The Nature of Payment Problems in the New Zealand Construction Industry

Delay and loss of payment is a serious problem in the construction industry of many countries. These affect the cash flow of contractors which is critical to meeting their financial obligations. Payment defaults by the principal leads to insolvency of contractors and in turn other parts of the project chain. In recognition of some of these problems, most countries have established payment-specific construction industry legislation and other contractual measures to mitigate the problems, but nevertheless the problem persists. In this context, the paper examines the nature of payment problems in the construction industry in New Zealand. It is part of a larger study, that seeks solutions to payment losses in the construction industry.The study uses two approaches; an analysis of liquidators’ reports, and an analysis of court cases involving payment disputes to determine the magnitude of payment problems on construction parties. The findings are presented using simple descriptive and interpretive analyses. The study finds that trade creditors are impacted negatively (payment delays and losses) by the liquidation of property developers, general construction and construction trade companies. 75% of trade creditors are unable to be paid fully by these categories of construction companies after liquidation proceedings. Liquidation proceedings take an average 18 months before they are finalised. The analysis of court cases found that 80% of payment disputes are between principals and contractors; with considerably significant percentage of disputes resulting in outright loss of payments. Only 40% of the cases are successful, in which case claimants are able to fully recover the amount in dispute. Payment losses are more prevalent in liquidation than delays and unlike in legal disputes, there is no security for those losses. The study finds that construction parties use remedies contained in the security of payment provisions within standard conditions of contract, and legislative documents

Causes of Payment Problems in the New Zealand Construction Industry

Payment delays and losses persist in the construction industry and continue to be a key concern to industry practitioners. Therefore an exploration of the key causes of payment delays and losses is undertaken in this study with the ultimate objective of seeking mitigating solutions. The study adopted a survey approach using an online questionnaire, administered to practitioners from the New Zealand construction industry, comprising consultants, head contractors and subcontractors. The data obtained was analysed using inferential statistical techniques, including comparing means and factor analysis. Factor analysis enabled clustering of the inter-related causes of payment delays and losses in order to find reduced number of causes. Accordingly, the study found that payment problems mainly relate to contractual issues, financial strength of industry players, disputes, short-comings of payment processes and ‘domino effects’. Among them, the financial strength of critical industry players was considered central to payment problems. The study concludes that any solution to these problems must address these primary causes, as a rational starting point. Thus procuring a feasible form of financial security at the outset of a project, and the pre-qualification of the financial status of critical project participants, were found to be significant in the mitigation of construction payment risks.Paper Type: Research articl

Causal relationship between project financing and overruns in major dam projects in Africa

Purpose Cost and schedule overruns are rife in dam projects. Normative evidence espouses overruns as though they are inimical to development and prosperity aspirations of stakeholders. This study examines the causal relationship between project financing and overruns. Design/methodology/approach Causative data were extracted from completion reports of 28 major dam projects in Africa. Each of the projects was financed jointly by up to 10 international development lenders. Relationships between causes of overruns and project outcomes were analysed. Findings Analyses elicit indicators of remarkable correlations between finance procedures and project outcomes. Lenders’ disposition to risk attenuation was the main debacles to project success. Interests had mounted, whilst release of fund was erratic and ill-timed. Finance objectives and mechanisms were grossly inadequate for projects’ intense bifurcations. Projects had slowed or stalled because lenders’ risks attenuation processes were purposed to favour lenders’ objectives, and not projects’ interests. In addition, findings also show project owners’ own funds and the number of lenders to a single project correlate with overruns. Practical implications Findings imply commercial complexities around major projects. They also show transactions are shaped by subtle (mis)trust behaviours in project finance procedures. Thus, scholarly solutions to project performance issues should consider behavioural issues of stakeholding parties more broadly, beyond contractors and project owners. Project finance ecosystems are vulnerable to major actors’ self-interests, opportunism and predatory conducts. Borrowers would manage this by developing and improving their capacity to build resilience and trust. Evidence shows intense borrower nations in Africa have limited capacity and acuity for these. Originality/value This study contextualises megaprojects in complexity rather than cost. Its additionality is in how finance steers absolute control of project environment away from project owners and how finance administration triggers risks and overrun

Quantity Surveyors’ Approaches to Minimising Uncertainty and Safeguarding Project Delivery

The unparalleled COVID-19 pandemic had a significant impact on supply chains, resulting in disruptions to construction activities and affecting various professions, including Quantity Surveying. This study aimed to determine the measures taken by the Quantity Surveying profession to minimise risks during the Covid-19 period that facilitated project delivery. The research employed both quantitative and qualitative approaches, involving the distribution of questionnaires and conducting interviews with practicing Quantity Surveyors. The data collected was analysed using the relative importance index for quantitative data and descriptive analysis for qualitative data. The study found that construction risk was the most significant risk, and it had a significant impact on project schedules. The risk mitigation strategy was the most employed risk reduction approach. The results also indicated that cooperation among contractors was crucial in meeting project deliverables

Direction Of The Causal Relationship Between Construction And The National Economy Of Sri Lanka

Causal relationships between construction and national economies have received considerable attention in the past. However, the results of research on this topic provide contrasting views about the nature of the relationship. This paper investigates the direction of the causal relationship between construction and the economy of a developing country, Sri Lanka, using empirical data for selected economic and construction indicators for the period 1990 to 2009. The pattern of the causal relationship was determined using the Granger causality test. The findings reveal that national economic activities precede construction activities for all indicators except construction investment. The study therefore concludes and strengthens the body of knowledge concerning the causal relationship between the construction sector in Sri Lanka and the national economy tending towards a uni-directional relationship, with the national economy inducing growth in the construction sector and not vice versa

