AN ASSESSMENT OF FACTORS AFFECTING CONSTRUCTION COST IN NIGERIA

ABSTRACT

The study was carried out to assess the Factors affecting Construction Cost in Nigeria using low-rise buildings in Nairobi Central Business District as a case study. In achieving this aim, the following specific objectives were laid out to determine the influence of cost of materials on the performance of construction projects in Nigeria and establish the influence of quality management on the performance of construction projects in Nigeria. Investigation revealed that maintaining steady cost projection on construction projects had been an issue of serious concern, both to the client and project contractors. Cost deviation from initial Cost plan, had been prevalent on Construction sites. However, little or no efforts has made to curtail the phenomenon, it is against this background that this research work attempt to study the factors that are responsible, so as to identify them and proffer possible ways of tackling the menace. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. Primary data were collected from the primary source which questionnaire was used as an instrument of data collection while secondary data were sources from textbooks, journals, newspapers and the internet were employed. The data were presented on a frequency distribution table and analyzed using simple percentage, while hypothesis was tested using chi-square test. It was discovered from the analysis that factors such as Contractors inexperience, inadequate planning, Inflation, incessant variation order, and change in project design were critical to causing cost overrun, while project complexity, shortening of project period and fraudulent practices are also responsible. The study concluded with recommending, adequate planning using conventional techniques, Studying and applying project history, material bulk purchase, proper project design and establishing proactive fraud prevention system on sites, as panacea for effective cost performance on sites.

CHAPTER ONE

1.1 Introduction

Construction industry in Nigeria had been a major source of employment for 70% of labour force in the country, thus it controls the capital flow, as well as labour resources, which has cost implications. Adequate management of these resources is considered an important aspect of project works; it determines to a large extent the overall success of project works. They described cost management system as a process that should be carried out throughout the life cycle of a project, from the inception to final completion and final payment to the contractor. In the light of this, the timeliness and cost effectiveness of various operation and decision carried out will determine to an extent the magnitude of cost that could be saved on the project (Kerzner, 2005; Ogunsemi and Jagboro, 2005).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

1.2 Background of Study

Construction industry has complexity in its nature because it contains a large number of parties such as clients, contractors, consultants, stakeholders, shareholders, regulators and others. Construction projects in the Gaza Strip suffer from many problems and complex issues in performance, such as cost, time and safety (Shaban, 2008). Client satisfaction is therefore a fundamental issue for construction participants who must constantly seek to improve their performance if they are to survive in the global marketplace. However, client satisfaction has remained an elusive issue for a majority of construction professionals (Cheng et al., 2005).

Due to the demand for built products from foreign investors and the growing economy, Vietnam’s construction industry, experience strong growth. While some of the construction projects are successfully executed, others faced difficulties (Bui &Ling, 2010). Despite the availability of various control techniques and project control software many construction projects still do not achieve their cost and time objectives (Oluwale & Sun, 2010).

Most third world countries face acute endemic housing problem that over the years has raised both national and international concerns. Habitat and World Bank, for example, fund many housing schemes worldwide in addressing the housing issue. Likewise, governmental and non-governmental institutions foster and orchestrate self-help campaigns directed at reducing inherent housing deficiency in these poor nations. However, a growing number of unfinished buildings in such countries seem to overshadow the efforts and thus pose many questions as to what is behind the failure in providing such a highly needed commodity. One may wonder whether such a failure has anything to do with architecture, attitudes and practices of the people or is it just a thing to be pegged on socio-economic platform of the society (Mirema & Mhando, 2005).

Construction cost is one of the most important criteria of success of projects throughout the lifecycle of the project and is of high concern to those who are involved in the construction industry. In order to manage construction project successfully various procurement strategies have been introduced. In spite very rarely projects are completed within estimated budget (Abdullah et al., 2010). Maintaining steady cost projection on construction projects had been until recently an issue of serious concern, both to the client and project contractors. Cost deviation from initial cost plan, had been prevalent on construction sites (Amusan,n.d).

