The Effect of Payment Delay on Construction Projects in Gaza Strip

Abstract

Construction industry is considered an important sector for the development in Gaza Strip. Payment process is an important element of the construction industry. Payment delay to contractors is a common cause of disputes in Gaza Strip construction industry. The aim of research is to identify the causes and the effects of payment delay, to determine the effective solutions that mitigate effects and risks of payment delay in Gaza Strip construction industry and to formulate a model to measure the risk of payment delays. The objectives of the study were achieved through three approaches, the first one was a literature review about three main parts; causes of payment delay, effects of payment delay and effective solutions that mitigate effects of payment delay. The second one was a valid questionnaire that was obtained from Gaza Strip contractors, owners and consultants opinions, (140) questionnaires were distributed to contractors, owners and consultants. 113 (80.71%) questionnaires were received. The last one by developing Support Vector Machine (SVM) model to measure the risk of payment delays. SPSS analysis was used to analyze the data collected. The factors that contribute to causes of payment delay in construction projects were divided to three groups. Results have shown that "contractor related factors" was the most important group. The factor "Failure to follow the certain procedures in claims" was in the first position at this group. The effect and risk of payment delay on construction projects were divided to four groups. Results have shown that "Effects on contractor" was the most important group. The factor "Late payment of salaries" was in the first position at this group. The top three effective solutions to mitigate effects and risks of payment delay in Gaza Strip according to this study were; contractors should submit timely accurate invoices with complete documents, contractors should chase payment due relentlessly and defined time frame for payment. Developing support vector machine model SVM model passed through several steps started with choosing the nine ranked payment delay effects on contractors as input factors from the questionnaire results, and one output factor; total payment delay risk in $US. A hypothetical case study and structured interview with (31) contractors was used to build the model. The Neurosolution (5.07) program was selected to build the SVM model, the accuracy performance of the adopted model recorded (93.47%); where the model performed well. This study recommended the contractors to have enough cash before beginning projects and to submit timely accurate invoices with complete documents. The owners are recommended to work within stipulated budget putting in bank account before starting the project execution and to pay progress payment to the contractors on time and to introduce payment bonds to contractors.