BOLA-EFE ITSEKOR

PROACTIVE COST CONTROL DURING CONSTRUCTION PROJECT

EXECUTION IN NIGERIA

BY

BOLA-EFE ITSEKOR

11H/0011/QS

SUBMITTED TO THE DEPARTMENT OF QUANTITY SURVEYING,

SCHOOL OF ENVIRONMENTAL DESIGN AND TECHNOLOGY,

FEDERAL POLYTECHNIC, NEKEDE, OWERRI,

IMO STATE.

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF

HIGHER NATIONAL DIPLOMA (HND) IN QUANTITY SURVEYING.

SEPTEMBER, 2013.

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DECLARATION

I declare that this thesis entitled PROACTIVE COST CONTROL DURING

CONSTRUCTION PROJECT EXECUTION IN NIGERIA is my original work. This

thesis has not been presented to any other institution and is not concurrently

submitted in candidature of any other degree or certificate, and that all

sources of material used for the thesis have been duly acknowledged.

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11H/0011/QS

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CERTIFICATION

This thesis titled PROACTIVE COST CONTROL DURING CONSTRUCTION PROJECT

EXECUTION IN NIGERIA by BOLA-EFE ITSEKOR meets the regulations and

standards governing the award of HIGHER NATIONAL DIPLOMA (HND) Certificate

in QUANTITY SURVEYING, Federal Polytechnic Nekede Owerri, Imo State

Nigeria, and it is approved for its literary presentation and contribution to

knowledge.

..

Surv. C. S Nwosu (FNIQS). Date

(Project supervisor)

..

Dr. Azubuike Oyoh (Ph.D) FRQS Date

(HOD Quantity surveying)

.. ...

External Examiner Date

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DEDICATION

I specially dedicate this project work to God Almighty, the Grand Architect of

the Universe for his Love and also to my Mother Mrs. Bose A. I. for looking down

from above.

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ACKNOWLEDGEMENT

The realization of this research work has comprehensively left me with a

tremendous burden of intellectual dept. For this reason therefore, I wish to

acknowledge my indebtedness to my Family and friends whose collaborative

effort has made this research work a success.

My special thanks go to my project supervisor Surv. C.S. Nwosu (FNIQS) for his

constructive criticism, correction, advice and suggestions during the course of

this work. To my Head of Department, as at the time the research work

commenced - Surv. Olusegun Ajayi and to all my lecturers who in one way or

the other contributed to my achieving this goal.

I am forever indebted to my maternal family for their moral assistance and

support during the course of my academic struggles.

Lastly, but of utmost importance, I want to say a big thank you to my Grand

Mother, Mrs. Agnes Aiyelo and my Aunty, Mrs. Remi A. Eruotor.

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TABLE OF CONTENTS

Title page .. i

Dedication page ii

Certification page . iii

Dedication . iv

Acknowledgement .... v

Table of content .. vi-ix

Abstract .... x

CHAPTER ONE

1.0 Introduction 1-2

1.1 Background of the study .. 2-3

1.2 Statement of the problem ..3-4

1.3 purpose of the study .. 4

1.4 significance of the study .. 5

1.5 Scope of the Study .. 5

1.6 Research Question .. 6

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1.7 Limitation of the study ..6-7

1.8 Aim and Objectives .. 7

1.9 Definition of Terms .. 8

CHAPTER TWO (LITERATURE REVIEW)

2.0 Introduction 9

2.1 The Nigeria Construction Industry . 9-11

2.2 The Roles of Construction Actors on Construction Cost 10-11

2.3 Diverse Interest of Construction Actors on Controlling

Of Construction Cost in Nigeria 12

2.4 Concept of Cost Control Quantity Surveyors Approach13-15

2.5 Effects of Non-Adoption of an Effective Cost Control System

During Project Execution . 15-30

2.6 Causes of the Non-Adoption of an Effective Cost Control System during

Project in Nigeria ... 30

2.7 Attempts towards Embracing an Effective Cost Control System during

Project Execution 31- 41

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CHAPTER THREE (Research Methodology)

3.0 Introduction . 42-43

3.1 Research Strategy ..43-44

3.2 Research Design .. 44

3.3 Population identification .45

3.4 Study Area .. 46

3.5 Sampling Design and Procedure...46-47

3.6 Questionnaire Assumption .47

3.7 Data Collection Instrument . 48

3.8 Administration of Data collection Instrument.. 48

3.9 Statistic Tools for Data Analysis .. 49

CHAPTER FOUR (Data Analysis and Discussion)

4.1 Introduction .. 50

4.2 Questionnaire Response Rate ...50-51

4.3 Proof of Existence and Extent of Cost Overrun in Nigeria 52-53

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4.4 Factors Responsible For Cost and Time Overrun On Building Construction

Projects in Nigeria 54-56

4.5 Analysis and Discussion of Research Question One .56-57

4.6 Analysis and Discussion of Research Question Two .58-59

4.7 Analysis and Discussion of Research Question Three .59-62

4.8 Analysis and Discussion of Research Question Four. 63-64

4.5 Analysis and Discussion of Research Question Five .65-67

CHAPTER FIVE (Conclusion and Recommendations)

5.1 Conclusion ..... 70

5.2 Recommendation .. 71-77

Reference 78-79

Appendix ... 80-85

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ABSTRACT

The construction industry in Nigeria at recent time is seen to be dwindling in its

contribution to the nations economy growth, due to the backdrop of both

private and public clients at embarking on construction projects as a result of

notorious/radical cost and time overruns experienced in the construction

industry which is a transition of the inability of construction actors/experts to

deliver projects in the encumbrance with the cost limit set at the pre-contract

stage.

Thus; this project work was embark on to propose a more effective means of

controlling construction cost during the period of project execution (post -

contract) rather than the much emphasized pre-contract cost control by

many scholars of which a full focus on the later still brings about the lingering

problem of cost and time overrun in the construction industry.

This study was developed and carried out to identify the effects and reasons of

not embracing an effective cost control system during project execution, the

factors responsible for cost and time overruns in Nigeria, to establish the

relationship that should exist between stakeholders in the construction industry

at achieving an effective cost control system during project execution and also

to propose recommendations at achieving a more proactive cost control system

during project execution in Nigeria.

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CHAPTER ONE

1.0 Introduction

The construction industry is the tool through which physical development is

achieved, and that is truly the locomotive of the national economy. The more

resources, engineering, labor, materials, equipment, capital, and market

exchange are provided from within the national economy, the higher the factor

of the extent of self reliance. The increasing complexity of infrastructure projects

and the environment within which they are constructed place greater demand on

construction managers to deliver projects on time, within the planned budget

and with high quality (Enshassi et al 2003).

Approximately two-third of the value of fixed capital produced in this country

(Nigeria) each year emanates from the construction industry. In Nigeria, the

construction industry accounts for about 60% of the nations capital investment

and 30% of its gross domestic product (Olowo-okere, 1988).

The construction industry also generates employment opportunity which places it

second to government in employment of labour (Husseini, 1991). In a supportive

motion Nwosu 2003, started that if employees in allied industries such as

manufacturers and suppliers of construction materials and professional advisers

and administrative personnel on construction projects were to be included, the

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total number of persons employed by the construction industry will be quite

appreciable.

Employers in the construction industry embrace a wide range of interest from

local government authorities, states and federal government departments,

nationalized industries, development authorities/companies and private

individuals. Public authorities account for about one-half of the work undertaken

by the construction industry and this can have serious effect for the industry in

times of financial crisis.

A virile construction industry causes the establishment and growth of other

supportive and servicing industries e.g. paint, glazing, tile e.t.c. thus the

construction industry has a multiplier effect on the development of the nations

economy (Nwosu, 2003).

