Interim Payments Research Articles

Issues Encountered in the Valuation of Interim Payment Process in Construction Projects

Valuation of interim payment by a quantity surveyor may be a cause of dispute for the parties involved in construction projects. Quantity surveyors as professionals must act and perform their duties in accordance with the statutes, avoid disputes, and meet the expectations of clients in evaluating interim payments. Valuation of interim payment must be made in an acceptable, reasonable, and judicious recommendation. This research seeks to enhance and enrich the process for a better and reliable payment to avoid disputes. The data were gathered through semistructured face-to-face in-depth interviews involving four types of respondents, namely, employers from the public and private sectors, contractors, and consultants. The content analysis approach was used to identify the current issues encountered by the parties involved in relation to interim payment. This research identified 10 common issues, which among others include accuracy, impartiality, justification, and guidelines that need careful consideration by a quantity surveyor in a valuation of interim payment process in order to avoid disputes.

PAYMENT PROCEDURES UNDER FIDIC CONSTRUCTION CONTRACT

Payment provisions are of crucial importance to contractors. Owner’s payments are the life blood of the contractor's work. Contractors and owners must understand the provisions governing all types of payments for a construction project. This paper presented an analysis of payment provisions under the FIDIC Conditions of Contract for Construction (2017 Redbook). FIDIC conditions of contract for Construction are widely used worldwide, especially in the middle eastern countries. The analysis includes: 1) Advance payment; 2) Interim payments; and 3) Final payment. The analysis reveals that FIDIC conditions of contract recognizes the importance of timely fulfilling of payment obligations of the owner and includes precise procedures and serious consequences for delayed payments. The contractor can take serious actions in response to delay in certifying payments or delay in receiving the certified payments, including suspending the work and/or terminating the contract after giving written notice to the owner regarding the intended action. Such notices should follow the stipulated time limit for each action depending on the type of delay. The analysis presented in this paper should prove to be useful to owners and contractors alike and can contribute to reducing disputes between the contracting parties.

PAYMENT PROCEDURES UNDER FIDIC CONSTRUCTION CONTRACT

Payment provisions are of crucial importance to contractors. Owner’s payments are the life blood of the contractor's work. Contractors and owners must understand the provisions governing all types of payments for a construction project. This paper presented an analysis of payment provisions under the FIDIC Conditions of Contract for Construction (2017 Redbook). FIDIC conditions of contract for Construction are widely used worldwide, especially in the middle eastern countries. The analysis includes: 1) Advance payment; 2) Interim payments; and 3) Final payment. The analysis reveals that FIDIC conditions of contract recognizes the importance of timely fulfilling of payment obligations of the owner and includes precise procedures and serious consequences for delayed payments. The contractor can take serious actions in response to delay in certifying payments or delay in receiving the certified payments, including suspending the work and/or terminating the contract after giving written notice to the owner regarding the intended action. Such notices should follow the stipulated time limit for each action depending on the type of delay. The analysis presented in this paper should prove to be useful to owners and contractors alike and can contribute to reducing disputes between the contracting parties.

Prediction of the Delay in the Portfolio Construction Using Naïve Bayesian Classification Algorithms

Abstract Projects suspensions are between the most insistent tasks confronted by the construction field accredited to the sector’s difficulty and its essential delay risk foundations’ interdependence. Machine learning provides a perfect group of techniques, which can attack those complex systems. The study aimed to recognize and progress a wellorganized predictive data tool to examine and learn from delay sources depend on preceding data of construction projects by using decision trees and naïve Bayesian classification algorithms. An intensive review of available data has been conducted to explore the real reasons and causes of construction project delays. The results show that the postponement of delay of interim payments is at the forefront of delay factors caused by the employer’s decision. Even the least one is to leave the job site caused by the contractor’s second part of the contract, the repeated unjustified stopping of the work at the site, without permission or notice from the client’s representatives. The developed model was applied to about 97 projects and used as a prediction model. The decision tree model shows higher accuracy in the prediction.

