Mbachu, J (2011) Sources of contractor's payment risks and cash flow problems in the New Zealand construction industry: Project team's perceptions of the risks and mitigation measures. Construction Management and Economics, 29(10), pp. 1027-1041. ISSN 01446193
Abstract
Little research is focused on payment risks which constitute the biggest obstacle to adequate cash flow and the contractor's ability to successfully complete a project and maintain a viable business. To minimize risks and improve net cash flow in a project, the various ways in which the key stakeholders could contribute to the contractor's payment risks and cash flow problems (the 'problems') were investigated along with the mitigation measures. Using a two-stage descriptive survey method, pilot interviews were conducted with contractors, subcontractors, project managers, designers and quantity surveyors (the 'group'). A questionnaire was designed based on the constructs generated during unstructured pilot interviews and used to obtain feedback from 120 members of the 'group' through structured interviews. The feedback was analysed for risks using the multi-factor analytical technique. Results showed that employers were the most risky sources contributing 24% of the contractor's 'problems' in a project. The contractors and subcontractors were evaluated as being 'high' risk sources contributing 19% and 17%, respectively. The consultants and suppliers were evaluated as 'moderate' and 'very low' risk sources, respectively, with overall 37% contribution. Ensuring valid payment and variation claims that are supported with well-documented evidence was a key mitigation measure suggested for addressing the critical risk factors attributed to the 'group'. The findings could guide the project team's risk management efforts, especially on how to efficiently allocate the available resources to address the risk factors with a view to achieving more satisfactory outcomes and profitability in a project.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cash flow; mitigation measures; payment risks; project management; risk management |
| Index terms: | designer, New Zealand, project manager, quantity surveying, project team, project management, construction industry, risk management, profitability, risk factor, survey, cash flow, interview, subcontractor, questionnaire, evidence, mitigation, variation |
| Subjects: | financial risk, project management theory and practice, Geography, contractual condition, financial management, environmental hazards, industry analysis, practitioner, evaluation and assessment methods, data collection methods, risk assessment, profession, project delivery, economic analysis |
| Topics: | Contract Administration, Project Management, Geographical Context, Research Practice, Cost Management, Business Strategy, Sustainability, Roles and Professions, Risk Management |
| Descriptive scope: | 5 PCTEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here