The Effect Of Labour And Material Costs On The Total Cost Of Construction

The Effect Of Labour And Material Costs On The Total Cost Of Construction

Abstract

This study was carried out to examine the effect of labour and material costs on the total cost of construction project using some selected construction companies in Lagos state as a case study.The study was specifically set to find out the extent labour cost contributes to the increase in the cost construction project, ind out the extent material cost contributes to the increase in the cost construction project, and find out the causes of labour and material cost overrun in construction project. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprise of staff in the financial department of the selected construction companies in Lagos State. In determining the sample size, the researcher conveniently selected 148 respondents and 141 were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables and mean scores. while the hypotheses were tested using Pearson statistical tool, SPSS v23. The result of the findings reveals that both the labour and material cost contributes highly to the increase in the cost construction project. Furthermore the result of the findings reveals that the major causes of labourcost overrun in construction project include; less productivity of labours, labour rate increment, less labour availability, fewer skills levels of labours, additional work time due to errors in the method statement, time extension of the project, and adverse weather conditions. Therefore, it is recommended that cost that needs to be managed effectively by all stakeholders, to ensure that materials are used efficiently on site, so as to reduce waste. It is also important that a Building Industry Price Book be instituted by the cidb/DPW to track the trends in building components and material prices. To mention but a few.

Table of Content

• Title Page
• Certification
• Dedication
• Acknowledgement
• Table of Content
• List of Tables
• Abstract

Chapter One:

Introduction

• 1.1 Background of the Study
• 1.2 Statement of the Problem
• 1.3 Objective of the Study
• 1.4 Research Questions
• 1.5 Research Hypothesis
• 1.6 Significance of the Study
• 1.7 Scope of the Study
• 1.8 Limitation of the Study
• 1.9 Definition of Terms
• 1.10 Organisations of the Study

Chapter Two:

Review of Literature

• 2.1 Conceptual Framework
• 2.2 Theoretical Framework
• 2.3 Empirical Review

Chapter Three:

Research Methodology

• 3.1 Research Design
• 3.2 Population of the Study
• 3.3 Sample Size Determination
• 3.4 Sample Size Selection Technique and Procedure
• 3.5 Research Instrument and Administration
• 3.6 Method of Data Collection
• 3.7 Method of Data Analysis
• 3.8 Validity of the Study
• 3.9 Reliability of the Study
• 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

• 4.1 Data Presentation
• 4.2 Analysis of Data
• 4.3 Answering Research Questions
• 4.4 Test of Hypotheses
• 4.5 Discussion of Findings

Chapter Five:

Summary, Conclusion and Recommendation

• 5.1 Summary
• 5.2 Conclusion
• 5.3 Recommendation
• References
• APPENDIX
• QUESTIONNAIRE

Chapter One

Introduction

1.1 Background of the Study

Labour cost is defined as the sum of all wages paid to employees, as well as the cost of employee benefits and overall taxes paid by the employer. The cost labour is broken into direct and indirect costs. Direct costs include wages for the employees physically making a product, like workers on an assembly line. Indirect costs are associated with support labor, such as employees that maintain factory equipment but don’t operate the machines themselves. When manufacturers set the price of a good they take the cost of labor into account. This is because they need to charge more than that good’s total cost of production. If demand for a good drops or the price consumers are willing to pay for the good falls, companies must adjust the cost of labor to remain profitable. They can reduce the number of employees, cut back on production, require higher levels of productivity, reduce indirect labor costs or reduce other factors in the cost of production. The construction industry is strongly dependent on subcontractors and material suppliers. Costs for purchasing material and services represent 75% of the turnover for Sweden’s three largest construction companies (Dubois & Gadde, 2000), and purchases of material correspond to at least 40% of the contract sum in a construction project (Boverket, 2005). Although material suppliers have a great impact on costs, quality and time in construction projects, there are few studies investigating how supplier’s performance affects these parameters. Hadikusumu et al. (2005) state that material delivery deviations, such as delayed deliveries, incorrect quantity and quality defects, are common in the construction industry, but measurement of material delivery deviations is a neglected area in construction, both by contractors and by construction management researchers.

