An Investigation of causes and effects of delayed payments to road contractors in Malawi for public funded road projects

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EBU5002 - DISSERTATION

RESEARCH REPORT

An Investigation of causes and effects of Delayed Payments to Road Contractors in Malawi for Public Funded Road Projects

Marking Tutor : Ron Smith

Submitted in partial fulfilment of the requirements for the Degree of MSC IN PROJECT MANAGEMENT

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ABSTRACT

Malawi is a landlocked country and roads are an integral part of the transportation system, therefore it is Government of Malawi’s priority that the road network is efficient so that it achieves both social and economic benefits to the country. Currently, the road network in Malawi is underdeveloped and the roads are not of international standard compared to neighbouring countries in the Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (Comesa) regional trading blocks to which Malawi is a member. Every year, the Government of Malawi commits substantial sums of money in the national budget to ensure development of the Road network and maintain the current roads to good standards to ensure continued and uninterrupted access to all corners of the country by all sectors of the society.

This effort by government to develop the road network is not without challenges. Delayed payments to road contractors have been a serious bottleneck in the successful implementation of road projects in Malawi. This is despite the reforms which were carried out in the Malawi Road Sector in 2005 which saw the creation of two separate bodies, the Roads Authority and the Roads Fund Administration with separate roles of administering the road network and managing funds for the road sector respectively.

This paper seeks to explore the causes and effects of delayed payments to Road Contractors in Malawi and has been confined to exploring the causes of delayed payments to only those projects which are funded from public coffers, using fuel levy by the Roads Fund Administration and appropriations from the government annual budget due to time constraints presented for carrying out the research.

Various findings have arisen from the research project and recommendations have been made accordingly to improve the current challenge of payment delays and mitigate resulting effects experienced by contractors and the general public.

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TABLE OF CONTENTS

ABSTRACT...2

ACKNOWLEDGEMENTS...vi

CHAPTER 1 - INTRODUCTION...1

1.1 Background...1

1.2 Problem Statement...2

1.3 Research Aim and Objectives...3

1.4 Research Questions...3

1.5 Justification for the Research...3

1.6 Limitations of the Study and Areas for Further Research...4

1.7 Structure of the Dissertation...5

CHAPTER 2 – LITERATURE REVIEW...7

2.1 Introduction...7

2.2 Main organisations involved in the road construction sector in Malawi...7

2.3 Successful project execution...10

2.3.1 The delayed payment concept...10

2.3.2 When does late payment occur?...11

2.3.3 Contributing factors to delayed payments to road contractors...11

2.3.4 The effects of delayed payments to road contractors...14

2.3.4.1 Solutions to the problem of delayed payments to road contractors...16

CHAPTER 3 – Research Design...19

2.1 Introduction...19

2.1.1 Research Philosophy...20

2.1.2 Research Approach...20

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2.1.4 Research Choice...21

2.1.5 Time Horizons...21

2.1.6 Techniques and Procedures...22

CHAPTER 4 - DATA COLLECTION, ANALYSIS AND INTERPRETATION...27

4.1 Data Collection...27

4.1.1 Questionnaire Administration...27

1. Road Contractors...28

2. Roads Fund Administration...28

3. Roads Authority...29

4. Consultants...29

4.2 Data Analysis...30

4.2.1 Causes Of delayed Payments...34

4.2.2 Effects of Delayed Payments...52

4.2.3 Solutions to delayed Payments...66

CHAPTER FIVE – CONCLUSION AND RECOMMENDATIONS...70

REFERENCES...1

Table of Graphs Graph 1- Causes of delayed payments (Contractors’ perspective)....36

Graph 2 - Causes of delayed payments (RFA’s perspective)...38

Graph 3 - Causes of delayed payments (RA’s perspective)...41

Graph 4- Causes of delayed payments (Consultants’ perspective)...44

Graph 5 - Causes of delayed payments to road contractors (all respondents)...45

Graph 6 - Effects of delayed payments (Road Contractors’ perspective)...54

Graph 7 - Effects of delayed payments (Consultant’s)...56

Graph 8 - Effects of delayed payments (RA’s perspective)...58

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Graph 10 - Effects of delayed payments to road contractors (all respondents)...61

Graph 11 - Solutions to delayed payments to road contractors (all respondents)...66

Table of Figures Figure -1 - Structure of Dissertation...6

Figure 2- Players involved in payment of certificate...9

Figure 3- Research Concept Map...18

Figure 4- Research “Onion” as adopted from (Tosey & Saunders, 2012)...19

Figure 4- Data Entry for received questionnaires...32

Figure 5 : Illustration of part of excel worksheet depicting how data was manipulated. .33 Figure 6 - Dissertation Work Plan...72

List of Tables Table 1- Analysis of arrears owed to road contractors...2

Table 2 - Summary of Sample Sizes...24

Table 3- Sample Size Calculation Worksheet...26

Table 4 - Scale of questionnaire responses...28

Table of Appendices Appendix 1 – Sample Research Questionnaire...1

Appendix 2: Excerpts of Interview with Roads Authority Senior Engineer...1

Appendix 3: Excerpts of Interview with Head of Finance for RFA...1

Table of Keys Key 1 - Legend to Graph 1...36

Key 2 - Legend to Graph 2...38

Key 3 - Legend to Graph 3...41

Key 4 - Legend to Graph 4...44

Key 5 - Legend to Graph 6...54

Key 6 - Legend to Graph 7...56

Key 7 - Legend to Graph 8...58

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ACRONYMS

RFA - Roads Fund Administration RA – Roads Authority

NCIC – National Construction Industry Council Government of Malawi – GoM

IPC – Interim Payment Certificate HoA – Head of Audit

HoF – Head of Finance

NRA – National Roads Authority PPP – Public Private Partnership

ANRP – Annual National Roads Programme SE – Senior Engineer

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ACKNOWLEDGEMENTS

To come up with this paper, I am indebted to various people and organisations who provided me with the necessary assistance during the course of the research. Special mention should go to my supervisors, Ron Smith and Peter Chiligo who provided the necessary guidance during the course of the research.

Special recognition should go to all Road contractors, Consultants, the Roads Authority and Roads Fund Administration staff who took time to respond to the questionnaires and provided time for interviews.

To my wife Blessings and daughter Joan, they deserve my sincere and heart felt appreciation for the moral and physical support rendered to me during the time they sacrificed the usual family union that coexists on a daily basis to give me free and uninterrupted time to concentrate on the dissertation.