1.1 Background Of Study

From the above stated points, it is clear that the construction industry

contributes a very huge quota to the nations economy. But in recent times there

has been a great backdrop in the construction industry especially in the private

sector. Building clients are becoming much more careful at embarking on any

construction projects because of frequent occurrence of notorious cost overrun

experienced in recent time. This has brought about building clients borrowing

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more money than anticipated at the inception stage of the project. This has lead

to project being stooped half-way or totally abandoned due to the client going

bankrupt. This has been a great limiting factor in the construction industry today.

This is largely due to the reason of cost control being emphasized only during

the pre-contract stage of most projects.

On the other hand, contractors after winning award of projects are faced with

multiple risks at executing the projects because of negligence of adopting an

effective cost control system during project execution, which as lead to loss of

profit or even running at loss in carrying out the contract.

As building becoming becomes more complex and employers more exacting in

their requirements, so it becomes necessary to improve and refine the cost

control tools used. Rising prices, restrictions of the use of capital and changing

interest rates have caused employers to demand that their professional advisers

should accept cost as an element in both design and execution and that they

should ensure suitably balanced cost throughout all parts and stages of the

building as well as an accurately forecast overall cost, involving close

collaboration between the architect and quantity surveyor (Seeley, 1995a).

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1.2 Statement of the Problem

The demand for construction products of all types coupled with tight monetary

supply has provided the construction industry with a big challenge to moderate

cost of projects. The major problem in this respect has been seen in large

numbers of cost overruns in the construction. Consequently, sub sequential

increase in the cost of construction products are being observed in construction

projects of all types.

This substantial increase in cost of construction projects has brought about loss

of clients confidence in both the consultants and contractors and also has added

more investment risk thus inhibiting regular investment in the construction

industry.

All these are as a result of not embracing or the lack of knowledge of an

effective cost control system during project execution.

1.3 Purpose of the Study

The construction industry generates about two-third of the value of fixed capital

in this country (Nigeria) and this is a huge margin. The problem of cost overrun

due to lack of utilizing an effective cost control system during project execution

in various construction projects as brought about a massive backdrop of

developers and investors from vetting into the industry; thus creating great

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shortage of employment and national development. This is why the researcher

sees it fit to solve this problem that is persisting in the construction industry in

Nigeria.

1.4 Significance of the Study

Most projects manager/consultants and contractors in Nigeria find it most

difficult in controlling cost on construction projects during project execution due

to a number of problems which includes poor projection, lapse in management

and control, over budgeting, poor materials, labour shortages, increased cost of

materials, delays in deliveries, wastage of materials, unexpected weather

changes, loss of materials, insecurities and poor communication. This result to

cost and time overrun conflicts and sometimes abandonment of projects. This

study was therefore developed and carried out to identify causes of these

notorious costs and time overruns and also proffer a more effective cost control

system to the construction industry in Nigeria.

1.5 Scope of the Study

This research specifically looked at problems faced by contractors, consultants

and clients at controlling the cost of projects on site, it further propose remedies

to enhance the cost control system to be more effective. It also elucidates the

role played by the consultants and clients in controlling the cost of the project

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from exceeding its cost limit. The study is limited to projects in Owerri metropolis

of Nigeria because there is easy access of information in Owerri metropolis by

the researcher.

Target respondents for this study are the principal actors in the construction

industry namely: the Client, the Consultant and the Contractor.

1.6 Research Questions

1.) Is the construction industry today making use of an effective cost

control system during project execution?

2.) Can an effective cost control system be achieved during project

execution in Nigeria?

3.) Why is the construction industry not embracing an effective cost

control system during project execution?

4.) What are the effects of not embracing a pragmatic cost control system

during project execution?

5.) What are the various ways an effective cost control system can be

achieved during project execution?

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1.7 Limitation of the Study

On the process of carrying out this work, there are some factors that were

barriers to the researcher in doing this work has planned.

They are;

FINANCE: As a result of the economic situation, the researcher did not have

enough money which is needed to carry out the research and get to the field

properly.

CHARACTER OF RESPONDENTS: Some of the respondents felt unwilling to give

response to questions and they find it difficult to give out informations that the

researcher needed for the completion of this work.

1.8 Aim and Objectives

The aim of this research work is to provide recommendations to minimize or

avoid cost and time overrun and frequency of its occurrence through devising

keys to an effective cost control system during project execution and hence

reduce its consequential effects on the construction industry in Nigeria.

The objectives of this research are as follows;

1.) To identify the role of various stakeholders in the construction industry at

controlling cost of a project during its execution.

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2.) To identify the factors responsible for not operating an effective cost

control system during project execution thus leading to cost and time

overrun in Nigeria.

3.) To identify the effects of the non-adoption of an effective cost control

during project execution on the construction industry.

4.) To identify the various factors responsible for cost and time overruns in

the construction industry.

5.) To establish the relationship that should exist between stakeholders in the

construction industry at achieving an effective cost control system during

project execution.

1.9 Definition of Terms

PROJECT EXECUTION: In the context of this research work this term (project

execution) will depict the sequence/stage involved in which a construction

project will follow from the award of the contract to the completion. This can be

generally understood as post-contract stage.

COST OVERRUN:

a) An instance in which the provision of contracted goods or services are claimed

to require more financial resources than was originally agreed between a project

sponsor and a contractor [User Guide, 2005].

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b) The amount by which actual costs exceed the baseline or approved Costs

[Wide-man, 2002].

For the purpose of this research cost overrun is defined as the difference

between the final actual cost of a construction project at completion and the

contract amount, agreed by and between the client (the project owner) and the

contractor during signing of the contract.

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CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter looks at a review of relevant literatures that give a background of

the Nigerian building construction industry, the challenge of high construction

cost, the factors affecting cost overrun and the solutions on how to minimize

cost overrun.

2.1 The Nigerian Construction Industry

In Nigeria, like most developing countries, the construction industry plays a

dominant role in the economic activities of the country. According to Olowo

Okere (1988) the construction industry accounts for about 60 percent of the

Nations capital investment and 30 percent of the Gross Domestic Product

(G.D.P)

Furthermore, the construction industry is said to have contributed about half of

the total stock of fixed capital investment in the Nigeria economy (Olaloku,

1987).The industry also generates employment opportunities which place it

second to the Government in the employment of labour (Husseini, 1991).

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When the construction industry was booming in the 1970s, the countrys

economy experienced similar effects during that period. However, from early 80s

to mid 1980s, the industry experienced a jolt and its effect was felt in all spheres

of national life (Isiadinso, 1988).

2.20 The Roles of Construction Actors on Construction cost

There are diverse interests in the construction industry. The principal interest or

actors in the construction industry are:

2.2.1 The Client

2.2.2 The Consultant

2.2.3 The Contractor

2.2.1 The Client

The Client is, by far, the single most important member of the construction team.

He is the initiator and financier of all the projects. Omole (1986) noted that the

major contribution the client can make to the successful operations of the

construction industry lies in his skill in specifying his needs prior to the

preparation of the design. It is also important for the client to set cost limits of

the project at the briefing .He should also ensure that adequate financial

provisions are made prior to the commencement of any project.

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2.2.2 The Consultant

The consultant is seen as one/establishment that safe guards the interest of the

client. Cost considerations are among the most important and basic

considerations that Consultants must deal with. It is essential to see that projects

are contained within the clients budget and cost forecasts. The Consultant has

the final control over virtually every project.

Accurate cost analysis and control is one of the necessary services the client

requires from the consultants (Omole, 1986).

2.2.3 The Contractor

Omole (1986) further reveals that the major task of Contractors is to assemble

and allocate the resources of labour, equipment and materials of the project in

order to achieve completion at maximum efficiency in terms of time, quality and

cost. He is also out to protect his own interest and make profit from execution of

the project.

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2.3 Diverse Interest of Construction Actors on Controlling Of

Construction Cost

The client is very much concerned with quality, cost and time; he wants the

building to be soundly constructed at a reasonable cost and within a specified

period of time. The term cost conveys a different meaning to the client and

contractor. While it signifies cost to the client as distinct from cost of labour,

plant and materials incurred by the contracting and subcontracting firms. Hence

it signifies the amount which the client will have to pay the contractor to

construct the building but not the actual cost to the contractor of building it.

