APPRAISAL OF FACTORS AFFECTING QUANTITY SURVEYOR'S ESTIMATE

APPRAISAL OF FACTORS AFFECTING QUANTITY SURVEYOR’S ESTIMATE

ABSTRACT

This study is an appraisal of factors affecting quantity surveyor’s estimate. The specific objective of the study is to establish the variation between costs estimates derived from the various estimation methods, to identify the factors that affects the quantity surveyor estimate of a project and to evaluate the degree of agreement between clients, contractors and consultant on the ranking of these factors. The research instrument used by the research is personal interview and structured questionnaire. Both were used in gathering information for this study. The questionnaire was designed in such a way that the respondent will understand the questions and be able to give the required answer appropriate. The study established and prioritised the factors that may influence the quantity surveyors’ estimate and final contract price when responding to a call for tenders. Results of a multi-attribute analysis showed thirty-seven factors which could influence the final contract price; the three most influential being poor tender documentation, complexity of design & construction, and completeness of project information. Other factors relating to project, client and contractor characteristics, design consultants and tendering conditions, estimating practice and external factors were also established and prioritised. Concordance analysis indicated high level of agreement amongst survey participants in the rank-ordering of the relative importance of the identified factors. The study recommend that the quantity surveying firms need to consider the building type, scope/size of building more critically when they are doing cost estimate in projects.

CHAPTER ONE

INTRODUCTION

1.1       Background of The Study

Cost information on buildings is normally based on “unit rates” which assume that costs hear a simple and direct relationship to units of finished work such as the area of a wall (Morion and Jagger 1995, p 27). This is the genesis of a fundamental problem of accuracy and reliability. Morton and Jagger (Morton and Jagger 1995, p 27) suggests that this method does not accurately reflect the way costs arc generated in the building process, as the method is a considerable barrier to accurate prediction and control. A study of the evolution of building elements reveals a general aim to improve cost efficiency through design and construction (Ashworth 2004, p 98). It is becoming increasingly apparent that to predict costs accurately is a problem which is common to all industries.

In virtually all contracts, preparing a realistic cost estimate is an essential component of any construction operation. Pre-tender cost estimation is early stage cost estimation and is the forecasting of the cost of a project during the planning and design stage (Serpell, 2005). This estimate serves as basis for financial support decisions and cost control. At the pre-tender stage, clients are interested in knowing the total project cost commitments. But cost estimation at the pre-tender stage is vulnerable to inaccuracy (bias) because they are frequently prepared within a narrow time frame, and often devoid of finalized project scope. Over and underestimation of cost have potent effects on a project. The former may cause the client to spend more resources for no beneficial matters or discourage financing institutions from lending the required amount of money due to doubts regarding the cost and resultant benefits of the project, while the latter may lead to downsizing the project scope and eventual abandonment.

Estimates are the basis upon which tender comparison and negotiations are carried out. An over-estimation a particular project means lesser (minimal) resources would be available for other projects. And, an under estimation may result to unrealistic negotiation (Odusami & Onukwube, 2008). A significant part of the construction procurement process that needs proper attention is the management of client expenditure. This is usually carried out by means of a budgetary control which involves the setting of realistic project budgets and the subsequent monitoring of client expenditure (Skitmore & Picken, 2000).

Most tenders were substantially won and lost on price alone, it has been observed that the final price paid by most clients are different from the price tendered by the contractor. In a competitive contract, majority of contractors with the lowest bidder often win the contract. Nevertheless this bid must not be so low that it might lead to completing the work without profit (Al-Khaldi, 1990). Therefore, the preparation of an accurate estimate, which is done prior to the physical realization of the work, demands detailed study of the bid document vis-à-vis the environmental situation. This thus involves a careful and cautious examination of the outcome of the study so as to come up with the most accurate estimate of the likely cost consistent with the time on hand, the accuracy and completeness of the information submitted (Abdal-Hadi, 2010). In view of the significance of accuracy of pre-tender cost estimate, it is assumed that identifying these factors which have effect on the accuracy of pre-tender cost estimate and reflecting on them at the early design stage can improve the accuracy and precision of the preliminary cost advice of the consultant quantity surveyor to his client.Pre-tender cost estimate is an attempt to forecast a contractor’s tender sum before detailed designs are finalized or upon the receipt of tenders, is undertaken by the consultant quantity surveyor on behalf of his client. There is therefore the need for estimates to be as accurate as possible (Odusami & Onukwube, 2008).

