An Investigation into the Elongated Interim Payment Duration: A Proposal of Optimum Payment Duration

Abstract

Elongated interim payment duration in construction contracts persist due to factors of various natures. This study undertook the objective to identify these factors, to quantify the cost impact (if any) of elongated interim payment duration and consequently, to propose an optimum standard interim payment duration for traditional standard contracts published by Pakistan Engineering Council (PEC). A survey questionnaire was developed in Google Forms and was shared online through professional, social networking sites and experts were engaged by personally visiting their offices. Responses, contract agreements and IPC records of various projects were collected from local industry. Survey responses were collected from clients, consultants and contractors. The data obtained was analyzed using MS EXCEL and IBM SPSS Statistics Version 23. This analysis included Cronbach’s Alpha test for reliability of data, Shapiro Wilk test for normality of data, Kruskal-Wallis test to compare the opinions of clients, consultants and contractors and T-test to check the hypothesis adopted in this study that current 44 days’ duration of PEC contract as a maximum duration required for processing interim payments in industry. The study identified a total of 41 factors causing payment delays out of which 5 were found to be cause of elongated interim payment duration. These elongated payment duration’s factors came out to be time for verification of bill with consultant, time for payment of verified bill with client, involvement of too many parties, administration or bureaucracy and duration of project. The study found that no additional amount is included in bid price for elongated duration of interim payment. Also, the study concluded that maximum processing duration for interim payment certificates in industry is less than 44 days. Hence shortening of standard interim payment duration to 28 days, is preferable and more beneficial to the stakeholders. It is recommended that the duration of interim payment of contracts other than traditional contract should also be inquired about and the survey should be expanded to international industry as well.