Some confusion has arisen between the term price and cost and it has been

suggested that price should be used when describing the cost to the client and

cost when describing/dealing with contracting cost.

Cost control during execution of project can be viewed from two points;

1.) From the contractors perspective: he is to control cost of the project

effectively in-order for him to make profit.

2.) From the consultant perspective: he is to control cost effectively during

the execution of the project in-order to make sure that the cost limit is

not exceeded thus; preventing the occurrence of cost overrun.

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2.4 Concept of Cost Control

Quantity Surveyors Approach

Cost control aims at ensuring that resources are used to the best advantage with

the alternating high cost and acute shortage of funds, the majority of promoters

(developers/clients) of building works are insisting on the project being designed

and executed to give maximum value for money.

As building becomes more complex and building clients more exacting in their

requirements, so it becomes necessary to improve and refine the cost control

tools. Constantly changing prices, restrictions on the use of capital and high

interest rate have caused building clients to demand that their professional

advisers should accept cost as an element in design and that they should ensure

suitably balanced cost throughout all parts of the building, as well as an

accurately forecast overall cost despite the difficulties entailed.

Quantity surveyors are employed to an increasing extent in the construction

industry during the design stage to advice architects on the probable cost

implication of their design decisions and to assist in obtaining economical and

efficient designs (Seeley, 1995).

An RICS report: Qs 2001(1991) rightly emphasized that clients needs early and

accurate cost advice more often than not well in advice of site acquisition and of

a commitment to build. In helping to define clients requirement in financial

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terms, quantity surveyors are exerting consideration influence of any resulting

design. This requires not only knowledge of construction cost, but also

knowledge of the property market and an ability to anticipate and visualize

clients detailed requirements. During the design stage, advice is needed on

relationship with of capital costs to maintenance cost and the cost implications of

design variables and differing construction techniques (Seeley, 1996).

It should be stated clearly that though much emphases is accrued to the cost

control during the pre-contract phase of a project, this constitute a major

problem bringing about cost overrun. To ensure that the building is kept within

the agreed cost limit, an effective cost control process should be continued

throughout the construction period, especially during the post-contract period.

2.4.1 Main Aims Of Cost Control

The major mains of cost control are probably threefold;

1.) To give the employer good value for his money- A building soundly

constructed of satisfactory quality and appearance and well suitable to

perform the functions of which its required, combined with economic

construction and layout, low future maintenance and operating costs

and completed on schedule as lost time and money, and in accordance

with the agreed brief.

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2.) To achieve a balance and logical distribution of the available funds

between the various parts of the building.

3.) To keep total expenditure within the employers budget frequently

based on an approximate estimate of cost prepared by the quantity

surveyor in the early stage of the design process. (Seeley, 1998)

Majority of the factors responsible for the escalation of cost overrun of building

construction projects are largely due to the use of an in-effective cost control

technique during the project execution.

2.5 Effects of Non-Adoption of an Effective Cost Control System

during Project Execution

The effects of the non-adoption of an effective cost control system during project

execution as been seen to possess a myriad of negative influence on the

construction industry. However the researcher will attempt to discuss these

under the following headings;

1.) Cost and time overrun

2.) Lack of clients confidence reposed on consultants and contractors.

3.) Abandonment of project

4.) Bankruptcy of both client and contractors.

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2.5.1 Cost and Time Overrun

There is need for strict cost discipline throughout all stages of design and

execution to ensure that the initial estimate, tender figure and final account sum

are closely related. From all indications the construction industry has been

finding this difficult to achieve.

Cost overrun as been seen to be common in infrastructure and building

construction projects. Researchers on construction projects in some developing

countries indicate that by the time a project is completed, the actual cost would

have exceed the original contract price by 30% (Al-momani, 1996). One of the

most comprehensive studies of cost overrun that exists found out that 9 out of

10 projects had cost overruns. Overruns of 50-100% were common (Flyvberg, et

al 2003).

According to hall peter hall (1982), the Sydney opera house in Sydney sets some

kind of world record for being both time and cost overrun. Originally estimated in

1957 to cost just seven million (7,000,000.00) dollars and to be completed in

January 1963, it was in fact finished in January 1973 at a cost of one hundred

and two million (102,000,000.00) dollars. This makes the final account cost

about 15 times the original estim

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Table 2.1 Shows Projects That Exceeded Their Estimate.

S/N PROJECTS ESTIMATE(m) FINAL COST(m)

1 Sydney Opera House 2.5m 87m

2 Thames Barrier building 23m 400m

3 Barbican Arts Centre 17m 80m

4 Devonport Dockyard 21m 83m

5 Kingston Crown Resort 0.25m 1.80m

6 Channel Tunnel 4,800m 11,000m

7 DOE Trident Nuclear Base 11,000m 19,000m

Source: Seeley, 1998.

2.5.1.1 CAUSES OF COST OVERRUN

The chief cause of cost/time overrun in building construction projects in Nigeria

is due to the non-adoption of a pragmatic cost control system during project

execution. It is not enough for the architect, engineers and other members of

the design team to produce a well articulated and accurate sets of drawings of a

project and the quantity surveyor producing a well and soundly prepared bill of

quantities after which the project is awarded to a competent contractor at a price

not exceeding the cost limit that really solves the problem of cost and time

overrun. The cost control system should be such that will be able to allow for

continuity throughout the execution of the project if the cost limit is not to be

exceeded.

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Morris (1990), studied the factors influencing cost overruns in public sector

projects, he found that Escalation in costs is attributable partly to the fact that

the original estimates were prepared at the then current prices, and partly to

delays which enhance the effect of inflation and to direct escalation in costs

arising out of change in scope, errors etc. Based on certain assumptions with

regard to the pace of expenditure on projects Morris have roughly computed that

for the 133 projects which were studied only about 25 to 30% of 18 the cost

increase can be attributed to inflation. The remaining 70 to 75% has to be

explained in terms of delays, inefficiencies, scope changes, changes in statutory

levies, variations in exchange rates and to the combined effect of these factors

with inflation.

Morris (1990) mentioned ten factors that influencing cost overruns of

construction projects. These factors are: inadequate project preparation,

planning and implementation, delay in construction as the first cause of cost

overruns. The second factor was supply of raw materials and equipment by

contractors. The third one was change in the scope of the project. The fourth

factor of cost overruns was resources constraint: funds, foreign exchange,

power; associated auxiliaries not ready. The delays in decisions making by

government, failure of specific coordinating bodies was the fifth factor. The sixth

cause was wrong /inappropriate choice of site. The seventh one was technical

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incompetence and poor organizational structure. The labour unrest was the

eighth one. The ninth factor cause cost overruns was natural calamities, and the

last one was the lack of experience of technical consultants, inadequacy of

foreign collaboration agreements, monopoly of technology.

Frimpongs et al (2002) studied 26 factors that cause cost overruns in

construction of building projects in Ghana, they sent to 55 questionnaires to

owners, 40 to contractors and 30 to consultant. According to the contractors and

consultants, monthly payments difficulties from agencies was the most important

cost overruns factor, while owners ranked poor contractor management as the

most important factor. Despite some difference in viewpoint held by the three

groups surveyed, there is a high degree of agreement among them with respect

to their ranking of the factors. The overall ranking results indicates that the three

groups felt that the major factors that can cause excessive building project

overruns in developing countries are poor contractor management, monthly

payment difficulties from agencies, material procurement, poor technical

performances, escalation of material prices according to their degree of

influence.

According to Robert F. Cox, (2007), project owners identified five reasons for

project cost overruns: these reasons were, incomplete drawings, poor pre

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planning process, escalating cost of materials, lack of timely decisions and

excessive change orders.

