ASSESSMENT OF COST CONTROL TECHNIQUES ON ROAD CONSTRUCTION PROJECT DELIVERY IN FCT ABUJA, NIGERIA

ABSTRACT

In construction industry the aim of project control is to ensure the projects finish on time, within budget and achieving other project objective. The advancement of technology in the last century has contributed to the increase in the number of complex construction projects that require proactive cost management. Cost control is an element of financial control since it supplements managerial control process in the organisation. Cost Management of road construction involves the application of engineering, financial and management practices to optimize the level of service outcome in return for the most cost-effective financial input. This study assessed the various cost control techniques used in road construction projects and its effect on project delivery. in addition, the study, identified the challenges of cost control techniques and examine the effectiveness of cost control technique. The preliminary data for this research was collected through a literature review and structured questionnaire and limited to construction firms. Mean Item Score (MIS) and Pearson correlation analysis were employed for data analysis. The preliminary analysis of data reveals six commonly used cost control techniques which include Cash Flow Analysis, Valuation of work in Progress, Cost Control, Materials  Management,  Budgetary Control  and  Cost  Value  Reconciliation.  The  findings further indicates that Cash Flow Analysis (CFA) (MIS=4.68) as the most effective cost control technique used in road construction project. Correlation analysis shows that all cost control techniques had strong relationship effect on road construction project delivery. The strength determinant relationship with the variables falls within the range of small, medium and large guidelines (r) value. The study concludes that cost control techniques have strong impact on road construction project delivery and also, challenges such as inadequate acquaintance on the utilisation of available tools and technology, deficiency in financial dedication in projects and fluctuation in prices of raw materials were ranked first (1st), second (2nd) and third (3rd) with mean score of 4.36, 4.24 and 4.20 respectively. It is recommended that Quantity Surveyors should  involve in  road  construction  due to  the smallest  response of  3  giving 12%  and construction firms should endeavour to send their employees to attend workshops, seminars and other training programs. This research work has been able to assess cost control techniques used in road construction project and their effectiveness of those techniques.

CHAPTER ONE

1.0       INTRODUCTION

1.1       Background to the Study

The construction Industry is an integral part of most global economies. Appallingly, it is seen as a threatening ambiance that will overall make shareholder who prioritise their interests above all (Holley and Farrow, 2012; Van Marrewijk et al., 2014; Memon et al., 2015; Osipova, 2015; Babic and Rebolj, 2016). The construction industry is an essential sector in every country as it is heavily interconnected with the economy as a whole. It affects, and is affected by the Gross Domestic Product of a nation. Moreover, the construction industry is dependent on different types of input such as human capital, financing and products from other industries (Murendeni and Clinton, 2018). Construction industry to a great extent is saddled with responsibility of the physical development and restructuring of the environment which make the built environment as a subset and most important to socio-economic development. Ling and Ang (2013); Aljohani et al. (2017) explained that, the project-oriented nature of the construction industry makes it unique and different from other business organisations due to its multi-faceted, complicated nature and the level of uncertainty it faces, an oversight in this view has only led to a higher- than-average failure rate compared to other businesses.

According to Aliu (2014), the built environment involves of Building, Civil and Heavy Engineering works. The construction industry has impact on the environment, economy, and society, explained by (Kucukvar and Tatari, 2013; Onat et al., 2014). The construction industry is one of the most active sectors propelling the Nigerian economy (World Bank, 2013). It is so vital to the nation’s economic development which is why it produces nearly 71% of the country’s fixed capital formation and accounts for 1.4% of the nation’s Gross Domestic Product (GDP) (World Bank, 2013). The construction sector is very important to the economy of any country.

