Feasibility of project bank accounts as a strategy of curbing the culture of late payments to contractors in Kampala

Abstract

Uganda’s construction industry has long been plagued by destitute payment practices perceived for decades. The construction industry's payment problem is characterised by delayed periods between supply of work/goods and payment, ordinarily caused by late or postponed payment past the contractually agreed date or by long payment credit terms given within the construction contract. Even with the increased use of Project bank Accounts internationally, its use in Uganda’s construction industry is still at infancy stage and mainly applied in the private sector. The research study sought to assess the causes of delays, their frequency and barriers that have limited the implementation of project bank accounts in Uganda’s projects. A qualitative and quantitative approach to data analysis was employed for the study. The data collected and analyzed with the use of descriptive analysis in Microsoft word and Excel Percentages and tables were used to analyze the results. As such, considering the data collected referring to the operation of PBAs and resistance to their use, this paper gives the outcomes of a questionnaire survey which aimed to find out the perspectives of constructing contractors in Kampala, the effectiveness and effect of PBAs; and the obstacles to the implementation of PBAs. The survey found that only 35% of contractors have used PBAs, but most of them (55%) are aware of their benefits and 70% are eager to use them in the future. The low reception of PBAs in Kampala is attributed to lack of regulation, limited disposable income from government and resistance from some clients. Despite these challenges, the use of project bank accounts in Kampala has several benefits that could make it a viable solution for contractors. The report recommends developing a regulatory framework, increasing the budget allocation and disbursement, raising awareness and education and encouraging collaboration and trust for PBAs in Kampala.