According to Users Guide, (2005), the following are the factors that change the

cost of the construction projects through time: poor project management, design

changes, unexpected ground conditions, inflation, shortages of materials, change

in exchange rates, inappropriate contractors, funding problems and force

majeure.

In developing countries the lack of proper phasing of construction projects can

contribute to the economy to become overheated. This leads to shortage of

construction materials as the demand will exceed the supply, this in turn leads to

a climb in the cost of construction materials; this inevitably gives rise to project

cost overruns, with consequential effects on inflation and a decline on efficient

activity in the construction industry (Mansfield, Ugwu and Doran, 1994).

In the following section of this research, factors which affect the cost of a

construction project will be dealt in detail under the following headings.

Incorrect planning

Incorrect planning is one of the most important factors that affect cost of

construction. Contractors must be aware of all resources that he might need for

any project. The contractors, also, should utilize all resources in an efficient

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manner. Proper scheduling is the key to utilizing project resources, if not, the

project cost will increase.

Fraudulent practices and kick backs

This factor was the second most important factor affecting construction cost in

Nigeria as noted by Elinwa and Silas (1993). Hussein (1999) also noted that

fraudulent practices and kick backs occasioned by greed are perpetrated by

some major players in the construction industry. The perpetrators of this act in

the industry are predominantly found within the rank and file of contractors,

consultants and public clients as evident from the report published by TELL

(2002).

TELL (2002) also revealed that there were verifiable cases of corruption in the

execution of some of the contracts awarded by the Petroleum (Special) Trust

Fund (PTF). The Interim Management Committee (IMC) set up by President

Obansanjo found that of the total 181.8 billion naira that accrued to PTF for the

three years it operated, as much as 25.6 billion naira was wrongly paid to

contractors. These include inflated contracts, fraudulent over payment of

contractors by some of the agency officials and undue receipts of interest on

funds placed in banks by the agencies.

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Design Change

This problem arose from inadequate project planning and management of the

design process. A quite distinctive example is the progress of West African Gas

Pipeline (WAGP). Asamoah (2002) reported that WAGP project has suffered a

number of setbacks, culminating in the escalation of its cost from an initial US

$500 million. One of the problems includes the changing of the initial plans to lay

the pipeline offshore to an onshore configuration.

Relationship between management and labour

There is always a gap between the project management and labour. This gap

should be kept as small as possible, so that the relationship between

management and labour may be strengthened. They should work as a team to

build a project with minimum cost. If the relationship between management and

labour is bad the morale of the laborers will decrease and production will

decrease leading to increased project cost.

Contract Management

Poor contract could be attributed to the manner in which contracts are awarded.

In most cases projects are awarded to the lowest bidder (Mansfield, Ugwu and

Doran, 1994).

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Some of these low bidders may lack management skills and have less regard for

contract plans, cost control, over all site management and resource allocation. As

we know in the case of Nigeria, contracts are usually awarded to politicians and

well connected individuals irrespective of the apparent deficiencies in their

relevant delivery potentials. Accordingly, Frimpong et al (2003) observed that

most contractors in Sub Saharan African are entrepreneurs who are in the

business of making money at the expense of good Management. Consequently,

they pay low wages, submit very low bids and have very little, if any ability to

plan and coordinate contracts.

Lack of coordination between designers and contractors

Contractors construct the project according to the project design. Normally, if the

design has any mistakes, the contractors may apply the mistakes without

knowing there are mistakes or without notifying and coordinating with the

designer or the client. Implementing designs with mistakes obviously costs a lot

of money.

Cost of materials

Material price is subject to supply and demand and is affected by many other

things, including quality, quantity, time, place, buyer and seller.

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Other factors affecting material cost include: currency exchange, low or high

demand, material specification, inflation pressure and availability of new

materials in the country.

Additional Work

Additional work is related to design changes, which is due to lack of detailed

briefing on the functional and technical requirements of the projects by the

clients (Mansfield et al, 1994).

Poor Financial control on site

Controlling the project financially on site is not an easy task .All resources need

to be controlled: labour productivity, material availability, material waste, good

and effective methods, using effective tools, equipment, good project planning

and scheduling.

Project management should therefore be aware of all those factors in order to

achieve better financial control on site.

Disputes on site

Dispute is a major obstacle for any project. Normally disputes will exist if work

does not match the contract document or if work is not included in the contract

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document. Any dispute will eventually delay the project and increase project

cost.

Fluctuation of prices of materials

Omoregie and Radfort (2005) surveyed contractors, consultants and public

clients and revealed price fluctuation as the most severe cause of project cost

escalation in Nigeria. This could be attributed to the limitation in exchange rate

which in turn affects construction materials prices and the general price level.

Another factor is the unstable inflationary trend in Nigeria which is a result of

demand exceeding supply, creating a scarcity of goods which in turn leads to

escalation of the goods.

Contract procedure

The contract document is the ground rule between all parties (contractors,

consultants and clients).One part of the contract document is the contract

procedure.

The contract procedure shows the type of contract, payment procedure

constraints and regulations within the contract. The type of contract affects the

projects because of the risk involved in some types of contract(i.e. lump

sum).Unclear contract procedures will lead to disputes, project delay and cost

overrun (Fisk ,1997)

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Wrong method of estimation

This factor could be attributed to the unpredicted inflationary trend, lack of

adequate training and experience at the senior management level, and

fraudulent practices Mansfield et al (1994)

Waste on site

It seems that the little waste of construction material on site should have a very

minor effect on the total material cost. However, this minor effect can reach up

to 50 % of the total material margin of a project. So waste on site has to be

considered on tendering any project (Elinwa and Silas, 1993)

Mode of financing bonds and payments

Ogunlana et al (1996) reported that financing and payment of completed works

is responsible for cost escalation in Nigeria. Generally, contractors are sometimes

not paid in accordance with the contract conditions. There are cases where

clients fail to honour Architects certificate of payment for up to 6 months or

more whereas the contact conditions, in most cases stipulates about 28 days .

Most contractors when preparing their tenders make allowance for partial

financing of the project. They charge the clients for payments of interests and

bank charges on moneys they anticipate to borrow from the banks to finance

these projects (Omole, 1986)

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The irregular financing of public projects is a major cause of liquidity problem for

contractors: however, contractors can be paid in accordance with the contract

agreement if clients can generate the availability of adequate funds before the

project commences (Mansfield et al, 1994).

From a holistic view of all started points, it is glaring that majority of the

problems arise during the project execution stage and these could all be

controlled by the use of an effective cost control system during project

execution.

2.5.2 LACK OF CLIENTS CONFIDENCE REPOSED ON CONSULTANT

AND CONTRACTOR

The client is seen as the initiator of any construction projects and as such he is

the one that funds the project which makes him the ultimate risk bearer. He

shops for professionals/consultants whom he is confident in based on the

consultants credibility and ingenuity. The consultant with his acumen and

professionalism is to safe guard the interest of the client against over spending

and making sure that the proper quality of work is achieved at the most

economic price/tender. These and more are the consultants responsibilities to

the client and of which the client repose much confident on the consultant to

deliver his quota, which also includes sourcing for a well qualified contractor.

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When the contractor is selected, the client in-turns appropriates confident on the

contractor based on the fact that he was selected by his consultant after due

scrutiny. When the project kick-starts and the clients begins to notice certain

discrepancies from the initial agreed cost limit and designs, he starts to question

the credibility and ingenuity of both the consultant and contractor. When such

situation lingers, the client might lost the confident he had reposed on the

consultant and contractor at achieving proper completion of the project. The

client might have to call for a total overhauling of the project team in-order for

him not to go bankrupt and to achieve his plans at delivery the project.

This will lead to retrenchment of workers which will in turn escalate the

unemployment status of the country (Nigeria). And also, the client may tend to

be much more careful at embarking on any construction projects or even worst,

he will not dear to engage on any construction projects in the future.

