USERS OF ACCOUNTING INFORMATION

USERS OF ACCOUNTING INFORMATION

According to Walter B. Meigs (1997) Accounting is commonly referred to as the language of business since the basic function of a language is to serve a means of communication, the above statement applied in business situation means that accounting is used to communicate matters relating to various aspect of business operations.

As individual enterprise keeps their account separately the attempt to communicate is essentially from a business enterprise to various individual groups and institution which are interested in the operation of that organization. Now although accounting is commonly identified with business, the business enterprise is not the only type of statement of financial position.

USERS OF ACCOUNTING INFORMATION

The users of accounting information are many and diverse such user are as follows:

1. Owners: Owners of the business have an obvious interest in the information provided by the accounting system; they assume the primary risk of the business by investing their money. They are naturally interested in obtaining accounting information that tells them something about the operation of their business and how much it is earning.

 Owners use accounting information to measure performance, compare their company with competitor and make decision to increase or decrease their ownership.

2. Creditors: A creditor is an individual or institution that provides parts of an organization resources by lending it money. Creditors earn income by providing resources to business, so their activities represent investment although creditors are not owners of the business to which they lend money, creditors are interested in analyzing the organizational financial statement to determine or ensure that their investment is safe, that interest due to them can be paid and that their money can be repaid as at when due.

3. MANAGERS: Accounting reports are clearly important to managers who must ensure that the organizations satisfy the long range goals of producing profits.

In addition to external financial statements managers need more detailed internal report broken down by operating division within the organization area of responsibilities.

4. GOVERNMENT: Numerous government agencies depending on accounting information of business. They need to determine that business are meeting their legal obligation in terms of paying taxes, contributing to social security, benefit for their employees and satisfy federal and state regulation such as those concerning the registration and trading of their stocks.

5. EMPLOYEES: The employees of large organization are virtually interested in the result of organizational operation. They use financial statement to determine if they are obtaining a fair share of the resources distributed by organization to bargain for wages and fringe benefit and to counter management claims during such bargaining prospective employment frequently instigate organization to accept a position by examining its financial statement in order to learn something about the organizations operation growth prospect and profitability.

6. FINANCIAL ANALYST: Many investment decision are made on the advice of financial analyst who are experts in analyzing accounting report, security analysts employed by stock brokerage firms frequently advice clients on buying and selling stocks of corporation. Many banks pension trustee, educational institution and other institutional investors employ their own financial analyst staffs who analyze financial statement and express their judgment on the performance of business.

7. INVESTORS: This is another set or group which make use of accounting information whether or not they employ security analyst for investment advice. According to Walgan Bach (1988) investor depends on accounting information for making investment decision prior to committing their resources to a business in form of loan or ownership, investor need to make careful investigation to determine that particular business represent an investment appropriate for their needs. The most significant aspect of such investment is an investor do not seek a controlling interest when they buy stock, instead they interest with expectation of earning a return on their investment. The return on stock investment has two components.

When considering an investment of this type, the investor has the problem of predicting the future income and growth of the business; investors are interested in enterprise growth increase. The income statement provides significance information for the investors such as revenue from products income and earning per share.

HISTORICAL BACKGROUND OF ACCOUNTING

HISTORICAL BACKGROUND OF ACCOUNTING

According to Warram Scar (1997), accounting system therefore refers to the method by which financial data about an organization or as activities are collected, processed, stored and distributed to members of the organization or firm and other interested parties.

The account of steward of the commune of Genoa, a city in Italy for the year 1340 are reported to be the earliest set of double entry record. This preload of double entry system was referred to as the Italian method which gradually spread to the rest of Europe and the world.

The spread of the system was accelerated with the population in 1444 on the know Texlan Italian Monk system on book keeping by an crodile scholar of his time. Of course the title of the book is in Italian language but was translated into English.

In English it means “Every thing about arithmetic, geometry and proportion” Even though the book was not all about double entry, it was only chapter that dealt with double entry book-keeping. This chapter was however popular among student that in 1504, of organization which uses accounting.

Legal entities ranging from individuals to government employed accounting to obtain information on the financial condition and performance of the entity in question.

