AN INVESTIGATION OF FACTORS THAT LEAD TO DELAYED FINAL ACCOUNT CONCLUSION OF BUILDING PROJECTS IN MALAWI CONSTRUCTION INDUSTRY

1. PROJECT TITLE
AN INVESTIGATION OF FACTORS THAT LEAD
TO DELAYED FINAL ACCOUNT CONCLUSION
OF BUILDING PROJECTS IN MALAWI
CONSTRUCTION INDUSTRY
BY: LENSON MHANGO
(BQS/09/PE/016)
SUPERVISED BY: MR. C.I.M. CHIOCHA

2. PRESENTATION OUTLINE
Introduction
Problem Statement
Objectives of the study
Research design and Methodology
Results and Discussion
Conclusion and Recommendation

3. INTRODUCTION
 Delay can be defined as time overrun or extension of time to
complete the project.
 There are high possibilities that delay issues in final account
closing cannot be avoided in Malawi construction industry
 Delay in final account closing is a situation when the actual
planning (time and budget allocation) of a construction project
exceeds the planned schedule or on the other hand, final
account closing exceeds the time and other provisions specified
in the contract (Zarabizan et al., 2009).
 “Final Account” is taken in the construction contracts simply as a
mechanism for dealing with the final contract sum or final
payment due to the Contractor after the Final Measurement
Period or after the Maintenance / Defects Liability Period

4. INTRODUCTION (CONT’D)
 Construction projects generally comprise five stages(Rumus,
Birchall, Griffiths, 2008):
 initiation/planning,
 design,
 tender,
 construction and
 final account/defect liability stage

5. INTRODUCTION (CONT’D)
 The role and performance of project participants and contracting
parties in a construction project in each stage influence the project
success
 However, the importance of the final account closing in the stipulated
time frame and agreed contract cost is always being neglected
 Undue protracted inaction makes the closing of final account more
difficult and frequently leads to the emergence of unnecessary
dispute (Duncan Cartlidge, 2009).

6. PROBLEM STATEMENT
 In the Malawi Construction Industry, the period of final
payment after practical completion tends to be longer than
that stipulated in the terms and conditions of various
construction contracts.
 Most standard contract forms contain provisions where the
construction players are obliged to settle the final account and
issue a final payment certificate to the contractor within a
specified period of time after the receipt of the contractor’s
final account statement (PWD, 2010).
 Despite this, delays in final account closing continue to be a
problem (Zarabizan et al, 2009).

7. OBJECTIVES OF THE STUDY
 Main objective
 The main objective is to investigate the factors that lead to
delayed final account conclusion of building projects in Malawi
construction industry

8. OBJECTIVES (CONT’D)
 Specific objectives
 To determine how many contractors have had their final
account being paid on time in their respective contracts
over the past five years
 To identify the challenges that contractors face as a
result of delayed final account conclusion and the
suggested solutions to the challenges that the
contractors face due to delayed final account conclusion
 To determine the underlying factors leading to delayed
final account settlement of building projects in Malawi
construction industry

9. RESEARCH DESIGN AND METHODOLOGY
 LOCATION
 The study was carried out in the City of Blantyre.
 RESEARCH METHOD
 This study was based on quantitative assessments
 DATA SOURCES
 Data was collected from a range of sources including
literature (published and unpublished), and some building
contractors in the city of Blantyre
 SAMPLING TECHNIGUE
 This study adopted the random sampling technique

10. METHODOLOGY (CONT’D)
 SAMPLE SIZE
 The sample size for this study was 44 building Contractors from within
Blantyre City, Malawi
 DATA COLLECTION METHOD
 Primary data
 Structured questionnaire was used
 Secondary data
 Already published data like the internet, previous research papers,
newspapers and journals
 DATA ANALYSIS
 The main statistics calculated in the data analysis were the mean,
frequency and percentage scores with aid of SPSS software.
 The data has been presented Graphically, in Tables and Pie
charts

11. RESULTS AND DISCUSSION (OVERVIEW)
 Response rate
The response rate was at 68%
Questionnaires sent Questionnaires received Response rate
44 30 68%

12. RESULTS AND DISCUSSION CONT’D
Director/paterner,
23%
Manager/senior
management/
quantity surveyor,
77%
Director/paterner
Manager/senior management/
quantity surveyor
 Position / Job Title of the persona that responded to the
questionnaire

13. RESULTS AND DISCUSSION CONT’D
 Overall experience of respondents
less than 5 years
53%
Between 5 to 10
years
33%
Between 10 to 15
years
7%
More than 20 years
7%
less than 5 years Between 5 to 10 years Between 10 to 15 years More than 20 years
Years Frequency Percent
less than 5 years 16 53.3
Between 5 to 10 years 10 33.3
Between 10 to 15 years 2 6.7
More than 20 years 2 6.7
Total 30 100.0

14. RESULTS AND DISCUSSION CONT’D
 Firm category
30 million
category
7%
75 million
category
3%
100 million
category
17%
200 million
category
30%
500 million
category and
above
43%

15. RESULTS AND DISCUSSION CONT’D
 projects executed and completed over the past
5 (Five) years
Frequency Percent
1-2 projects 1 3.3
2-4 projects 7 23.3
4-6 projects 4 13.3
6-8 projects 4 13.3
8-10 projects 2 6.7
more than 10 projects 12 40.0
Total 30 100.0
3.3
23.3
13.3 13.3
6.7
40.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
1-2 projects 2-4 projects 4-6 projects 6-8 projects 8-10
projects
more than
10 projects
PERCENTAGES(%)
NO. OF PROJECTS EXECUTED