Optimal Contract for Outsourcing Information Acquisition

We consider how a principal can optimally outsource information acquisition to an agent in a dynamic environment when the principal can observe neither the agent's effort of collecting information nor signal realizations. Neither initial transaction nor interim payments are allowed to prevent the principal from effectively delegating her decision to the agent. Focusing on scoring rules, we find a contract that allows the principal to achieve the first best: the principal can induce the agent not only to exert effort but also to report a right belief at the right time.

Optimal contract for outsourcing information acquisition

We consider how a principal can optimally outsource information acquisition to an agent in a dynamic environment when the principal can observe neither the agent’s effort of collecting information nor signal realizations. Neither initial transaction nor interim payments are allowed to prevent the principal from effectively delegating her decision to the agent. Focusing on scoring rules, we find a contract that allows the principal to achieve the first best: the principal can induce the agent not only to exert effort but also to report a right belief at the right time.

Indifference pricing of insurance-linked securities in a multi-period model

Insurance-linked securities (ILS) have recently become an important risk transfer mechanism to help insurers and reinsurers transfer catastrophe risks to the capital market. We employ the utility indifference approach to establish a pricing framework for a representative agent who trades an ILS with payoff linked to an insurance risk process and a reference rate process. The agent, while investing in a financial market composed of traditional financial instruments, discovers her indifference prices of the ILS by weighing the ILS trade on her exponential utility. The problem has been studied extensively, but mainly in one-period models that are best suited for zero-coupon instruments. In view of the prevalence of ILS with interim payments, we extend the study to a multi-period model by working with time 0 equivalent values and solving a multi-period optimization problem. We offer insights into issues such as coherence and time consistency of the ask and bid indifference prices obtained. Finally, we conduct a sensitivity analysis of the prices against certain risk parameters.

Securing interim payments in construction projects through a blockchain-based framework

Interim payment provisions in construction projects are susceptible to unfair practices. In construction project participants with varying financial capacities belonging to different organizations are bound by contractual relationships. Due to this type of project organizational structure, project participants do not completely trust each other which prevents the adoption of existing centralized automated frameworks for interim payment. Therefore, this paper presents a distributed blockchain-based framework that does not require to be trusted for automatically enforcing the terms and conditions related to interim payments and sharing payment records at project-level transparently and securely. A logic to automatically initiate, validate, and disburse interim payments according to general contract conditions for interim payments is formalized in this paper. A blockchain-based data model that enables selective-transparency in payment records is proposed. This data model facilitates the sharing of sensitive financial information privately between two contracting parties and non-sensitive payment-related information publicly among all project participants. The proposed blockchain-based framework is supported by a key management strategy to facilitate different security properties such as confidentiality and authenticity of data and users. Considering the non-technical nature of construction project participants, the proposed key management strategy is designed to dynamically generate cryptographic keys from publicly sharable parameters so that storage and management overheads are reduced. Security properties such as immutability, data confidentiality, user integrity, performance, and cost of deployment of the proposed blockchain framework are validated and recommendations for executing the proposed framework with a high level of security are discussed in this paper.

Administration of Construction Contract Interim Payments Based on Earned-Value Reduction Techniques

AbstractProgress payment valuations and certifications represent a core construction contract administration function. If not attended to by the concerned contract administrators in accordance with...

Medical-legal partnerships: 11 years' experience of providing acute legal advice for critically ill patients and their families.

