Conditional Payments in the Indonesian Construction Industry

A healthy cash flow is the lifeblood of the construction business. As a result, payment has always been an important issue in construction industry practice. In a construction project, the main contractor will normally assign several subcontractors to assist in its work. Problems arise in the main contractor-subcontractor relationship with regard to the issue of “pay when paid” or “pay when certified.” Indonesia, a country with much construction development, is still facing this problem. The research presented has three objectives: (1) to determine conditional payment practice in the Indonesian construction industry; (2) to identify the causes and effects of conditional payment practice in the Indonesian construction industry; and (3) to identify solutions to this practice in Indonesia. It is expected that a deeper understanding of the direct and indirect impacts of this practice in Indonesia will be obtained from the research.