Record Details

The Nature of Payment Problems in the New Zealand Construction Industry

Construction Economics and Building

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Field Value
 
Title The Nature of Payment Problems in the New Zealand Construction Industry
 
Creator Ramachandra, Thanuja
Rotimi, James Olabode
 
Subject Engineering
Payment loss, Payment disputes, Liquidation,Construction Industry, New Zealand.
Construction Management
 
Description 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.
 
Publisher UTS ePRESS
 
Contributor —
 
Date 2011-06-20
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://epress.lib.uts.edu.au/journals/index.php/AJCEB/article/view/2171
10.5130/AJCEB.v11i2.2171
 
Source Construction Economics and Building; Vol 11, No 2 (2011): AJCEB; 22-33
2204-9029
 
Language eng
 
Relation http://epress.lib.uts.edu.au/journals/index.php/AJCEB/article/view/2171/2340
 
Coverage New Nealand
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Rights Copyright (c) 2011 Thanuja Ramachandra, James Olabode Rotimi
http://creativecommons.org/licenses/by/4.0