments to the contractors.
4.3.3 Significance of the strategies that contractors can adopt to mitigate the consequen-
ces of delayed payments. Contractors can implement strategies to mitigate the consequences
of delayed payments. “Submitting timely and accurate invoices complete with all required
documentation (MR = 4.479)” was identified as the most suitable strategy that contractors
could adopt to mitigate the consequences of delayed payments. Mohamad et al. (2018) also
agreed that timely and accurate submission of invoices should be the most critical strategy
for contractors. “Charging interest on delayed payments (MR = 4.167)” was ranked the
second most significant strategy for the contractors, which will encourage paying damages
for delayed payments, allowed in many conditions of the contract. However, Enshassi and
Abuhamra (2015) had given a considerably low ranking for charging interest on delayed
payments. The reason for the poor ranking can be because of the confinement of the study to
Gaza Strip and some rankings are common to several strategies. Like the consultants, the
contractors can also practise “defining a time frame for the payment (MR = 4.104)”, which
was ranked the third most suitable strategy that can be adopted by contractors. Peters et al.
(2019) ranked the right to a defined time frame for payment as the fourth most important
remedy for reducing a delayed payment. The differences in the rankings can be due to the
focus of the study on small- and medium-scale contractors.
4.3.4 Significance of the strategies that non-stakeholders can adopt to mitigate the conse-
quences of delayed payments. By “introducing payment-related legislation (MR = 4.083)”,
clients will be required to comply with legislation and ensure that contractors receive timely
payments. However, Kumi (2016) found that legislation was less significant. Enshassi and
Abuhamra (2015) found payment-related legislation third in the significance. By
implementing Security Payment Act in Sri Lanka, parties, such as contractors, sub-
contractors and sub-sub-contractors, which are at the lower tiers of the construction supply
chain, will have the advantage of promptly receiving payments (Priyadarshani, 2018). In
this study, “getting professional bodies and government agencies to take the required
actions (MR = 4.042)” was ranked second in the significance. Other parties could adopt
“Solving disputes regarding the methods of measurements (MR = 3.745)”, which was ranked
third in the significance, to encourage fair and reasonable valuations and avoid unclear
methods of measurements.
JFMPC 5. Conclusions and recommendations
26,2 The study focussed on streamlining the management of payment delays in government-
funded construction projects. Accordingly, the factors that cause delayed payments in
government-funded construction projects, consequences of such delayed payments and
strategies that can be adopted to mitigate the consequences of such delayed payments were
identified. Issues relating to the budgetary allocations made by the treasury, slow
252 processing of claims, insufficient documentation and information provided for valuations
and legislative procedures were the most significant causes of delayed payments, for which,
clients, consultants, contractors and other parties, respectively, are responsible. The most
significant consequences of delayed payments affecting clients, consultants, contractors and
other parties are the delays encountered in completing the projects, the longer time required
to be spent on the project than what was planned, cash flow problems and the retardation of
the development of the country, respectively. The most suitable strategies the clients,
consultants, contractors and other parties must adopt to mitigate the consequences of
delayed payments are obtaining budgetary allocations in advance and updating the budget
based on variations/valuations, setting a defined time frame for payments, submitting
timely and accurate invoices with complete documentation and introducing payment-related
legislation, respectively.
The study contributes to theory by identifying the causes, consequences and strategies
relating to delayed payments in government-funded construction projects in respect of
clients, consultants, contractors and other parties. The study makes a theoretical
contribution by ranking these causes, consequences and strategies to indicate their levels of
significance. Further, it contributes to the existing knowledge by benchmarking the causes,
consequences and strategies related to delayed payments in government-funded
construction projects.
The study findings will be of value when developing action plans to mitigate the
consequences of delayed payments in government-funded construction projects based on
the rankings given to the relevant causes, consequences and strategies under different
categories. Furthermore, the classification of the causes, consequences and strategies under
clients, consultants, contractors and other parties will help to identify the causes and
consequences most relevant to a particular situation, so the most appropriate strategy for a
given situation can be identified to take the immediate remedial action. The study findings
will enable the government to understand the lessons learned and take appropriate
preventive actions in its future projects to mitigate the consequences of delayed payments.
The study findings will be only applicable to developing countries whose economic policies
and the degree of financial stability is similar to those of Sri Lanka. However, the causes,
consequences and strategies identified will depend on the country concerned due to specific
economic, financial and social and technological levels. Future researchers can develop
mechanisms to determine the inter-dependencies and inter-relations among the identified
causes, consequences and strategies.

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256 Further reading

Institute of Quantity Surveyors Sri Lanka (2019), “Members directory”, available at: www.iqssl.lk
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Corresponding author
Kaveesha Gihani Dewagoda can be contacted at: kaveesha.gihani.dewagoda@gmail.com

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