2.5.3 ABANDONMENT OF PROJECTS

According to Nwosu (1995), project abandonment is the non-completion of any

project at any stage prior to handover; he continued that projects when

abandoned constitute an eye sore and poses considerable sensual mental and

psychological dissatisfaction and torture to the members of the public. In a

supportive motion, Akindoyemi (1986), poses that whatever the reasons for the

abandonment of project, the cost are not limited to the monetary costs of

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completion over and above the cost had the project being completed normally,

he went ahead saying that these abandoned projects are more in quantum now

than at the previous years.

When projects experience any form of acute cost overrun during its execution,

which most of the times is due to inappropriate cost control system during its

execution, the client who is the financier of the project will have no-other choice

but to abandon such project.

2.5.4 BANKRUPTCY OF BOTH CLIENT AND CONTRACTOR

According to the English dictionary; Bankruptcy is the legal inability to pay ones

debt. Insolvency is an omnibus term used to cover various forms of individual or

companies being so short of cash to affect their legal position.

It can also be seen as the inability to pay ones debts or discharging ones

liabilities. In law only individuals or partnership can become bankrupt.

Companies are said to be insolvent and such companies are put into liquidation.

According to Seeley (1996), insolvencies occurred among building contractors

amounting to more than 1500 in 1982 alone, this represented over 14% of total

liquidation in England and whales, during this period. These aroused primarily

because of wide fluctuations in the demand of building works, the existence of

many small and medium-sized firms often lacking sufficient financial expertise

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and being under-capitalized and high interest rates and restrictions on capital.

Some contractual and organizational aspects can also contribute significantly to

the occurrence of insolvencies, such as inviting excessive number of contractors

to tender for a project, the accumulation of undecided claims, excessive price

cutting by tenderers, decrease in the value of work in progress with

consequently higher proportionate overhead, delay in payments to contractors

arising from non-settlement of final accounts and non-release of retention,

undervaluation of works and over-valuation of works at the early stage of the

contract, leaving insufficient funds to complete the works. These and many more

leads to contractors going bankrupt. With a closer look at the above causes one

will notice that most of the causes stems during the project execution.

Also, this has its consequential effects on the project client and if not properly

handled, it will lead to the client becoming bankrupt also.

2.6 CAUSES OF THE NON-ADOPTION OF AN EFFECTIVE COST

CONTROL SYSTEM DURING PROJECT EXECUTION

Some of the reasons why an effective cost control system is not embraced

during project execution are briefly outlined;

1.) Lack of professional competence and knowledge on the part of the

consultant and contractor.

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2.) The non-inclusion of a competent quantity surveyor in the post-contract

stage of the project.

3.) Fraudulent practices and kick-backs (corruption)

4.) Professional negligence on the part of the project consultants.

ATTEMPTS TOWARDS AN EFFECTIVE COST CONTROL SYSTEM DURING

PROJECT EXECUTION

2.7.1. CONSULTANTS ROLE AT ACHIEVING AN EFFECTIVE COST

CONTROL SYSTEM DURING PROJECT EXECUTION

The consultants role at controlling project cost during its execution is normally

carried out by the Quantity Surveyor (PQS). Though the quantity surveyor cost

control functions under the standard forms of construction contracts has no

authority to issue instructions that would affect the cost of the project (Nisbet,

1989).

At the time the contractors starts work on the site, the quantity surveyor should

have scrutinized the priced bills, schedule of basic rates where applicable,

contract drawings, contract conditions, contractors master program, insurances

and any other relevant documents. He should at an early stage agree ground

levels with the contractor and suitable arrangements for dealing with daywork

vouchers and claims for increased costs. An accurate record of drawings should

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be supplied with all relevant cost information. The opportunity should be taken

on the occasion of site visits for measurement and interim valuations to note

matters such as labour strength, plants in use, weather conditions and causes of

delay, which subsequently have bearing on the matter of claims. Throughout the

contract period, the quantity surveyor should maintain an effective cost

arrangement by constant check on costs and by supplying cost advice to the

architect in ample time for any necessary corrective action to be taken without

adverse effects on the project (Seeley, 1996).

As stated by Seeley, 1996, the main functions of the quantity surveyor once work

as started on site is one of project financial control. It is important to ensure that

any variations, claims or extra cost does not raise the likely final account figure

above the cost limit. It is particularly necessary to monitor the financial effects of

variations and these should ideally be costed by the quantity surveyor before

they are issued. The quantity surveyor should liaise with the contractor at regular

intervals for valuation of variations, to agree measured works and to discuss any

claims submitted by the contractor and/or subcontractors. It is however the

quantity surveyors responsibility to prepare independent valuations although he

should consider any representation made by the contractor.

From the above, it is noted that it will be of paramount interest to the consultant

that an effective cost control system is operated throughout the construction

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period to ensure that the authorized cost of the project is not exceeded. When

contingencies are allowed in a project, such sum should be used only to cover

for cost of unforeseen work that could not be reasonably foreseen at the design

stage. It should not be used for design alterations, except with prior approval of

the employer/client (Seeley, 1996).

Seeley, 1996, went on to say that it is very important that the probable cost of

all variations be costed before the architect issues any variation orders, so that

their financial effects can be taken into account. Early consideration should be

given to expenditure against provisional and prime cost sums and the

contingency fund, and the examination of subcontractors and suppliers

quotations. It is advisable to carry out continuing cost studies in constructional

areas where detailed designs is in-complete, and this applies particularly to

mechanical and electrical services. Additionally, the quantity surveyor will

normally produce monthly forecast of final expenditure and predict and monitor

cash flow (Seeley, 1998).

Should any of the cost information obtained by the quantity surveyor prove

unsatisfactory, such as the possibility of final expenditure exceeding the contract

sum, urgent action must be taken to rectify the situation, working in close liaison

with other members of the design team.

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Summing up, the employer should be informed of his financial commitments and

when he will be required to make payments. The design team and in particular,

the quantity surveyor must effectively control expenditure on variations,

contingency expenditure, provisional and prime cost items set against

quotations, quality control, completion time and claims (Seeley, 1998).

The employer can reasonably expect to be supplied with the following

information;

1.) An estimate of the final account at regular intervals during the contract

period, preferably monthly.

2.) A comparison of the estimate with the total allocated financial

resources.

3.) If the comparison between the final account estimate and the resource

allocated is not favorable he will require an explanation and an

indication of remedial action.

4.) An indication of when he will be expected to pay money and

approximately in what amounts. (Nisbet, 1981).

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2.7.2. CONTRACTORS ROLE AT ACHIEVING AN EFFECTIVE COST

CONTROL SYSTEM DURING PROJECT EXECUTION

Many construction companies become insolvent through bad estimating and

planning, ineffective contract control and/or inadequate site cost control (Seeley,

1998). In-order for a contracting firm to effectively control cost of a project

during its execution, such firms must look into the following;

CASHFLOW: Cashflow may be defined as the actual movement of cash/money

in and out of a business. Within the construction organization positive Cashflow

is derived mainly from monies received through monthly payment certificates.

Negative Cashflow is related to monies expanded on a contract to pay wages,

purchase materials and plants, meet sub-contractors accounts and overheads

expended during the progress of construction. The assessment of the profitability

of a particular contract consist basically of knowing precisely the value of work

executed at a specific date, compared with the actual costs incurred in achieving

that value of work. The difference between the two figures will be the amount

available to allocate to the off-site overheads of the company, to fund its capital

and make profit. In adverse situation on the difference may show that off-site

overheads are not being covered and that no profit is being made. On a

construction project, the contractor when there is cash deficit, where cash is in

surplus, the contract is said to be self financing. (Aqua Group, 1990b).

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Cashflow problems can be reduced if an effective cost control procedure can be

operated by the contractor in respect to the matters listed;

1.) Realistic monthly assessment of preliminaries from fully document and

priced preliminaries schedules.

2.) Increased costs under contracts with fluctuations kept up to date in

monthly valuations.

3.) Variations to the contract accurately assessed and included in

valuations.

