Construction in further quandary with govt. delaying release of due payments

• Govt. owes construction sector excess of Rs.50bn for completed public sector projects
• CCI warns further delaying of payments puts sector at risk
• Says many construction entities likely to fold up; many would be out of jobs

By Shabiya Ali Ahlam
The local construction sector is set to slump further with its pleas to the government to release due payments, which are in excess of Rs.50 billion, continuing to fall on deaf ears. 

The Chamber of Construction Industry of Sri Lanka (CCISL) warned that the failure to heed to the request puts the sector at high risk, with the increased likelihood of many entities shutting down.

“The small contractors have received some relief, but the larger players, who have over thousands of employees in its permanent payroll are struggling to pay at least half of April salaries. The payments of these funds for certified bills are for work executed on public sector projects,” said CCISL Secretary General/CEO Eng. 
Nissanka Wijeratne.

“If this situation is not addressed, if the companies do not get their payments at least now, many entities would fold up. This means large numbers would be out of jobs,” added the Chamber representative.

Eng. Wijeratne shared that the Chamber has repeatedly made representations to the government and have written to President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, but a response is yet to be received.
The Chamber head warned that delaying the release of funds due will have a further cascading effect since contractors will not be able to pay sub-contractors, labour suppliers, and material suppliers.

“Companies are not going to pay the supply chain out of their pockets. They just can’t, given the current situation with the outbreak. The profit for the construction players is only 5 percent of the entire project value, the rest is for the supply chain. They are short of that kind of money and they need it now,” asserted Eng Wijeratne.

The CCI head stressed the government should seriously consider settling all outstanding certified bills to contractors and consultants immediately.

To further relieve the cash flow burden of the sector due to the slowdown in activities, Eng. Wijeratne said that the CCI has proposed to the government to release the amount retained from monthly payment certificates on construction contracts when maximum limit of 5 percent is reached on submission of a bank guarantee.

Secondly it has proposed to release all retentions recovered from ongoing contracts, and not to recover retentions from future contracts with the submission of a bank guarantee for 5 percent of the contract sum.

Lately, the chamber has requested to include construction contractors and consultants as eligible business sectors in Section 2(1) (a) of Central Bank Circular No.5 of 2020.

The construction sector contributes about 8 percent to the GDP and provides direct employment to approximately 650,000 persons and indirect employment to over 300,000 persons.