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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/8067

Title: Assessing the financial impact of construction securities on the cash flow of building contractors in Ghana
Authors: Adabre, Michael Atafo
Keywords: Risk
Bonds
Gurantees
Insurance Policies
Cash retention and construction
Issue Date: 9-Nov-2015
Abstract: Risks affect construction industries and Ghana is no exception. Due to the negative impacts of risks, the multiplier effects of construction have not been fully utilized. To mitigate risks, one of the mechanisms used in Ghana is risk transfer through the acquisition of financial securities. Securities are demanded by clients at various contract phases to ensure that the risks aimed to be controlled by the securities are curbed. This study therefore seeks to assess the cost effects of these securities on the contract sum and the cash flow of contractors. Review of literature, however, does not provide much information on whether the risks that these financial securities seek to repress still persist in the Ghanaian construction industry or not. Moreover, there is a knowledge gap of the securities that clients call for, the cost implication of these securities on the contract sum and the cash flow of contractors. These gaps in knowledge are the guides for the setting of the research questions and objectives. Using Accra as the study area, purposive sampling was adopted for the selection of project participants. With a questionnaire survey, data were collected from thirty-two (32) quantity surveyors mostly from the public sector, ten (10) banks and ten (10) insurance companies. Data were analyzed using descriptive statistic, parametric and non-parametric analysis and finally, a simulation (scenario analysis) of the cost implication at various penal sums. Results from the analysis revealed that the dominant pre-contract risk is low bid rates. Also, inadequate capital as a risk factor occurs most frequently at the contract stage whiles time overruns ensued dominantly at the post-contract stage. The study further provided insight into the most frequently demanded securities such as guarantees, bonds and cash retention. Moreover, it was also found out that an increment of 4.60% maximum of contract sum is likely when guarantees are used and 2.80% maximum when bonds are used. This research contributes to the implication of these cost increment on the cash flow of contractors. Again, it contributes to cost planning before project commencement. It was recommended that high penal sum could be used as a way of eliminating or reducing risks in a more risky environment. However, low penal sum can be used to encourage greater participation and competition of bidders as well as lessen the cost burden on bidders provided that there is a past record of very low risks in an area. Assessing the cost benefit analysis of using high penal sum and low penal sum; and improvement in the usage of Liquidated and Ascertained Damages (LAD) and retention bond/guarantees are suggested potential areas for further research in Ghana.
Description: A thesis submitted to the Board of Graduate Studies, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the award of the Degree of Master of Philosophy in Building Technology, 2015
URI: http://hdl.handle.net/123456789/8067
Appears in Collections:College of Architecture and Planning

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