The case for re-engineering contract payment mechanisms

In the UK, the normal practice in the construction industry is for the contractor to be paid monthly during the execution of the works. The value of these payments is determined by agreement between the respective Quantity Surveyors of the employer and the Contractor. Advances based on measurement is a system of payment which requires detailed and time consuming management. It does not reward achievement nor does it distinguish between the inefficient and efficient contractor. Of crucial importance, it does not deliver to the customer best value for money. The paper will review current mechanisms available to the construction industry and will demonstrate that these mechanisms fall short of facilitating best practice and ultimately client satisfaction. It will do so by highlighting issues that are affected by cash flow and of key relevance to performance and client satisfaction. It will also examine these issues from a contractor's perspective thus, underlining adverse consequences of moving away from the traditional system. The paper concludes by a call for reengineering the payment mechanism and suggesting the criteria by which new methods can developed.