Identifying the Causes of Payment Disputes in Construction Projects in Australia

This research paper aims to identify the causes of payment disputes in construction projects in Australia and their impact on project performance. It also recommends suitable strategies to resolve payment disputes. The lack of integration between the processes in the construction industry results in the development of disputes in construction projects. Payment dispute is one such factor that affects the overall performance of the projects including project time schedule and budget. The functionability of a project depends on the payments as initially the two parties involved in this process are the clients and the contractors have agreed upon a particular amount.

Running head: RESEARCH IN PROJECT MANAGEMENT
Research in project management
Name of the student
Name of the university
Author note

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Executive Summary
The nature of construction projects are hugely fragmented where different parties have
different objectives to it. The lack of integration between the processes in the construction
industry results in the development disputes in construction projects. Payment dispute is one
such factor that affects the overall performance of the projects including project time schedule
and budget. The functionability of a project depends on the payments as initially the two parties
involved in this process are the clients and the contractors have agreed upon a particular amount.

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Table of Contents
Description.......................................................................................................................................3
Annotated Bibliography and Summary...........................................................................................4
Critical appraisal..............................................................................................................................5
Preliminary research question..........................................................................................................6
Personal reflection...........................................................................................................................7
References........................................................................................................................................8

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Topic: Identifying the causes of payment disputes in the context of construction projects in
Australia.
Description
The nature of construction projects are hugely fragmented where different parties have
different objectives to it. The lack of integration between the processes in the construction
industry results in the development disputes in construction projects. Payment dispute in one
such factor that affects the overall performance of the projects including project time schedule
and budget. Security of payment is a contributor in disputes in majority of the projects and
various analysis shows that 50% of the disputes arise due to payment issues (Mitkus&Mitkus
2014,pp.777-786). The functionability of a project depends on the payments as initially the two
parties involved in this process are the clients and the contractors have agreed upon a particular
amount. However, lack of timely payments results in delay of the project activity which will
cause dispute between the involved parties. In the modern day practice, it has been seen that the
percentage of the payment is withheld by the principal contractor to its subcontractor depending
upon the scenario (Zarei, Sharifi & Chaghouee 2018,pp.29-40). However, this results in the
development of complicated situations as it is clear whether it is appropriate to withheld payment
or not. Payment dispute is an issue which has not been addressed in majority of cases ad the
study will have the following objectives:
 To identify the cause of payment disputes in context to construction projects in Australia
 To critically evaluate the impact of payment disputes to construction projects in Australia
 To recommend suitable strategies to resolve payments disputes to construction projects in
Australia

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Annotated Bibliography and Summary
Article 1 SME failures balanced by start-ups: the Australian economy is in good shape, as an
increase in the level of insolvencies reported this year has been balanced by a
corresponding boost in the number of small businesses being launched.
(2016). Australian Banking & Finance, [online] 3(5), p.11. Available at:
http://go.galegroup.com.ezproxy.cqu.edu.au/ps/i.do?id=GALE
%7CA261631351&v=2.1&u=cqu&it=r&p=AONE&sw=w [Accessed 6 Aug. 2018].
Article 2 Bailey S. & Chew A., 2013. Collins inquiry into construction insolvency: Part 2 -
safeguarding sub-contractor payments. Mondaq Business Briefing, pp.Mondaq
Business Briefing, Feb 12, 2013.
Article 3 Doloi, H., 2012. Understanding Impacts Of Time And Cost Related Construction
Risks On Operational Performance Of Ppp Projects. International Journal of
Strategic Property Management, 16(3), pp.316–337.
Article 4 Smith, C., 2010. Internationalising industrial disputes: the case of the Maritime Union
of Australia. Employee Relations, 32(6), pp.557–573.
Bailey S. & Chew A., 2013. Collins inquiry into construction insolvency: Part 2 -
safeguarding sub-contractor payments. Mondaq Business Briefing, Mondaq Business
Briefing, Feb 12, 2013.
Summary
Industrial disputes have been considered as one of the risk factors that the global as well
as the Australian sectors are facing these days. There are ample of evidences where it can be
found that bankruptcy or insolvency in the construction projects has been escalated in a great
deal of manner (Smith 2010). Based on this scenario, this article is going to discuss the role of