4.) Discounts and retention monies properly claimed against contractors

own nominated subcontractors and suppliers.

5.) Daywork sheets completed and cleared for monthly payments.

6.) Collection of all monies properly due to the contractor; and

7.) Ensuring that all claims for loss and expense are fully documented

properly presented and submitted as quickly as possible. (Seeley,1998)

SITE COST CONTROL: it is cost control in the context of profit or loss that is the

primary concern of the contractors quantity surveyor. In his capacity he works

closely with the site manager who is basically the controller. Monitoring

performance, comparing it against determined targets, and taking remedial

action where necessary. The factors to be controlled include the tangible physical

resources of operatives, materials, machines and subcontractors. Equally

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important are the non-tangible items such as progress and productivity (items),

cost (money), quality, safety, information, methods and the performance of sub-

ordinate management staff (Gunning, 1983).

The main sources of data available to the contractors quantity surveyor are;

1.) Contract Bills Generally firm bills of quantities ease the task of the

contractors site cost control if followed religiously.

2.) Estimates of Cost the consultant quantity surveyor will normally

regard the priced bill in terms of end products of the work. This is a

very different concept from the cost constituents in terms of labour,

materials, plant, sublet work, site establishment costs, overheads

contributions and profit that may be components of the individual rates.

3.) Method Statement The method statement prepared by construction

management will form the basis of working against which the tender

will have been completed. This statement will detail the assumption

made as how the project is to be resourced with plant and labour and

what is to be carried out by subcontractors and by direct labour.

4.) Master Programme The master programme will set out in as much

detail as possible the sequence and timing of the intended work.

(Seeley, 1998).

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During construction these four data sources will be supplemented by interim

valuations, up to date accounts of labour, plant, materials and subcontracted

works, salaries and all other site cost; and finally the programme of work

executed compared with the assumptions upon which the tender was based.

Supported by this back-up data, achievement of an effective cost value

comparison will involve the following;

1.) The calculation of the true value of work carried out on a cumulative

basis to a prescribed cut-off date.

2.) The reinstatement of the true value of the work in terms that can be

directly compared with cost.

3.) Costs are collated to the-same cut-off date as that adopted for the

statement of true value sometimes refers to as true selling value cost

will be adjusted to take account of liabilities for costs that have not yet

been recorded but against which no value of work has been taken for

costs generated against which no value of work as yet been carried

out.

(Seeley, 1998.)

Supplied with these three sets of data, it is then possible to ascertain whether

profit or loss is been made on expenditure against labour, materials, plants and

site overheads, and whether the level of contribution is better or worse than that

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upon which the tender is based. This comparison may be made in terms of the

whole project or if data in terms of both value and cost can be accurately

subdivided into construction element making the project.

The key document for monitoring the value of work in progress is the interim

valuation. The contractor will not, however, normally accept without questioning

the value certified by the employers quantity surveyor. As a check, the

contractor should prepare payment applications in considerable details. For

internal accounting purpose, the contractors application will subsequently be

adjusted by any over or under measurement. (Meopham, 1983.)

As a management tool, the contractors quantity surveyor should look for

consistent and in-consistent trends as between the value and cost of each

earned allowances month by month. If a consistent trend is observed, for

instance by regular over-spending on labour at a consistent level, then

management will endeavor to identify some underlying reason. Examples include

the all-in-labour rate being highly anticipated at the time of tender, or output

being consistently lower than the constants upon which the tender was based.

The inconsistent relationship between earned allowance and actual cost is more

likely to have been caused by an isolated event and again management should

notify the reason and obtain solution in each case. The key factor is to recognize

that there is a problem at a time sufficiently contemporary with the event to be

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able to take effective action. On the cost side of the cost value comparison, it is

essential that there is a close liaison between the contractors quantity surveyor

and site accountant on a very large contract. (Meopham, 1983.)

COST VALUE RECONCILIATION: The cost and value of variations must

continually monitor and assessed. A contractor must ensure that he has clearly

defined procedures for identifying variations and that he conforms fully with the

requirements and contract, regarding notices and the supply of supportive

informations and particulars. After interim valuations have been made, the

contractor should list all un-agreed claims, variations, daywork, re-

measurements, interest on overdue sums and any other disputed items. The

contractor should also assess the progress achieved by monitoring the value of

work carried-out against the work programme.

Accurate recording of the cost of materials, plant, labour, site staff and

overheads, and subcontractors work and claims is essential in cost value

reconciliation. A monthly reconciliation of materials delivered to site should be

made against the quantities certified in the measurement. Allowance must be

made for materials rejected, used on site but not measured as in strengthening

of temporary roads, used off-site as a minor work for adjoining landowners and

materials that are stockpiled. If the unaccounted for exceeds the estimated

wastage allowance, further investigation will be needed. Possible causes may be

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errors in measurement, additional works being performed without supporting

variation orders, or loss through unforeseen circumstances, such as excessive

penetration of granular materials into a very soft sub-base. (Seeley, 1998.)

With the regards to labour costs, site staff usually should be given the

responsibility to complete time sheets indicating the amount of time/hours

worked by each operative and the amount of bonus earned in that particular

period. Management should monitor the allocation of staff on various contracts,

and should record holidays, sickness or other reasons for absence and overtime

payments and check that staff and overhead charges are kept within the

intended budget. (Seeley, 1998.)

OVERHEADS: On a construction project a distinction should be drawn between

site overheads and company overhead. The contractor is generally reimbursed

for his site overhead by means of the contract preliminaries or sometimes by

added sums to the rates contained in the bill of quantities. Care should be taken

so that the rate of recovery of revenue to match the rate at which expenditure is

incurred on site overheads. (Seeley, 1998.)

FINANCIAL REPORTING: Contractors should sustain a good management

practice which dictates that reliable and regular financial reporting is necessary

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to control a project cost effectively and such reports should be produced ideally

on a monthly basis. A basic financial report of a contract should contain;

1.) Initial tender figure and expected profit,

2.) Forecast figures at completion for value and profit.

3.) Current payment application by the contractor.

4.) Current certified value.

5.) Adjustments to the certified valuations.

6.) Costs to date and accounting period in question.

7.) Cash received to date, retention deduced and certified sums unpaid.

(Barnett, 1992.)

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CHAPTER THREE

RESEARCH METHODOLOGY

3.0 INTRODUCTION

Sequel to the obvious problem of radical cost and time overrun experienced in

the construction industry which is largely due to the non-adoption of an effective

cost control system during project execution, this research aims at identifying the

factors responsible for these occurrence and also to proffer solutions on how the

problem of cost overrun experienced can be minimized or avoided. In achieving

the above, the following steps were followed.

1. Identification of the problem

2. Definition of the problem

3. Analysis of the problem

4. Solution to the problem.

RESTATEMENT OF THE RESEARCH AIM AND OBJECTIVES

The aim of this research work is to provide recommendations to minimize or

avoid cost and time overrun and frequency of its occurrence through devising

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keys to an effective cost control system during project execution and hence

reduce its consequential effects on the construction industry in Nigeria.

The objectives of this research are as follows;

1.) To identify the role of various stakeholders in the construction industry in

controlling cost of a project during its execution.

2.) To establish the relationship that should exist between stakeholders in the

construction industry at achieving an effective cost control system during

project execution.

3.) To identify the factors responsible for not operating an effective cost

control system during project execution thus leading to cost and time

overrun in Nigeria.

4.) To identify the effects of the non-adoption of an effective cost control

during project execution on the construction industry.

5.) To identify the various factors responsible for cost and time overruns in

the construction industry.

3.10 RESEARCH STRATEGY

Naoum (1998) defined the research strategy as the way in which the research

objectives can be questioned. Two types of research strategies are used in

studies, quantitative and qualitative research. Quantitative approach is used to

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gather factual data and to study relationships between facts and how such facts

and relationships accord with theories and the findings of any research executed

previously, but the qualitative approach seek to gain insights and to understand

people's perception of "the world" whether as individuals or groups (Fellows and

Liu, 1997). In this research, a quantitative approach is used to understand/derive

the perception of construction professionals/actors in Nigeria towards the non-

adoption of an effective cost control system during project execution thus;

bringing about time and cost overrun in construction projects in Nigeria.

