Payment Woes among Contractors in Malaysia

Thye, Chun Fei (2020) Payment Woes among Contractors in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

Late and non-payment scenario has seriously plagued the construction industry and affects the contractor’s cash flow, thereby can have a devasting effect down the contractual payment chain. Eventually, PAM Contract 2006 (With Quantities) is widely used to manage contractual relationship between contractor and employer. This paper presents the findings of a study conducted amongst contractors in Malaysia with the aim to address the seriousness of late and non-payment problems, to study the root causes and consequences of late and non-payment and to recommend the possible solution in resolving the late and non-payment issues. The analysis revealed that root cause of late and non-payment issues with greatest significance is contributed by employer’s poor financial management, followed by technical problems or poor documentation, employer’s withholding of payment without valid reason, conflicts or poor communication between the employer and contractor, delay in certifications and disagreement on valuation of work done. Survey also shown that the consequence of suspension of works impose the most possible consequence of late and non-payment practices. It followed by determination of contractor’s own employment and claiming of interests. More so, the most possible solution in remedying the late and non-payment is by the adoption of adjudication (CIPAA 2012) and followed by arbitration, mediation and litigation. In summary, findings of this research may assist contractor in addressing problems associated to late and non-payment in an effective and timely manner, thus smoothen the contractors’ cash flow.