Effective Payment Policy For Construction Project Execution: A Critical Review Essay.

Description of the topic

The concept of resolving payment related dispute has always found the way in the field of project development and control. As the construction project, involves a lot equipment and also it involves a lot of contracts that needs to be signed between the developer and the several third parties supplying the equipment In order to execute the project with desired success, project managers always try to create a payment system that is able to avoid any kind of dispute during the project execution.

Construction Project does not always witness the success in resolving payment dispute for poor payment management technique. Hence, there has been a constant requirement for developing a method that ensures success in executing a project. Successful payment policies is an important issue in the construction project execution field for its effectiveness in controlling projects. In this context, a review will be prepared for assessing the effectiveness of the proper payment system and particularly how the issue hampers project success.

The authors of the first article has assessed the poor payment design and the impact it has on the project management, particularly in long term projects. The traditional payment management approach that tries to resolves the issues at the end of the project had some faults in terms of project execution and modelling. This outcomes has been tried to improve in this new method. Traditional construction project execution method as argued by the authors follows cascading payment planning which is not so effective in long term project execution. The new method called fair value option according to the article, is particularly a better choice for executing project in complex and chaotic settings. According to the article the fair value option is useful for projects that works with contracts which might contain poor bargain.

According to the article, the success factors of project payment, no matter in which field is being applied, three parameters needs to be addressed for better project executions. These factors, according to the article are efficiency, stakeholder satisfaction including the contractors and the executions of the contracts as a whole. However, the way the three factors will influence a particular project is inclusive in nature and the effect of these parameters will be decided by the level of choice in which the project will be executed.

The article has presented a discussion on procedure for making an assessment of the impact of the fair value option. The authors have suggested for the regression model for this purpose. According to the authors regression is a perfect choice for this task. The regression model confirms the effectiveness of the fair value options. The model shows that the process is particularly helpful in situations where there is a requirement for increasing the interaction of the process that are closely related with the project. Sometimes during the project execution phase, the contracts are needs be terminated. This creates issues as the contractors demand the principle amount that was agreed when the contract was signed.. Hence, there should be proper method which might be able to avoid dispute and hence fair value option is an effective approach which will help the contractor to avail the payment if the termination is not the fault of the contractor.

Table for the four relevant articles

The article has illustrated the issue of payment management in a lucid way and also developed the need for having a better payment system for resolving the dispute in the construction project with better project controlling approach. The authors with proper argument has chosen the fair value option over the others, specially the traditional approaches. However, one important thing is missing in the discussion of the article. The fair value option which have been suggested by the authors, is not tested against any empirical method which might have been made the argument much stronger and provide it a necessary validations. This very fact might be considered as the shortcomings related to the article.

The authors have only considered the effectiveness of the fair value option and that too in the theoretical context. The article has not discussed about the large scale implications of the particular method. In order to understand whether the particular method is really effective in practical applications or not, there should be a large empirical analysis that considers several layers that the projects goes through. This analysis will provide the practical basis for the application of the model.

The fair value method provides effective measures for managing project that delivers results. But before applying the method one thing should be noted that the model only considers single item measurements which might not be always reliable. However the problem can be well managed if some modification is done in the approach. The approach is to introduce an index that solves the issues with the measurement. However the authors has not suggested or opted for such methods and that goes into the shortcomings of the otherwise a very well presented article.   

In the review, we study the following research questions:

• RQ1: What payments challenges need to be addressed for achieving success in construction project?
• RQ2: What issues are most important for effective payment management for construction project?

The topic of construction project execution is very complex in nature and this requires very professional approach for conducting project at corporate levels (Kerzner, 2018). Only a professional and experience team is not enough in this regard (Kerzner and Kerzner, 2017). While doing the research for preparing the paper I have learned that although the topic of construction project execution is highly complex, but the process is possible to manage if proper approach is followed. As different projects works with different project deliverables, the outcomes varies. However one thing that is common is the requirement for a good and effective control technique. Without having a proper control method in place it is not possible to drive the project with success. However it is not easy to understand which process will work best for a given project as the complexity and nature of the project varies significantly. Hence, it requires an in depth study of the project deliverables to understand the project in details. However, irrespective of the project topic, three variables are very important and they are customer satisfaction, stakeholder management, proper negotiations and the overall performance of the team assigned for the process. All these parameters are effectively addressed by the agile method. Although the agile method was exclusively developed for the software industries, over the years the method has become very popular for its capability to address project related issues very effectively so that the project becomes successful or the chance of the success becomes high. However, the traditional methods of designing payment system for construction project execution is not so effective when compared to the fair value method. The primary reason for traditional methods not being so successful and required replacement, that these methods follows cascading payment system which is not very much effective for project that must be executed in chaotic setup. However, before applying the fair value option in project management, it must be verified through empirical analysis to develop a stronger concept about the method being applied in practical projects, especially projects that are deployed in large scale.

References:

Dainty, A.R., Millett, S.J. and Briscoe, G.H., 2015. New perspectives on construction supply chain integration. Supply chain management: An international journal, 6(4), pp.163-173.

Danuri, M.M., Munaaim, M.C., Rahman, H.A. and Hanid, M., 2016. Late and non-payment issues in the Australian Construction Industry-Contractor's perspective. In International Conference on Construction, Culture, Innovation and Management (CCIM).

Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.

Kerzner, H., 2018. Strategic planning for construction project using a project management maturity model. John Wiley & Sons.

Sin, T.A.S., 2016. Payment issues–The present dilemmas of Australian construction industry. Unpublished Masters Dissertations, University Technology Australia, Skoda.

Wu, J., Kumaraswamy, M. and Soo, G., 2014. Payment problems and regulatory responses in the construction industry: Australia perspective. Journal of Professional Issues in Engineering Education and Practice, 134(4), pp.399-407.