Medical-legal partnerships integrate lawyers into health care to identify and address legal problems that can create and perpetuate disparities in health for patients and their families. They have previously been utilised for patients who are at high-risk of being disadvantaged such as the elderly, the disabled and those affected by chronic diseases. We have used a partnership to address the legal needs of patients with acute, critical illness including major trauma. In 2007, a free, comprehensive legal advice service was established at University Hospital Southampton NHS Foundation Trust. The service is bound by strict guidelines which have been endorsed by NHS England. The legal service is specifically prevented from acting against the NHS. A retrospective analysis of the service over a period of 11 years was undertaken to look at the range of legal advice sought. Where a potential compensation claim against a third party was identified, the percentage of cases where the legal service was instructed was noted and the outcome for those cases was examined in further detail. Five hundred and fifty-one patients and or their families have been referred to the legal service. Of these, 343 had sustained major trauma. Over 2300 hours of free legal advice were provided on non-compensation issues, primarily related to welfare benefits, local authority assistance, obtaining power of attorney or seeking Deputyship from the Court of Protection and claims against existing insurance policies. Two hundred and seventy-five of the 551 patients (50%) were found to have a potential compensation claim against a third party. The legal service was instructed to pursue a claim in 82 cases. Interim payments of nearly £13 million were provided and £128 million of compensation has been awarded in 51 cases that have been settled. Medical-legal partnerships are well-established in the USA. We have demonstrated that in UK, there is a demand for early legal advice for patients who have sustained critical illness including major trauma. More data are required to identify the rehabilitation outcomes for patients who have received legal support. A similar medical-legal partnership should be considered at every acute NHS Trust.

Risk Level of the Factors Affecting the Quality of Construction Projects in Pakistan

Construction is an indispensable and major production of any developed and developing country from economic and social view. It provides the required infrastructure for living a successful happy life. Hence, it is always deemed that all construction projects must be completed successfully in order to get full advantage of the project. Among the measure indicating success of any project, quality is amongst key decisive factor. Objective: Hence, this paper has discovered factors which affect quality of construction projects. Methods/Analysis: The initial identification of the factors was made through previous published research works related to quality factors of construction projects worldwide. A total of 32 factors were identified and a structured questionnaire survey was conducted where 46 completed questionnaires were received from the construction practitioners which were analyzed statistically. Findings: The analyzed results highlighted that improper selection and use of equipment, poor quality construction materials, lack of training for staff, delay of interim payments from Client and shortage of Technical persons are top 5 factor affecting quality of construction projects. Novelty/ Importance: Unfortunately, worldwide including construction sector in Pakistan, there are many projects which have suffered from poor quality standards, which have been discovered in this study. The quality of the projects is caused by several factors which are very essential to identify and corrective actions should be taken for improving the level of quality of construction projects. Keywords: Affecting Factors, Construction Management and Pakistan, Quality

Modeling the Completion Time of Public School Building Projects Using Neural Networks

The Ministry of Education in Iraq is confronting a colossal deficiency in school buildings while stakeholders of government funded school buildings projects are experiencing the ill effects of extreme delays caused by many reasons. Those stakeholders are particularly worried to know ahead of time (at contract assignment) the expected completion time of any new school building project. As indicated by a previous research conducted by the authors, taking into account the opinions of Iraqi experts involved with government funded school building projects, nine major causes of delay in school building projects were affirmed through a questionnaire survey specifically are; the contractor's financial status, delay in interim payments, change orders, the contractor rank, work stoppages, the contract value, experience of the supervising engineers, the contract duration and delay penalty. In this research, two prediction models (A and B) were produced to help the concerned decision makers to foresee the expected completion time of typically designed school building projects having (12) and (18) classes separately. The ANN multi-layer feed forward with back-propagation algorithm was utilized to build up the mathematical equations. The created prediction equations demonstrated a high degree of average accuracy of (96.43%) and (96.79%) for schools having (12) and (18) classes, with (R2) for both ANN models of (79.60%) and (85.30%) respectively. It was found that the most influential parameters of both models were the ratio of the sum of work stoppages to the contract duration, the ratio of contractor's financial status to the contract value, the ratio of delay penalty to the total value of contract and the ratio of mean interim payments duration to the contract duration.

