EVALUATION OF THE RELATIONSHIP BETWEEN DELAYED PAYMENTS AND COST AND TIME OVERRUNS

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Department of Environmental Design

ABSTRACT
This study was undertaken to establish the relationship that exist between delayed payments and time and cost overruns. Data were collected from seven hundred and fifty (750) construction projects in Nigeria completed between 1989 and 2005. After a careful study of the data on the seven hundred and fifty (750) projects, data on one hundred and fifty one (151) completed building projects were accepted and analysed. The total delay in payments, the time overrun, and the cost overrun were determined for each of the projects. The coefficients of correlation of delayed payments and cost overruns, and delayed payments and time overruns were calculated for combined public and private building projects, public building projects, and private building projects. For the combined public and private building projects, the value of the coefficients of correlation of delayed payments and cost overruns and delayed payments and time overruns are 0.41, and 0.5,3 respectively. For public building projects, the coefficients of correlation of delayed payments and cost overruns and delayed payments and time overruns are 0.41, and 0.57, respectively. In the case of private building projects, the coefficients of correlation of delayed payments and cost overruns and delayed payments and time overruns are 0.66, and 0.30, respectively. Two hypotheses, Hypothesis 1 and Hypothesis 2, were formulated to assess the significance of the correlation coefficients of delayed payments and cost overruns, and delayed payments and time overruns, respectively. Based on bivariate normal distribution of the data, the hypotheses were tested at 5% level of significance using the Fisher r-to-z transformation. The P-value for each of the correlation coefficients was found to be greater than the tabulated value. From the results, it is concluded that cost overrun has positive but weak relationship with delayed payments in the combined public and private building projects, and the public projects. Cost overrun has positive and fairly strong relationship with delayed payments in private building projects. Time overrun has positive but moderate relationship with delayed payments in combined public and private building projects. Time overrun has positive but weak relationship with delayed payments in private building projects. The coefficients of correlation of cost overruns and delayed payments, and time overruns and delayed payments for all categories of building projects studied are significant at 5% level of significance. From the values of correlation coefficients and the established significance of the correlation coefficients, delayed payments do cause time and cost overruns in building projects. From the findings of this study, it is recommended that delayed payments should be avoided to forestall the possibility of running into time and cost overruns and their associated consequences in building projects.