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the New South Wales (NSW) construction industry insolvency enquiry. In fact, the purpose of
this article is to provide an understanding regarding the disputes of the sub contractor payments
and safeguard their interests in this context. As far as the NSW government initiatives are
concerned, it can be argued that the authority has installed a NSW building and construction
commission with the aim to set up and administer the project trust accounts and ensuring the
security of payment legislation for the sub-contractors.
In addition to this, the article also reflects other regulatory measures that the NSW
government is following to make the construction business sector more effective and transparent.
In this regard, the article mentioned other regulatory frameworks like the Ontario’s Construction
Liens Act and the Maryland Construction Trust Fund Statute that are entitled to safeguard the
payments down to the lowest tier subcontractors. Furthermore, the article also encompasses the
idea of protection mechanism in terms of the set-off rights, security, termination and recovery of
damages. The aim of this article is to put emphasis on the role of the contractors to take the
payment responsibilities which is not prevalent in most of the regions in Australia. Therefore,
entrusting on the government initiatives and existing legislation will be a better way to resolve
payment disputes in the construction sectors in Australia. In this context, the Maryland statutory
trust scheme and the Ontario construction Liens Act and Project Bank accounts are getting more
importance in this article.
Critical appraisal
Industrial disputes are considered to be common phenomenon in the context of the
business sectors across the world. There are series of problems and issues regarding the business
operations that can pose a serious threat to the business operations. Among those issues the
disputers in payments or insolvency is identified as one of the major issues that the business

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organizations are facing with. However, in the context of Australian business sector, this kind of
issues can be seen in the construction sectors primarily. As per the report of the Dun &
Bradstreet, a great number of small and medium scale companies are failed to retain their market
orientation between 2010 and the first quarter of 2011 (Doloi 2012, pp.316–337). The
deteriorating trend of the payments is observed as one of the major causes regarding this
declination. Subsequently, the role of the banks as a savior in dire situation is not happened in
case of the bankruptcy.
However, it can be argued that the article rightly pointed out the crisis scenario of the
Australian construction companies and their inabilities to give payments to the sub-contractor.
Moreover, the article also addressed the government measures in terms of the legislations and the
regulatory framework but there was no mention of the factors behind this insolvency and
payment disputes. The government initiatives in order to safeguard the payments of the sub-
contractors is identified as an effective tool but without having proper understanding of the
factors behind the emergence of payment disputes the remedies may fail to deliver an effective
result. Therefore, it is very important to highlight the factors responsible to create payment
disputes in the construction sector in Australia and after figuring out the causes it will be
beneficial to plan accordingly.
Preliminary research question
 What are the causes of payment disputes in context to construction projects in Australia?
 What is the impact of payment disputes to construction projects in Australia?

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Personal reflection
This project has been challenging and provided a great learning experience. I have
learned about the different types of project disputes especially in the construction industry in
Australia. I had no idea that payment dispute is one of the major disputes in projects and the
remaining disputes arise due to this factor. I gained knowledge about the origin of disputes and
working through different peer reviewed journals to identify the most effective ways of settling
the disputes. I have knowledge regarding the process of conducting critical analysis as it was
difficult for me to collect appropriate data. There are limited resources in this topic as the gap
arises due to the fact that majority of the literatures have addressed all the disputes as a whole.
However, none of the literature have solely focused on the payment disputes and the study will
identify this gap. I have developed research objectives based on my understanding of the project
and have developed research questions based on it.
I have developed the annotated bibliography based on the topic and the most relevant
articles discusses the payment disputes and insolvency. The article has provided different acts
and measures that has been executed to reduce the disputes. However, there has been significant
in specifying the different factors of payment disputes which make the solutions quite
superficial. This is the reason I want to conduct the research with this topic so that I can focus on
the factors of payment disputes and how it impacts the performance of the organization. In this
research, I will focus on the precautionary measures that will have to be taken to reduce the
chances of disputes between two parties. However, relevancy and significant data is less in this
topic and it took considerable amount of time to collect data.

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References
Bailey S. & Chew A., 2013. Collins inquiry into construction insolvency: Part 2 - safeguarding
sub-contractor payments. Mondaq Business Briefing, pp.Mondaq Business Briefing, Feb
12, 2013.
Doloi, H., 2012. Understanding Impacts Of Time And Cost Related Construction Risks On
Operational Performance Of Ppp Projects. International Journal of Strategic Property
Management, 16(3), pp.316–337.
Mitkus, S. &Mitkus, T., 2014. Causes of conflicts in a construction industry: A communicational
approach. Procedia-Social and Behavioral Sciences, 110, pp.777-786.
SME failures balanced by start-ups: the Australian economy is in good shape, as an increase in
the level of insolvencies reported this year has been balanced by a corresponding boost in
the number of small businesses being launched. (2016). Australian Banking & Finance,
[online] 3(5), p.11. Available at: http://go.galegroup.com.ezproxy.cqu.edu.au/ps/i.do?
id=GALE%7CA261631351&v=2.1&u=cqu&it=r&p=AONE&sw=w [Accessed 6 Aug.
2018].
Smith, C., 2010. Internationalising industrial disputes: the case of the Maritime Union of
Australia. Employee Relations, 32(6), pp.557–573.
Zarei, B., Sharifi, H. &Chaghouee, Y., 2018. Delay causes analysis in complex construction
projects: a Semantic Network Analysis approach. Production Planning & Control, 29(1),
pp.29-40.