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AN INVESTIGATION OFCAUSES AND EFFECTS OF DELAYED PAYMENTS TO ROAD CONTRACTORS IN MALAWI FOR PUBLIC FUNDED ROAD PROJECTS

CHAPTER 1 - INTRODUCTION 1.1 Background

Malawi is a landlocked country and heavily relies on road transport for both internal access between the country’s three regions and external access to its neighbouring countries of Zambia, Mozambique and Tanzania. The official road network for Malawi covers a total distance of 15,451km.

This road network is not fully developed, with only 4,045 km i.e. twenty seven percent (27%) of the total network being paved (Road Network, n.d).

To this end, Malawi government has focused on road network expansion as a national public sector investment program. This is backed by the Malawi Growth and Development Strategy (MGDS) which identifies transport infrastructure as a priority area for public investment, (Government of Malawi, 2010).

Critical to this road network development is the effectiveness of the construction industry in carrying out its functions. One key player in the construction industry is the road contractor. To ensure effective delivery of projects, and for good health of the contractors business, it is imperative for contractors to have smooth cash flow (Hunter, 2012). Good cash flow is fundamental in the development and sustainability of a healthy and competitive construction industry (Robertson & Maritz, 2012).

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Apart from the Roads Fund Administration and the Roads Authority, the other key player in the road sector is the government of Malawi which provides funding for road constructions through parliamentary appropriations.

1.2 Problem Statement

Despite the well set up arrangement in the Malawian road construction industry, there are many challenges which are faced and need to be overcome. One of the problems is delayed payment to contractors. Many contractors in Malawi experience delays in getting paid for work done (Mazengera, 2009).

According to Gara & Hawkins, (2014), as at 30 June 2014, the Malawi government owed road contractors and other players in the industry for work done, a total sum of Twenty Seven Billion, Four Hundred Twenty Million Kwacha(MWK27.42Bn) , an equivalent of Six Eight Million, Five Hundred and Fifty Thousand Dollars ($68.55Mn), where 1USD=MWK400. The sum includes actual amounts claimed for work done plus interest charged on the delayed payments.

An analysis of the evolution of the arrears as at 30 June 2014 revealed that the amount outstanding dated as far back as the fiscal year 2009/2010 as depicted in the table below:

Financial Year Amount of Arrears

2009/2010 $13,073,119

2010/2011 $28,673,435

2011/2012 $27,477,520

2012/2013 $21,256,107

2013/2014 $68,550,400

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A review of selected 50 contractor certificates for major road projects for the five year period between 2009 and 2014 showed that 25% of the certificates were delayed by exceeding the agreed contract payment period of 45 days from date of logging a certificate by the contractor to payment date by the Roads Fund Administration.

Late payment challenges are considered to affect many players in the local construction industry and are referred to as financial problems by those affected by it, whether in public or private funded projects (Abdul -Rahman et al. 2006).According to Huse, 2002, timely payment of contractor certificates ensures the well being of contractors.It is therefore imperative to ascertain the key factors causing delays in payments to contractors in the context of public funded projects and establish the resulting effects of these payment delays.

1.3 Research Aim and Objectives

The research seeks to investigate the causes contributing to the delayed payments to road contractors in Malawi and the resulting impact of this delay and develop solutions to address the causes of delayed payments.

Specifically, the research will address the following two objectives:

1. Establish the causes of delayed payments to road contractors in Malawi 2. Establish the effects of delayed payments

1.4 Research Questions

In order to realise the specific objectives of the study, the following questions will be answered:

1. What are the causes of delayed payments to road contractors in Malawi? 2. What are the effects of delayed payments to road contractors in Malawi? 1.5 Justification for the Research

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challenges of project management implementation and how to deal with them in relation to payments to contractors.

Practically, the research will help the road construction industry players; RA, RFA, Contractors and consultants to resolve current concern of delayed payments to contractors being experienced in Malawi which has led to the Roads Fund Administration and the Government of Malawi paying huge sums of money in interest to road contractors for delayed payments, monies critical to national road network expansion as well as for maintenance and rehabilitation of roads. From the results of the research and its recommendations, it is hoped that all parties in the road construction sector will take necessary strides to eliminate the factors causing the payment delays.

1.6 Limitations of the Study and Areas for Further Research

The constraints encountered when undertaking the research are as follows:

 Limited finances to carry out the research, with every resource being financed by the researcher resulting in limiting the tests to only a sample of a population of current contractors carrying out works;

 Limitation to information accesses as some institutions did not cooperate to provide institutional information for privacy reasons and lack of trust on the use to which the research findings would be put. Therefore information was only sought from institutions which were readily available and were willing to give the information.

 Longitudinal effects: Time available to investigate the research problem was constrained by the fact that this is an academic research and formed part of an assignment to attain an academic qualification therefore it had a due date and the research could only be conducted within this time to meet the deadline. It is also worth noting that the research was conducted within the researcher’s free time as he is fully employed and fully attending to work at the time of doing the research.

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questionnaires were expensive as such supplementary methods such as emails were used to administer questionnaires.

 The research approach use of mixed methods using questionnaires and interviews to collect both quantitative and qualitative data but the questionnaire fell short of collecting qualitative data, with most of the respondents only tackling the quantitative questions and not providing qualitative information in the sections provided for this.

Although the research only concentrated on causes and effects of delayed payments to contractors, this does not exhaust possible research areas relating to the road construction industry. There is potential for further research on other areas in the sector such as investigation into factors leading to high rate of project success for donor funded road projects compared to public funded road projects in Malawi.

1.7 Structure of the Dissertation

This paper has been structured in such a way that it has various chapters with particular subheadings within them. The reason for this structuring is to enhance clarity of the important issues discussed in the paper. These chapters are linked to one another and should be read as such throughout this report.

Figure -1 below depicts the dissertation structure which will be followed in the subsequent sections of the dissertation. This has been included to give the researcher advance knowledge of the framework of the research.

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1.1. Background

1.2. Problem statement

1.3. Justification for the research 1.4. Purpose of the study

1.5. Specific Objectives

1.6. Limitations of the study and areas for further research 1.7. Structure of the dissertation

Chapter 2 – Literature Review 2.1 Summary of general theory 2.2 Review of previous work

Chapter 3 – Research Design and Methodology 3.1 Research philosophy

3.2 Research Approach 3.3 Research Strategies 3.4 Research Choice 3.5 Time Horizons

3.6 Techniques and Procedures

Chapter 4 – Data Analysis and Findings 1.1. Questionnaire Administration

1.2. Data Entry and Analysis 1.3. Causes of Delayed Payments 1.4. Effects of Delayed Payments 1.5. Solutions to Delayed Payments

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CHAPTER 2 – LITERATURE REVIEW 2.1 Introduction

The following chapter critically reviews the existing literature related to the research topic of delayed payments to road contractors undertaken by other researchers. A literature review is an evaluative report of information found in the literature related to a selected area of study (unknown, n.d). The concept map for the research formed a guide in the literature review section of the research project. Refer to Figure 3 for the research concept map.

