Evaluating the effectiveness of construction payment provisions in New Zealand
Ramachandra, T; Rotimi, JOB
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Standard forms of contract and Construction Contracts Act (CCA) are designed as primary means of mitigating payment problems within the New Zealand construction industry. However, payment problems have been on the increase since last four decades. The research therefore evaluated the effectiveness of those payment provisions. Construction practitioners surveyed were of the opinion that overall the provisions in the standard forms of contract and the CCA are moderately effective. The right to claim and right to respond to claims under both documents are more effective than the provisions for non-payments. Detail analyses of views indicate that 20-30% of participants found the provisions highly effective while another equal percentage considered them slightly effective. This distribution of effectiveness is supported by the views which include: the CCA improves payment problems as it resolves disputes faster; the CCA is incapable of guaranteeing payment; failure to comply with the CCA provisions and reluctance to apply the provisions on certain reputed project partners. The research therefore recommends that there needs to be changes to the CCA to have a separate mean(s) of securing payment in the form of escrow account, payment bond or any other means. This would encourage construction parties to use the CCA provisions and thereby improve the effectiveness of the overall Act.