Nigerian economy is one of the ten fastest growing economies in the world and among the six fastest in Africa stated by (World Bank, 2013). The construction project can vary from extremely profitable to barely worth it and sometimes end up costing the contractor more than what he or she is getting paid to complete it. In construction organisation, the goal of project control is to ensure the projects finish on time, within budget and achieving other project activities. The construction industry has developed throughout the years with experiences from different countries that have experienced down and up periods in the construction related activities. According to Sanni and Hashim (2013) the advancement of technology in the last century has contributed to the increase in the number of complex construction projects that require proactive management. Sanni and Hashim (2013); Adjei et al. (2015) presumed that ″cost control is a component of financial control since it complements administrative control measure in the organisation″. Cost control ought to be viewed as a significant management instrument that remains essential to the endurance of a development company. According to Adjei et al. (2018), cost control practice is a process whereby the cost of the construction project is monitored, evaluated and compares the planned budgeted cost with the actual site cost for decisions to be made to bring the cost on track. The need to control cost is significant to wipe out the superfluous wastages of resources. It remains fundamental for the construction company to work a successful cost control technique throughout the implementation phase of project to retain the cost of the plan inside the construction preliminary estimates.

Many projects start with good ideas, huge investments and great efforts. However, most of them do not achieve much success. The fundamental aims of the construction industry which are to deliver project within scheduled time, acceptable cost, specified quality and safety of stakeholders have focused on the requirement for cost control that is viable. Clients practically in construction project are keen on getting fully utilitarian facilities finished in time, quality, cost and scope. A project is able to construct within the estimated time and budget, to the right standards and scope is an excellent builder as stated by Opatunji (2018). Cost control is a process where the construction cost of the project is managed through the best methods and techniques so that the contractor does not suffer losses when carrying out the activities of the project.  Construction work cost control remains part of the problematic undertakings in the present project cost management confronted by utmost construction company and have not completely made the most of its advantages. The practice of cost control is a required task for the survival and growth of every construction firm. The preparation of cost control helps construction industry to eliminate and/or reduce unnecessary wastage of resources in the execution of construction projects (Adjei et al., 2017; Bahaudin et al., 2012). Cost control is the process of monitoring; evaluating and comparing planned results with actual results to determine the status of the cost of the project, schedule and technical performance objectives of the project. According to Adjei et al. (2017); Adjei et al. (2015); Sanni and Hashim (2013) It is therefore important that, every construction company operates in an effective way by practicing cost control procedure during the post construction stage of the construction project, to keep the cost of executing the project within the budgeted cost as initially prepared and approved. When construction work begins, the budgeted cost of the construction project serves as the baseline for the contractor or whoever is undertaking cost control to use it to check and control the construction costs, explained by (Bahaudin et al., 2012).

The cost control principles are also expected to act as telltale or offer early warning system, notifications of possible budget difficulties at predetermined periods for corrective measures to be decided to solve the cost variances. Opatunji (2018) establish the cost control techniques used among construction Practitioners such as Budgetary control, Cash flow analysis, Earned value management, Cost reduction on site, Material management, Risk analysis, Cost planning, Work programmes, Valuation of work in progress few among others. In the opinion of Adjei et al. (2017) and Khamidi et al. (2011) the project Quantity Surveyor or the Cost Engineer

needs to apply the cost control techniques to develop a series of options for the other project members to consider and select one of the best options that fit within the approved budget limit. There exist high numbers of projects that fail to meet critical success factors like cost, quality and time over the years (Hamed et al., 2015). Both private and public sectors in the construction industry have lost substantial amounts of money as a result of failed projects in cost, quality and time.

In the construction industry, very little study has been conducted on the challenges of cost control in any of construction organisation. Researchers such as Adjei et al. (2017); identified challenges of Cost Control Practice in the construction organisation with exceptionally limited literature review and Kirun and Varghese (2015); a literature review was carried out to identify major problems, the techniques used for identify the problem is Delphi techniques. In request to address this problem, this study is intended to assess the effect of cost control techniques used in road construction projects.

1.2 Statement of the Research Problem

Probably no business needs an effective cost control techniques more than road construction industry. Because road construction companies operate on such a small profit margin due to winning contracts have undoubtedly become fiercer; cost control cannot be overemphasized. On this note, cost management of road construction involves the application of engineering, financial and management practices to optimize the level of service outcome in return for the most cost-effective financial input (Malkoc, 2017). Opatunji (2018) carried out evaluation cost control techniques used in Nigeria but this research was emphasis on construction of building and the data collected was limited to Quantity Surveyors in Oyo state. Ahmad et al. (2012) conducted a research on assessment of practices in Malaysia, the research identified the cost control methods and procedures that construction practitioners in Malaysia are utilised.

