Causes and Effects of Late Payments on Company’s Projects: A Case on Engineering Services, Pakistan

The study found that causes of payment problems in the engineering services; cash flow problems due to delays and non-payments experienced on other projects, disputes over-payment claims and responses, cash flow difficulties due to lack of initial capital, the attitude of payers, easy exit of players, and the general payment culture of the industry. Subsequent clustering of the identified factors using a factor analysis provided knowledge on key areas that industry practitioners need to focus on in mitigating payment problems within the industry. From the factor analysis, the underlying factors for payment problems are six-fold: contractual issues, financial strength of industry players, disputes between players, project characteristics, the ‘domino effect’, and others. Most of the causes of payment problems fall under the clusters: financial strengths of industry players, project characteristics, and the ‘domino effect’. It is safe to conclude that the domino effect is partly due to financial weaknesses of key construction industry players.