Moreover, just as it is necessary to have a good command of the grammar of a language before any literature can be studied so as to understand what is clearly and correctly in term of the grammatical convention of the language so also to interpret accounting information appraisal, it is necessary for this reason, it is important to be familiar with certain basic concept and convention of accounting so that words and terms used in accounting are understood in their technical sense.

It is possible to consider that any data or information which is obtained from or create in the accounting system of an organization or firm is known as accounting information, whether contained in the financial statement a special report or verbal statement.

Accounting information of the types that might be contain in a complete or partial financial report i.e. statement of comprehensive income and Lucca Paclole published his separate book whose title the “Perfect School of Merchant” the influence of Italy on accountings profession has fall in the modern time, almost the point of insignificant much of the current thinking in the profession is merely dictated by two country, the United Kingdom and the United State of America.

USES OF COST INDICES

USES OF COST INDICES

The following are the different uses of cost indices:
1- Updating of cost information: Cost indices is used to bring a tender figure for previously similar job p to current price so it can be used for comparism purposes as part of cost planning. It will also be necessary to make some allowances for increasing cost during the period between the date of preparation of the estimate and the probable tender date.

2- Extrapolation of existing trends: Plotting the pattern of cost measured by an index may be possible to forecast a trends into the future through the use of cost indices. However, there are very great danger in attempting this.

In terms of steady changes in price extrapolating into one or two years ahead is possible but in terms of erratic inflation rates extrapolation purely on trends is not possible.

3- Assessment of fluctuation in price materials: On occasions it will be necessary to assess the effects of price increase in materials on the estimated cost of the project, particularly where the rates of increase is substantial.

In order to do this, it is necessary to approximately breakdown the cost of the job in to material and or further breakdown of the cost of materials or component to be used on the job can be assess. It is customary to use analysis already prepared for previous job of a similar type.

4- Identification of changes in cost relationship: If a cost index is prepared for a different components of a building or for alternative possible solution to design problem (e.g. steel vs concrete frame).

Then it is possible to use the changes in the relationship between one component and another at a time, it may be possible to identify when one solution appears to be at better position than the other.

TYPES OF COST INDEX (INDICES)

TYPES OF COST INDEX (INDICES)

1. Factor cost Index: In this method, the cost of a typical building is analyzed into constituent (Labour, material and plant resources) monitored over time then a combined average index can be prepared which measure this changes in the total cost of the building over the same period.

Each resources need to be given due importance (weighted) in the index according to value in the total building instead of monitoring the absolute price of resources separate index or factors may be used.

2. Tender Cost Index: This method is principally based on tender document rate in the Bill of Quantities with the tender document as the source of cost information, thereby recoding what is usually happening in the market place.

In the approach either the total price related to the size of the building (e.g. cost/sq meter of gross floor area). Or the price of some selected representative of the Bill of Quantities items are collected from a large number of current successful tenders bill from which weighted average are obtained.

This is done at index time intervals and with the starting date as the base used in computation of the index at each time period.

APPLICATION OF COST INDEX (INDICES)

Which ever way an index is prepared, it will usually take the form of an indicator figure for a particular month, quarter or year related to a datum of 100 at a chosen point in time e.g. current index figure might be say 130 related to 100 in January a year ago.

This means that cost on a certain basis had increased by 30% during the period. If in a years of time the index rises to 140. it must be remembered – this would be a further rise of 10 points on the scale not 10%.
The actual percentage increase would be 140 – 130 /130 X 100 = 7.698%.

There are four basic requirement for the evaluation of cost index.
1- The datum point of the index should be far enough in time for a trends to be established but not so far away that it is likely to be based on an obsolete criteria.

2- The intervals at which index figure are shown should be reasonably close in relation to the total period of the index so that at least a dozen or so figure area available.

3- The index must be kept to date.

4- The basis of construction of the index must be known in order for it to be used wisely (Seeley H., 1996).

BUILDING COST INDEX

BUILDING COST INDEX

A building cost index can be defined as a percentage measure of the changes in price or cost of an item, component or group of items over time and in relation to a certain data usually termed the base data.