The literature review was carried out through books, Project management and engineering journals, conference papers, academic and masters theses, internet, newspapers and books in order to identify factors which are responsible for causing delays in making payments to road contractors and the effects the delayed payments have on the contractors and the construction industry as a whole. The sources used are secondary because of their ease to locate (Saunders, et al., 2009).

A wide range of studies on problems facing contractors in the construction industry have been undertaken in several countries, with some researchers specifically tackling the issue of delayed payments in the construction industry in their countries, emphasizing that this challenge is not only in Malawi but spread throughout the world.

2.2 Main organisations involved in the road construction sector in Malawi To ensure the understanding of the payment system in the road construction industry, below is a summary of the brief roles of the main players in the industry:

1. The Roads Fund Administration

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The organisation is responsible for making all payments to contractors for road works and reports to the minister of finance. The sources of revenue for the Roads Fund Administration are road tolls levied on international transit vehicles for using Malawi Roads, fuel levy paid by all fuel buyers as a percentage of the fuel pump price, and parliamentary appropriations through the national budget. The Roads Fund Administration, together with the Roads Authority, as explained below, is the client in the road construction projects in Malawi.

2. The Roads Authority

The Roads Authority (RA) is a statutory body which was formed in 2006 through an Act of Parliament no.3 of 2006 as a direct result of the road sector reforms in Malawi as highlighted above. Its function is to manage the road network in Malawi. The Roads Authority reports to the ministry of Transport and Public Infrastructure.

Annually, the Roads Authority prepares an Annual National Roads Programme (ANRP), and engages consultants and Works Contractors to carry out road works as outlined in the ANRP. The Roads Authority is therefore the client in road construction projects together with the RFA as above.

Approval for payment to road contractors for work done is by the Roads Authority itself, and the payments are made by the Roads Fund Administration.

3. Road Contractors

These are employed by the Roads Authority and are the executors of the road works contracts and perform their work in line with the contractual agreements with Roads Authority.

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executed over a specified period of time. The Road contractors prepare certificates for payment for work done.

4. Consultants

These, like the contractors enter into contract with the Roads Authority to act and represent fully the Roads Authority, and to administer the construction contract and ensure its full compliance by the road contractors. Just like contractors, the consultants are paid for the work they do on behalf of Roads Authority.

Consultants are involved in the payment process of contractors by certifying the work done by contractors including the quantities being claimed by the contractors.

Figure 2below illustrates the various players involved in the payment chain of certificates for road contractors. It is important to note that the positioning of the organizations in the chain is not a hierarchy and does not in any way represent the importance of the organizations, but rather the stages at which the organisations are involved in the payment process.

Figure 2- Players involved in payment of certificate Contractor

Consultant

Roads Authority Roads Fund

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2.3 Successful project execution

For a project to be executed successfully there is need among many things to effectively allocate and use the available resources (Munns & Bjeirmi, 1996). Almost all project resources, including human, machinery, materials etc., depend on the availability of cash.

According to Cantoria, 2011, managing cash flow in construction projects is a vital aspect of project management’s implementation plan. Without proper cashflow, implementing a project would be a challenge. According to Al-Joburi et al., 2012, cash flow impacts every aspect of construction projects’ implementation process and cash shortages can lead to project failure and business bankruptcy. In Ghana, studies indicate that delayed payments to contractors contribute to poor cashflow forecasting on the part of Ghanaian road contractors, thus affecting successful implementation of road projects (Amoako, 2011). This challenge is still prevalent today, and even faces Malawian Road contractors.

2.3.1 The delayed payment concept

Important definitions pertaining to key research terminology has been included below: 1. Payment

As per the Oxford Dictionary, payment is defined as the action or process of paying someone or something or of being paid.

2. Interim Payment

This is payment certificate issued before the final certificate payment. Such payments are meant to assist contractors to overcome cash flow problems and provide a source of self-financing in respect of their own commitments to suppliers and sub-contractors (Deen, 2011).

3. Advance Payment

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4. Late or delayed payment

This is defined as failure of a paymaster to pay within the period of honouring of certificates as provided in the contract (Harris & McCaffer , 2003)

5. Interest on delayed payment

This is interest paid to contractors calculated on contractor’s delayed certificates meant for payment. According to the special conditions of contracts between road contractors and the RA, this amount is calculated as a percentage of the outstanding amount using the prevailing commercial bank lending rates and is compounded on a monthly basis.

2.3.2 When does late payment occur?

According to Roads Authority, (2012), the general conditions of contract for road projects between the Roads Authority and all road contractors stipulate that payment of certificate for road and related works to a contractor is within forty five (45) days from the date it is passed on to the consultant by the contractor. Within these 45 days, the certificate is supposed to change hands from consultant to Roads Authority who checks and approves the certificate for payment and send it to the Roads Fund Administration for eventual payment. If the certificate is not paid within the above stipulated 45 days, then delay is deemed to have occurred in paying a contractor.

2.3.3 Contributing factors to delayed payments to road contractors

Various literature reviewed identify several factors contributing to delay in making payments to contractors.

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average, 53 days after tendering of invoices or application for payment (Johnston, 1999).

Malawian contractors have been faced with the same problem of delayed payments like their international counterparts. According to Gara & Hawkins, (2014), as of 30th June

2014, the government of Malawi owed contractors for carrying out various infrastructure projects money in excess of USD56.2million, with some of these arrears spanning over two years.

Their study revealed that the arrears (delayed payments) arose due to cashflow challenges which came about due to the flowing factors:

a) Inability to provide funds envisaged in the budget

This arose due to failure to achieve levels of targeted revenue generation in the budget. This is attributed to poor financial planning and budgetary provision for projects.

b) Committing to expenditure beyond that provided for in the budget

Payments to road contractors sometimes exceed the budgeted funds due to price escalations and interest charges on late payments thus eroding the budgeted funds leading to delays in making payments.

c) Procedural weaknesses leading to failure to make payments

According to Laryea, (2010), payment problems to contractors in Ghana result from cumbersome payment procedures, with the payment structure very beaurecratic and complicated making release of payment such a big problem. In some cases the Ministry of Finance asks contractors to account for previous monies paid before another payment is made.

