Delayed payments by State to local construction firms has piled up to over 6 billion rupees, said a senior industry official.

"The general understanding is that once a bill is submitted and if it is certified by the engineer the contractor should receive the money within 2 months," Amara Dissanayake, the chief executive at the National Construction Association of Sri Lanka (NCASL) said.

NCASL is the body responsible for the development of the island's Construction industry.

"The payments have been delayed for the last six months. This is a major factor preventing the progress of the construction community," Dissanayake added.

The 'standard bidding document' by the Institute for Construction Training and Development (ICTAD) spells out the conditions for bill settlement followed by most construction firms.

"The conditions of these contracts have to be changed," said Dissanayake.

"A guarantee should be given to the bank so once our engineers approve and submit the bills the banks can release the money with the client's guarantee. Then there will not be a block here," he suggested.

Dissanayake said the over dues are mostly from state sector institutions.

"If it a contract given by the private sector they will naturally negotiate and put maximum effort to settle the money, but when it is from the government sector they have limitations," he said.

"Roads, bridges, and major irrigation projects and water supply and drainage projects...these are the major projects where the money is being held."

The Road Development Authority has the highest overdue of 5 billion rupees.

As at June 30, 2010, the Ministry of Urban Development and Sacred Area owes local contractors 141 million rupees, while the National Water Supply and Drainage Board also has171 million rupees outstanding.

Over dues from the Ministry of Healthcare and Nutrition runs up to 64 million rupees, while the Sri Lanka Customs, the biggest revenue collector for the government owes 52 million.

The Ministry of Higher Education owes 29 million to local contractors.

Ministry of environment and natural resources owes 13 million rupees, Sri Lanka Railaways 12 million, Colombo Municipal Council 10 million and the Ministry of Local Government, five million rupees.

The Board of Investment owes a local contractor 558,000 rupees.

Construction industry in Sri Lanka is dominated by a hand full of large players like Maga, Tudawe Brothers, ICC, Sierra, Walkers, Nawaloka, Sanken and Access Engineering.

The post war reconstruction requirements are expected to throw open many opportunities for the industry which went through a lean period in last two years. .

The sector is expected to grow seven to eight percent over the next five years as forecast by NDB stockbrokers, the stock brokering arm of National Development Bank.

However now construction firms are struggling as the delay in recovering money for completed projects is hampering their cash flows.

"Even the small and medium contractors are affected by them," said Dissanayake.

"Most of theses people run on overdrafts and interest on overdraft are very high," he added.