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THE EFFECTS OF PROJECT PLANNING TECHNIQUES ON CONTRACTORS PROFIT

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Projects are used in all economic and non-economic fields as mean of organizing the activity, aiming the achievement of desired objectives. There is a direct relationship between projects, projects portfolio, programs and the organizational strategy. Projects, as the main way of creating and dealing with change (Cleland, Gareis, 2006), are used to implement strategies. Meskendahl (2010) refers to projects as the central building block used in implementing strategies, therefore business success is determined by the success of the projects. A project is an individual or collaborative enterprise, possibly involving research or design that is carefully planned, usually by a project team, to achieve a particular aim New York Time (2009). A project is also temporary because it has a defined beginning, end time, and defined scope and resources (Cathy, 2009). A project is unique because it is not a routine operation, but a specific set of operations designed to accomplish a singular goal. Based on these characteristics, carefully it is imperative to plan to achieve targeted outcome. Thus; Project planning can be defined as a part or branch of project management, which relates to the use of schedules to plan and subsequently report progress within the project environment.

Dubois and Gadde (2002) described the construction industry as decoupled and McKinsey (2017) confirmed that it is still true. The lack of coupling is present both between the construction project and its subcontractors as well as between the project and the parent company and other projects. This hampers the possibility to have a successful coordination of resources on a portfolio level within the contractor, as resources are in many cases utilised from a common resource pool (Engwall and Jerbrant 2003).The construction industry therefore embraces a wide range of loosely integrated organizations that collectively construct, alter and repair a wide range of different building and civil engineering projects. Individuals, organizations and government need to carry out some form of project planning for building and civil engineering project before embarking on whatever activity they are engaged to do. According to Lock (2002), the principal identifying characteristics of a project is its novelty, it’s a step unknown fraught with risk and uncertainty. No two projects are ever exactly alike and even a repeated project will differ from its predecessor in one or more commercial, administrative and physical aspect.

Construction is also characterized by time and cost intensive production processes which make it prone to project risks and failure, mainly in terms of time and cost. In practice, this means, that the performance of construction projects is usually low. In particular, construction projects are very often delayed and over budget. This is not just due to problems faced during project scheduling, but also during related processes.

Laryea and Hughes (2009) attempted to find how contractors’ in Ghana include financial risk in their bid prices. The research showed that besides having risk allowances as lump sums or percentage allowances, the method used is neither scientific nor informed by any empirical evidence. Ojo (2010) found that design changes, financial losses and inadequate specifications were the risk factors with most impacts on construction sites but the study did not highlight any Project project planning (PRM) technique used by Contractors to respond to such risks.

Another research carried out in Nigeria on this subject was on the evaluation of key risk factors and the measures to mitigate their effects on construction projects (Dada, 2010). Though the research found financial, political and physical risks as the most significant, the use of contingency sum and insurance cover were adjudged to be the most effective means of mitigating risk.

However, no study has reported on the PRM practices used by Nigerian Contractors in redevelopments projects, with their attendant problems and challenges in terms of scoping.

1.1.2 ORGANIZATIONAL PROFILE

Julius Berger Nigeria Plc is a Nigerian construction company, headquartered in Abuja FCT, located at 10 Shettima A. Munguno Crescent | Utako 900 108 | FCT Abuja

The company is represented across Nigeria in structural engineering and infrastructure works, and in southern Nigeria through domestic and international oil and gas industry projects (this company is also listed on the "flake list" for craigslist). It is known for constructing most of Nigeria's infrastructures, major expressways, and even some residential buildings for the Chevron Nigeria headquarters in Lagos.

The company was listed on the Nigerian Stock Exchange in 1991. Before this, its parent company was Bilfinger Berger. Bilfinger Berger is still the largest shareholder in the company. The construction business of Julius Berger Nigeria is the heart of the Julius Berger Group.

With 18,000 employees from close to 40 nations and clients from both Nigeria and the global oil and gas industry, JB is a leading construction company and the largest private employer in Nigeria.

MAJOR PROJECTS

· The company built the Eko Bridge completed in 1968, the Third Mainland Bridge completed in 1990 and the Abuja Stadium completed in 2003.

· Tin Can Island Port, commissioned in 1977.

· Lagos Inner Ring Road, completed in 1979.

· Ajaokuta Steel Plant, completed in 1990.

· Itakpe – Ajaokuta Ore Railway, completed in 1990.

· Abuja International Airport phase II, completed in 1997.

· Central Bank of Nigeria Head Office, completed in 2002.

· Uyo infrastructure and road works, ongoing since 2008.

· First discharge drain built utilizing pipe-jacking technology in Nigeria, completed in 2011.

· National Assembly phase III, completed in 2011.

· Multiple projects, Escravos GTL plant in southern Nigeria, commissioned in 2012.

· Bonny Liquefied Natural Gas facility, multiple ongoing works since 1996.

· Challawa Gorge Dam Karaye, completed in 1992

· Ongoing Nigerian Cultural Center Abuja (status - Under Const)

· Incar Plaza, Abuja (status - Under Const)

· Silverbird Entertainment Center, Abuja (status - Completed)

· National Library Abuja (status - Under Const)

· World Trade Center Abuja (status - Under Const)

· Abuja Mall (status - Under Const)

· Grand Towers Mall, Abuja (status - Under Const

1.2 PROBLEM STATEMENT

The general low usage of formal project planning and management techniques by Contractors globally often culminates into project failures, incessant claims for variations, huge financial losses and sometimes results in bankruptcy of Contractors (Allan et al, 2007). This situation is more prevalent in redevelopment projects due to the inevitable problems of unexpected additional work, excessive requirements and scope management issues, project funding not aligned with project plans, delay, structural failure, cost overrun, etc (Naaranoja and Uden, 2007). These problems or uncertainties, among others, increase the project risk and make their management crucial if success is desired.

For the construction firm, Julius Berger PLC, are back on site in continuation of the re-construction of the N167 billion Lagos-Ibadan expressways, Grand Towers Mall, Abuja (status - Under Const. Billions of Naira was expended and the overall aim of the project was not achieved. This huge expenditure and apparent failure in the primary objectives of the project led to complaints, probe panels and subsequent abandonment of the project.

Research has shown that financial, political and physical risks are the most significant to Nigerian Contractors (Dada, 2010). However, of the different levels of risk (country, market or project), there is shortage of research as to how Contractors approach project planning at organizational level.

1.3 RESEARCH OBJECTIVES

1. To explore project planning practices applied by Julius Berger at various project levels.

2. To assess awareness and usage of formal and informal project planning practices by Julius Berger, Abuja office.

3. To examine the success or failure of the project planning approach used by Julius Berger Contractors on Grand Towers Mall, Abuja (status - Under Const project.

4. To evaluate the impact of the applied project planning approach to the attainment of project profits.

1.4 RESEARCH QUESTIONS

1. What project planning guidelines and practices exist in Julius Berger Nigeria Plc, Abuja?

2. How do you gather information about newer project planning strategies to be applied in your on-going projects?

3. What are the effects of project planning on contractor’s profit

1.5 HYPOTHESIS FORMULATION

Hypothesis for this study include:

1. Ho: There is no significant relationship between effective project planning and contractor’s profit.

Hi: There is significant relationship between effective planning and contractor’s profit.