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Although beauracracy was coined with an aim of ensuring that large organisations are managed properly and are able to achieve efficiency and be accountable to people, inefficiencies in the systems have made beauracracy an enemy of contractors and other business players in industries. According to Max Weber bureaucracy is the ideal and rational type of administration useful for achievement of positive results. However, he notes the dysfunctions of bureaucracy due to excessive application of its guiding principles by office holders, negatively imacting on on social and economic development especially in poor countries.

According to Arab News, (2013), in Saudi Arabia, the causes of delayed payments to contractors apart from beauracracy also include lack of compelling legislation to protect contractors from clients who delay payments. The system in Saudi Arabia requires contractors to implement projects as long as the contract has been signed, even if the payments are delayed. This does not empower the contractor to force client to make timely payments through abandonment of work since will be deemed to have failed the contract and be sued for damages.

Research done by Ali et al.(n.d), found that one of the factors which contribute to late payment to contractors is the economic conditions especially during economic crisis. Economic conditions have an impact on the client’s cashflow impacting on the ability to make payments, thus delaying payments to contractors.

According to Ngwaluko, (2013), contractors are faced with problems of payment due to the use of manual payment system. Manual payment system is slow as it involves personnel moving files between offices and any delay by one person affects the whole payment chain.

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According to Donkor,( 2011), the following factors contribute to delays in making payments to contractors for donor funded projects in Ghana:

 Lack of proper feasibility studies into the availability of finance to complete a project.

 Variations are made on project without taking serious consideration of its financial implication.

 The number of signatures that must be appended to the documents.

 Late preparation of certificates

 Inability to provide funds, due to poor budgetary allocation and mismanagement of funds

 Late variation of valuations

 Inaccuarate bills of quantities

 Slow coordination and seeking of approval from concerned authorities

 Delay in work apprpoval

 Lack of communication

 Poor contract management

 Liaison problems among contracting parties’

 Client’s cashflow problems

 Bribe paid before certificate is signed

 Inadequate supporting documents

All these factors will be assessed via a survey to determine if they also contribute to delayed payments to Road Contractors in Malawi.

2.3.4 The effects of delayed payments to road contractors

Literature reviewed pertaining to the effects of delayed payments to contractors revealed a wide range of impacts from financial to socio-economic challenges. Ten main effects were identified from the literature reviewed.

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critical and is one of the greatest factors which contribute to delays in completing projects.

According to Latham, (1994), delayed payments to contractors will not only cause delays in completing projects but also has the potential effect of forcing contractors out of business and getting bankrupt. In America, the bankruptcy of Truland, a large electrical contractor was attributed to delayed payments to the contractor by the main client of the project(Sernovitz, 2014).

Apart from the contractors themselves, other parties who are connected to the contractors in one way or another also suffer because payment delays to the contractors. According to Obeidat, (2014), delayed payments to road contractors in Jordan has led to contractors to be unable to pay their obligations to banks and the salaries of their employees. This is similar in Ghana, where studies on effects of delayed payments to contractors revealed that late Payment will cause severe cash flow problems especially to contractors, and this would have a devastating secondary effect down the contractual payment chain(Amoako, 2011).

The other effect of delayed payments to contractors is reputation damage to contractors due to delayed completion of works or abandonment of works due to the delayed payments which impacts on their cashflow and ability to perform their work(Gara & Hawkins, 2014).

The construction industry is also faced with disputes between clients and contractors with various factors contributinng to this, one being the issue of delayed payments. This leads to high advesrary between client and contractor and leads to negative effects on the project success(Muhamid, 2014).

Apart from the reputation damage identified above, Gara & Hawkins, (2014), in their report of assessing public arrears and liabilites generated from contracts in the Road Sector in Malawi, they identified a number of other impacts of delayed payments to road contracors in Malawi as listed below:

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2. Create Negative Chain Effect on other Parties 3. Create Cash Flow Problems

4. Cost overrun

5. Result in Delay in Completion of Projects 6. Lead to Bankruptcy or Liquidation

7. Lead to Abandonment of Projects

8. Result in Formal Dispute Resolution e.g. Litigation/Arbitration 9. Create Negative Social Impacts

These impacts of delayed payments are in tandem with what other studies studies in countries outside Malawi found and the research will seek to establish if these impacts/effects are still relevant to the Malawian road contractors.

2.3.4.1 Solutions to the problem of delayed payments to road contractors According to Prism, (2013), acknowledgement is made that delayed payments is a norm in every line of business but recognises that the construction industry is unique due to its complex nature of contracting and sub contracting, as such there is need to have legislation to give guidance on payments to contractors. This, it is argued should help to bring fairness to both parties because in the absence of legislation to enforce payment, the only beneficiary is the entity withholding the payment as it reduces its need for bank financing.

Coordination is another critical element to ensure payment delays are eliminated. Clients, Consultants and Contractors should consider the project as their own and should coordinate effectively to ensure smooth flow of communication among the contracting parties(Donkor, 2011).

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Charging interest on delayed payments is another option available to the contractor. Accroding to Huse, (2002), charging interest on delayed payments will act as an incentive to the clients to make timely payments to contractors since interest charges apart from affecting client’s cashflow, they also are an expense and increases the client’s expenditure beyond his budget.

Studies undertaken by Zou, (2006), revaled that in order to combat corruption in the construction sector, “there is need to strengthen the management of the construction market through development of laws and regulations, and development of a transparent work process as well as providing ethical and technical education to the related personnel”.

2.3.5 Conceptual framework

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CHAPTER 3 – Research Design 3.1 Introduction

This chapter deals with the research design employed in undertaking the research project. When planning for any undertaking, it is imperative to properly set out a plan in order to ensure that its execution is carried out in an orderly and logical manner. The plan or design acts as a framework upon which the whole undertaking is carried out from start to finish.

To ensure important elements of the research are not missed out, (Tosey & Saunders, 2012), propose that the researcher should use the research onion as depicted in Figure 4 below.

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By following the research onion from its outermost layer to the innermost layer, the research design was systematically followed as outlined in the below sub headlines.

3.1.1 Research Philosophy

The first layer of the research onion depicts the research philosophies which can be adopted for carrying out research. Saunders et al., 2009, identifies two main philosophical perspectives for business research as positivism and interpretivism.

According to Williams, 2011, the basis of positivism philosophy is the highly structured methodology to enable generalization and quantifiable observations and evaluate the result with the help of statistical methods, while the interpretive philosophy believes that the social world of management and business is too complex as to be formulated in theories and laws such as in the natural science. According to Johnson & Christensen, 2012, with the interpretive philosophy, there are many truths to a simple fact and these are relevant for every situation and research problem.

