ABSTRACT
The Nigerian Construction Industry (NCI) faces numerous cost-related challenges that have in some cases increased costs of construction projects by up to 61.84%. Such challenges include the increasing complexity of construction projects which necessitate specialist skills required for their design, construction, operation and maintenance. The control of the cost of construction projects, Project Cost Control (PCC), is thus confronted by new problems, as well as the use of old tools. There is need for cost control methods that will assist project team members in identifying objectives, choosing cost control priorities and setting up a feedback system. The aim of this study was to assess the influence of cost control practices on the cost performance of construction projects as a means of recommending improvements in the cost control process on construction sites. This research was carried out in the Federal Capital Territory Abuja, which as the capital city of Nigeria, has numerous on-going construction activities. A random survey of 65 selected construction practitioners was undertaken with the use of structured, close-ended questionnaires. This research has found that ‘Controlling of sub contract cost’ (Mean Score = 4.49 on a 5.0 scale), ‘Cost variance (Mean Score = 4.48) and ‘Cost reports (Mean Score = 4.43) are the most frequently applied PCC practices. Conversely, construction professionals shied away from the use of S-curve for cost/time monitoring. The study also discovered that 80% of the sample always conducted variance analysis, while only 1% admitted to never checking deviations from budget through variance analysis. It was concluded that ‘Delayed/No payments for works done’ and ‘late/non-involvement of QS in project’ as well as ‘use of outdated cost control techniques’ were the major barriers to realization of the ideal benefits of PCC. These results reveal that more work still needs to be done in the area of use of tools for PCC; the study thus recommended that Quantity Surveyors be introduced to the project as early as possible to help address cost challenges right from the design stages through to the post construction.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the Study
Globally, construction industries are characterised to be dynamic and faced with lots of uncertainties, this has made cost control and management difficult to achieve, inevitably causing poor cost performance (Sinesilassie et al., 2018). Several construction project developments fail because of excessive pressure on designers to optimize value in terms of time, cost limit, and quality (Anyanwu, 2013). As mismanagement of resources in past times is among the leading cause of the economic depression, the country is presently experiencing, expressed in lack of resources and increased inflation. This calls for dedicated efforts geared towards ensuring that projects do not exceed budgets (Yismalet & Alemu, 2018).
Cost control describes a situation where the project costs associated with construction are managed through the use of scientifically proven tools and techniques. Such a situation ensures that a contractor is able to profit from executing the project. While seeking to construct at the cheapest possible cost, contractors are however bound to deliver the project within stipulated objectives (Kumar et al., 2015).
Ogege (2011) stated that all projects are conceived and designed to achieve a goal, irrespective of the size or nature. For it to be successful, it must be planned. A project can be considered successful in relation to certain criteria; time, cost, project effectiveness, quality and acceptance by the clients, although the definition of project success is subjective, as each stakeholder have his/her own definition of success. Successes and failures are relative terms and are highly subjective (Sinesilassie et al., 2018). Cost performance however refers to how closely the project’s final cost approximates its initial, planned cost, which was set during the design stage of the project.
In the construction industry, majority of clients are concerned with getting facilities and projects that meet their expectations – which usually means completed within the stipulated time, cost, quality and scope. This has placed an additional new and complex burden on constructional professionals; Builders, Architects, Quantity Surveyors, Engineers and project managers (Kumar et al., 2015). Furthermore, the project cost management processes has increased in complexity owing to the use of novel procurement methods, construction technologies, material and equipment resources and specialists in new and varied fields. Project execution involves a substantial amount of resources; the loss of such resources through failure or abandonment of the project can effectively end the ability of investors and financiers to fund future projects. This means proper cost control and management is paramount (Ogege, 2011).
Construction costs and time are must be considered in the management of any project; both are also almost universally regarded as key performance indices for project success (Aziz et al., 2013). It is generally known that in the majority of cases the actual cost of project work exceeds the estimated cost (Kokate & Darade, 2018). To this end, methods are needed which allows members of the project team, to identify objectives and choose priorities for cost control systems. To achieve this, it is necessary to evaluate existing practices to establish best practices which enhance the influence of cost control practices on the cost performance of construction projects and feed back in the construction process.
