Abstract
This study examines contract planning on construction projects from clients’ perspective and its effects on performance. The objectives are to determine the contract planning practices applied in the Nigerian construction industry, assess the awareness and usage of contract planning tools and techniques applied by clients on construction projects, evaluate factors affecting contract planning practices on construction projects and determine its effects on performance of construction projects. A cross-sectional design was employed where both qualitative and quantitative methods were used in the study. The targeted sample size was 132 respondents out of a total population of 241 road construction stakeholders. The findings indicated that there was a significant positive relationship between monitoring intensity, risk management, evaluation and performance of road construction projects in the study context. The performance of the road construction projects in Imo State was more related to the availability and use of resources which include funding, human resources and the basic raw materials used in the construction process which results into delays, cost overruns and poor quality service. Based on these study findings it is therefore recommended that Imo State should commit more resources to evaluation and risk management to realize higher level of service delivery in the road construction sector.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Ashworth, Hogg, and Higgs (2013) described the construction industry as one of the most important sectors of the economy, which integrates a wide variety of skilled and unskilled professionals. These professionals engage in the provision of goods and services ranging from construction, alteration, refurbishment to repairs of building and civil engineering structures. All these professionals work together under various types of contractual agreements to actualize the client’s brief and deliver the project. Each construction project is unique and has its main objectives are outlined by the client based on project circumstances. Amongst the most common objectives of any successful project are deliveries at the right time, within authorized cost and meeting the envisaged quality standards (Love 1998). Construction projects, like all others, are not risks free and thereby can result to financial loss. Construction risks are events that generally influence any or all of the project objectives. Risk events could either be positive in terms of opportunities or negative in terms of threats to either or the entire project objectives (Hillson 2002).
Significant proportions of factors impeding project performance in the construction industry are traceable to actions and inaction of principal stakeholders in the sectors. One aspect where stakeholders have failed in its responsibilities relates to contract planning. Contract planning According to Simmons (2007), refers to the process of systematically and efficiently managing contract creation, execution and analysis for maximizing operational and financial performance and minimizing risk. Contract planning processes are the activities/steps taken during contract planning, this is divided into two (2) phases PMT (2006) which are the pre-contract planning and post-contract planning on clients perspective and contractors perspective, but in the cause of this project we will be looking at the clients perspective, The research literatures in construction project management is replete with concerns about poor or ineffective contract planning (Idoro, 2009; Idoro, 2012; & Dalibi, 2016). Most countries in the Middle-East and some part of Africa do not utilize project planning and management techniques in the delivery of construction projects (Sayegh, 2008; Laryea & Hughes, 2009). Ashworth (2007) reported that the use of formal contract planning and management techniques in the UK construction industry is low. The result culminates in project failures, incessant claims for variations, huge financial losses and sometimes results in bankruptcy of Clients and Contractors Ashworth (2007).
Several academic and professional literatures have developed in the field of effective contract planning and management within construction contexts. The degree of application of contract planning and management techniques by contractors especially, was found to differ in various construction industries across the globe (2008). Against this literature gap therefore, this study is conducted to evaluate the effect of construction contract planning on project performance in Imo State.
1.2 Problem Statement
Contract planning in construction projects is bedeviled with chronic inefficiencies that influence the performance of project delivery. These protracted outcomes are a result of two possible concern, low awareness and usage, and exogenous and endogenous factors influencing contract planning. Ashworth (2007) reported that the use of formal contract planning and management techniques in the UK construction industry is low. The result culminates in project failures, incessant claims for variations, huge financial losses and sometimes results in bankruptcy of Contractors Ashworth (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 & Uden, 2007). These problems or uncertainties, among others, increase the project risk and make their management crucial if success is desired. Several projects in the housing and road sub-sectors across Nigeria have witnessed huge investment of public and private funds without commensurate result expended. This huge expenditure and apparent failure in the primary objectives of the project led to complaints, probe panels and subsequent abandonment of the project. According to Obi (2014), the rate at which project delays, failures, cost overruns and abandonment are experienced on many projects handled by indigenous building contractors and clients in Imo State Nigeria is quite alarming.
