Ramifications of Payment Delays on Contractors in the Construction Industry

Contractors’ investment for government construction projects is mostly based on loans from banks or financers. Successful project completion does not ensure profit to the contractor until payments are made. Interest from the loans gets accumulated until the point that contractors are forced to resort to legal assistance for the pending bills to be cleared. Well-established contractors with years of savings can withstand the delays, but it is difficult for the upcoming contractors in the field. The present study aims to find the consequences of non-payment of bills by the government on medium- and low-scale contractors and how it affects their future prospects. Legal cases filled in this regard are considered primary data. Contracts’ petitions regarding non-payment are considered along with the interest rates claimed as compensation. Results showed that a predetermined clause in the contract will ensure risk allotment to the stakeholders appropriately and will prove pivotal in the judgmental process through litigation.