IMPACT OF PAYMENT PROBLEMS ON THE PERFORMANCE OF MICRO, SMALL AND MEDIUM SIZE CONSTRUCTION CONTRACTORS

Purpose: Prompt payment has serious implication for the success of construction contracts, and this is particularly so where smaller construction contractors are involved since they rely heavily on cash flow to sustain their business operations. Despite the existence of contractual provisions and legislations, payment problems are still endemic in the construction industry. The study was therefore undertaken to investigate the causes of payment problems, and their impact on the contractual and business performance of micro, small and medium size construction contractors. Design/methodology/approach: Sixty-two (62) construction contractors in Akwa Ibom State in the micro, small and medium size category were surveyed using a well-structured questionnaire. Findings: The result reveals that the practice of pay-when-paid, delay in certification of interim payment, involvement of too many parties in the process of honouring certificate and failure to agree on valuation of work done rank as important factors responsible for payment problems. In addition, increase in the construction costs, decrease in contractors’ profitability and delay in project completion time rank as the major effect of payment problems. The study also concludes that there is no difference in the perception of micro, small and medium-sized firms on the impact of payment problems. Originality/value: In spite of the importance of smaller contractors in the construction economy of Nigeria, studies on payment problems affecting this financially weak and vulnerable segment of the construction sector are scarce. Investigation of the important factors responsible for payment problems would provide insight to construction industry stakeholders in devising mitigating measures. Overall, this will improve the efficiency, sustainability and viability of the construction sector.