16. RESULTS AND DISCUSSION CONT’D
 projects that had their final account concluded
on time
No. of projects Frequency Percent
None 9 30.0
Less than 2 projects 11 36.7
Less than 4 projects 6 20.0
Less than 6 projects 2 6.7
Less than 8 projects 1 3.3
Less than 10 projects 1 3.3
Total 30 100.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
None Less than
2 projects
Less than
4 projects
Less than
6 projects
Less than
8 projects
Less than
10
projects
30.0
36.7
20.0
6.7
3.3 3.3PERCENTAGES%
NO. OF PROJECTS

17. RESULTS AND DISCUSSION CONT’D
 Challenges that the contractors face due to delayed final
account closing
 Representation of additional cost ranked highest with a mean of
3.90
 The second highest challenge is reduced credit ratings with a
mean of 3.80
 The third highest ranking is the increment of bankruptcy among
contractors with a mean of 3.76
 Opportunity loss of contractors in getting other projects ranked
fourth with a mean of 3.66

18. RESULTS AND DISCUSSION CONT’D
 Suggested solutions to the challenges
 Variations to the contract to be settled at the earliest
time possible ranked highest with a mean of 4.60
 The second highest suggested solution is preparation
and agreement of any aspects of the final account
throughout the progress of the works with a mean of
4.57
 The third highest ranking that the respondents further
agreed was that the parties should start finalizing
measurement upon completion of any part of the works
with a mean of 4.40

19. RESULTS AND DISCUSSION CONT’D
 Factors that affect final account closing
 Delay in valuation of variations ranked highest with
a mean of 4.21
 The second highest influence is delay in settling
claims; e.g. additional costs with a mean of 4.07
 Third highest ranking is ignoring re-measurement of
provisional quantities with a mean of 4.00

20. RESULTS AND DISCUSSION CONT’D
 Findings for objective 1
 From the survey, it has been considered that Final
Account, like construction dispute, is a difficult-to-
settle-task which is skills-oriented, adversarial,
repetitive, tactical, time consuming and, more
frequently, lack of appreciation
 This has echoed the common understanding in the
construction industry that most final accounts were
settled far beyond the period stated in the
respective contract.

21. RESULTS AND DISCUSSION CONT’D
 Findings for objective 2
CHALLENGES RANK
Representation of additional cost 1
Reduced credit ratings 2
Increment of bankruptcy among contractors 3
Opportunity loss of contractors in getting other projects 4
Trade credit constraints 5
Loss of reputation 6

22. RESULTS AND DISCUSSION CONT’D
 Findings of objective 2
SOLUTIONS RANK
Variations to the contract should be settled at the earliest time possible 1
Preparation and agreement of any aspects of the final account throughout 2 the
progress of the Works
Parties should start finalizing measurement upon completion of any part 3 of the
Works
Parties should maintain a “running” final account for which 4
measurements and agreements occur throughout the project
Parties to the contract should be up-to-date on all documentation and track 5
records regarding the project

23. RESULTS AND DISCUSSION CONT’D
 Findings for Objective 3
 Delay in valuation of variations- usually are the root
of most claims and disputes
 Delay in settling claims; e.g additional costs-
nowadays claims in construction contract are verily
common and mostly inevitable
 Ignoring re-measurement of provisional quantities-
Measurement is the central aspect in building
project that needs to be dealt with even if there was
no change to the works

24. RESULTS AND DISCUSSION CONT’D
 Findings for Objective 3
 Poor documentation and lack of Records- which is
common and essential in support of all aspects
forming the Final Account, in particular in relation
 to valuation of variations,
 substantiation of claims,
 measurement,
 day works and site works which bear significant
impact on the final contract sum

25. CONCLUSION
 For many years, the issue of delay in final account
closing of building projects in Malawi construction
projects has been recorded as unsatisfactory
phenomenal
 Client or paymasters should practice an efficient
system to make sure that the contractor receives
the payment accordingly
 Hence, delays of final accounts closing can be
resolved at the early stage if the documents are
kept properly

26. CONCLUSION CONT’D
 Delay in the closing of final accounts may also
cause problems to contractor in making working
capital and eventually lead to bankruptcy
 Personal in charge in the project should be
maintained especially the project manager until the
closing of final accounts is completed.
 Thus, project managers need to have better
understanding of critical success/failure factors in
the construction project and how to measure them

27. RECOMMENDATIONS
 In all circumstances, it is not suggested that final
account preparation should commence only upon
completion of the project
 Whilst this may be the case in most situations, it is
not good practice, as there is abundant opportunity
for final account measurement during the course of
the Works
 From what have learned through this research, it is
suggested that:

28. RECOMMENDATIONS CONT’D
 Variations to the contract should be settled at the
earliest time possible
 Preparation and agreement of any aspects of the
final account throughout the progress of the Works
 Parties should start finalizing measurement upon
completion of any part of the Works
 Parties should maintain a “running” final account for
which measurements and agreements occur
throughout the project
 Parties to the contract should be up-to-date on all
documentation and track records regarding the
project

29. THANK YOU
GOD BLESS YOU
ALL!!!!!!!!