Alternative Remedies in Standard Essential Patents Disputes

The possibility to seek and obtain injunctions for the infringement of Standard Essential Patents (SEPs) is limited in both the US and the EU. The reasons for restricting the use of injunctions is due to concern of patent holdup, i.e. the possibility of SEP holder to force standard-implementers to accept onerous licensing terms, exceeding patent’s true economic value, as well as seeing injunctions as incompatible with the commitment given by the patent holder that it will license its SEPs on fair, reasonable and non-discriminatory (FRAND) terms. Limiting the use of injunctions by SEP holders may enable implementers to engage in a holdout, i.e. delaying taking a license for as long as possible, forcing the patentee to engage in expensive and protracted litigation in order to settle for below FRAND terms. Instead of focusing on injunctions, courts may use some procedural remedies in SEP disputes to restore the balance between the interests of patent holders and implementers. Courts could, at the beginning of the trial, order the defendant to make interim payments into escrow, or provide another type of security, reflecting the value of SEP holder’s whole portfolio, and not just for the patents in the litigation. Once interim payments are in place, courts may separate patent and FRAND issue and try patent issues first, as such could provide parties a sense of the overall strength of the SEP portfolio. Courts may adjust the level of interim payments, after patent issues have been resolved, by setting the higher amount if most of the patents have been confirmed valid and infringed or, conversely, lower the amount if most of the patents have been found to be invalid and non-infringed. Interim payments could therefore secure the interests of SEP holders and make holdout strategy more costly, while at the same time dispense the need for injunctions and mitigate the concern about holdup.

Risks of Abandonment in Residential Projects Caused by Subcontractors

Implementation housing policies for new homebuyer had triggered construction activities and demands in residential projects. However, many residential projects were either uncompleted or abandoned. The abandonment in residential construction projects was seriously concerned by government. The study investigated the risks of abandonment in residential construction projects which were caused by subcontractors. The surveyed was collated through reviewing of existing literatures, personal interview and questionnaire which data were formed. The questionnaires were sent out with the return rate of 74.15%. The quantitative method was introduced to obtain data for analysis. The data gathered included in the main six categories of the research. The results showed that delays in interim payments, financial difficulties faced by the owner, financial difficulties faced by the contractor, incompetent contractors or subcontractors, instability in politics were the most important factor which caused abandonment in construction residential projects. The research suggested that owners and contractors need for strengthening on selection of merit subcontractor. It helped to minimise and mitigate these identified risks factor caused abandonment in residential construction project.

Proposed Reform for Singapore’s 2004 Building and Construction Industry Security of Payment Act

AbstractThis paper discusses Singapore’s Building and Construction Industry Security of Payment Act and an area of delay in the resolution of dispute under the Act. Prior to the Act, there was no regulation to ensure prompt and fair progress (interim) payments to contractors and suppliers. As a result, many contractors were not paid fairly and reasonably during the period of construction. The Act mandates strict time lines for the payment of claims, failing which, contractors and suppliers may apply for an adjudication determination. By and large, the adjudication process is fast and low cost. But the author wishes to discuss an area of delay and proposes reform to the Act.

CONTRACTUAL IMPLICATIONS OF CASH FLOW ON OWNER AND CONTRACTOR IN VILLA CONSTRUCTION PROJECTS

Cash flow forecasting is one of the most essential tools toward assessing the distribution of expenditure and revenues of construction projects with respect to the time of the project. The work presented in this paper aims to find out the minimum fund required for cash outflow in case of delay in payments and to identify contractual implications and consequences due to failure of meeting planned cash flow on both the owner and the contractor. Data from record files of 25 villas, in Muscat, Oman, with different sizes was analysed to identify the minimum fund required with the contractor to maintain the progress of work in-case of delay of interim payments. The analysis also included identification of consequences of delay of interim payments. It was found that the minimum fund required is 8.5 per cent of the contract value for maximum interim payment delay of four weeks. The value of required minimum fund increases as the period of delay increases. In most cases the percentage of the required minimum fund increases with the increase of the contract value. Work stoppage, delay in completion, penalties and incompletion of projects are major consequences of delay on interim payments.