For the purposes of this research, the philosophy which was adopted is interpretivism. This philosophy was chosen because the researcher believes that there are many truths to the research questions relating to delayed payments to road contractors and the effects this has on them supported by the fact that different players have different perspectives to the same situation.

According to Saunders et al., (2007), “the most important determinant of the research philosophy adopted is the research question with one approach better than the other in answering particular research questions”.

3.1.2 Research Approach

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3.1.3 Research Strategies

Due to the need to collect data from different sources in the construction industry, the research combines two strategies which are important to produce the most relevant data for conducting the research. These strategies are survey and case study and have been explained in the sub sections below.

3.1.3.1 Case Study

For the research, two organisations have been chosen as the case study institutions and these are:

1. The Roads Fund Administration 2. The Roads Authority.

These two organisations are very significant for the research for the role they play in the payment process to road contractors as highlighted in in chapter 2.

3.1.3.2 Survey

Survey research was adopted for the list of contractors and consultants. Surveys are used to obtain up to date information on public opinion to various topics. According to Saunders et al., 2009, surveys, as a data collection method, are popular because they allow large amounts of data to be collected in a cost effective manner.

3.1.4 Research Choice

The research onion’s fourth layer outlines various research choices available to the researcher when carrying out research. The researcher shall use mixed methods to ensure both numeric and non-numeric data is captured for use in quantitative and qualitative analysis.

3.1.5 Time Horizons

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horiszon looks at a snapshot of events at a particular time, while as a longitudinal time horizon looks at a series of events over a long period of time.

As can be seen in Figure 7, the research was conducted by following a plan which was largely based upon the limited time available as per the University of Bolton Time Table.

3.1.6 Techniques and Procedures

The research employed the use of interviews and questionnaires for data collection for the research. Refer to appendices section for sample questionnaire (Appendix 1) and interview excerpts (Appendix 2 and Appendix 3).

3.1.6.1 Sample Size for Road Contractors

The total list of road contractors who had been awarded contracts by the Roads Authority in the first half of the financial year beginning 1 July 2014 was obtained from the Roads Authority. The list included civil contractors in all the categories of contractors as specified by the National Construction Industry Council. The total for the population was 105.

The research concentrated only on these current financial year contractors other than all the registered contractors with the National Construction Industry Council because these were the proven active contractors at the time of starting the research and thus were deemed more relevant to the research considering that they can be traced and accessed easily to meet the limited time available for the research.

A determination of the sample size was made using published tables from Research Advisor from the link http://research-advisors.com/tools/SampleSize.htm. According to Israel, (1992), another way of determining sample size is to rely on published tables which provide a sample size for a given set of criteria.

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Population size = 105 Confidence level = 95% Margin of Error = 5%

The required minimum sample size is 83. Refer to Table 3 for the sample size calculations.

Determination of the actual respondents to be selected for purposes of administering questionnaires was made using simple random sampling. The total list of the road contractors obtained (population), was tabulated on an excel worksheet and given numbers from 1 to 105, and using Microsoft Excel random function, “=RAND ()”, 83 contractors were selected.

3.1.6.2 Sample Size for Roads Fund Administration

Purposive, non-probability sampling was used to select the sample in this case study organisation. This is because not every employee in the organisation is involved in the processing of contractor certificate payment and thus not all employees would have knowledge of factors that contribute to delayed payments to contractors or the impact this has to the contractors.

In total, the key personnel involved in the processing of contractor certificates for payment were eleven (11). This includes 3 engineers who work as technical auditors and eight accountants. Thus the total population for the Roads Fund Administration for the research is 11.

The Sample Size for the Roads Fund Administration, using the published tables as explained above gave a sample size of 11, where

Population size = 11 Confidence level = 95% Margin of Error = 5%

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3.1.6.3 Sample Size from Roads Authority

Just like with the Roads Fund Administration, non-probability sampling was used to select the sample. Emphasis was placed on the engineers who are involved in the payment process, and these totalled 14. Using the published table as per Table 3, at confidence level of 95% and Margin of error of 5%, this gives a sample size of 14.We selected all the 14 engineers and sent them questionnaires to respond.

3.1.6.4 Consultants

The total list of active consultants who were engaged by the Roads Authority in the first half of the financial year beginning 1 July 2014 was obtained and these in total were 7.

We limited our population to only these active consultants due to challenges of accessibility for those consultants who are not active. This was intended to ensure that accessing them is easier considering the limited time available for conducting the research and reporting the results thereof.

Using the published table as in depicted in Table 3, the total sample size for consultants at confidence level of 95% and margin of error of 5% is 7.All the 7 consultants were selected and questionnaires were administered to them.

Below is the summary of the sample sizes for each target of respondents for the survey

Target Respondent Sample Size

Road Contractors 83

Roads Fund Administration 11

Roads Authority 14

Consultants 7

Table 2 - Summary of Sample Sizes 3.1.7 Research Ethics

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participants of any research is the confidentiality of their identity as well as unauthorized use of information provided for the research, just to name a few.

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CHAPTER 4 - DATA COLLECTION, ANALYSIS AND INTERPRETATION

This chapter deals with data collection for the research and explains how the methods and procedures mentioned in chapter 3 were practically used in the data collection. Further, the chapter addresses the subject of data analysis for the collected data and lastly how the results of the analysis were interpreted.

The research employed both quantitative and qualitative techniques to analyse the numerous multifaceted numeric and non-numeric collected data. Microsoft Excel was used to carry out the data analysis owing to the simplicity of the application to analyse data to suit the requirements of the research.

4.1 Data Collection

The data for the research was sourced through questionnaires, literature studies of reports from Roads Authority and Roads Fund Administration, Contract documents, other government documents and the internet relating to the construction industry and interviews with various personnel in the sector.

For the collected data to be meaningful, it must be converted into a form that makes sense to the readers of the research report because in its raw form, data is meaningless. This therefore requires that data collected is analysed and interpreted to provide answers to the research questions and address the research objectives.

4.1.1 Questionnaire Administration

Questionnaires were administered to all the four categories of respondents, i.e. contractors, Roads Authority, Roads Fund Administration and Consultants.