Risk Management Capability for Risk Allocation in Social Infrastructure Public Private Partnerships: A New Zealand Perspective

The use of Public-Private Partnerships (PPPs) has become increasingly popular as an innovative way for procuring public infrastructure projects. One of the main reasons for this widespread adoption is the transfer and allocation of risks. Research has shown that fair allocation of risks is crucial for the success of a PPP. This study recognized the significance of fair risk distribution and examined seven crucial risk allocation criteria (RAC) along with 16 risks that are often improperly assigned based on previous research. An online questionnaire through Qualtrics was administered to experts who had prior involvement in three schools and two prison PPP projects in New Zealand to obtain data on risk management capability. The data collected from 43 respondents was analysed using mean score analysis. Relevant statistical tests such as Cronbach's alpha and independent sample t-tests were performed to ensure the accuracy of the analysis results. The objective of this study is to offer valuable insights to PPP stakeholders on the most efficient measures to achieve fair risk allocation and the state of risk management capabilities of public and private sectors in New Zealand. To accomplish fair risk allocation, the study proposes considering the risk management capacities of both the public and private sectors in the context of the identified RAC. The findings of the study are anticipated to aid PPP stakeholders in formulating strategies that can enhance risk management and establish a balanced distribution of risks

Construction project performance : the role of client knowledge and procurement systems

Creative Commons Attribution Non-commercial International Licence 4.0 (CC BY-NC 4.0)https://creativecommons.org/licenses/by/4.0/fals

Legislation for effective post‐disaster reconstruction

New Zealand is vulnerable to natural disasters. When disasters occur, the effects can be devastating on the built environment. As one aspect of a major programme of research in New Zealand, the authors address the recovery issue in terms of how legislation either facilitates or hinders reconstruction. The results of a survey to building control officers and other disaster practitioners in New Zealand on the application of the Building Act 2004 post‐disaster are presented in this paper. There are indications that the New Zealand Building Act 2004 will not be supportive or enabling in post‐disaster reconstruction environments, particularly in large‐scale disaster events. Key problems found were procedural constraints as a result of high consenting standards and logistic considerations. The desire is to create the best possible conditions that will encourage rapid rebuilding of lives and communities after large‐scale disasters in New Zealand and that can only be done within a supportive legislative environment. Santruka Infrastruktūros tinklai Naujojoje Zelandijoje platūs, miestai išbarstyti, tačiau tankiai apgyvendinti, tad stichines nelaimes gali pridaryti žalos. Tokios nelaimes gali nusiaubti gamtine ir užstatyta aplinka. Bendruomene tam turetu pasiruošti iš anksto, o ne pasikliauti operatyviu atkūrimo procesu po ivykio. Kaip viena iš Naujojoje Zelandijoje vykstančios stambios tyrimu programos aspektu autoriai pasirinko atkūrimo klausima ir ji nagrineja analizuodami, kaip istatymai padeda arba trukdo atstatymo projektams ir programoms. Iprastoms statyboms taikomi istatymai numato saugu infrastruktūros, kapitalo investiciju ir žemetvarkos pletojima, užtikrindami aplinkosauga, tačiau dažnai jie netinka atstatymo po stichiniu nelaimiu projektams. Šiame darbe pristatomi rezultatai, gauti apklausus Naujosios Zelandijos statybu kontroles pareigūnus ir kitus stichiniu nelaimiu specialistus del Statybu istatymo (2004) taikymo po stichiniu nelaimiu. Yra ženklu, kad Naujosios Zelandijos statybu istatymas (2004) nebus palankus arba sudarantis galimybes nuo stichiniu nelaimiu nukentejusioms teritorijoms atstatyti, ypač kai stichines nelaimes yra stambaus masto. Apklausos rezultatai rodo, kad tebekyla iššūkiai, kaip pagal ši istatyma atstatymo uždavinius ivykdyti veiksmingai. Daugiausia demesio tarp iškeltu klausimu skirta procedūriniams suvaržymams, susijusiems su aukštais kvalifikaciniais standartais ir kitomis logistikos aplinkybemis. Būtinas nemenkas demesys, norint taikyti Statybu istatyma reagavimo i nelaimes ir aplinkos atkūrimo srityje. Siekiama sukurti geriausias imanomas salygas, kurios skatins spartu gyvenamosios aplinkos ir bendruomenes infrastruktūros atstatyma po stambiu stichiniu nelaimiu Naujojoje Zelandijoje ir kurios imanomos tik palankioje teisineje aplinkoje. First Publish Online: 18 Oct 201

A rank order of determinants of construction organisation's performance in New Zealand

There are certain factors within and outside organisations that can influence organisational performance. The presence or absence of those factors impacts organisations' ability to gain a competitive advantage over their rivals. As a risk-prone business sector, construction organisations need to identify those determinants that could ensure their superior performance. To date, global studies have identified many determinants that govern the performance of construction organisations. However, few of these are known in New Zealand, and their weightings could be useful in forming business strategies. Therefore, this paper measures the significance of identified determinants of construction organisational performance. A total of 100 professionals participated in a questionnaire survey administered using a snowball sampling technique. The Relative Importance Index approach was used to rank the determinants according to their importance to organisational performance. Five main determinants were significant and ranked highly, with more than 80% relative importance index scores. These determinants are resources and capabilities, competitive strategies, organisational characteristics, environmental factors, and customers relationship management. This finding provides a useful benchmark for future research on the significance of some determinants that could explain the performance differentials experienced in the construction domain in New Zealand