Historical and current cost information and data to serves important uses for the ascertainment of trends or percentage change in building prices using the index number over a period of time.

It is a way of comparing the effect of resources, price movement on the cost of project over time.

It is one of the most important items of cost information in terms of forecasting techniques depend on historic (i.e. past information), which is known as building cost index.

The aim of building cost index is to measures changes in the cost of an item or group of items from one point in time to another.

A base data is chosen and is usually given the value of 100.

COMPONENT OF BUILDING COST

COMPONENT OF BUILDING COST

The cost of building is a combination of various or individual elements of cost which makes up the total building cost. These element formed the basis for determining the trends of the building cost at a given period of time.

Building is divided into five (5) different elements according to Ayeni, (1986) which includes the following:
a) Labour element
b) Material element
c) Plant element
d) Overhead element
e) Profit element

LABOUR ELEMENT

This is define as all operatives on the site executing the project. They includes craftmen, artisans and apprentice of various cadres. They also include labourers and foremen of trade groups.

The overall cost of the combination of these manual hands will be considered in terms of unit cost of the work which gives the total cost of the given unit of work. Labour content in building cost is about 10-20% but if compared with material is 35-40%.

MATERIAL ELEMENT

The cost of the material required is usually more in proportion to that of labour (60:40) in ratio. Material takes 60% while labour takes 40%. Therefore, care must be taken in procurement and handling of the materials. In the case of procurement, the cost of material will depend on whether the materials is produced locally or imported and also the nature of supply: No construction industry can survives without satisfactory supply of raw materials. Buttler (1987).

The choice of the material used in the construction work has a significant impact either imported or locally produced. Where almost 75% of the materials used in the construction industry in Nigeria either as raw material or as finished product offer little hope for control of construction cost. (Ajan Lekole, 1987).

The development and use of local building materials which were previously available close to rural areas have been discarded in favour in imported materials some of which can be produced locally.

In contrast the sources of materials either imported or locally produced has a significant role in determining the building cost. Locally produced materials have less cost than the imported materials.

In building up the cost of the materials, certain cost are to be considered, they are:
(1) The cost of delivery of the materials to site.
(2) The cost of loading and unloading
(3) The percentage addition for shrinkage on materials like concrete and mortal mix if water is added to it.
(4) A percentage for waste on all the materials
(5) Lap percentage on materials like roofing sheets.
(6) Bulking percentage on materials like soil excavation.
(7) Percentage for absorption on material like paints.
(8) Percentage addition for compaction on materials like concrete placing and hard core filling during compaction.

PLANT ELEMENT

The plant simply means machines that perform the work which can be done by manual labour. At time, it is employed to do what may involved too much risk if done manually.

Plant can be classified into two classes:
(1) Small plant and tools: Such as scaffolding poles, wheel barrows, peak axes etc.

(2) Mechanical plant such as excavators, concrete mixers, dumper, and power hoist etc.

As the building designs and demand in Nigeria becomes more sophisticated, the need for the increase in the use of plant arises. Thus, the Nigerian building contractor is now faced with the growing need for mechanical plant.

Although there has been some indigenous efforts to produce some local machinery, almost all mechanical plants employed on Nigeria building site are imported.

This is because of the low level of technology in the country and in particular the absence of the functioning iron and steel industry in Nigeria. The scarcity of imported machine parts and foreign expertise is invariably reflected in the very high cost of building usually paid by the client. Mogbo, (1979).

OVERHEAD ELEMENT

This is the cost of administering a project and providing general plant facilities and site base services and distinct from site administration expenses. Much of which had been included in the preliminary section of the bill of quantities. The overall charges are commonly charged as a percentage on each item of the bill of quantities.

PROFIT ELEMENT

Like any other business undertaking, it simply means the monetary gains in which the contractor gets as a result of running the affairs of the work. The contractor must be expected to make profit, if he is to remain in business.

The profit is spread over each of the item of work and in the form of percentage on such item. These are some of the factors that influence the percentages of profit in the building industry such as:

1) The organizational structured of contracting firm: If for instance a structure was constructed by a small size firm and presently it will be constructed by a large firm or contractor the rat of the percentage charged on the item will be higher and it has an impact on increasing the building cost.