The questionnaire contained 4 sections. Section 1 was for general information while sections 1 to 3 addressed the research questions and specific research objectives as explained in chapter 1. Specifically, the questionnaire was structured as follows:

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2. Section 2 - Causes of delayed payments 3. Section 3 – Effects of delayed payments 4. Section 4 - Solutions to delayed payments

The questionnaire was designed to carter for both quantitative and qualitative data collection. For the quantitative section, structured questions with prelisted answers were asked to the respondents and the respondents were required to rank their responses on a scale of 1 to 5 with the scales standing for the following as in table below:

1 = Very Low 2 = Low 3 = Medium 4 = High 5 = Very High

Table 4 - Scale of questionnaire responses

After the quantitative questions in each section, there followed qualitative questions whereby respondents were asked to provide their own explanations to the issues in the questionnaire, over and above the prelisted answers provided in relation to the questions asked. This was intended to capture data not captured in the quantitative sections and also to get more explanations to the quantitative questions asked. A sample questionnaire has been included in appendix 1.

The questionnaires were administered to all the categories of respondents as below: 1. Road Contractors

From the sample of 83 contractors, questionnaires were sent to all the 83 contractors via email and physical delivery as a hard copy. Out of these 83 contractors, a total of 40 contractors responded to the questionnaire and the remaining 43 did not do so even after following up with them and sending reminders. The total questionnaires responded to represents a response rate of 72% of the total sample size of contractors chosen for the research.

2. Roads Fund Administration

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3. Roads Authority

Electronically and manually, questionnaires were sent to all the 14 selected engineers at Roads Authority. Out of these 14 questionnaires, only 10 were returned. This represents a 71% response rate.

4. Consultants

As is similar with the other respondents, questionnaires were sent electronically and manually to all the 7 consultants in the sample and all of them returned the questionnaires, representing a 100% response rate.

To ensure all the target respondents to whom questionnaires were sent are remembered, an excel worksheet was opened where all the target respondents to whom questionnaires were sent were recorded. The excel worksheet contained the names of the respondents, their email address, contact telephone numbers and physical address, the status of questionnaires sent i.e. returned or not returned. This ensured all questionnaires were tracked. Upon being returned by the respondents, the questionnaires were filed to safeguard them from being lost.

4.1.2 Interview with RA and RFA employees

The other technique involved interviewing employees of Roads Authority and Roads Fund Administration, being the main players in the payment process of certificates as explained in chapter two. Meetings were booked with four people, two from each organisation and confirmation was only received from two people, each from RA and RFA and these were finally interviewed.

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4.2 Data Analysis

The quantitative data collected from the various respondent categories was analysed by following the below steps:

1. All the questionnaires collected from respondents were grouped into their categories according to the type of respondent i.e. contractors, consultants, Roads Authority and Roads Fund Administration. After this grouping, each questionnaire was given a code to ensure that it is unique and that once it has been entered into the excel worksheet, it should not be entered again to avoid duplicating data for the analysis and thus getting wrong results for the research. The contractor’s questionnaires were given codes from contractor 1 to contractor 50. The consultant’s questionnaires were given codes from Consultant 1 to Consultant 7. Similarly for the Roads Fund Administration questionnaires, these were coded from RFA 1 to RFA 11, and the Roads Authority questionnaires were coded from RA1 to RA 10.

2. After the first step, a worksheet in excel was created for data entry. All the data from the questionnaires collected was entered into this excel worksheet to establish the number of responses for each section of the questionnaire from the different respondent categories. The questions required responses on a range of 1 to 5, where the range represented ranking from very low to Very high as explained in Table 4 above.

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4. After the data had been entered onto excel, the analysis took the form of populating the number of responses for each score .i.e. very low, low, medium, high and very high, for each category of respondent in order to establish how many of the respondents had given a particular value to the same question. An excel function of “=countif ()” was used to undertake this exercise to ensure that all data had responses are considered owing to the many questionnaires collected. To act as control, the total number of responses for each particular field was summed up by adding these values derived above. This was done using the excel operation of “=sum ()”.As an example, see Figure 5for the analysis of data entered for contractors when analysing the causes of delayed payments.

5. After obtaining the scores as in 5 above, they were further analysed as a percentage of total responses derived in 5 above and graphs were plotted to depict a visual outlook of the responses for each category of respondents in order to get meaning from the data analysed. Refer to Figure 6 below for an illustration of how data was manipulated.

6. Considering that the research respondents are in different categories, a weighted average of the responses in each category was derived using the average formula in excel for each category of respondents. The formula for the average used is as follows: “=Average(A1:A5)”, where “A1:A5” represent the range of percentage responses for each of the variables, very low to very high. A single graph for the weighted averages was plotted to come up with a general pattern of all respondents considered together using the law of whole numbers. The graphs will be analysed in terms of how skewed they are about the neutral axis, and conclusions drawn from thereon and recommendations accordingly made.

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4.2.1 Causes Of delayed Payments

An analysis of the causes of delayed payments have been analysed according to each category of respondent i.e. Contractors, Roads Fund Administration, Roads Authority and Consultants. Different respondents placed different amounts of importance to the causes of delayed payments, in some cases showing similar results. The results of the analysis have been included in the subsequent subheadings.

4.2.1.1 Causes of delayed payments - Road Contractors

A survey of the causes of delayed payments to road contractors revealed the following factors as the causes of delayed payments as depicted in Graph 1. The results clearly indicate that contractors consider all the factors in the questionnaire to contribute to delayed payment of certificates for work done, albeit with different importance placed to each factor as below.

Lack of adequate funds on the part of client was considered the major cause of delayed payments by road contactors. One hundred percent (100%) of the respondents ranked delayed payments as a having a very high impact on delaying certificate payments for work done, with Eighty Five percent (85%) of them ranking it very high and fifteen percent (15%) ranking it high.

This was followed by bureaucracy and red tape in the payment system. One 100% of respondents ranked the factor as significant, with fifty seven percent (57%) ranking it as very high and forty three percent ranking it as high.

The other factors followed in the following descending order:

 Ninety Five percent (95%) of the respondents ranked the use of manual payment system as a contributor to delayed payments, with the respondents splitting between forty seven and half percent each ranking the factor between high and very high.

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very high as contributing to delays in making timely payments to contractors. Fifty percent of all the contractors rated the factor as high and forty two and half percent (42.5%) rated it very high.

 In total, seventy five (75%) of contractors ranked corruption in the system between high and very high in contributing to payment delays. Forty five percent (45%) rated it high and thirty five percent (35%) rated it very high.

 Seventy five percent (75%) of contractors ranked poor relationship between contractor and the client between high and very high at fifty five percent (55%) and twenty percent (20%) respectively.

 Seventy percent (70%) of contractors ranked political affiliation of contractor between high and very high in contributing to payment delays. From this 70%, fifty two and half percent (52.5%) ranked the factor it high and seventeen and half percent (17.5%) ranked it very high.

