Corporate Accountability for Contractor Deviations in Construction Payment Claims: Legal, Ethical, and Governance Perspectives

Arief Koeswanto; Prastiwo Anggoro; Sarwono Hardjomuljadi; Ediyanto Arief; Sami’an; Achmad Soeharto

doi:10.30656/ajudikasi.v10i1.11874

Authors

Arief Koeswanto Universitas Pekalongan
Prastiwo Anggoro Universitas Pekalongan
Sarwono Hardjomuljadi Universitas Pekalongan
Ediyanto Arief Universitas Pekalongan
Sami’an Universitas Pekalongan
Achmad Soeharto Universitas Pekalongan

DOI:

https://doi.org/10.30656/ajudikasi.v10i1.11874

Keywords:

Accountability, Payment Claims, Construction Law, Fraud Prevention, Corporate Governance

Abstract

The Indonesian construction industry is central to national infrastructure and economic development, yet construction projects remain vulnerable to contractual, ethical, and governance risks. This article examines corporate accountability for contractor payment-claim deviations in an Indonesian construction project, focusing on the interaction between contract law, professional ethics, Good Corporate Governance, and ISO 9001:2015-based quality management. The study adopts a normative juridical approach combined with a qualitative single-case analysis of a chemical plant construction project in East Java that used a modified FIDIC contract. Primary materials comprise contract clauses, invoice and Interim Payment Certificate records, supporting claim documents, project correspondence, and professional observations, while secondary materials include Indonesian construction-law regulations, FIDIC-related literature, and scholarship on fraud prevention and construction claims. The case indicates that payment-claim deviations were associated with premature or inadequately supported claims, inconsistencies between claimed and verified work progress, and weaknesses in documentation and verification controls. The analysis shows that payment claims operate as legal-contractual events and governance-control events, requiring clear entitlement, reliable evidence, engineer verification, and an auditable approval trail. Fraud-risk concepts are used to interpret how opportunity, rationalization, capability, and organizational ethical orientation may normalize irregular claims. The study argues that accountability should be strengthened through clearer claim documentation, risk-based internal controls, ethical leadership, DAAB institutionalization, simplified EoT/VO procedures, and safeguards against contractual power asymmetry.

Downloads

Download data is not yet available.

References

Abdel-Hamid, D. Mohamed, and Abdel-Rahman Alaa El-Din Mostafa. “The Effect of FIDIC Red Book 2017 to Avoid Disputes in Egyptian Construction Field.” Ain Shams Engineering Journal 14, no. 5 (2023): 101963.

Abdel-Khalek, Hesham A., Remon Fayek Aziz, and Israa A. Abdellatif. “Prepare and Analysis for Claims in Construction Projects Using Primavera Contract Management (PCM).” Alexandria Engineering Journal 58, no. 2 (2019): 487–97.

Ahmadisheykhsarmast, Salar, and Rifat Sonmez. “A Smart Contract System for Security of Payment of Construction Contracts.” Automation in Construction 120 (2020): 103401.

Alqudah, Hamza, Noor Afza Amran, Haslinda Hassan, Abdalwali Lutfi, Noha Alessa, and Mohammed Amin Almaiah. “Examining the Critical Factors of Internal Audit Effectiveness from Internal Auditors’ Perspective: Moderating Role of Extrinsic Rewards.” Heliyon 9, no. 10 (2023). https://www.cell.com/heliyon/fulltext/S2405-8440(23)07705-8?uuid=uuid%3Adc0ffb4e-da3d-4960-a895-013ffaff5328.

Al-Sabah, Ruqaya S., and Sarah S. Al-enezi. “Reducing Contract Disputes: A Comparative Analysis of FIDIC and GCC Standard General Conditions of Contract for Construction Projects.” Journal of Engineering Research, 2024. https://www.sciencedirect.com/science/article/pii/S2307187724002542.

Awed, Joseph, and Alireza Ahmadian Fard Fini. “Governmentality in Construction Claim Management: Role of Smart Data Initiatives.” Project Leadership and Society 5 (2024): 100158.

Bockius, Heike, and Nadine Gatzert. “Organizational Risk Culture: A Literature Review on Dimensions, Assessment, Value Relevance, and Improvement Levers.” European Management Journal 42, no. 4 (2024): 539–64.

Brunet, Maude. “Governance-as-Practice for Major Public Infrastructure Projects: A Case of Multilevel Project Governing.” International Journal of Project Management 37, no. 2 (2019): 283–97.

Budayan, Cenk, and Ozan Okudan. “Roadmap for the Implementation of Total Quality Management (TQM) in ISO 9001-Certified Construction Companies: Evidence from Turkey.” Ain Shams Engineering Journal 13, no. 6 (2022): 101788.

Dizon, Michael Anthony C. “Socio-Legal Study of Technology: A Norms and Values Approach to Hacking and Encryption Law and Policy.” Computer Law & Security Review 52 (2024): 105958.

Elazouni, Ashraf, Yuvraj Gajpal, and Ali Fares. “Negotiating Win-Win Payment Terms between Construction Contractors and Subcontractors.” Automation in Construction 146 (2023): 104676.

