Recapitulating the Payment Default Effects to Contractors in the Kenyan Construction Industry
Mark Obegi Kenyatta1, Ahmad Omar Alkizim2, Titus Kivaa Mbiti3
1Mark Obegi Kenyatta, Student, MSc. Construction Projec Management Jomo Kenyatta University of Agriculture & Technology, Juja, Kenya.
2Dr. Ahmad Omar Alkizim, PhD (Reading, UK), MSc. Construction Management, Project Management & Value Engineering, Juja, Kenya.
3Dr. Titus Kivaa Mbiti, PhD, RMIT, Australia, Construction Management, Project Management & Construction research, Juja, Kenya.
Manuscript received on August 15, 2015. | Revised Manuscript received on August 28, 2015. | Manuscript published on September 05, 2015. | PP: 95-102 | Volume-5 Issue-4, September 2015 . | Retrieval Number: D2707095415 /2015©BEIESP
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Abstract: Cash flow is undoubtedly the bloodline that drives enterprise in the construction industry. Any interference in its smooth flow may therefore lead to severe consequences. “Work first and get paid later”, is the motto of the construction industry. This arrangement inevitably demands the input of several parties in the form of labour, materials, plant and other trade credits as the work progresses. Further, the end product becomes part and parcel of the land, whose legal possession lies squarely with the construction client. The sweat and pain of unpaid parties in the construction pyramid are therefore left at a disadvantaged position as they chase for their claims. This paper recapitulates the effects resulting from payment default to contractors from their construction clients in Kenya. Content analyses of payment dispute cases lodged in the commercial division of the Kenyan courts as well as the standard contracts were employed. The study finds that payment default in the form of late payment of one or several certificates, underpayment or paying in installments and nonpayment have led to cash flow hardships to contractors and their lower tier parties, late completion of projects, construction disputes and even insolvency. To mitigate on these impacts, this paper proposes that the industry players consider legislating on a payment specific regime just like it has happened in other countries.
Keywords: Payment default, contractors, construction industry of Kenya.