Late payment to subcontractors in the construction industry

Bolton, Sam, Wedawatta, Gayan, Wanigarathna, Nadeeshani and Malalgoda, Chamindi (2022) Late payment to subcontractors in the construction industry. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 14 (4). ISSN 1943-4170

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Official URL: https://doi.org/10.1061/(ASCE)LA.1943-4170.0000552

Abstract

Late payment is a recurring issue in the United Kingdom construction industry. While the existence of the problem is well known, there is a dearth of quantified evidence on the extent of the problem from a subcontractor point of view. This research sought to quantify the extent of late payment and late release of retention and their effects on construction subcontractors in the UK. A research design including the analysis of payment data of 30 selected projects (355 payments) from a case study and a supplementary questionnaire survey with 21 subcontractors were used to investigate the issues. Late payment was observed in most of the case study subcontract projects (77%) and nearly half of the payments (46%), suggesting it is common practice. Statistical analysis showed that while there was no statistically significant link between payment delay and contract sum, subcontractors are likely to experience longer payment delays in projects with a higher number of payments. It was found that the late release of the second half of the retention posed an even more significant problem to subcontractors, with a considerable portion of the income (upward of 2.5%); sometimes the entire profit, being held up for nearly 2 months from the due date. The findings highlight that while the regulatory and contractual measures over time have sought to address the issue of late payment, it remains a prevalent issue and that subcontractors often fail to rely on such measures. This necessitates subcontractors to factor late payment into their cash flow planning. The authors suggest that the recent and proposed initiatives such as the project bank accounts, central retention deposit scheme, and smart contracts offer potential to mitigate payment delays.

Item Type: Journal Article
Keywords: construction, Sub contractor payment
Faculty: Faculty of Science & Engineering
SWORD Depositor: Symplectic User
Depositing User: Symplectic User
Date Deposited: 18 May 2022 12:50
Last Modified: 08 Jul 2022 11:21
URI: https://arro.anglia.ac.uk/id/eprint/707601

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