Effects of Payment Delays at Two Links in Payment Chains on the Progress of Construction Projects: System Dynamic Modeling and Simulation

Hongtao Xie, Junwei Zheng, Yunhua Zhang and Hongyang Li
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Hongtao Xie: Faculty of Management and Economics, Kunming University of Science and Technology, Kunming 650500, China
Junwei Zheng: Department of Construction Management, Kunming University of Science and Technology, Kunming 650500, China
Yunhua Zhang: Department of Construction Management, Kunming University of Science and Technology, Kunming 650500, China
Hongyang Li: School of Civil Engineering and Transportation, South China University of Technology, Guangzhou 510641, China

Sustainability, 2019, vol. 11, issue 15, 1-25

Abstract: Payment is the lifeblood of construction projects. However, steady fund flow is rare in construction projects. This paper focused on a quantitative evaluation of the impact of payment delays at the two links (i.e., from owner to general contractor and from general contractor to subcontractor) on the progress of a construction project. A hybrid research method combining the interpretative structural modeling (ISM) method and system dynamics was used to simulate the complex relationships between a payment delay and project progress. Four distinct payment policies are quantitatively simulated to reveal the impact of payment delays at the two links on the progress of a construction project. The results show that shortening the payment period at the two links in the payment chain will accelerate the flow of funds and relieve the burden on contractors in providing advance funds in terms of amount and duration, making them powerful measures to ensure smooth progress. The other three payment policies require that the subcontractor provide large sums of advance funds for lengthy periods to ensure smooth project delivery.

Keywords: payment delay; project progress; system dynamic; simulation; construction project (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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