Effect of Delayed Interim Payment Certificate (IPCs) Payment Release on Success of Private Construction Projects in Pakistan

Abstract

Delays on construction projects is a major issue faced by construction industry throughout the globe, especially Pakistan. Delayed progress payments and interim payment certificate releases significantly disturb cash flow management on construction projects which may lead to delays, cost overrun and quality issues. Public projects have some means to mitigate this issue but no such framework exist on private construction projects. Hence there is need to identify what factors cause’s delays in progress payments (IPCs) and how they can be mitigated. For this purpose, 39 factors causing delay in progress payments and 7 possible mitigation strategies were identified from literature review. A two phase qualitative approach is used to analyze this data. In phase one, the 39 factors are shortlisted based on their mean score ranking. 15 factors were identified to have major role in causing delayed IPC and progress payments. Cronbach’s alpha analysis is performed to check the internal consistency of questionnaire. A value of 0.852 is achieved which shows good internal consistency. In phase two, the significant relation among the 15 major IPC delay factors and project outcomes (completion time, cost, and quality) is evaluated as well as role of mitigation strategies in mitigating the major IPC delay factors. Shapiro wilk test is used to check normality of the data. Due to the nonparametric nature of data, one sample Wilcoxon test is used for evaluation of significant relationship among major IPC delay factors, project outcomes, and mitigation strategies. Results conclude that time is the most effected outcome due to factors causing IPC delays, led by quality and cost. An Entity Relationship Diagram is developed based on combine results of both phases. It was also concluded that existing mitigation strategies are capable of mitigating majority of the major IPC delay factors except “retention as insurance against defects”, “wrong project and project delivery type selection”, and “errors in drawings and specifications”. Another astonishing conclusion based on the results of this study is that contrary to the common believe, retention amounts do not effect cost management of contractors directly but they do effect quality levels of the project product. Overall, the Entity Relationship Diagram provides complete picture of major factors causing IPC delays, their effect on individual project outcome in term of project completion cost, time, and quality, as well as role of identified mitigation strategies in mitigating/ resolving each individual major IPC payment delay factor.