The amount of money invested in the production of a product. The ingredients of a meal or the pasts of the machine would be things that incur material costs. This cost is apart from the cost of labour to produce the product. The material cost of together with the cost of labour helps determine the total cost of a product and its eventual sale price (Hadikusumu et al. 2005).The growing need for construction of all types coupled with a tight monetary supply has provided the construction industry with a big challenge to cut cost. According to Mendelson and Greenfield (1996) the remaining part of the twentieth century would involve corporations, institutions and government in a race to survive. The attendant dwindling economic fortune of nations economies around the World have geared up the participant in these sectors (the client in particular) to take up the challenge of ensuring efficient use of their resources to obtain value for money in terms of performance.The total cost of construction in normal circumstances is expected to be the sum of the following cost: materials, labour, site overheads, equipment/plant, head office cost and profit but in many parts of the world particularly in Nigeria, there are other costs to be allowed for.Therefore, this study is carried out to investigate the effect of labour and material costs on the total cost of construction project

1.2 Statement of the Problem

The demand for more construction of all types, coupled with a tight monetary supply has provided the construction industry with a big challenge to cut costs. The problem of high contract costs of all aspects of construction is becoming obvious. Consequently, substantial increases are being observed in projects.This substantial increase has brought about loss of client confidence in consultants, added investment risks, inability to deliver value to clients, and disinvestment in the construction industry.Hence, the study seeks to examine the effect of labour and material costs on the total cost of construction project.

1.3 Objective of the Study

The primary objective of the study is to examine the effect of labour and material costs on the total cost of construction project.

The specific objectives is as follows:

1. To find out the extent labour cost contributes to the increase in the cost construction project.
2. To find out the extent material cost contributes to the increase in the cost construction project.
3. To find out the causes of labour and material cost overrun in construction project.

1.4 Research Question

The following questions have been prepared for the study

1. What is the extent labour cost contribute to the increase in the cost construction project?
2. What is the extent material cost contribute to the increase in the cost construction project?
3. What are the causes of labour cost overrun in construction project?
4. What are the causes of material cost overrun in construction project?

1.5 Research Hypothesis

• Ho: There is no significant relationship between labour-material cost and the cost construction project.
• Ha: There is a significant relationship between labour-material cost and the cost construction project.

1.6 Significance of the Study

This study will be significant to policy makers and stakeholders in the construction industry as they will be exposed to the influence the use of labour, and cost of material has on the outcome of a building project.

The study will be significant to the academic community as it will contribute to the existing literature.

1.7 Scope of the Study

The study will find out whether labour cost has an effect on construction project. The study will also examine whether the cost of material has an influence on the total cost of construction project. Lastly, the study will investigate whether stakeholders perspective have an impact on the total cost of construction project. Hence this study is delimited to some selected construction companies in Lagos State.

1.8 Limitation of the Study

Financial Constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time Constraint

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9 Definition of Terms

Labour:

Work, especially physical work

Material:

The matter from which a thing is or can be made

Construction Project:

The organized effort to construct a building or structure.

1.10 Organizations of the Study

The study is categorized into five chapters. The first chapter presents the background of the study, statement of the problem, objective of the study, research questions and hypothesis, the significance of the study, scope/limitations of the study, and definition of terms. The chapter two covers the review of literature with emphasis on conceptual framework, theoretical framework, and empirical review. Likewise, the chapter three which is the research methodology, specifically covers the research design, population of the study, sample size determination, sample size, and selection technique and procedure, research instrument and administration, method of data collection, method of data analysis, validity and reliability of the study, and ethical consideration. The second to last chapter being the chapter four presents the data presentation and analysis, while the last chapter(chapter five) contains the summary, conclusion and recommendation.

Chapter Five

Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings on the effect of labour and material costs on the total cost of construction project using some selected construction companies in Lagos state as a case study. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on the effect of labour and material costs on the total cost of construction project using some selected construction companies in Lagos state as a case study. The study is was specifically set to find out the extent labour cost contributes to the increase in the cost construction project, ind out the extent material cost contributes to the increase in the cost construction project, and find out the causes of labour and material cost overrun in construction project.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 500 responses were validated from the enrolled participants where all respondent are staff in the financial department of the selected construction companies in Lagos State.

5.3 Conclusions

Based on the findings of this study, the researcher made the following conclusion.

1. Both the labour and material cost contributes highly to the increase in the cost construction project.
2. The major causes of labour cost overrun in construction project include; less productivity of labours, labour rate increment, less labour availability, fewer skills levels of labours, additional work time due to errors in the method statement, time extension of the project, and adverse weather conditions.
3. The major causes of material cost overrun in construction project include; scarcity of resources, material destruction due to force major situations, price fluctuation of materials, high wastage of material, import and manufacturing restrictions, misplace of material due to irresponsibility of labours, and errors of the procurement process.

5.4 Recommendation

The following recommendations were proffered with respect to the findings of the study;

1. Cost that needs to be managed effectively by all stakeholders, to ensure that materials are used efficiently on site, so as to reduce waste. It is also important that a Building Industry Price Book be instituted by the cidb/DPW to track the trends in building components and material prices.

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