 Fifty five percent (55%) of respondent contractors ranked delay in submitting contractor’s payment claim between high and very high in contributing to payment delays to road contractors. The 55% was made up of fifty two and half percent (high) and two and half percent (very high).

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F1 F2 F3 F4 F5 F6 F7 F8 F9 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Causes of Delayed Payments - Contractors

P er ce n ta ge R es p o n se s

Graph 1- Causes of delayed payments (Contractors’ perspective). FI Corruption in the system

F2 Lack of adequate funds on the part of client F3 Bureaucracy and Red Tape in the system F4 Variations in the original contract

F5 Poor relationship between contractor and the client F6 Inaccurate bills of quantities

F7 Political affiliation of contractor F8 Use of manual payment system

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4.2.1.2 Causes of delayed payments – Roads Fund Administration

Analysis of delayed payments from questionnaires administered to Roads Fund Administration revealed that delayed payments are majorly caused by lack of funds on the part of client and Bureaucracy and Red Tape in the system. These factors were each given a score of One hundred percent (100%) i.e. all respondents ranked them as very high contributing factors.

Other factors were also agreed to cause delays to payment of certificates and these have been included below in descending order in terms of importance by the Roads Fund Administration.

 All respondents ranked inaccurate bills of quantities and/or Disagreement on the valuation of works done between high and very high, with forty five percent (45%) ranking the factor as high and fifty five percent (55%) ranking the factor as very high.

 All respondents ranked the use of manual payment system between high and very high in contributing to delayed payments. Thirty Six percent (36%) of the respondents rated the factor as high whilst sixty four of the respondents rated the factor as very high.

 Eighty two percent (82%) of respondents ranked delay in submitting contractor’s payment claim between high and very high in contributing to payment delay to contractors.

 Eighty two percent of respondents (82%) ranked poor relationship between contractor and the client as contributing to delays in making payment to contractor

 Fifty Five (55%) of respondents ranked corruption in the system between high and very high as causing delays in making timely payments to road contracts

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F1 F2 F3 F4 F5 F6 F7 F8 F9 0.00%

20.00% 40.00% 60.00% 80.00% 100.00% 120.00%

Causes of Delayed Payments - RFA

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Graph 2 - Causes of delayed payments (RFA’s perspective).

FI Corruption in the system

F2 Lack of adequate funds on the part of client F3 Bureaucracy and Red Tape in the system F4 Variations in the original contract

F5 Poor relationship between contractor and the client F6 Inaccurate bills of quantities

F7 Political affiliation of contractor F8 Use of manual payment system

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4.2.1.3 Causes of delayed payments – Roads Authority

Analysis of factors causing payment delays from questionnaires administered to Roads Authority revealed the following that Roads Authority regard lack of adequate funds on the part of client being the greatest cause of delay in making timely payments to contractor with 100% of the respondents ranking the factor as very high.

Bureaucracy and Red Tape in the system came second in the rankings by Roads Authority, with 100% of the respondents raking the factor between high and very high, broken down as sixty percent (60%) high and forty percent (40%) very high.

The other factors produced the following rankings in descending order:

 Ninety percent (90%) of respondents ranked inaccurate bills of quantities and/or disagreement on the valuation of works done between high and very high in contributing payment delays to road contractors.

 Ninety percent (90%) of respondents from the Roads Authority ranked variations in the original contract e.g. Changes in designs and scope of contracts between high and very high in contributing to payment delays, with 60% ranking it as high and 30% ranking it as very high.

 Eighty percent (80%) of RA respondents ranked delay in submitting contractor’s payment claim between high and very high in causing payment delays, with thirty percent (30%) ranking the factor as high and fifty percent (50%) ranking the factor as very high.

 Eighty percent (80%) of Roads Authority respondents ranked Use of manual payment system between high and very high in causing payment delays, with thirty percent (30%) ranking it as high and fifty percent (50%) ranking it as very high factor.

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The following two factors did not get prominence amongst the respondents contributing to delayed payments:

 Poor relationship between contractor and the client, with only thirty percent (30%) respondents rating as high, whilst the other portion was ranked as 30% medium and 40% ranked it between low and very low in causing payment delays.

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F1 F2 F3 F4 F5 F6 F7 F8 F9 0%

20% 40% 60% 80% 100% 120%

Causes of Delayed Payments - RA

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Graph 3 - Causes of delayed payments (RA’s perspective).

FI Corruption in the system

F2 Lack of adequate funds on the part of client F3 Bureaucracy and Red Tape in the system F4 Variations in the original contract

F5 Poor relationship between contractor and the client F6 Inaccurate bills of quantities

F7 Political affiliation of contractor F8 Use of manual payment system

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4.2.1.4 Causes of delayed payments – Consultants

Analysis of causes of delayed payments amongst respondents drawn from consultants revealed that consultants ranked lack of adequate funds on the part of client, and bureaucracy and Red Tape in the system are the leading causes of delayed payments to road contractors in Malawi with all the respondents unanimously agreeing to these factors.

The following factors were also considered to be significant by the consultants in contributing to delayed payments and have been explained below in descending order:

 One hundred percent of consultants ranked Poor relationship between contractor and the client between high and very high in contributing to delayed projects, with forty three percent (43%) of these ranking it as high and fifty seven percent (57%) of them ranking it as very high.

 One hundred percent (100%) of the consultants ranked delay in submitting contractor’s payment claim between high and very high in contributing to payment delays to contractors, with forty three percent (43%) of these ranking the factor as high and fifty seven percent (57%) ranking it as very high.

 Use of manual payment system was also ranked as one of the major causes of payment delays. Eighty percent of consultants ranked it between high and very high, with forty three percent (43%) as high and fifty seven percent (57%) as very high.

 Eighty six percent of respondents ranked variations in the original contract between high and very high in causing payment delays. This ranking is made up of forty three percent (43%) high and forty three percent (43%) very high.

 Forty three percent of consultants ranked corruption in the system as having a very high significance in causing payment delays, and 29% ranked it as high and the other 29% ranked it as medium.

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 Political affiliation of contractor, with only fourteen percent (14%) of the consultants ranking it as high, whilst seventy one (71%) ranked it as medium and fifteen percent (15%) ranked it as low.

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F1 F2 F3 F4 F5 F6 F7 F8 F9 0%

20% 40% 60% 80% 100% 120%

Causes of Delayed Payments (Consultants)

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Graph 4- Causes of delayed payments (Consultants’ perspective).

