Payment Problems in Construction Projects in Australia: A Review

This report assesses the pervasive issue of payment problems within the Australian construction industry, particularly in the Sydney region. It highlights the increasing number of court cases related to payment disputes and identifies factors such as security of payments and contract breaches as primary causes. The report summarizes a key article that identifies payment as the leading cause of disputes, emphasizing the need for clear contract specifications to mitigate these issues. A critical appraisal of the article acknowledges its relevance but points out its limited focus on payment challenges specifically. Personal reflections underscore the author's experience with payment-related problems in construction projects and calls for government investigation and resolution to reduce court cases, prevent cost overruns, and improve project outcomes. The report concludes by suggesting that proactive payment settlement considerations by clients can prevent potential disputes.

Running head: PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 1
Assessing the Problems of Payment Problems in Construction Projects in Sydney Region
Student’s name
Institution affiliation

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 2
Contents
Assessing the Problems of Payment Problems in Construction Projects in Sydney Region.........................2
Introduction.............................................................................................................................................2
Preliminary research questions...............................................................................................................2
Primary article summary.........................................................................................................................3
Four article comparison...........................................................................................................................5
Critical appraisal of the article.................................................................................................................6
Personal reflection...................................................................................................................................7
References...................................................................................................................................................9
Assessing the Problems of Payment Problems in Construction Projects in
Sydney Region
Introduction

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 3
The topic will involve analyzing the payment problems as relevant in the construction
projects in Australia. The reason for choosing the topic is due to the increased court cases
involving payment disputes in the country (Brand, and Davenport, 2012, p. 193). According to
different research articles, the Australian construction industry is faced with an increasing
number of disputes that are caused by different factors. Among them, security of payments and
breach are the primary causes with payment problems identified as the topmost factors. Mostly
the dispute involves the client and contractors or subcontractors .This aspect calls for studies to
be carried out in the assessment of the problem so that solution could be sought out.
Preliminary research questions
The preliminary research questions include the following;
 Why is the payment security challenge very rampant in the Australian project
construction industry?
 Who are the stakeholders involved in the dispute related to payment security
problem?
 What are the solutions to payment security disputes in the construction projects?
Primary article summary
Gutierrez, A.L.C., Panuwatwanich, K. and Walker, A., 2013. Learning from the Past:
Analysis of Factors Contributing to Construction Project Disputes in Australia. Law and
Dispute Resolution.
These authors acknowledge that the construction projects are characterized with
fragmented since it involves diverse parties who have varied objectives and aims. The article
involves a study to investigate the key factors that contribute to the disputes that have been
evident in Australia recently. The authors applied a qualitative analysis that they conducted on

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 4
78 cases of data from the courts in the country that they obtained from the database of
LexisNexis in determining factors leading to the disputes in the construction industry (Gutierrez,
Panuwatwanich, and Walker, 2013, p. 1). The paper concluded that the main disputes cause
factors included damages, timing, negligence variations and payments. The factor of payment
was considered to be the primary cause of disputes in the various cases reviewed, which makes
more than 50% (Gutierrez, Panuwatwanich, and Walker, 2013, p. 1). This paper acknowledges
that payment is the sole source of project disagreements. The conclusion of the research is that
these factors causing disputes contain elements that if well-articulated in the project contracts
can help mitigate the disputes. For instance, specifying materials to avoid negligence from
defective work, general damage amounts that alleged parties can claim; procedures of claiming
project timeline extension, specifications regarding the progress and claims of payment and
making appropriate agreements when variations related to the contract happen (Gutierrez,
Panuwatwanich, and Walker, 2013, p. 1). The article is useful to my project since it covers one
of the key factors; of payment challenge in construction projects and how it affects the project.
The main limitation of this article is based on the small size of the sample which makes it
challenging to spread the outcome of the study to the large Australian population. In this case, it
will not form the key foundation of the study but will be used as a source of literature review for
the project. According to the article more research needs to be conducted to find out more
content concerning the causes of disputes in the projects related to the construction industry.
Link: https://research
repository.griffith.edu.au/bitstream/handle/10072/54433/86056_1.pdf?sequence=1

