Development of payment performance assessment tools for the Nigerian construction industry

Abstract

The widespread of late and non-payment in the construction industry is increasing at an alarming rate. Many researchers have investigated these problems in many countries. However, most of the studies focused on solutions based on managerial/administrative approaches emphasizing the causes, effects, reactions, and impacts. Besides, many of them tend to see the solutions to the payment problems from a legal perspective. This has led to the introduction of the legislative Payment Act in various countries of the world. Despite the rampant occurrence of late and non-payment, none of the research has looked at the criteria and attributes for evaluating client’s payment performance in the industry. This study developed and validated the payment performance assessment tools on four selected organizations. Two methodologies, the Delphi method and Analytical Hierarchy Process (AHP) were used. After three rounds of inquiries with a panel of experts, a consensus was reached on organizational culture and payment performance attributes for public and private organizations. Moreover, Spearman Correlation was run for public and private client organizational culture, and the results revealed the existence of positive relationships between client’s organizational culture and payment performance attributes when the level of significance was one percent (r = -0.561, Sig. = 0.004). The payment performance assessment tools were developed by integrating organizational culture and payment performance attributes. The tools were calibrated based on consensus benchmarking, ranging from 0.00-0.69 as late payment performance, 0.70-0.98 as prompt payment performance, and 0.99-1.00 as absolute/ perfect prompt payment performance. Finally, the payment performance levels of the 4 organizations were evaluated, and the results showed that organization (A) obtained 0.88 point, organization (B) recorded 0.509 point, organization (C) had 0.945 and organization (D) obtained 0.114 point. None of the organizations fell into the absolute prompt payment performance category. However, two of these organizations experienced late payment performance and the other two had prompt payment performance. The findings showed that a strong organizational culture resulted in prompt payment performance and vice-versa. This research provides payment performance assessment tools for the construction community that will be useful for clients and contractors. Besides, the present findings provide insights into a client’s payment performance level. Based on the study, the clients should focus on supportive and innovative culture to achieve prompt payment performance and it is recommended that the study be extended across regions.