Client support co‐ordinator – bridging the gap in brain injury legal cases

PurposeThis paper aims to consider the new role of Client Support Co‐ordinator (CSC), which is being developed by some law firms, and the assistance this can provide for brain injury survivors and their families and carers.Design/methodology/approachThis article considers how the CSC can assist in the early acute stages following acquired brain injury. It is designed to take the reader through the benefits that a CSC can bring in supporting not only the brain injury survivor but also their families and carers. The literature is reviewed briefly, followed by reflections and suggestions which are based on this review and on practical experience.FindingsThis role is designed not to replace but to supplement existing social care providers and to bridge the gap in a legal case between receiving first instructions and the instruction of a private case manager. By adopting a more proactive, holistic case management type service at the acute stage the rehabilitation outcomes can be improved and families and carers better supported. Specialist brain and serious injury lawyers involved in dealing with brain injury litigation will often face a number of practical problems prior to being able to prove legal liability. Once primary liability is confirmed lawyers can proceed to obtain interim payments to pay for a private case manager who will then arrange the client's care and rehabilitation package.Originality/valueThis article shows that during the initial process, this guidance and support for brain injury survivors and their families and carers is vital and any additional support that can be provided should be sought at an early stage. This paper demonstrates the efficacy of employing a client support co‐ordinator in this period.

Construction loans and industry development: the case of Hong Kong

Building contractors are generally small private firms. Bank loans are their major, if not only, source of external finance. However, building and construction loans represent a mere minuscule portion of all bank loans in Hong Kong, suggesting that contractors may have been neglected by banks. With the case of Hong Kong, this study examines the lack of supply and demand of construction finance, and the implications for industry competition and innovation. Contractors’ perceptions were solicited through a questionnaire survey. Key issues identified were further explored in subsequent interviews. The results were then triangulated with secondary data. It is found that although contractors do not usually have enough assets to pledge as collateral, they generally do not need to borrow that much. The provision of interim payments has enabled them to work with small capital outlay. However, the interim payment mechanism has induced a low barrier to entry, which has helped perpetuate the vicious circle of labour intensiveness of building construction, exploitation of labour‐only subcontracting, proliferation of small subcontractors and intense rivalry between firms. The findings conclude that contractors’ limited access to finance generally and bank loans in particular has posed a major barrier to innovation and hence industry development.

A mathematical‐based model for company‐level budgeting incorporating future unknown contracts

PurposeOne of the main challenges facing construction contractors is incorporating future unknown contracts into their annual financial budgets. This paper sets out to review current academic work in this area and to argue that computer‐based simulation techniques are too complex to be adopted in the industry. Therefore, an alternative and a mathematically‐based technique needs to be developed and evaluated.Design/methodology/approachThe paper proposes that, as the pattern of winning construction contracts lacks any seasonality, it may be possible to assume all future work to be starting at one point in time and, by using an average standard value build‐up curve, average duration and the total value work needed, contractors will be able to estimate the total value of contracts needed to achieve a target turnover. Based on the total value of contracts to be won, a proposed mathematical equation is then used to assess the levels of working capital requirements.FindingsThe paper evaluates the proposed mathematical model through a series of hypothetical scenarios (developed using a detailed and tested computer‐based simulation model). Results demonstrated the validity and reliability of the models.Research limitations/implicationsThe working capital element of the proposed model applies to construction projects where traditional payment mechanisms have been applied (interim payments based on measurements).Practical implicationsThe model is very practical in nature and will allow construction companies (particularly large ones) to assess the level of work (in terms of number and values of contracts) they will need to win for them to meet targets for turnover. The model also allows contractors to assess the associated level of funding required.Originality/valueThe mathematical model developed allows contractors to incorporate into their budgets future unknown contracts without the need for computer simulation.

Automating progress measurement of construction projects

The accurate and up to date measurement of work in progress on construction sites is vital for project management functions like schedule and cost control. Currently, it takes place using traditional building surveying techniques and visual inspections. The usually monthly measurements are error prone and not frequent enough for reliable and effective project controls. This paper explores the potential of using computer vision technology in assisting the project management task. In particular, it examines the development of an integrated building information system that aims to determine the progress of construction from digital images captured on site in order to semi-automate the work in progress measurement and calculation of interim payments as well as function as an early warning system of potential delays. The study focuses on the quantity rather than quality aspect of work and is limited to the superstructure of buildings.