Project Cost Control In The Nigerian Construction Industry (A Case Study Of El-Alan Construction Company Limited)

Project and Seminar Material for Project Management

Project Cost Control In The Nigerian Construction Industry (A Case Study Of El-Alan Construction Company Limited)


Chapter One


Introduction

1.1. Background of the Study

In construction almost all clients are interested in obtaining gully functional facilities completed in time, cost, quality and scope. A builder who is able to construct within the estimated time and budget, to the right standards and scope is an excellent builder. Cost control is a process where the construction cost of the project is managed through the best methods and techniques so that the contractor does not suffer losses when carrying out the activities of the project. One of the aims of cost control according to George et. al (2012), is to construct at the cheapest possible costs consistent with the project objectives. Ultimately the decision of the manager that something should be done differently and the translation of that decision into practice are the actions to achieve control (Harris and McCaffer, 2002). Raina (1999) observes that it is of little use after a process has been completed to discover that its cost was actually too much. Most project managers and contractors in Nigeria find difficulty in controlling costs on their construction sites due to a number of problems which include poor project preparation, 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, insecurity and poor communication. This results into cost and time overruns, conflicts, and sometimes abandoning projects. This study was therefore carried out to identify the cost control techniques used in Ibadan, Oyo State and recommended to stakeholders who do not follow proper monitoring programs and cost controlling techniques.


1.2 Statement of the Problem

According to Seeley (1979) Ashworth (1999) Ayodele (2005) cost control techniques include the followings: approximate estimate, cost plan, bill of quantities, interim valuation/ stage payment, valuation of variation, fluctuation, final account preparation and cost analysis.

The Bill of Quantities, according to NIQS (2008) shall fully describe and accurately represent the quantity and quality of work to be carried out. Each of the sheets on which the bill of quantities is made has four different columns.

  1. Description column- Contains the descriptions of the type and quality of materials to be expended onthe works.
  2. Quantity column- contains the quantities of materials to be expended on the job will take i.e basis of the preparation of program of work.
  3. Rate Column- contain the unit rate i.e naira/ unit of materials to be utilised on the work. This forms the basis on which the cost of work is calculated.
  4. Amount Column- Contain the total cost of work for each of the elements.

Summarily show below:

  1. Description column- Quality
  2. Quantity Column- Time
  3. Rate Column- Cost
  4. Amount Column

The above four columns which represent Quantity, Time and Cost is not limited to Bill of Quantities only, other techniques of cost control e.g interim valuation/stage payment, valuation of variation, valuation of fluctuation etc. are adequately represented by/or taken care of, by the columns.

It has been observed that many building projects development in Nigeria do not bother about the use of cost control techniques. This is corroborated by Ogunsemi (2002) who discovered that the non-use of cost control has contributed to the incessant building collapse in Lagos state of Nigeria. To minimise the building collapses, this study is set to determine the effect of conformance to or utilization of Bills of Quantities by government and private developers on building projects in Nigeria on the parameters of quality, delivery time and cost.


1.3 Objectives of the Study

The main objective of this study is to determine the effect of compensation management on employee performance. Specific objectives include;

  1. Compare the effects of the use of cost control techniques on quality of construction project of government and private developers.
  2. Compare the effects of the use of cost control techniques on cost of construction projects of government and private developers.
  3. Compare the effects of the use of cost control techniques on delivery period of construction projects of governments and private developers.

1.4 Research Questions

  1. What is the impact of cost control on construction activities in Nigeria?
  2. What is the effect of cost control on successful construction in Nigeria?
  3. What is the impact of cost control on construction project delivery timeline?

1.5 Research Hypotheses

Hypothesis I
  • H0: There is no significant impact of cost control techniques on quality of construction project of government and private developers.
  • Hi: There is significant impact of cost control techniques on quality of construction project of government and private developers.
Hypothesis II
  • H0:There is no significant impact of cost control techniques on cost of construction projects of government and private developers.
  • Hi: There is significant impact of cost control techniques on cost of construction projects of government and private developers.
Hypothesis III
  • H0: There is no significant impact of cost control techniques on delivery period of construction projects of governments and private developers.
  • Hi: There is significant impact of cost control techniques on delivery period of construction projects of governments and private developers.

1.6 Significance of the Study

The Nigerian construction sector is facing some challenges in which a greater percentage of the problems are management oriented. It is therefore important to plan and ensure due process in the management of construction projects so to achieve the best practice and quality delivery of the products. Also, this research work will enable the entire construction actors (i.e. clients, contractors and consultants) to be able to appreciate the importance of best practice of construction management in Nigeria right from the design stage to the commissioning stage.


1.7 Scope of the Study

The scope of this research is limited to construction management activities in Nigeria. The research is targeted to know how construction management is practiced and the management tools used in practice. The result will be analyzed using basic statistical method.


1.8 Limitations of the study

The demanding schedule of respondents made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaires in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all research under this study but is restricted to the selected respondents used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided. Other limitations include;

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.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Summary of Findings

The objectives of the study were to;

  1. Compare the effects of the use of cost control techniques on quality of construction project of government and private developers.
  2. Compare the effects of the use of cost control techniques on cost of construction projects of government and private developers.
  3. Compare the effects of the use of cost control techniques on delivery period of construction projects of governments and private developers.

Findings from the study revealed that majority of the respondents were of the opinion that there is significant impact of cost control techniques on quality of construction project of government and private developers, there is significant impact of cost control techniques on cost of construction projects of government and private developers and that there is significant impact of cost control techniques on delivery period of construction projects of governments and private developers.


5.2 Conclusion

It is the resources well managed or mismanaged today that makes for tomorrows prosperity or depression. the economic depression we are now facing is more out of mismanagement of resources than lack of resources. The key to the success of construction investment industry is professional management. There is urgent need for innovations in the management of our construction resources for a viable product as the relationship between inflation and cost of construction is directly proportional. However, in the type of economic environment x-rayed in the above chapters, the point has been made clear that the task before cost managers of the construction industry under such conditions are more difficult than in normal conditions. Nevertheless, it creates special challenges for managers of construction cost and/or industry to ensure the survival and structural strength of their organization. This can be achieved only through optimal use and management of construction resources.


5.3 Recommendations

  1. The need for change management: Cost managers of construction industry should enhance the inevitability of change because predicting business outcomes in a volatile and depressed economic environment is unquestionable and a herculean task. Hence, they should therefore design suitable framework for change management by evolving techniques which could assist in assimilating and adapting to changes.
  2. Effective cost planning, monitoring and control should be vigorously pursued by both the client and the contractor as this will help to keep track of progress in implementation of project in relation to targets, timely removal of constraints and corrective actions taken as required. This is because we cannot keep productivity at a high level in the construction industry without adequate planning of the business. to this end, whatever the level of uncertainty, we just cannot do without planning.
  3. Awards of government contracts should be to the professionals on competitive bidding and not for someone who is “highly connected” so that meaningful and total management should be achieved without dubious manipulation.
  4. There are several natural resources such as stones, clay, limestone in the country which can be tapped and utilized and this will facilitate the development of indigenous construction materials industry and reducing the volume of imports. More encouragement by way of better condition of service, annual bonus and better pay should be given to the workers and management at the various government owned companies e.g. cement industries etc. to make them put in their best and help reduce the shortage of these essential construction materials.

Project Cost Control In The Nigerian Construction Industry (A Case Study Of El-Alan Construction Company Limited)


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