COST CONTROL AND EFFECTIVE PROJECT DELIVERY OF CONSTRUCTION COMPANIES IN RIVERS STATE

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The core objectives of the construction industry which are to deliver project within a short time, reasonable cost, good quality and safety of occupants have stressed the need for cost control that is effective. Alvey (2014) describes cost control as a method of controlling the cost of building within a determined value during the design stage. This involves the preparation of an approximate estimate to which the project is committed, and the refining of the cost as the design detail developers. Seeley (2013) describes cost control as a systematic application of cost control criteria to the design process so as to maintain in the first place a sensible and economic relation between cost, quality, utility and appearance and in the second place, such overall control of proposed expenditure as circumstances might dictate. He stressed further that cost control does not merely estimate the tender sum but probe deeper into the cost implication of each building element whereby each design decision maintain a sensible relationship through the design and construction stages. In another sense, Nunnally (2007) describes project cost control as involving the measurement and recording of project cost and progress and a comparison between actual and planned performance. The principle objective of project cost control is to maximize profit while completing the project on time at a satisfactory level of quality. He further stated that proper cost control procedure will result in the accumulation of historical cost data, which are invaluable in estimating and controlling future project. Ashworth (2013) saw project cost control as the application of economic principle to the construction project. It does not only examine the cost appropriate to a specific project but also the factors that influence the determinants of this cost. Ayodele (2005) further defined cost control as the process of establishing the cost of project development and monitoring such cost from inception to completion and making sure that the pre-determined cost is not unreasonably exceeded. According to Connell (2008) the followings are the reasons for choosing the assessment of cost control on building project delivery:

1. Building projects are subject to public accountability and transparency
2. Building projects are subject to limited budget. There must be a setting out of a cost target that will be spent on the proposed project.
3. In building projects, time frame is part of what is put into when embarking on a project.
4. Building projects are seen as a major for the social benefit of all and sundry. The society in general, expects so much in terms of honesty due process, workability and functionality on part of the authorities handling or supervising such projects.
5. Building projects are seen as a social benefit due to the whole society from Government of the day hence avoidance of failure of such projects.

According to Seeley (2013) Ashworth (2013) 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.

a) Description column- Contains the descriptions of the type and quality of materials to be expended on the works.

b) 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.

c) 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.

d) 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 (2011) 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.

1.2 STATEMENT OF THE PROBLEM

In Nigeria, many construction Projects development have failed owing to the various technical and financial pressures of cost limit, quality and value optimization. Jagboro and Banalola (2005) wrote that the interim report of the Presidential panel on contracts at the wake of the present democratic government in Nigeria confirmed a staggering amount of over four hundred and fifty billion naira for project which can be classified as failed contracts, spanning from 2013 to 2014. The main reason for this is not far-fetched as many of the professional firms involved in project administration lack adequate management inputs in both quantitative and qualitative terms. Another reason for this high rate of projects abandonment and failed contracts in Nigeria, is that in most government projects, the mobilization fee which is given to the contractor is reimbursed to those who awarded the contract as "bribe" usually of huge sums of money and this thereby increases the cost of the project, affects the quality of job executed by the contractor and will also leave the project either unexecuted or abandoned. This is because the money meant for the project execution has been diverted into individual pockets (Osemenam, 2015). However, the design of building and other infrastructure is predicated on different contributors exhibiting various professional skills with a view to obtaining an optimum design solution. These inputs are based on the understanding of design and execution parameters ranging from functionality and usefulness of the project, aesthetics and appearance, safety of the structure, quality of workmanship, cost and financial matters and most importantly clients satisfaction with the project on completion. Business everywhere is faced with everyday challenges for survival and the need to adapt is very important. Appointing the project manager at the right time and seeking his professional advice for cost matters is a very key problem in the Nigerian construction delivery.

1.3 AIMS OF THE STUDY

The major purpose of this study is to examine cost control and effective project delivery of construction companies. Other general objectives of the study are:

1. To examine cost control technique frequently used by contractors in construction projects.
2. To examine if these cost control strategies have actually been effective.
3. To examine the effects of the use of cost control techniques on delivery period of projects.
4. To examine the factors that affect cost in construction companies.
5. To examine the relationship between cost control and effective project delivery in construction companies.
6. To examine the problems encountered by contractors in managing construction project cost.

1.4. RESEARCH QUESTIONS

1. What are the cost control techniques frequently used by contractors in construction projects?
2. Does these cost control strategies actually been effective?
3. What are the effects of the use of cost control techniques on delivery period of projects?
4. What are the factors that affect cost in construction companies?
5. What is the relationship between cost control and effective project delivery in construction companies?
6. What are the problems encountered by contractors in managing construction project cost?

1.5 RESEARCH HYPOTHESES

H01: There is no significant effect of cost control on effective project delivery in construction in Nigeria.

H02: There is no significant relationship between cost control and effective project delivery in construction in Nigeria.

.1.6 SIGNIFICANCE OF THE STUDY

This study will be of importance to building professionals and the general public because it would not only clarify but also create awareness of the extent to which inadequacies in cost control techniques can adversely affect project performance. The study will also help contractors, clients, consultants and all parties involved in construction projects about ways of improving their current method of cost management and control. The study will also be of great benefit for other student researchers who may want to venture into the same subject matter. Having gotten results-both empirically and theoretically, the study will serve as a foundation for future research studies. The study will be significant as it seeks to shed more light on why construction projects cost mismanagement is still prevalent in Rivers construction projects. The research is intended for applicability by various users or stakeholders such as Government agencies, project managers, contractors, general public, construction management authority, financial institutions, students as well as professional bodies. The study was determined to identify the areas where urgent action needs to be taken to safeguard the interest of the sector. The study may help in application of theoretical training to policy makers to address practical problems in the sector, and to provide insights to today’s and the future managers on the importance of construction completion. The study may encourage further researchers on the area to research as it’s not exhaustive. The study may also benefit scholars who would wish to undertake further studies aimed at establishing factors influencing construction projects completion. The study provides insight to practical actions required to control cost overruns and time management, facts necessary to change for effective site productivity and possible pit-falls and how to address them amicably.

1.7    SCOPE OF THE STUDY 

The study is based on cost control and effective project delivery of construction companies in Rivers state.

1.8 LIMITATION OF 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

Construction: In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking. Normally, the job is managed by a project manager, and supervised by a construction manager, design engineer, construction engineer or project architect.

Cost: A cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost.

Deliverable: Deliverable is a term used in project management to describe a tangible or intangible object produced as a result of the project that is intended to be delivered to a customer (either internal or external). A deliverable could be a report, a document, a server upgrade or any other building block of an overall project.