3.20 RESEARCH DESIGN

"Research design" refers to the plan or organization of scientific investigation,

designing of a research study involves the development of a plan or strategy that

will guide the collection and analyses of data (Poilt and Hungler, 1985). This

research consists of six phases; the first one is the proposal for identifying and

defining the problems and establishment of the objectives of the study and

development of research plan. The second phase of the research includes

literature review. Literatures of cost control procedures during project execution

and of time and cost overruns were reviewed. The third phase of the research

included a field survey which included the firms of

Building clients, contractors and consultants, also some actual cases were

collected during the field survey. The fourth phase of the research includes the

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questionnaire design and distribution. The questionnaire was used to collect the

required data in order to achieve the research objectives. The fifth phase of the

research focused on data analysis and presentation/discussion. The sixth and last

phase of the research includes the conclusion and recommendation.

3.30 POPULATION IDENTIFICATION

Population as defined by Best and Kahn (1986) is any group of individuals that

have one or more characteristics in common that

Are of interest to the researcher .The population may be all the Individuals of a

particular type or more restricted part of that group.

The population identified for this research work includes some professionals of

the building team, consulting and contracting firms.

The population selection was based on the assumptions.

(i) The contracting firms should have experienced and reputable

professionals and clients in their operating status respectively.

(ii) The consulting companies must have fully registered and experience

professionals as their staff with reasonable year of experience in the

construction industry.

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3.40 STUDY AREA

The study area for this research is based in Owerri, Imo state. The choice of

Owerri as the study area is because since the inception of the new administration

led by His Excellency Governor Rochas Owelle Anayo Okorocha, in 2011, the

state has had all types of construction projects with most of them experiencing

cost overrun. Imo state also enjoys the benefits of being the fulcrum of the

eastern part of Nigeria. Owerri city is a relatively built up environment with

many infrastructures like roads, bridges, estates ,government establishments, all

kinds of private and public developments, schools, hospitals, theaters, cinemas,

shopping malls to mention a few. All these infrastructures are the handiwork of

construction experts (consulting and contracting firms) in display all-over the

state, thus enabling the massive presence of reputable construction professionals

in the city. As such there cannot be a better place to obtain data for this study.

3.50 SAMPLING DESIGN AND PROCEDURES

Having identified clients, consultants and contractors as the target groups for the

effective conduct of this research, seventy respondents comprising of sixteen

clients, twenty two consultants and thirty two contractors were randomly

selected using stratified random sampling technique as a type of probability

sampling in order to give everyone that falls into any of these identified target

groups equal and independent chance of being included in the sample.

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3.60 QUESTIONNAIRE ASSUMPTION

The questionnaire is perhaps the most popular instrument used in the data

gathering process in conducting researchers.

In the course of doing this, some assumptions were taken as standard to the

method. The use of this instrument for the collection of our data therefore,

becomes understandable.

These include:

(i) That questionnaire method tends to give security to information and

to the respondents; also it is the fastest and one of the most

accurate and economical means of gathering information for a

research of the type.

(ii) That because the questions are short and precise, it would not take

much of the respondents time.

(iii) That the respondents would answer the questions correctly and

accurately.

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3.70 DATA COLLECTION INSTRUMENT

Two sets of data were identified as being relevant to the effective conduct of this

research namely primary and secondary. The primary data which refers to field

data were obtained through the use of well structured questionnaire developed

from the initial identification of likely factors responsible for the non-adoption of

a pragmatic cost control system during project execution in Nigeria and solutions

to minimizing same.

The questionnaire was designed to elicit information on the following:

(a) The respondents role in construction

(b) The respondents professional background

(c) How long the respondents have been in construction.

Secondary data through the review of various relevant literatures were also

used in the course of carrying out the research.

3.80 ADMINISTRATION OF THE DATA COLLECTION INSTRUMENT

The questionnaires were first validated by my supervisor before its

administration. The administration of the questionnaire was done by hand to the

various target groups.

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3.90 STATISTICAL TOOLS FOR DATA ANALYSIS

The descriptive survey method was used, where seventy well structured

questionnaires were distributed among the principal actors in the construction

industry namely: the client, the consultant and the contractor. Frequency and

percentages were used for the descriptive data. Coded broad sheets were

thereafter used for extracting data from the returned questionnaires. These were

analyzed by SPSS (Statistical Package for Social Science) having carefully

completed the variable view and imputed the extracted data appropriately on the

data viewed.

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CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION

4.1. INTRODUCTION

This part of the research deals with the analysis and discussion of the data

gathered from the desk study and questionnaire survey.

The procedure used in analyzing the results was aimed at establishing the

relative effects and factors responsible for not adopting an effective cost control

system during project execution. The questionnaire gave each respondent an

opportunity to identify the factor that was likely to cause cost overrun by giving

the response True, False, Yes, No , and in some cases giving their opinion

liberally.

From the desk study a variety of completed public/private building construction

projects throughout Nigeria were surveyed. During the desk study all the

documents of each project such as correspondence letters, project report,

payment certificate, the contract amount, contract time during signing of the

contract and actual completion time of the project were thoroughly investigated.

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4.2. QUESTIONNAIRE RESPONSE RATE

Detailed questionnaires were designed and distributed for the assessment of the

causes and effects of the non-adoption of an effective cost control system during

project execution in Nigeria, for this purpose the questionnaires were distributed

to major stakeholders in the construction industry; these are Contractors,

Consultants and Clients (project owners). To make the analysis more

comprehensive a total of 70 questionnaires were distributed to consultants,

contractors and clients (project owners) out of which 50 questionnaires were

filled and returned. Table 4.1 below shows the number of questionnaires

distributed to clients, consultants and contractors and the number of

questionnaires returned from these stakeholders including their percentage

response rate.

Table 4.1: Summary of Number and Percentage of Questionnaires Distributed

and Returned; and Response Rate.

NO

RESPONDENTS

QUESTIONNAIRE

DISTRIBUTED

NO (%)

QUESTIONNAIRE

RECEIVED

NO (%)

RESPONSE

RATE

(%)

1 CLIENTS 16 22.857 10 20 14.286

2 CONSULTANTS 22 31.429 15 30 21.429

3 CONTRACTORS 32 45.714 25 50 35.714

TOTAL/AVERAGE 70 100 50 100 71.429

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4.3. PROOF OF EXISTENCE AND EXTENT OF COST OVERRUN

The first step in this research is to check whether cost overrun in building

construction projects in Nigeria had been found existent or not. On the basis of

data gathered from the desk study, out of 70 building construction projects

investigated 67, (95.7%), building projects suffered cost overrun. From this

result, the number of construction projects that suffered cost overrun in Nigeria

are more than the number of projects that suffered cost overrun in other

countries, as indicated in the literature review part of this thesis Flyvbjerg, et al,

(2003), found that 9 out of 10 projects experienced cost overrun.

The total cost overrun ranges from the minimum amount of 0% to the

maximum amount of 126% of the contract amount for individual projects; and

the mean rate of cost overrun was found to be about 15.14% of the contract

amount.

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Table 4.2: Below shows the types of building projects, contract amount, actual

cost at completion and rate of cost overrun.

S/n Project No. Of

projects

Sum of contract

cost x 104

(naira)

Sum of contract

cost @ completion

x 104 (naira)

Sum of cost

overrun x 104

(naira)

Cost

overrun

(%)

1

Educational

Buildings.

