Delayed payments beset construction firms

September 09, 2022 - 08:13
Many construction firms are running unprofitably amid high material costs, and delayed payments are adding to their woes, according to insiders.
Workers carry out tasks at a CIENCO4 project in Thanh Hóa Province. Photo

HÀ NỘI — Many construction firms are running unprofitably amid high material costs, and delayed payments are adding to their woes, according to insiders.

According to Khương Tất Thắng, Deputy Director-General of the Truong Son Construction Corporation, delayed payments are a glaring problem that have been dogging construction firms for years.

For his firm, delayed payments largely occur at projects financed by public money, and the payments usually 5 to 10 years overdue.  

"For some of our ongoing highway projects, the investors unilaterally added such contractual terms that only when they are allocated enough public money are they obliged to make due payments," he said.

He also said investors sometimes temporarily withheld 2 to 5 per cent of their total payments on the grounds of administrative procedures. He urged the investors to practise the techniques more flexibly so his firm could maintain higher working capital for its operation. 

Hoàng Trung Kiên, Vice Business Manager of the CIENCO4 Group JSC, said that delayed payments caused severe problems to construction firms, including cash-flow shortages and tax arrears.

He said his company's overdue accounts receivable had amounted to VNĐ187 billion, and the delayed payments could be attributed to investors' negligence.

To deal with the situation, he called for a regulation that obliges investors to pay off all the money they owe to construction firms before they can put the facilities to use.

He also called for shortened administrative procedures for investors to obtain public money more efficiently, thereby decreasing disbursement time. Red tape has lengthened payment delays in some projects to nearly 10 years.

Vũ Gia Bình, Deputy Director-General of the Construction Corporation No1 JSC, revealed that some investors employ underhand tactics, such as board reshuffles and supervisor replacements, affecting construction firms' works and delaying payments.

The deputy director-general called for separate payments for each finished section to speed up disbursement since sections normally do not finish concurrently.

According to Vũ Xuân Thắng, Deputy Director-General of the Construction Machinery Corporation, payment procedures are cumbersome in Việt Nam and sub-contractors are the party bearing the brunt of delayed payments.

For fixed-price contracts, sub-contractors have to go through lengthy procedures to get payments for the volumes of works overshooting the contractual volumes.

For lump-sum contracts, sub-contractors are not paid for the excessive volumes, causing dismay among constructors.

For contracts involving private money, investors often use delaying tactics to delay or avoid payments to sub-contractors, even though the facilities have been transferred and are in use. — VNS