A large number of factors have effects on quantity surveyors’. Meaning and explanation can be given to this, taking cognizance of the multidisciplinary nature of the construction industry and its works, which fuse together the combine efforts of the owner, the professionals, the contractors and suppliers. Proper integration of the combine efforts of these parties from the design table to the implementation or execution of projects will show significant effects on the overall project cost.

The problem of inaccurate cost estimate reflected by the increasingly large number of projects being completed with time and cost overrun. By identifying the factors responsible for the inaccuracy in a pre-tender cost estimate it would surely improve on project delivery. Improving tendering efficiency that will be of benefits to clients, consulting firms and it would provide contractors better ways to improve on their method of tendering. There is dearth of literature on the factors affecting quantity surveyor estimate in Nigeria. Thus the need to carryout an appraisal on the factors affecting quantity surveyors’ estimated.

1.2       Problem Statement

A number of cost estimating methods are used to ascertain and possibly project building costs at the pre-tender stage. These include the unit method, floor area method, cube method, approximate quantities, elemental analysis and pricing bills of quantities before tender. The most commonly used cost estimating method was the floor area method (The Quantity Surveyor 2001). This is largely a post second world war method, which had application in public building facilities that were identified such as schools and residential developments (Ferry et al 1999, p 121). Such an estimate merely attempts to forecast that a building of a certain size can be built for a certain sum of money. It cannot analyze whether a particular design is going to meet that cost. It is possible to weight the estimate subjectively on the grounds that the proposed solution looks to be at the expensive end or the low-cost end of the market, but this subject the work into the realms of guesswork. The other methods of’ cost estimation require more information at the design stage.

1.3        Objectives of the Study

The general objective of the study is to appraise the factors affecting quantity surveyors’ estimate:

The specific objective of the study is:-

1. To establish the variation between costs estimates derived from the various estimation methods.
2. To establish factors that affects the quantity surveyor estimate of a project
3. To evaluate the degree of agreement between clients, contractors and consultant on the ranking of these factors

1.4       Research Questions

1. What is the magnitude of variation between preliminary costs estimates derived from the various estimating methods?
2.  What are the factors that affect the quantity surveyors estimate of a project?
3. What is the the degree of agreement between clients, contractors and consultant on the ranking of these factors?

1.5       Scope of the Study

The study on the factors affecting quantity surveyor’s estimate was limited to residential and office buildings. This is because they comprise the bulk of construction work in Nairobi. In addition, the preliminary cost estimating methods has the large applications in the residential and office building projects.

1.6       Significance of the Study

This study seeks to avail information for use by the various construction industry stakeholders; clients professionals, contractors, investors and researchers. The study on the appraisal of factors affecting quantity surveyor’s estimate has identified areas that cause estimating inaccuracies when using various cost estimation methods and make recommendations on how to improve on the methods. With inaccuracies and variations being reduced, it is expected that the clients would start actual financial planning with greater certainty. The results of this study will have practical application in the cost estimating and cost planning practice. The study is a step towards the development and establishment of a cost estimating model system to be used in the building industry in Nigeria.

1.7       Structure of the Study

This research project has five chapters and their contents arc briefly outlined below.

Chapter one discusses the problems of preliminary cost estimating. It discusses the effects of implications of potential avenues of inaccuracies. It includes the objectives, hypothesis, scope and significance of the study.

Chapter two discusses the concept of accuracy and its difficulty especially because of non availability of required information in early stages. It formulates a domain of reasonable accuracy which envisages availability of estimates for the purpose for which it is required. It discusses the various forms of estimates at different stages of the project and their levels of accuracy depending on information available.

Chapter three gives the methodology to be used in the study. The research design, The Population, sample, data collection instruments and methods employed.

Chapter four handles the analysis of the independent and dependent variables, the data interpretation and presentation in the forms of descriptive and inferential statistics is made and their explanations thereof. Chapter five covers the conclusions of the research findings, gives recommendations of the study and finally suggests possible areas of further study..