29

579,654.49

631,703.16

52,048.67

8.98

2

Office

Buildings

15

81,602.00

93,714.40

12,112.40

14.84

3

Residential

Buildings

10

149,574.00

171,906.75

22,332.75

14.93

4

Health

Buildings

9

85,096.00

124,867.04

39,771.04

46.74

5

Industrial

Buildings

4

68,705.00

85,219.42

16,514.42

24.04

6

Others

3 21,786.00

28,309.60

6,523.60 29.94

Total/Mean

70.00 986,417.49 1,135,720.36 149,302.88 15.14

Source: various

From the above Table 4.2, it can be seen that the rate of cost overrun has

significant variations for the different types of building construction projects.

From the desk study it was found that educational buildings projects have the

lowest rate of cost overrun with 8.98% of the contract amount. Which means

educational building projects required an additional cost of 8.98% to accomplish

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the project. The reasons for rate of cost overrun to be relatively low in these

projects is that, for educational projects the type of buildings that are being built

are similar in architectural, structural, electrical, and sanitary designs for different

locations, hence scope of the works in these building projects are known very

well and the change orders/variations are minimal, if any. The cost overruns in

these projects are most of the time due to inadequate cost control during project

execution, increase in the cost of construction materials and due to unexpected

or unforeseeable ground conditions, etc... Health buildings have the highest rate

of cost overrun with 46.74% of the initial contract amount. Which means health

buildings required an additional cost of 46.74% to accomplish the project.

4.4. FACTORS RESPONSIBLE FOR COST AND TIME OVERRUN ON

BUILDING CONSTRUCTION PROJECTS IN NIGERIA.

In an attempt to analyze this, one question (question 6) was formulated on the

questionnaire and the results obtained are analyzed below;

Question 6 the following have been investigated to be the major factors

responsible for construction cost overrun in Nigeria. As a participant in the

construction industry what in your opinion is the most responsible factor for the

occurrence of cost/time overrun

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Table 4.3: Identification of the main factors responsible for cost/time overrun in

Nigeria.

FACTORS CLIENT CONSULT CONTR. AGGREG. %

Poor Financial control on site 6 2 10 18 36

Increase of prices of Materials and Labour Nil 2 6 8 16

Wrong method of Estimation 2 Nil 2 4 8

Wastage on site 1 Nil Nil 1 2

Lack of Co-ordination between consultant and

contractor.

1

4

4

9

18

Variations/design Change Nil 6 3 9 18

Others Nil 1 Nil 1 2

TOTAL 10 15 25 50 100

DISCUSSION

Table 4.3 shows that poor financial control on site with 36% mean score is the

chief factor responsible for construction and time overrun in Nigeria, responses

from the client and contractor both ranked this as the most severe factor while

the consultant ranked variations/design changes as the number one. Lack of co-

ordination between consultant and contractor during project execution and

variations/design changes both with 18% mean score ranked second as the most

responsible factor causing cost and time overrun.

Increase in prices of materials and labour during project execution was ranked

third with 16% mean score, contractors sees this factor as the second most

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responsible factor/cause of cost/time overrun while clients and consultants sees

it as the third most responsible factor.

Wastage on site and other factors specified by the responders as Kick

backs/corruption and government policies ranked fourth with 2% mean score

each.

It can be concluded from the results obtained from the analysis on table 4.3 that

the major causes of cost and time overrun all arises during project execution on

site and if proactive efforts are taken during this stage it can help to minimize or

totally rule out the occurrence of cost and time overrun on building construction

projects in Nigeria. Thus the Need of Adopting an Effective Cost Control System

during Project Execution becomes eminent.

4.5. ANALYSIS AND DISCUSSION OF RESEARCH QUESTION ONE

RESEARCH QUESTION 1 is the construction industry making use of an Effective

Cost Control System during Project Execution?

On attempting to analyze the above question, one question was formulated

(question 1) on the questionnaire to gather response from the research

population as stated on chapter three.

Question 1 is the construction industry making use of a Pragmatic/Effective

Cost Control System during Project Execution in Nigeria presently?

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Table 4.4. The responses from the received questionnaire are analyzed below;

RESPONSES CLIENT CONSULTANT CONTRACTOR AGGREGATE %

YES 2 5 4 11 22

NO 8 10 20 38 76

UNDECIDED Nil Nil 1 1 2

TOTAL 10 15 25 50 100

DISCUSSION OF RESEARCH QUESTION ONE

From the results obtained above, it shows that majority of construction actors in

Nigeria are not satisfied with what is obtainable in the construction industry in

Nigeria as regards to the system of Cost Control used during Project Execution.

22% of respondents comprising of 2 clients, 5 consultants and 4 contractors

arriving at 11 aggregate responses replied YES to the question of being

satisfied while 76% comprising of 8 clients, 10 consultants and 20 contractors

arriving at 38 aggregate responses replied NO to the question. Only two

percent (2%) replied Undecided consisting of only one (1) client.

From the results obtained here, it can be concluded that at present the

construction industry in Nigeria is not making use of a pragmatic Cost Control

System during project execution.

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4.6. ANALYSIS AND DISCUSSION OF RESEARCH QUESTION TWO

RESEARCH QUESTION 2 Can an Effective Cost Control System be achieved

during Project Execution in Nigeria?

In the bid to resolve the above question, one question was formulated (Question

2) on the questionnaire to gather response from the respondents/target

population.

Question 2 is it possible to adopt a pragmatic cost control during construction

project execution in Nigeria?

Table 4.5. The responses from the received questionnaire are analyzed below;

RESPONSES CLIENT CONSULTANT CONTRACTOR AGGREGATE %

YES 5 10 20 35 70

NO 3 2 4 9 18

UNDECIDED 2 3 1 6 2

TOTAL 10 15 25 50 100

DISCUSSION OF RESEARCH QUESTION TWO

From the results obtained above, it can be gathered that majority of the

respondents believe and are still optimistic that an effective cost control system

can be achieved, 70% of the respondents comprising of 5 clients, 10 contractors

and 20 contractors making an aggregate score of 35 all replied YES to the

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question, 18% of the respondents replied NO comprising of 3 clients, 2

consultants and 4 contractors making up 9 aggregate score, they are of the

opinion that corruption in the construction industry cannot be eradicated from

the industry. 12% of the respondents replied Undecided to the question

comprises of 2 clients, 3 consultants and 1 contractor making a aggregate score

of 6.

It can be concluded that though at present the construction industry is not

making use of an effective cost control system during project execution, the

possibilities of adopting it in the nearest future is very high. Thus the zeal of the

researcher to embark on this research was fueled/powered up.

4.7. ANALYSIS AND DISCUSSION OF RESEARCH QUESTION THREE

RESEARCH QUESTION 3 why is the construction industry not making use of an

effective cost control system during project execution in Nigeria?

To analyze the above research question, two questions (Question 3 and 4) were

formulated and presented on the questionnaire.

Question 3 what is the major factor responsible for the non-adoption of an

effective cost control system during project execution?

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Table 4.6: The responses from the received questionnaire are analyzed below;

FACTORS CLIENT CONSULT CONTR. AGGREG. %

Lack of professional competence and

knowledge on the part of the contractor.

3

5

2

10

20

Non-inclusion of a competent quantity

Surveyor during post contract stage.

4

5

10

19

38

Rise of corruption in Nigeria 1 3 3 7 14

Professional negligence on the part of the

project consultant

2

1

5

8

16

Others Nil 1 5 6 12

TOTAL 10 15 25 50 100

Question 4 lack of proper team work by consultants and contractors at post

contract stage contribute greatly to the traces of the non-adoption of an effective

cost control system during project execution?

Table 4.7: The responses from the received questionnaire are analyzed below;

RESPONSES CLIENT CONSULTANT CONTRACTOR AGGREGATE %

YES 8 10 20 38 76

NO Nil 3 3 6 12

UNDECIDED 2 2 2 6 12

TOTAL 10 15 25 50 100

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DISCUSSION OF RESEARCH QUESTION THREE

From the results obtained from table 4.6, all parties (4 clients, 5 consultants and

10 contractors with an aggregate of 19 reaching a mean perce