Cooray et al. (2018) also evaluate the cost control techniques used on building construction projects in Sri Lanka, the research analysed the effect of cost control techniques identified with project delivery regarding the s building construction industry in Maldives. Adjei et al. (2017) the challenges of cost control practice in the construction sector, the research identified current challenges of project cost control practice in the construction firm. According to Anyanwu (2013) on project cost control in the Nigerian construction firm; the overall purpose of cost control and the management is to make sure that scant resources are used to the optimum advantages of the main parties to a construction contract.

It is born out of deficiencies in appropriate prediction of cost control techniques used in road construction project. The complexities and foreseen of most element of works in road construction project cannot overemphasise. This study therefore used the idea that, cost control techniques have become a predominant factor to be considered in the road construction projects because of ineffective cost and time control during the execution stage. The research would therefore, increase awareness amongst the construction firm.

1.3 Research Question

i.      What are the cost control techniques utilised in road construction project?

ii.      What  are  the  challenges  of  cost  control  techniques  utilised  in  road  construction projects?

iii.     What is the effectiveness of cost control technique, utilised in road construction project?

iv.      What is the relationship between cost control techniques and road construction project delivery?

1.4 Aim and Objective of the Study

This study aimed at assessing the effect of cost control techniques used in road construction projects with a view to improve project delivery.

Considering the aim, the study addresses the following objectives:

i.      To identify cost control techniques used in road construction projects.

ii.      To examine the challenges of cost control techniques used in road construction projects.

iii.     To measure the effectiveness of cost control technique, used in road construction projects.

iv.      To analyse relationship between cost control techniques and road construction project delivery.

1.5 Justification for the Study

In order to justify the gap of this study, the contributions of the following researchers cannot be overemphasised. Ahmad et al. (2012) identified the cost control methods and procedures utilised by the construction practitioners in Malaysia. Cooray et al. (2018) considered analysis of cost control techniques used on building construction projects and the research analysed the impact of cost control methods related to project delivery with respect to the building construction industry in Maldives. In another study, Adjei et al. (2017) noted the challenges of cost control practice in the construction industry, and identified the current challenges of project cost control practice in the construction industry. Anyanwu (2013) researched on the project cost control in the Nigerian construction industry, the overall aim of cost control and management is to make sure that scarce resources are utilized to the optimum benefits of the main parties to a construction contract. In another study, Opatunji (2018) evaluated cost control techniques used in Nigeria but the research focused on construction of building and the data collected was limited to Quantity Surveyors in Oyo state. In another investigation, Ayodele and Alabi (2014) explored on the impact of cost control on building projects delivery in Nigeria. Kirun and Varghese (2015) researched the issue of project cost control in building projects and to comprehend the purposes for cost overrun; the utilization of Delphi method is to recognize the issues in controlling the project cost, recommend solutions for overcome these problems, and identifies lessons learned.

None of the previous researchers had evaluated and analysed the cost control techniques including the effect on road construction project delivery. Most of the literatures have documented failures in construction projects (Building). Thus, cost control techniques have become a dominant factor to be considered in the road construction projects due to unsuccessful cost and time control during the implementation stage. This study will however fill the gap by assessment of cost control techniques on road construction project delivery. The outcome of this research work would therefore, be beneficial to construction firm as their main aim is to minimize cost.

1.6 Scope of the study

The research concentrated on Quantity Surveyors/Cost Engineers/Civil Engineers working with construction firms. This study excludes the cost control techniques practised by contractors in the pre-construction, construction and post construction stage. It also excluded cost control procedures related to the accounting and financial management of the company. The project parties studied was civil engineering contractor involve in road construction.

The project parties examined was construction firms. involve in road construction. The research addressed road construction projects in Abuja-FCT only, Nigeria.

The study used construction firms that are registered with the Corporate Affairs Commission and the Federation of Construction Industry in Nigeria, also involved in road construction works.  Perversely only contractors  of  category “A” and  “B” under the  classification  of contractors by The Bureau of Public Procurement (BPP) form the sampling frame, as only larger companies are financially capable of using any effective cost control techniques and also only highway road type was focused in which includes any public roads.

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