An assessment of risks associated with contractor’s cash flow projections in South-South, Nigeria

Abstract

Construction contracts have been widely acknowledged to be capital intensive, complicated, and risk prone. The purpose of the study is to assess risk factors affecting contractors’ cash flow for construction projects and examine their influence on contractors’ cash flow projections. In line with quantitative survey approach adopted for the study, 193 copies of a structured questionnaire were administered while 130 valid responses were received to give a response rate of 67.4%. Data collected were analysed using descriptive statistics and Kruskal Wallis. Findings indicate that the 5 top rated risk factors affecting contractor’s cash flow were ‘delay in payment by client’, ‘delay in delivery of materials’, contractor’s lack of resources, exchange rate, and inflation while the 5 least rated risk factors by respondents were currency of cost data, disagreement over retention, over valuation, adjustment of prime cost sums, and force majeure. It was also discovered that ‘contractor’s lack of resources’ had the highest severity of influence according to the view of respondents. The study concludes that cash flow projections of contractors handling construction projects in south-south Nigeria are prone to risks, most of which are significant. However, it was established that the five top risks which should be of concern to contractors are delay in payment by client, delay in delivery of materials, contractor’s lack of resources, exchange rate, and inflation. The study recommends that contractors and other stakeholders could consider putting in place risk control measures to counter those risks identified in this study as likely to have high severity of influence on cash flow with a view towards bolstering project delivery.

Keywords:

• Risk factors
• contractor
• cash flow
• construction projects
• Nigeria

Disclosure statement

There is no conflict of interest by authors in developing this article.