Farquhar, Jillian, Nicolette Michels, and Julie Robson. “Triangulation in Industrial Qualitative Case Study Research: Widening the Scope.” Industrial Marketing Management 87 (2020): 160–70.

Freeman, Christopher. “Fraud and Complexity Theory: Moving beyond the Fraud Triangle towards a New Theoretical Framework.” Journal of Economic Criminology 10 (2025): 100198.

Hamledari, Hesam, and Martin Fischer. “Construction Payment Automation Using Blockchain-Enabled Smart Contracts and Robotic Reality Capture Technologies.” Automation in Construction 132 (2021): 103926.

Hernad, José Manuel Conde, and Cristina González Gaya. “Methodology for Implementing Document Management Systems to Support ISO 9001: 2008 Quality Management Systems.” Procedia Engineering 63 (2013): 29–35.

Hilal, Waleed, S. Andrew Gadsden, and John Yawney. “Financial Fraud: A Review of Anomaly Detection Techniques and Recent Advances.” Expert Systems With Applications 193 (2022): 116429.

Lehtinen, Jere, Giorgio Locatelli, Tristano Sainati, Karlos Artto, and Barbara Evans. “The Grand Challenge: Effective Anti-Corruption Measures in Projects.” International Journal of Project Management 40, no. 4 (2022): 347–61.

Love, Peter ED, Jane Matthews, Stuart R. Porter, Brad Carey, and Weili Fang. “Quality II: A New Paradigm for Construction.” Developments in the Built Environment 16 (2023): 100261.

Lukichev, Sergey, and Marina Romanovich. “The Quality Management System as a Key Factor for Sustainable Development of the Construction Companies.” Procedia Engineering 165 (2016): 1717–21.

Martin, Loosemore, and Lim Benson. “Relationship Quality in Construction Projects: A Subcontractor Perspective of Principal Contractor Relationships.” International Journal of Project Management 39, no. 6 (2021): 633–45.

Msawil, Mahir, David Greenwood, and Mohamad Kassem. “A Systematic Evaluation of Blockchain-Enabled Contract Administration in Construction Projects.” Automation in Construction 143 (2022): 104553.

Narsa, Niluh Putu Dian Rosalina Handayani, Lesta Mega Evi Afifa, and Oktaviani Ari Wardhaningrum. “Fraud Triangle and Earnings Management Based on the Modified M-Score: A Study on Manufacturing Company in Indonesia.” Heliyon 9, no. 2 (2023). https://www.cell.com/heliyon/fulltext/S2405-8440(23)00856-3.

Ranjbar, Alireza Amin, Ramin Ansari, Roohollah Taherkhani, and M. Reza Hosseini. “Developing a Novel Cash Flow Risk Analysis Framework for Construction Projects Based on 5D BIM.” Journal of Building Engineering 44 (2021): 103341.

Riaz, Hassan, Khurram Iqbal Ahmad Khan, Fahim Ullah, Muhammad Bilal Tahir, Muwaffaq Alqurashi, and Badr T. Alsulami. “Key Factors for Implementation of Total Quality Management in Construction Sector: A System Dynamics Approach.” Ain Shams Engineering Journal 14, no. 3 (2023): 101903.

Sargiacomo, Massimo, Jeff Everett, Luca Ianni, and Antonio D’Andreamatteo. “Auditing for Fraud and Corruption: A Public-Interest-Based Definition and Analysis.” The British Accounting Review 56, no. 2 (2024): 101355.

Saygili, Murathan, Isa Emre Mert, and Onur Behzat Tokdemir. “A Decentralized Structure to Reduce and Resolve Construction Disputes in a Hybrid Blockchain Network.” Automation in Construction 134 (2022): 104056.

Shojaei, Alireza, Ian Flood, Hashem Izadi Moud, Mohsen Hatami, and Xun Zhang. “An Implementation of Smart Contracts by Integrating BIM and Blockchain.” In Proceedings of the Future Technologies Conference (FTC) 2019, vol. 1070, edited by Kohei Arai, Rahul Bhatia, and Supriya Kapoor. Advances in Intelligent Systems and Computing. Springer International Publishing, 2020. https://doi.org/10.1007/978-3-030-32523-7_36.

Sonmez, Rifat, Salar Ahmadisheykhsarmast, and Aslı Akçamete Güngör. “BIM Integrated Smart Contract for Construction Project Progress Payment Administration.” Automation in Construction 139 (2022): 104294.

Ssegawa, J. K., and S. Keakile. “Analyzing the Nature of Contractor Claims and Strategies for Their Effective Management: A Case of BuildServe in Botswana.” Procedia Computer Science 219 (2023): 1814–22.

Tian, Junmin, and Hui Sun. “Corporate Financialization, Internal Control and Financial Fraud.” Finance Research Letters 56 (2023): 104046.

Titus, Olalekan Olaolu, and Kherun Nita Ali. “Construction Dispute and Contract Incompleteness in Nigeria Construction Industry.” Ain Shams Engineering Journal 14, no. 10 (2023): 102153.

Wayoro, Didier, Wilfried Nonguierma, and Michelle Parkouda. “Upfront Efforts for Upcoming Benefits? ISO 9001: 2015 Certification and Firms’ Performance in 33 Countries.” International Economics 183 (2025): 100620.