Every year, large companies spend large sums on the research and development about the most optimum combination of production or the most optimum function and feature of their products and services. The impact of poor quality on the price of products and organization earnings and the amount of cost should be paid for high quality has raised many important issues affecting cost accounting, quality control, repairs and maintenance, supply chain, production management, stores, safety and health, education and improvement and so forth (Amin, 2011). A minimum prerequisite for identifying such projects is the ability to measure the performance. Unfortunately, two issues complicate the measuring task: diseconomies or economies of scale and multidimensional inputs and outputs (Myrtveit & Stensrud, 2005).

Ankrah and Proverbs (2005) showed that despite the inherent benefits of performance measurement in helping identify unnecessary causes of waste so that remedial actions can be taken, performance measurement is not extensively implemented because of the inadequacy of measures, complexity of measurement, time consuming and costly nature of performance measurement, and project-oriented nature of the industry. Where performance measurement is implemented, various frameworks are available, some targeting project performance whilst others focus on overall business performance.

Ideally, projects designed and managed by highly trained construction professionals and executed by qualified contractors selected on the basis of their capability should meet the project performance goals. These goals are in terms of the contract period, budget, quality, environmental sustainability and client satisfaction. However, there is evidence that despite the high quality of training of consultants in the building industry in Nigeria and regulation of the industry in major urban areas, construction projects do not always meet their goals. This is manifested by myriad projects that have cost overrun, delayed completion period and poor quality resulting to collapsed buildings in various parts of the country, high maintenance costs, dissatisfied clients and even buildings which are not functional (Kibuchi & Muchungu, 2012).

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to assess the Factors affecting Construction Cost in building project.

1.3 Statement of Problems

Investigation revealed that maintaining steady cost projection on construction projects had been an issue of serious concern, both to the client and project contractors. Cost deviation from initial Cost plan, had been prevalent on Construction sites. Past industry experiences show that, medium to large size projects have high failure rate. The consequences can be costly and lengthy, with the worst outcomes often leading to undesirable litigation engagements. Developing Countries have higher rate of low project performance than developed countries (Lepartobiko, 2012).

There is evidence that the performance of the construction in Nigeria is poor as time and cost performance of projects are to the extent that over 70% of the projects initiated are likely to escalate with time with a magnitude of over 50% and over 50% of the projects likely to escalate in cost with a magnitude of over 20% (Nyangilo, 2012).

Kibuchi and Muchungu (2012) discovered that despite the high quality of training of consultants in the building industry in Nigeria and regulation of the industry in major urban areas, construction projects do not always meet their goals. This is manifested by myriad projects that have cost overrun, delayed completion period and poor quality resulting to collapsed buildings in various parts of the country, high maintenance costs, dissatisfied clients and even buildings which are not functional.

This research therefore, investigated the factors affecting the performance of construction projects in Nigeria in order to assist owners, consultants and contractors to overcome performance problem and to improve performance of their construction projects. Hence, performance of any construction projects can be evaluated according to key performance indicators.

1.4 Aim and Objectives of Study

The aim of the study is to assess the Factors affecting Construction Cost in Nigeria using low-rise buildings in Nairobi Central Business District as a case study. In achieving this aim, the following specific objectives were laid out as follows:

To determine the influence of cost of materials on the performance of construction projects in Nigeria;
To examine the influence of time management on performance of construction projects in Nigeria;
To establish the influence of leadership style on performance of construction projects in Nigeria; and
To establish the influence of quality management on the performance of construction projects in Nigeria.

1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

Does cost of material influence the performance of construction projects in Nigeria?
To what extent does quality management influence the performance of construction projects in Nigeria?
How does time management influence the performance of construction projects in Nigeria?
What effect does the leadership style have on the performance of construction projects in Nigeria?

1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

H0: The cost of material does not influence the performance of construction projects in Nigeria
H1: The cost of material influence the performance of construction projects in Nigeria

1.7 Significance of Study

Construction industry contains large number of parties as clients, contractors, consultants, stakeholders, shareholders, regulators and others. Construction projects in Nigeria suffer from many problems and complex issues in performance because of many reasons and factors.

