PAYMENT PROBLEMS AMONG KENYAN CONTRACTORS: AN ASSESSMENT INTO THE CAUSES AND EFFECTS OF DELAYED AND NON PAYMENTS ISSUES

Abstract

This paper presents findings of the survey carried out among the general Building construction firms in Kenyabetween June and October 2012, forming part of my earlier work and my on going thesis. The main objectiveof this study was to assess the factors causing late and non- payment issues from both government and privatefunded projects and their effects to Building contractors in Kenya. In this study, a questionnaire survey wascarried out among randomly shortlisted building contractors within Nairobi County. The ministry of publicworks list of registered contractors in category A to F was used to shortlist a representative sample of 24respondents. The data collected was analyzed and the findings were then discussed. Based on literaturereviews, the following factors were found to cause the problem: Employer’s poor financial managementpractices, delays in certification, underpayment of the certified amounts, disagreements on the value of workdone, local culture/attitude, conflict among parties involved, contractor’s invalid claims and delays in releasingretention monies. The study also found out that the problem led to Contractor’s cash flow problems, stress,time overruns, negative social impacts, and abandonment of projects, disputes, bankruptcy and liquidationamong others. In conclusion, the study recommended the following remedies in securing payment debt; aright to regular periodic payments, a right to a defined time frame for payment, a right to speedy disputeresolution mechanism e.g. adjudication, a right to suspend work, mandatory creation of a trust account, a rightto lien and interest on late payments. In trying to solve this problem, some countries like the United Kingdom,Singapore, New Zealand and Australia have enacted construction specific legislations. It is the author’sconsidered view, that time is now right for the Kenyan construction industry to also consider taking this route.