1.2 Statement of the Research
It has been observed earlier that project cost control refers to a situation where the costs associated with construction projects are managed through the use of scientific tools and techniques, in order to ensure that contractors profit from carrying out projects. The problem of poor management and control of costs which eventually leads to cost overrun and failure in project execution occurs globally (Yismalet & Alemu, 2018). The failure to manage the costs of projects properly can lead to business collapse, which gives a poor image of the capacity of construction professionals and firms. Out-of-control project costs affect the economy at different levels – site, project, firm, local, national and global (Aziz et al., 2013).
Despite the enormous benefits attached to the cost control and management practices, the implementation of it is lacking in many countries, specifically on the African Continent (Matins, 2018). The effect of poor cost control appears more felt in developing countries, because overruns might be double or more of the estimated costs (Ullah et al., 2016). This situation has generated a lot of attention from stakeholders in the Nigeria construction industry, rooted as it is in poor management of information for estimating and cost control (Odediran et al., 2010).
Ikechukwu et al. (2017) noted that a lingering lack of cost control could lead to a decrease in project production, project abandonment and rate of national growth. Buildings are increasingly becoming complex and building clients more exacting in their demand for better value for their money (Cunningham, 2015), but the existing cost control practices in the Nigerian construction industry are not known for yielding efficient result, leading to almost all projects ending above the initial contract sum (Kokate & Darade, 2018). Thus control practices should take adequate account of the type of environment, the peculiar nature of projects and the set objectives among other things. Therefore the aim of this work is to appraise the influence of current cost control practices on the performance of building projects. this calls for a dire need to understudy the current influence of the cost control practices in the performance of the building projects in Abuja – FCT, Nigeria.
1.3 Research Questions
Consequent upon the above, this study will provide answers to the following questions:
i. What are the cost control techniques and practices in the Nigerian construction industry?
ii. To what level are these cost control techniques and practices implemented in the Nigerian construction industry?
iii. What are the problems encountered by firms during the implementation?
iv. What is the relationship between implementation of cost control practices and performance of building projects?
1.4 Aim and Objectives
1.4.1 Aims
The aim of this study is to assess the influence of cost control practices on the cost performance of construction projects in Abuja, FCT, Nigeria, with a view to recommending improvements in the cost control process on construction sites.
The specific objectives of the study are:
i. To identify the cost control techniques and practices applied on construction projects in the study area.
ii. To determine the level of implementation of cost control techniques and practices.
iii. To examine the problems encountered during the implementation of cost control on construction projects
iv. To determine the relationship between implementation of cost control practices and performance of construction projects.
1.5 Justification for the Study
Cost control is an important aspect of the management of construction projects in any country. (Kumar et al., 2015) in their study of contractors in Uganda, identified major cost control techniques to be; schedules, budgets, inspections, reports, meetings, monitoring and use of bills of quantities.
It has become a commonplace in all stages of the construction development process to experience cost overruns due to lack of cost control, (Cunningham, 2015) outlined the need to focus on costs under PC sums and provisional sums, outlining procedures in respects to administration of variations, claims for increased costs of labours and materials. Furthermore (Kokate & Darade, 2018) stated in a residential building project understudied, due to proper cost control applied, the actual project duration was lower to the planned budget duration, as well as the actual cost against the budgeted cost.
Some researchers (Ogege, 2011; Anyanwu, 2013) have stated that the development of cost management and its application in trimming down cost can be best performed by Quantity surveyors, who receive additional training in the art of cost management, as opposed to other professionals in the construction industry. Malkanthi et al. (2017) however iterated that the problem is not that of lack of cost control techniques; rather, contractors lack sufficient incentive to gaurantee uptake of such tools.
Yismalet & Alemu (2018) also stated that to be efficient, a cost control system must be an early warning tool that allows economically faulty construction operations to be pinpointed and corrected in time. Such a tool must pay balanced attention to labour, equipments and overhead costs, which form the bulk of costs in most projects.
1.6 Scope of the Study
This research reviewed various techniques, systems and procedures adopted by firms in controlling the cost of construction projects in Nigeria and a recommendation of the most effective practices at both pre and post contract level. It shall be limited to professionals within Federal Capita Territory Abuja, in order to provide a balanced view of project cost control. Abuja was chosen because a lot of construction activities are carried out there and it is expected that reliable information will be available from respondents.
This material content is developed to serve as a GUIDE for students to conduct academic research
INFLUENCE OF COST CONTROL PRACTICES ON THE COST PERFORMANCE OF CONSTRUCTION PROJECTS IN ABUJA-FCT, NIGERIA
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