An evaluation of contractors’ satisfaction with payment terms influencing construction cash fl ow

Henry Odeyinka, A Kaka

    Research output: Contribution to journalArticle

    Abstract

    Construction cash fl ow models developed in previous researches demonstrated thatcash fl ow profi les vary for differing procurement methods. However, the issue of whethercontractors are satisfi ed or dissatisfi ed with payment terms impacting cash fl ows indiffering procurement methods is yet to be investigated. This is the concern of this study.• The study identifi ed from literature, payment terms potentially thought to impactconstruction cash fl ow. Using a 6-point Likert-type scale, a questionnaire survey wasadministered to UK construction contractors in order to assess their level of satisfactionwith identifi ed payment terms infl uencing construction cash fl ow. Responsesfrom the survey, which focused on traditional and design and build procurement methodswere analysed using mean response analysis and one-way analysis of variance.• Results showed that while contractors were satisfi ed with most of the contractualfactors investigated under both procurement systems, they were dissatisfi ed with two ofthe factors, namely, time lag between entitlement to receive and actually receiving cashpayment and percentage of contract sum retained. This dissatisfaction calls for actionto consider devising alternative means of dealing with retention and delay payments.
    Original languageEnglish
    Pages (from-to)171-180
    JournalJournal of Financial Management of Property and Construction
    Volume10
    Issue number3
    Publication statusPublished - Dec 2005

    Keywords

    • cash flow
    • design and build contract
    • payment term
    • traditional procurement

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