Financial factors and impacts of project delays in Malaysian construction industry

The construction industry has been determined as one of the main pillars toward a country’s development. Project delays are one of the crucial issues facing the construction industry. Delays give major impacts in terms of on time project delivery, cash flow management, and the required quality. Previous studies highlighted general factors of delay that lead to the failure of contractor performance, including non-financial factors, but financial factors are significant issues in the Malaysian construction industry. Therefore, this study investigated the factors and impacts of financial difficulties faced by contractors in the Malaysian construction industry. The study objective was to investigate the causes of financial issues, to analyse the implications of financial issues and its effects, and to identify the available options and strategic methods to resolve these financial issues. Structured interview sessions were conducted using standard structured questions involving seven respondents who were selected based on their experience and competence in running construction projects in Malaysia. The results of the study revealed that the main causes of delay in construction projects included lack of cash flow management, past due payment received from client, and difficulties in obtaining funds from financial institutions. The implications of these financial issues and their effects on delayed projects would lead to total abandonment, delayed for one to three years from expected delivery date to the clients, increased costs of the project, low quality workmanship, incomplete construction projects, bad reputation to the contractors and clients, budget overrun, time overrun, upward review of contract sum, and revised contract prices. The recommendations to improve and overcome financial issues faced included better managing the cash flow, budget, and payment received from clients.