Payment Mechanisms for Integrated Teams in Construction

Ibrahim Motawa, Ammar Kaka


Abstract

The overwhelming consensus for process andteam integration has emerged as an enabler tomanage construction projects. Theperformance of integrated teams is highlyaffected by the adopted payment mechanism.However, the payment mechanisms availablefor a project may need the team tocompromise in order to agree on a fairmechanism for as many members as possible.This paper introduces a methodology tosimulate the profiles of alternative paymentmechanisms. The methodology aims to helpproject teams define the most appropriatemechanism for each member. The proposedmethodology is therefore novel and superior toexisting cash flow models where the focus hasbeen limited to main contractors only. Topromote its use as a performance enablingmechanism, the methodology utilizes “theproject process map”, “the stakeholders &supply chain”, “the pricing method” and “thepayment mechanism”. This will act as an aid todesign or “fine-tune” payment mechanisms toindividual projects characteristics consideringpayment for off-site materials andcomponents, which always concerns projectfabricators and supply chain.

Full Text

PDF

References

Abeysekera V., (2002). Re-engineering payment procedures: an agenda for client financed construction. In: Ng, S.T., Cheung, S., Lam, K. & Poon, S. (eds.) Re-engineering construction: Enabling and motivating excellence, Hong Kong, 79-85.

Arditi D. & Yasamis F., (1998). Incentive/disincentive contracts: perceptions of owners and contractors. Journal of Construction Engineering and Management, 124(5), 361-71. http://dx.doi.org/10.1061/(ASCE)0733-9364(1998)124:5(361)

Bubshait A.A., (2003). Incentive/disincentive contracts and its effects on industrial projects. International Journal of Project Management, 21(1), 63-70. http://dx.doi.org/10.1016/S0263-7863(01)00078-3

Cheetham D.W., Lewis J. & Jones S.T., (1995). The effect of stage payments on contractors' cash flow - some possible consequences. Proceedings of CIB W96 -Architectural Management - Dublin.

Clough R.H. and Sears G.A., (1994). Construction contracting. sixth edition. New York: John Wiley & Sons, Inc.

Egan Sir J., (1998). Rethinking Construction. London: Department of the Environment, Transport and the Regions.

IChemE., (2003). Form of contract: target cost contracts - the burgundy book, first edition. Rugby: IChemE.

IChemE., (2002). Form of contract: reimbursable contracts - the green book, third edition. Rugby: IChemE.

Kagioglou M., Cooper R., Aouad G., Hinks J., Sexton M. & Sheath D.M., (1998). A generic guide to the design and construction Process Protocol. University of Salford, ISBN 0-902896-17-2.

Latham Sir M., (1994). Constructing the team: Final report of the government/industry review of procurement and contractual arrangements in the UK construction industry. London: HMSO.

Masterman J.W.E., (2002). An introduction to building procurement systems, second edition. London: Spon Press.

Motawa I. and Kaka A., (2006). The architecture of an IT system for payment methods in construction. Proceedings of the Fifth International Conference on Engineering Computational Technology, Las Palmas de Gran Canaria, Spain, 12-15 September 2006, paper 143.

O'Reilly M.P., (1993). Principles of construction law. Essex: Longman Group UK Ltd.

Potts K.P., (1988). An alternative payment system for major 'fast track' construction projects. J. of Construction Management and Economics, Vol. 6, 25-33. http://dx.doi.org/10.1080/01446198800000004

Potts K., (1995). Major construction works: contractual and financial management. Harlow: Longman Group Limited.

RIBA Publications (2001). Architect's handbook of practice management, 7th edition. London: RIBA Publications.

Smith N.J. (ed.), (2002). Engineering project management - second edition. Ames, IA: Blackwell Science.

Williams K., (1992). Civil engineering contracts - volume 1: the law, administration, safety. West Sussex: Ellis Horwood Limited.