AN EVALUATION OF COST AND TIME OVERRUN OF CONSTRUCTION PROJECTS IN NIGERIA

AN EVALUATION OF COST AND TIME OVERRUN OF CONSTRUCTION PROJECTS IN NIGERIA

(CASE STUDY OF CONSTRUCTION SITES IN NIGER STATE)

ABSTRACT

Maintaining a continuous cost and time performance on construction projects had been a problem, until recently an issue of serious concern both to the client, consultants, and contractors of projects. Cost and time overrun of client’s budget limit had been dominant on construction projects. However, effort has been made to curtail this occurrence, it is at this ground that this study attempt to evaluate cost and time overrun, so as to identify and rank the factors responsible for cost and time overrun, their economic impacts and ways of tackling this problem. The study attempt through choosing principal construction actors as target population and samples were drawn to this effect at random from the class of professionals, using probability sampling methods. Data collected from primary source consisting of a well structured questionnaire in likert scale while the secondary data were obtained through review of journals, articles and relevant research works. The data were analyzed using significance index (S.I), relative importance index (RII), percentage score, mean score and standard deviation, in order to rank the factors causing cost and time overruns of construction projects according to the degree of significance as assessed by the respondents. The results obtained from the ranking the factors reveals that top five major causes of cost and time overruns are; cost of materials (RII = 4.72), lack of competent manager (RII = 4.90), incomplete drawings (RII = 4.85), material fluctuation (RII = 4.33), and dealings with suppliers and traders (RII = 4.64). It was concluded by advising the stakeholders of construction projects to properly control finance during design through to site operation, ensure adequacy of plans and specifications, and also involvement of competent project manager. The study also ranked the impacts of cost and time overrun, the results reveals that abandonment of projects (RII = 4.77), increase in client’s expenditure (RII = 4.74), and bad reputation (RII = 4.67) as top three impacts of cost and time overrun on construction projects. The statistical package for social scientist (SPSS) v19 was also used to analyze the variables using paired t-test and linear regression at 5% confidence limits. From the analyses, the findings show that there is a significance difference between the total contract sum and cost overrun and it also showed that there is a significance difference between the total project duration and time overrun. The study recommends urgent involvement of construction stakeholders in a proactive strategic planning and approaches to keep construction projects cost and delays within a reasonable limit for achieving their set goals.

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND THE STUDY

In developed countries, the construction industry has become an important sector in the economy of many countries (Takim, 2005). It also contributes to the Gross Domestic Product (GDP) and employment rate of many nations (Olawale 2010). Moreover, the author also stated that construction project activity is becoming an important market, because this industry procures products and material used by it from other businesses in other sectors. Chronic problem of cost overruns is the major challenge facing the construction industry in developing countries. Like Nigeria, the construction industry has suffered many setbacks in term of completion of the project at stipulated period within the predetermined sum. Most of the construction project in Nigeria experience cost and time overrun which in turn lead to the abandonment of project. This is simply because there is lack of assessment of the causal relationship of cost and time overruns factors.

There have been many studies on cost and time overruns (Kaming et al., 1997 & Cox, et al., 1999). These study results have one thing in common. It was observed that there were more cases of cost overruns compared to time overruns. This makes the problem of cost overruns to be of great important compared to time overrun. Most of the previous researches had focused on a few factors that cause time and cost overruns, such as changes in design which has been reported to account for 5 – 8% of the total cost of the construction project (Cox et al., 1999). This approach leaves behind many factors that one encounters in the final account reports. Probably to investigate most of them and rank them accordingly should be the best approach. Despite some of the factors may look insignificant on one project, but may prove to be significant on another project, as the terms of project are not always the same. It happens that, there is always the need for further research and debate because of the great problem of construction cost and time overruns.