A successful project is a project that has been completed on schedule, within budget, scope and satisfied the required quality (Allan 1991, 2004; Hatush & Skitmore 1997; Doloi 2007). Projects that do not deliver the required value they promise and of course do not realize their original objectives are all failed projects, in other words for a project to fail one or all of these component time, cost and quality have failed (Frank 2011).
1.3 Research Questions
1. What are the contract planning practices applied in the construction industry?
2. What is the level of awareness and usage of contract planning practices in the construction industry?
3. What are the factors affecting contract planning practices on construction projects?
4. What are the effects of contract planning practices to construction projects performance?
1.4 Aim and Objectives of the Study
The aim of the study is to investigate the effects of contract planning on construction project performance, and the objectives are:
1. To determine contract planning practices applied in the construction industry.
2. To assess awareness and usage of contract planning practices in the construction industry.
3. To examine the factors affecting contract planning practices
4. To evaluate the effect of contract planning practices to construction project performance.
1.5 Significance of the study
The study sought to examine contract planning and project performance of the road construction projects in Nigeria, specifically in Imo State. This study gave insights to understanding the importance of contract planning in the construction industry. It may also have some contribution to the formulation of appropriate policies relating to the performance of road construction projects. These policies will help the concerned bodies dealing in road construction such as Nigeria National Roads Authority, Ministry of Works and Transport, Local Government road construction committees at the district, and private organizations such as CAIIP to focus on the root causes of incomplete road projects than giving attention to the observed problems. In addition to this, the policies may facilitate further studies on the problem since there is little relevant and comprehensive data on the study in Nigeria. The information obtained during the study will ultimately build on the existing body of knowledge to pave way for further research in the field of contract planning and performance in academia.
1.6 Scope of the study
The study was carried out on the effect of contract planning on construction project performance. This study was carried out on road constructions in Imo state.
1.7 Justification of the study
While a lot of attention has been directed toward implementation procedures in acquisition of goods and services in public organizations, little has been done to establish the best practices in compliance to contract regulations in Nigeria. This study generated information relating to contract planning and performance of road projects, specifically in Imo State. It was intended that the findings of this research will be useful source of information to Imo State in strengthening the acquisition, implementation and integration of contract monitoring practices in administration. The study may also influence government policies with regard to contracts and also form a basis on which academic researchers can do further studies in monitoring and evaluation.
1.8 Operational definitions
Contract planning: In the Wikipedia Encyclopedia of 28 September 2015, contract planning is the management of either common commercial or complex contracts made with customers, vendors, partners or employees. It is a process of systematically and efficiently managing contract creation, execution and analysis for the purpose of maximizing financial and operational performance and minimizing risk. It was found that 42% of enterprises the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks and nearly 65%of enterprises report that contract life cycle management has improved exposure to financial and legal risks.
Monitoring intensity: This is measurable concentration of regular observation and recording of activities taking place in a project.
Risk management: Hubbard (2009) defined risk management as the identification, assessment, and prioritization of risk followed by coordinated and economic application of resources to minimize, monitor, and control the probability and/ or impact of unfortunate events. This definition was adopted for the study.
Evaluation: According to Farlex Partner, 2012, evaluation is a systematic, objective assessment of relevance, effectiveness and impact of activities in the light of specified objectives. Indeed, it is an assessment, judgment of the worthiness or value of a project, policy, intervention, state of affairs, self.
Project Performance: This is an ongoing review of the efficiency and importance of a given project. It is used as a means of understanding and improving company, department and personnel performance.
Stakeholders: Those persons and entities that have an interest in the strategy of an entity. Stakeholders normally include shareholders, customers, staff and the local community.
Strategy: This is the determination of the basic goals and objectives of a firm and the adoption of courses of action including the allocation of resources necessary for carrying out these goals. Structure: the means by which the organization seeks to achieve its strategic objective and implement strategies and strategic change.
1.9 Organization of Study
The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.
This material content is developed to serve as a GUIDE for students to conduct academic research
THE EFFECT OF CONTRACT PLANNING ON CONSTRUCTION PROJECT PERFORMANCE
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