FI Corruption in the system

F2 Lack of adequate funds on the part of client F3 Bureaucracy and Red Tape in the system F4 Variations in the original contract

F5 Poor relationship between contractor and the client F6 Inaccurate bills of quantities

F7 Political affiliation of contractor F8 Use of manual payment system

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4.2.1.5 Causes of delayed payments – All respondents

The analysis of causes of delayed payments amongst the four categories of respondents, considered in totality provided the following results as depicted in Graph 5below.

Very Low Low Medium High Very High 0% 10% 20% 30% 40% 50% 60%

Causes of Delayed Payments

p e rc e n ta ge R e sp o n se s

Graph 5 - Causes of delayed payments to road contractors (all respondents)

Overall, all the respondents agree with the assertions of causes of delayed payments included in the research questionnaire. The majority of the responses for all respondents ranged between medium and very high as follows:

 Road contractors, 34% very high, 45% high and 29% medium;

 Consultants had 49% very high, 29% high, and 21% medium;

 Roads Fund Administration had 55% very high, 26% high and 18% medium, and lastly;

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4.2.1.6 Summary of the causes of delayed payments

The comments from the qualitative section of the questionnaire provided by respondents provided more information into the causes of delayed payments as described below:

1. Lack of adequate funding on the part of client

It was revealed that the client for the roads, Roads Fund Administration has funding challenges due to the over reliance on fuel levy to fund road projects. The money that is funded in the national budget at times is not fully made available during the financial year. It was also established from the responses that this lack of adequate funding is exacerbated by politicizing road projects. “Don’t pretend like you don’t stay in Malawi. You see, our politicians are the ones contributing to the poor development of this country. A president can decide today and make a directive on a podium during a political rally that a road project should start in an area, without consulting anybody on the availability of funds or even the economic viability of the road. This presents problems of payments to contractors when work starts since there are no budgeted funds for such road projects”. Extracted from excerpts of interview with Head of Finance, Roads Fund Administration. See Appendix 3 for the full excerpts of the interview.

This lack of adequate funding on the part of client contributes to delayed payments because at the time of applying for payment by contractors, it is often found that the client has no money to pay contractors for work done. The most contractors to suffer are those undertaking big projects requiring huge sums of money, and in the event of limited available funds, these are often side stepped during payments and priority is given to smaller contractors carrying out smaller projects.

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budget is not immediately available and comes in bits and pieces, affecting availability of funds to pay contractors. This has an effect on timely payment of road contractors.

The interviews also revealed that the revenue sources for the road fund are very few and contributes to inadequate funds on the part of client. See Appendix 2.

2. Bureaucracy and red Tape in the system

Most respondents agreed to bureaucracy and red tape in the system as being one of the major causes of delayed payments to road contractors. These results were corroborated with interviews carried out with the respondents. “There are many, but I can’t explain all of them because of time. But prominent ones include duplication of work by RFA and RA. The same work performed by RA is performed again by RFA, except for the payment. Technical auditors of RFA go to inspect road projects, an activity which is also done by RA engineers and inspectors”. Extracted from excerpts of interview with HoF, RFA. See Appendix 3.

From the comments provided by respondents in the questionnaires, it was revealed that once a certificate has been prepared by a contractor, it passes through seven offices before payment is finally made. From the contractor, the certificate is passed on to a consultant who checks and certifies the work done by the contractor. The contractor then routes the certificate to Roads Authority, where the project engineer authorizes the certificate after comparing the certificate with work done on the ground. The project engineer then routes the certificate to the regional engineer, who authorizes the certificate for payment by Roads Fund Administration after satisfying himself with the certificate.

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being claimed for work done. After certification by technical auditors, the certificate is sent to the head of audit who also conducts a check of the certificate.

After being checked by the head of audit, the certificate goes to the senior accountant who prepares a payment voucher which is authorised by the head of finance and finally payment is made. This whole process takes weeks to complete at the expense of a contractor waiting for the much needed cash to meet costs of the project.

3. Disagreements on the valuation of work done

The research revealed that there are often disagreements between contractor and consultant including the client, RA and RFA, on the valuation of work done. Often times, it is found that the contractor overstates the value of work of done, and sometimes he may even use incorrect rates in order to claim huge amounts from the certificate. This leads to delays in payment to the contractor since there is back and forth tossing of the certificate between the parties involved in the payment process and this leads to delays in processing the certificate and eventually delays payment to the contractor. See Appendix 2: Excerpts of Interview with Roads Authority Senior Engineer

It was also established that the disagreements arise due to lack of adequate documentation to support the certificate claim by the contractor. See Appendix 2.This presents problems to the client when reviewing the certificate, resulting in delays in payment since the supporting documentation is asked to be provided before the certificate starts to be processed.

Sometimes, it happens that a certificate passes through the consultant and the Roads Authority, but when it reaches the Roads Fund Administration, issues may be discovered pertaining to the valuation of works, and the certificate is sent back to Roads Authority to resolve with Consultant and Contractor. This entails the payment process starting all over, thus contributing to delay in making payment.

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The comments from the respondents also revealed that contractors, often times encounter cases of bribery whereby people involved in the payment, having knowledge that contractors often rely on timely payment of certificates to have a healthy cashflow, ask for bribes in order to speed up the certificate payment. This practice goes to worst cases where client deliberately overlooks paying a certificate or tries to find fault with a certificate in order to get a bribe to process the certificate. “It is also alleged that there is corruption in the payment chain, more especially at the RA and RFA stages. Some contractors have complained of being extorted to pay money in order that their certificates are processed timely”. Excerpts from interview with the Senior Engineer, Roads Authority. See Appendix 2. Different respondents placed different importance to corruption as a causative factor of delayed payments, with contractors ranking it highest of all the respondent groups and Roads Authority and Roads Fund administration ranking it lowly. Refer to Graphs 1 – 4. This is not surprising bearing in mind that the contractors are the victims of the malpractice.

5. Poor relationship between contractor and client

Survey results collaborated with interviews of contractors revealed that bad blood between contractor and client results in delays in processing contractor certificate for payment. Sometimes there is bad blood between client employees and a contractor and this may get too personal to an extent that the client deliberately delays the certificate to make a point to the contractor that he has power over the contractor and can pull the strings.

6. Variations and change of scope of works

Contract variations and change of scope in road works contracts is a normal occurrence due to such factors as change in designs due to unforeseen circumstances. When variations take place, more especially where the scope of work has increased, a contractor is not paid outright for the extra work done and is required to make the claim on the final certificate. This results in the contractor being not paid timely for work done.

Figure

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