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 5
Four article comparison

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 6
Critical appraisal of the article
The article can be said to have relevant contents that are related to the project topic of
challenges in payment disputes in the Australian project construction industry. The reason is that
it contains content that explores payment as a key factor of project construction disputes among
others. According to the authors, the problem is caused by a breach of contract from delayed

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 7
payments. The authors’ research article has contributed to the studies that are aimed at looking
into the challenge of payment in construction projects in Australia (Gutierrez, Panuwatwanich,
and Walker, 2013, p. 1). According to them, the problem emanates from issues related to the
breach of contract, where the client and the involved contractor disagree on what percentage of
payment is to be settled at what time or what percentage of the project is to be implemented
before the final payment is done to the client. On the other side, it can be said that the article has
contributed less to the whole aspect of research to look for a solution to the problem. The reason
is that it is not focused on the aspect of payment challenges in construction projects but tackles
so many other factors such as breach, insurance and indemnity among others (Murphy, 2016).
This is to say that the article pays limited focus on the issue of payment as a challenge affecting
construction projects. However, it can be concluded that the article tried expounding more on
their research since the payment factors normally get accompanied by various other factors that
influence disputes in construction projects. It would have been better if the authors expounded
more on the aspect of payment challenge after finding that it was the main issue evident in the
project construction industry.
Personal reflection
According to personal experience, the construction industry and projects subsequently are
involved with a lot of challenges, the primary being related to the aspect of payment. Research
needs to be carried out so that the main cause and solution to the problem of payment in
construction projects can be sought. In this case, it would avoid disagreement and a subsequent
extension of the project timelines (Murphy, 2016). When the timeline gets extended
unnecessarily, it brings about the problems of cost and time overruns. This further elongates the
dispute of disagreement as the original elements of the contract come to change. The issue has

PAYMENT PROBLEM IN CONSTRUCTION PROJECTS IN AUSTRALIA 8
been evident in almost all the construction projects in Australia and generally all over the world.
Australia alone has courts flooded with cases that involve the settlement of payment which later
leads to disagreement and a possible dispute. Besides this occurrence in the court, the problem
seems recurrent as new projects end up having the same problem which curtails project
termination. In view of this fact, the court needs to raise a concern to the state government of
Australia to have it investigate the challenge of payment disputes in the construction industry so
that a long-term solution is attained. This move will not only bring about a solution to the
problem but other subsequent benefits will be evident. For instance, it will lead to the reduction
of court cases related to the payment disputes (Flemming, and Ebert, 2017, p. 33). It would also
solve the problem of cost and time overruns in the projects and the entire industry in general.
This would further affect the economy of the country based on timely completion of projects and
saving of both time and project costs as useful resources that could be directed to other areas.
The issue can be solved through the idea of clients making all the necessary considerations
regarding project payment settlement so that any potential issues would be noted from other
factors.

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References
Brand, M.C. and Davenport, P., 2012. Adjudication in Australia: An analysis of the amendments
introduced by the Building and Construction Industry Security of Payment Amendment
Act 2010 (NSW). International Journal of Law in the Built Environment, 4(3), pp.189-
202. https://doi.org/10.1108/17561451211273347
Flemming, S. and Ebert, J. 2017.,Projects Disputes In Australia: Recent Cases - June 2017 -
Real Estate and Construction - Australia. [online] Mondaq.com. Available at:
http://www.mondaq.com/australia/x/603316/Building+Construction/Projects+Disputes+I
n+Australia+Recent+Cases
Gutierrez, A.L.C., Panuwatwanich, K. and Walker, A., 2013. Learning from the Past: Analysis of
Factors Contributing to Construction Project Disputes in Australia. Law and Dispute
Resolution.
https://research-repository.griffith.edu.au/bitstream/handle/10072/54433/86056_1.pdf?
sequence=1
Murphy, C. 2016., [online] Audit.wa.gov.au. Available at:
https://audit.wa.gov.au/wp-content/uploads/2016/12/report2016_31-
PaymentSubcontractors.pdf