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ASSESSMENT OF FACTORS AFFECTING COST PERFORMANCE OF CONSTRUCTION PROJECT IN NIGERIA

Chapter one

Introduction

1.1. Background to the 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, Fleming, Proverbs&Oduoza, 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 orchestrateself-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, Aftab,Azis&Rahman, 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). One of the most important facets of managing a construction company is leadership. Although the issue of leadership has been widely covered in management or business school, little attention has been given to the study of managerial behavior or style of the leaders in construction projects (Bresnen et al., 1986). Learning from high performance projects is crucial for construction improvement. Therefore, we need to identify outstanding projects or role models. A minimum prerequisite for identifying such projects is the ability to measure the performance. Unfortunately, two issues complicate the measuring task: i) diseconomies or economies of scale and ii) multidimensional inputs and outputs (Myrtveit&Stensrud, 2005).

In view of key performance indicators, the construction industry is generally considered to have underperformed compared to other industries. Not only that, the UK construction industry has been criticized for not performing at the same level as that of other developed countries. In relation to this, the UK working groups on Key Performance Indicators (KPIs) have identified ten parameters for benchmarking projects, in order to achieve a good performance, in response to Egan’s report. These consist of seven project performance indicators, namely: construction cost, construction time, cost predictability, time predictability, defects, client satisfaction with the product and client satisfaction with the service; and three company performance indicators, namely: safety, profitability and productivity (Akintoye&Takim, 2002).

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.

Construction has emerged among the top performing sectors in the period alongside financial services and transport and communication. The sector contributed Sh12.6 billion to the GDP in the period supported by the massive road infrastructure projects currently in progress across the country (Waithaka,2011). Public entities, private firms and individuals continuously engage in acquiring physical assets in different forms such as commercial buildings, residential buildings, schools, hospitals, development infrastructure like roads, water dams, telecommunication and electricity. These projects involve major capital investments driven by market demand or perceived needs. To remain competitive in either profit or non-profit engagements, you need to focus on procedures that offer competitive advantage and value. You need to understand the needs of the customer and correctly deploy the available resources in meetings the expectations of the client by maintaining a competitive edge over your competitors. For residential houses, a Nigerian family will value the luxury of privacy and safety. Time and cost overruns on infrastructure development projects during implementation continue to pose great challenges to developing countries (Kigari & wainaina, n.d).

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).

1.2. Statement of the Problem

Nigeria as a country has witnessed a substantial increase in the number of stalled projects due to inappropriate project organization structures and ineffective leadership. 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.

Previous studies: Nyangilo, 2012; Lepartobiko, 2012; Kibuchi&Muchungu, 2012; Takim&Akintoye, 2002; Mhando & Mrema, 2005, indicate that the failure of any project is mainly related to the problems and failure in performance. Generally, 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). 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.

Objective of the study

The objective of this research was to investigate the factors affecting the performance of construction projects in Nigeria, a survey of low-rise buildings in Nairobi Central Business District.

To determine the influence of cost of materials on the performance of construction projects in Nigeria.

To establish the influence of quality management 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.

1.4. Research Questions

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?

1.5. Significant of the 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.

1.6. Scope of the study

The study focused on selected low-rise building construction projects situated in Uyo local government. Other buildings were left out because it could have been uneconomical to study all buildings locate in Uyo. Uyo was selected because of proximity to the researcher. The study examined the cost of materials, quality management, time management and leadership style as the independent variable and performance of a construction project as the dependent variable.

1.7. Limitations of the Study

Inadequate previous information on the factors affecting the performance of construction projects for comparison purposes as well as the twenty two building sample size may not be a good ground for extrapolation or generalization of a study finding.