Payment culture in Malaysian construction industry

Abstract

Cash flow is the life blood of the construction industry and basically cash flow is majorly contributed by payment that gain. Unfortunately, late payment becomes a habit in the construction industry and this practice could turn the construction company to many implications such as bankruptcy, the higher the contract sum due to the risk, uncomfortable relationship between the payer and payee, disturbance supply chain and others. The objectives of this master project are to study the construction industry payment scenario, impact of late payment to contractors, to identify the factors of late payment in the construction industry and to identify methods for tackling late payment in the construction industry. Literature review by performing focusing on issues related to late payment and primary data were collected by distributing 100 sets of questionnaires based on convenience sampling. The collected data were analysed by using frequency distribution and relative important index. The results of the study show that the late payment is one of the most critical problems in the Malaysian construction industry. The majority of the contractor experienced late payment quite frequently and even beyond the stipulated term. The top 3 impact of the late payment problems is the negative chain effect on other parties, results in delay in completion projects and leads to bankruptcy or liquidation. The top 3 factors that contribute to the late payment problem are disagree with the valuation of work done, technical problem and conflict among parties involve. The top 3 method for tackling late payment problem are uses of technology, sector based approaches and fair and clear payments practice.