As one arbitrator once observed that, it is hard to imagine a building contract, which preceded to completion without delay or variation whatsoever (Koleola & Henry 2008, Nwachukwu & Emoh 2010). However, this does not mean that there are no construction projects that have been completed within the projects budget. According to Chan (2001) that his concern is that such ideal situations are rare. Based on research, that there are more building projects that had cost and time overruns than those which were completed within budget (Chan & Kumaraswamy, 1996). Hence this study focused on developing the path model of causative factors of cost and time overruns in construction projects. The occurrence of cost and time overruns has been blamed on the many factors that influence construction project cost and time overruns (Kaming et al., 1997). However the aim of this is to evaluate the cost and time overrun in construction projects in Nigeria.

1.2 STATEMENT OF RESEARCH PROBLEM

Construction project can be viewed as a vibrant industry which is constantly facing problems. These problem and many stakeholders in these kinds of projects, make the management of costs difficult which in turn causes cost and time overruns. Therefore, cost and time overruns are considered one of the most critical issues during the execution of construction projects (Chan et al., 2004, Doloi, 2011). As stated by Westhuizen & Fitzgerald (2005), the presence of cost overruns could be reason for project failure. However this idea has been disagreed by many authors who considered that project success depends on many other factors that should be evaluated to conclude the success or failure of a project (Chan et al., 2004). Moreover, there have been many researches that suggest that the success of a project depends on the presence of certain critical factors which can also change depending on the objective to be met (Iyer & Jha, 2005). Construction projects this days is being faced with problems because of problems like unnecessary delays in project completion, low output in production, low quality and cost and time overrun is the most significant issue faced worldwide. Commonly, most of the projects are faced with cost overrun when executed (Azhar et al., 2010). This is because construction industry plays an important role in the growth of any nation both economically and socially. This leads to the following questions about cost and time overrun of construction projects, and should be addressed.

1.     What are the causes of cost and time overrun of construction projects in Nigeria?

2.     What are the impacts of cost and time overrun on Nigeria’s construction industry?

3.     What are the ways by which cost and time overrun can be minimized in the construction industry?

4.     What is the percentage cost and time overruns of construction projects in Niger State?

1.3 AIM AND OBJECTIVES

1.3.1 Aim

The main aim of the study is to evaluate the cost and time overruns of construction project in Nigeria.

1.3.2 Objectives

The objectives of this study are enumerated as follows.

1.     To identify and rank the main causes of cost and time overruns of construction projects in Nigeria.

2.     To identify the ways by which cost and time overruns have impact on construction projects.

3.     To evaluate the percentage cost and time overrun of construction projects in Nigeria.

4.     To proffer solutions on how to mitigate the occurrence of cost and time overrun on construction projects.

1.4 NEED FOR THE STUDY

An evaluation of cost and time overrun would enable Clients, Contractors and Consultants give an economic/viable approach to construction project work such that they would be able to eliminate and calculate cost of projects, construction delay and reduce its occurrence in construction.

The utilization of these solutions will help minimize construction projects cost and time overruns and it will also restore client’s confidence in consultants, minimize investment risks, and generally boost the viability and sustainability of the construction industry in Nigeria.

 1.5 RESEARCH METHODODLOGY

The secondary data will be collected through the literature review of journals, textbooks, past projects, handbooks, in order to access the major causes of cost and time overrun in construction industries. The primary data will be collected from principal actors in the construction industry through the use of questionnaire, archival records, physical artifacts and direct observations. The data collected will be analyzed using SPSS v19, which will be used to determine the significance of the percentage of cost and time overrun to the overall performance of the project. The Likert scale will also be used to rank the severity of factors causing cost and time overrun, its impacts, and measures to be used in mitigating these factors. Data collected and analyzed will be presented using pie chart, histogram, and tables.

1.6 SCOPE AND LIMITATION OF THE STUDY

This research is limited to evaluation of cost and time overruns of construction projects and proffering solutions on how to minimize construction project cost overruns and delays in Nigeria.

The research study area is limited to projects in the Niger state metropolis of Nigeria because there is an ease in obtaining data in Niger state metropolis by the researcher.

The principal actors in the construction industry namely; the Client, the Consultant and the Contractor are the principal correspondent.