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Cost of Building Projects in Nigeria

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Small and Medium Scale Contractors’ Perception of the Factors Affecting Production Cost of Building Projects in Nigeria

By Dr Emmanuel T. Adu

and

Samuel Ekung

Department of Quantity Surveying

University of Uyo, Nigeria


Abstract                                                                       

Knowledge and understanding of key factors affecting production cost of building projects is significant to mitigate problems of poor cost performance in the construction industry. This study investigated factors affecting production cost of building projects and attempts to classify the factors into three resource groups. The study involved an explorative research adopting questionnaire survey. The survey involved 145 professionals from small and medium scale contracting firms in Nigeria. Fifty five potential factors were ranked by professionals to determine their effect on the production costs of public building projects. Data collected were analysed using mean item score, and Mann-Whitney U test was conducted to compare respondents’ perception in both categories. The results revealed design changes, fluctuation in prices of materials, construction error, production waste, inadequate planning and high cost of labour and machinery are significant factors affecting the production cost of public building projects. The respondents’ perception is consistent in both categories as no significant different was established by the hypothesis test (p = .938, .871; and .820 > 0.05). To mitigate the influence of these factors, the study recommends proactive cost management strategies should be instituted and embraced as company`s philosophy to achieve cost–effective delivery.

Key words: Building Project, Contractor, Estimation Accuracy, Perception, Production Cost.

Introduction

The growing need to achieve value for money which is the effective utilization of scarce resources necessitated the need for research into the effect of resource-related factors on production cost of public building projects. Cost is one of the major considerations throughout the project life cycle and is often regarded as one of the most important parameters and determinant of project success (Choge & Muturi, 2014; Memon, Rahman, Abdullah, & Azis, 2010). The construction industry and the society at large are concerned about high cost of building in various ways. Transformation of production cost of construction resources over project activities is fundamental to the achievement of client`s goal of completing the projects within budget. Production cost also referred to as contractor`s cost is a major component of the overall project cost. Effective management of production cost in construction project largely determines the total project cost and profit margin.

The major challenge facing the construction sector today is project completion within estimated costs. Studies show that poor cost performance is prominent in the industry, globally (Ameh, Soyingbe, & Odusami, 2010; Enshassi, Al-Najjar, & Kumaraswamy, 2009; Le-Hoai, Lee, & Lee, 2008; Azhar, Farooqui, & Ahmed, 2008; and Koushki, Al-Rashid, & Kartam, 2005). Ramli (2003) observed that cost performance in the construction industry is less effective compared to other project objectives such as schedule. Poor cost management is common among the Small and Medium Contractor Enterprises (SMEs) in developing countries like Nigeria. Investigation into the performance of these categories of contractors with the view to enhancing their performance cannot be compromised in the economy of a nation. Small and medium scale contractors have been noted to be the engine through which the growth objectives of developing countries can be achieved and are potential sources of income in many developing countries (Kayanula & Quartey, 2000). They are labour intensive, capital saving and capable of creating new jobs. Lack of effective management during their early stages has been reported as a major cause of business failure for small and medium sized contractors (Thwala & Phaladi, 2009). The rate of poor cost performance in the construction industry is enormous especially among the small and medium scale contractors who could hardly stay viable in construction business more than four or five years (Thwala and Phaladi, 2009). Cost performance measures the degree to which the general conditions promote the completion of a project within the estimated budget. Among the factors responsible for the poor cost performance of construction projects are resource-related factors which this study intends to investigate.

Poor cost performance of construction projects over time has given bad reputation to the industry because of its diverse implications. Globally, most mentioned effects of the poor performance is cost overrun (Ameh, Soyingbe, & Odusami, 2010; Enshassi, Al-Najjar, & Kumaraswamy, 2009; Le-Hoai, Lee, & Lee, 2008; Azhar, Farooqui, & Ahmed, 2008; and Koushki, Al-Rashid, & Kartam, 2005). Other effects include company failure, delay, supplementary agreement, adversarial relations among stakeholders, budget shortfall of project owners, project abandonment, project failure, and a drop in building activities (Mbachu and Nkado, 2004; Nega, 2008). These are some of the problems arising from poor cost performance of construction projects. This study however focuses on production cost of construction projects. The importance of production cost to the overall project cost has necessitated the investigation into resource-related factors affecting the cost. Many of the small and medium contractors in the study area have ignored or have not adequately considered these factors during planning and implementation of buildings projects

This study is therefore concerned with determining the effects of resource-related factors on production cost based on the assessment of small and medium scale contractors in the building industry. The determination of these factors and the ranking of their effects on production costs enable the identification of critical factors and the need to seek mitigating solutions. The objective of this study are therefore to evaluate and determine resource-related factors affecting production costs of building project based on the perceptions of small and medium scale contractors in the study area. Achieving of this objective will help to overcome the challenges of poor cost performance of construction projects in the study area. The three null hypotheses formulated for the factors affecting the production cost: material, labour, plant and equipment are:

  1. There is no significant difference in the perception of small and medium scale contractors on the effects of material related factors affecting production cost of public building projects.
  2. There is no significant difference in the perception of small and medium scale contractors on the effects of labour related factors affecting production cost in public building projects.
  3. There is no significant difference in the perception of small and medium scale contractors on the effects of plant and equipment related factors affecting production cost of public building projects.

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About the Authors


Dr Emmanuel Adu

University of Uyo
Uyo, Nigeria

 


Dr Emmanuel T. Adu
graduated in 2000 with an honours degree in Quantity Surveying from Federal University of Technology, Nigeria. He also obtained Master degree in Project Management from Federal University of Technology, Owerri, Nigeria in 2005. He obtained a PhD in Project Management from Federal University of Technology, Owerri, Nigeria in 2015. He is a registered Quantity Surveyors licensed by the Quantity Surveyors Registration Board of Nigeria. He is currently a Senior Lecturer in the Department of Quantity Surveying where he is also preside as the Head of Department. Dr Adu is an experienced Quantity Surveyor with industry experience and footprint in many high profiled projects as a result of over sixteen years practice. Dr Adu’s research interests include risk management, production cost management and project management with publications in both local and international journals and peer reviewed conferences proceedings. Dr Adu can be contacted at teatea4t@yahoo.com

 


Samuel Ekung

University of Uyo
Uyo, Nigeria

 


Samuel Ekung
is registered Quantity Surveyor certified by Quantity Surveyor Registration Board of Nigeria. Mr Ekung obtained his first degree in Quantity Surveying from the University of Uyo, Uyo, Nigeria with Second Class Upper Division 2008. He bagged double Master Degrees in Quantity Surveying from the University of Salford, United Kingdom with Distinction in 2013 and Construction Management from the University of Uyo, Uyo, Nigeria in 2014. He is currently studying for PhD in Construction Management with interest in Sustainability Costs and Optimization Strategies in the Tropics. Mr Ekung is deeply rooted in construction and cost management discourse. He is currently a Lecturer in the Department of Quantity Surveying University of Uyo, Uyo, Nigeria. Mr Ekung is an experienced Quantity Surveyors with industry experience and footprint in many high profiled projects. His research interest include procurement, stakeholder management and sustainability cost management. His research outputs are published in many refereed international journals and peer reviewed conferences proceedings. Samuel Ekung can be contacted at s.b.ekung@edu.salford.ac.uk