The Security of Payments in Construction Projects

Abstract

The fundamental objective of any commercial transaction is to generate profit. However, achieving sustainable profitability requires more than ambition, it necessitates disciplined financial planning, rigorous cash flow control, and continuous monitoring. At the heart of this process lies a critical factor which is ensuring that payments are secure and made promptly, in full alignment with the contractual terms agreed upon by the parties. In the construction industry, however, delayed or suspended payments remain a persistent challenge. These issues often arise from complex contractual arrangements such as back-to-back payment clauses alongside contractor performance concerns, project delays, administrative inefficiencies, inter-party disputes, or, at times, unprofessional conduct. Such disruptions frequently escalate into formal disputes, with payment-related disagreements emerging as a leading cause of contention between employers and contractors, as well as between contractors and subcontractors. To mitigate these risks and uphold financial stability, all parties must actively protect their interests. Contractors have the right to ensure the timely receipt of payments, while employers must secure that any advance payments are utilised solely for the intended project scope. Additionally, interim payment applications should accurately reflect the actual value of the work completed, avoiding exaggerated or front-loaded claims during the early phases of the contract. Ensuring transparency and accountability in payment practices is therefore essential to reducing disputes and maintaining trust throughout the project lifecycle.