AGI Construction sector proposes legislation on delayed payment

Accra, Feb. 5, GNA -The Association of Ghana Industries (AGI) Construction Sector has proposed to government to legislate interest on delayed payment for public construction works.

A statement signed by Mr Rockson Dogbegah, AGI Construction Sector Chair, said the delayed payment was a major problem in the Ghanaian construction industry.

It said delayed payments affect contractors, who often borrow working capital from banks in order to finance their construction operations and invariably end up having to pay interest on these borrowings.

“Delayed payments increases credit default tendencies and actual defaults. Consequently, it becomes more difficult for construction firms to access credit from the banks,” the statement said.

It said most banks now consider government projects as risky because of the common issues of delayed payments associated with them and have therefore become increasing disinterested in lending to the construction sector; thus, threatening the sustainability of the already low-capitalised local contractors.

The statement said the passage of the construction industry Delayed Payment Law would ensure that funds for construction projects are well budgeted for and available before the commencement of the project.

It would also help in making provisions for compensation to be paid to contractors in the event of delayed payments to ensure justice in the construction industry and promote the sustainability and development of firms and the industry.

On the Acceptance of Bid Declaration as replacement of Bid Security, the statement said Bid Securities / Guarantees come at a great cost to the Bidder, often set either as a percentage of the bidder’s offer or as a percentage of the allocated budget for the procurement requirement.

It said high insurance cost, high bank charges and collateral security requirements had introduced inefficiencies into the construction industry, constraining the ability of local contractors to compete for bidding opportunities.

“When bids are successful, the financing cost and cash flow problems associated with bid security requirements threaten the sustainability of Local Ghanaian Contractors,” it said.

The statement said a replacement of bid securities with bid declaration documents would help improve contractor liquidity; reduced cost of projects and business operations; enhance the competitive bidding process to include more local contracts; and reduce delays in procurement procedures.

The AGI Construction Sector was established with the vision to be the most active and vibrant construction industry mouthpiece in championing construction industry development initiatives.

To achieve this, it seeks to influence the development and growth of the construction industry, through effective stakeholder engagements and policy reform initiatives that will enhance the capacity and competitiveness of construction sector service providers in Ghana.

Since its establishment, it has championed a number of initiatives with the support of the Business Sector Advocacy Challenge (BUSAC) Fund and its Partners: Danida, the EU and USAID.