Effects of Construction Contracts on Performance: The Case of Construction Firms in Kampala, Uganda

Abstract

The study aimed to investigate the influence of construction contracts on the overall performance of selected construction firms in Kampala district. Specifically, it sought to assess the impact of formally contracting personnel, evaluate the effect of special contract conditions, and examine the role of surety bonds on firm performance within the construction industry. A descriptive design utilizing quantitative methods was utilized. The study utilized purposive and random sampling techniques to select relevant respondents from various positions within construction firms, ensuring a comprehensive analysis of the subject matter. A sample size of 76 respondents was involved in the study. Data collection was facilitated through a structured questionnaire comprising Likert scale type questions, piloted to ensure relevance and logical flow. The study achieved an 88.3% response rate, with 80 questionnaires returned and analyzed. The study found that there exist a significant controlling effect on the relationship between (i) contracted (temporary) personnel and performance of construction firms (r=0.778, p=0.000), (ii) special conditions of contract and performance of construction firms (r=892, p=0.000) and (iii) surety bonds and performance of construction firms (r=0.830, p=0.000). Analysis of performance indicators highlighted the importance of factors such as adherence to construction codes, client satisfaction, and innovative practices in determining firm success. In conclusion, the study underscored the critical role of construction contracts in shaping the performance of construction firms in Kampala district. To optimize firm performance, it is recommended that firms prioritize the recruitment and retention of skilled personnel, adhere meticulously to construction contracts, and leverage surety bonds for risk mitigation. These findings provide valuable insights for construction industry stakeholders, guiding strategic decision-making to enhance operational efficiency and project outcomes.