This research was very important to investigate the main factors affecting the performance of construction projects. The practices concerned with the KPIs such as time, cost, quality and leadership styles was analyzed in order to know the main practical problems of project performance in Nigeria and then formulated recommendations to improve performance of construction projects in Nigeria.

Because of performance problem in Nigeria as shown previously and because previous studies in Nairobi CBD about this topic do not deal with all aspects of construction project performance; this study was required and very important to be considered.

In this study, it was studied the factors affecting the performance of construction projects in Nigeria. These factors can be said as key performance indicators (KPIs). These KPIs can be used to measure performance in construction projects and can then be used for benchmarking purposes. This will be a key component of any organization move towards achieving best practice in order to overcome performance problem in Nairobi CBD.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.8 Scope of Study

The scope of the research is focused on the Assessment of Factors Affecting Construction Cost in Nigeria using Low-rise buildings in Nairobi Central Business District as a case study.

1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
Research material: availability of research material is a major setback to the scope of the study.
Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

1.10 Definition of Terms

Construction: according to Wikipedia's encyclopedia construction is designed as a process of assembling of infrastructure and consists of building up of several activities into final project.

Project: it is a temporary endeavor having a defined beginning and end which is an undertaken to meet unique goals and Objectives.

Building Construction: it is the process off aiding structure to real property.

Building: It is defined as a structure erected where it is to stand with the main functions of shelter and habitation for man.

…

CHAPTER TWO

2.0 Literature Review

2.1 Introduction

The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …

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TABLE OF CONTENTS
PRELIMINARY PAGES

Title page
Approval page
Dedication
Acknowledgement
Table of Contents
Abstract
CHAPTER ONE

INTRODUCTION

1.1 Introduction

1.2 Background of Study

1.3 Statement of Problems

1.4 Aim and Objectives of Study

1.5 Research Questions

1.6 Research Hypothesis

1.7 Significance of Study

1.8 Scope of Study

1.9 Limitations of the Study

1.10 Definition of Terms

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

2.2 Conceptual Review of Budget Planning and Control

2.2.1 Traditional Procurement

2.2.2 Management Procurement

2.2.3 Integrated Procurement

2.2.4 In House Procurement

2.3 Cost Performance is the Fundamental Norm of Measuring Project Success

2.4 Theoretical Framework of Construction Site

2.4.1 Types of Construction

2.4.1.1 Residential Building

2.4.1.2 Institutional and Commercial Building

2.4.1.3 Specialized Industrial Construction

2.4.1.4 Infrastructure and Heavy Construction

2.5 Performance in the Construction Industry

2.5.1 Contractual performance

2.5.2 Performance specification

2.5.3 Performance bond

2.6 Definition of Time and Cost Performance

2.7 Time Variance for Water and Sanitation Projects

2.7.1 Bromilow’s Time-Cost Model

2.8 Problem of Performance in Construction Industry

2.9 Project Management and Performance

2.10 Empirical Studies

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

3.2 Research Design

3.3 Population of Study

3.4 Sampling and Sampling Technique

3.5 Validation of Research Instrument

3.6 Method of Data Collection

3.7 Method of Data Analysis

3.8 Questionnaire

3.8.1 Interview

3.8.2 Key Informants Interview

3.8.3 Observation

3.9 Ethical Consideration

3.10 Statistical Analysis

CHAPTER FOUR

DATA ANALYSIS, RESULT AND DISCUSSION

4.1 Introduction

4.2 Presentation and Analysis of Data

4.3 Re-statement of Research Questions

4.4 Test of Hypothesis 1

4.5 Discussion of Findings

4.5.1 Factors Affecting Construction Cost Performance

4.5.5.1 Fluctuation in Prices of Materials

4.5.5.2 Cash Flow and Financial Difficulties Faced by Flow and Financial Contractors

4.5.5.3 Shortage of Site Workers

4.5.5.4 Lack of Communication between Parties

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Introduction

5.2 Summary of Findings

5.3 Conclusion

5.4 Recommendation

REFERENCES

APPENDIX A - “QUESTIONNAIRE”

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