AN EFFECTIVE PAYMENT FRAMEWORK FOR BUILDING WORKS IN EKITI STATE, NIGERIA

Abstract

In commercial contracts all over the world, payment for works, goods and services have always been a contentious issue, largely due to problems surrounding untimely payment and their consequent impact on cash flow. The problem is exacerbated in construction contracts because it is capital intensive in nature and requires that the construction contractor be paid on agreed terms in order to maintain regular cash flow and avoid insolvency. This research therefore examined the problems related to untimely payment with a view to developing a framework to facilitate effective payment so as to enhance construction project performance in Ekiti State. Primary data were collected through administration of questionnaire and interview schedule was conducted on Clients of public projects, Consultants (Quantity Surveyors and Architects) and Contractors. Secondary data on selected completed projects which included retention and final account payments and compliance to payment implementation policy among others were also obtained. Percentile was used to analyse the profile of the respondents and that of construction companies. Mean Item Score was used to assess the factors influencing untimely payments; the stakeholders preferred payment options; contractors’ level of satisfaction with payment terms and strategies for mitigating payment problems while Analysis of Variance (ANOVA) was used for the test of the hypotheses. Content analysis through qualitative software package called NVivo 11 version was used to examine the report on interview conducted on the problems, deficiencies and weaknesses associated with existing payment frameworks. The outcome of the results was harmonised and an improved framework was developed from interpreted results. The study revealed that inadequate finance (MS = 4.01), delay in payment by clients (MS = 3.82) and delay in settling claims (MS = 3.67) as the most significant factors influencing untimely payment. Completion to quality specification (MS = 4.04), timely project completion (MS = 4.02) and prompt payment (MS = 3.94) were found to be the most significant factors promoting timely payment. It was also revealed that stakeholders preferred payment options included advance payment and interim valuation (MS=3.77); interim valuation (MS = 3.61) and stage payment (MS = 3.54). While valuation interval (MS = 3.62), payment method (MS = 3.60) and percentage of contract sum retained (MS = 3.54) were found to be the most satisfactory payment terms to contractors. Furthermore, administrative measure, that is direct payment (MS = 4.16), build and safe security of payment scheme (MS = 3.89) and payment insolvency bond (MS = 3.76) was found to be the best strategy for mitigating payment problems. The study recommended the need to make direct payment to nominated subcontractors and suppliers to resolve retention and final payment; the need for joint escrow account to resolve and bridge time lag between entitlement to receive and actual receiving cash payment and payment of interest by clients for lateness in honoring payment certificate in order to ensure compliance to payment implementation policy. Finally, the improved framework developed for effective payment is strongly recommended for use in order to ameliorate payment problems for building works.