2) The volume of work the contractors have at hand also affects the profit charged by the contractor.

3) The types of tender adopted for the contract affects the percentage of profit. A negotiated contract will attract high profit than a competitive contract. However, the level of interest in the commercial market with time have effect on the percentage of profit to be charged by the contractor.

4) The location of site also plays its part, a site located in a business oriented area will attract high profit charges than a site in a place where poor people lives.

5) The type of client affects building cost; it is commonly by believed by the contractors that certain client, can afford to pay any cost as such will put a higher profit.

The profit and overhead usually amount to between 15-25 in building contract sum.

The profit and overhead element percentage is added together and calculated as a percentage to be added to the cost of each item or elements in the building, the total of all the item in the building plus profit and overhead form the building cost.

FACTORS AFFECTING BUILDING COST

FACTORS AFFECTING BUILDING COST

Some of the factors affecting building cost in Nigeria are identified as follows:

1. Government Policies: This is one of the most significant factors influencing the cost of building in Nigeria

The existence of several tiers of foreign exchange has contributed to the rapid devaluation of Nigeria currency, causing the exchange rate to fluctuate and at most time increased on the price of imported materials thereby contributing to the total cost of the building.

Government has build factories like cement factories, iron and steel factory as well as encourages foreign investors for the establishment of manufacturing and assembly companies of the building component in the country. These policies is aimed at making building materials available and affordable.

2. Bribery and corruption: Bribery and corruption has taken its fold in the society in such a way that money and gift presented as part of the incentive in securing a project or manipulation of product all of which reflect on the final cost of the project. It has be observed that 10% of the project sum goes to the pocket of the top functionaries in government contracts.

Also 5-10% goes to the supervising team to ensure prompt certification for payment at interim valuation period. About 45% of the present job cost of such is added to the construction work in Nigeria (Olassedebe, 1996). As a result, the contractor use a poor workmanship in execution of the work. (Ademoroti, 1988).

3. Design Method: Building cost is affected by the design or construction method. If the client desire to use pre-cast concrete instead of insitu concrete or the use of system building instead of traditional types of construction.

The choice of the pre-cast or system building in the construction makes the building cost to be on a higher side if compared to the use of in-situ or traditional types of construction of building.

4. Employment of Expatriates: Nigeria construction industry is like an international shopping centers that seemingly operates without any set of rules.

All aspect of its operation were affected by the situation apart from infiltration of the industry by quacks expatriates, consultant and contractors who dominate major project in Nigeria.

These foreigner were alleged to conspired among themselves to heavily inflate the cost of building project.

5. Increase in Fuel Price or Shortage in Supply of fuel especially petrol and diesel used in plant and vehicles on site and by the supervising team, thereby affecting the cost of hiring and maintaining plant on site. This also affects the freight charged on building materials. The over head charged will also be affected and basically it will increased the building cost.

6. Inflation: This applies to the cost of labour and material. It plays a substantial role in increasing the cost of a building in Nigeria. A very good example of inflation impacts on building cost happened early January – March 2001 where the cost of cement rose from N780.00 – N1100.00 resulting to 41% increase.

Service Charge

Service Charge

A service charge is a means by which a landlord can recover from tenants the cost of maintaining and repairing a building and providing certain services.

Why it is levied on tenant of multi-tenanted commercial properties are

1. Repairs extending to major structural repairs.
2. General maintenance service including cleaning, refuse collection, lightening, healing, air- conditioning and security commercial service charges forms part of the lease of multi-let commercial buildings such as office blocks, retail developments such as shopping complexes, business, parts and industrial estates.
3. Items which are covered by service change service charges are made up of a number of different items. The main items are listed below not all items will be charged to every home, for example some block do not have left. There is a separate charge for each individual service which can change from year to year, for example your contribution lift repairs.
4. You may be charged for the following services where they apply to your block, it is not intended as an exhaustive list but a general guide.

1. Repair/Replacement and Maintenance to the Block: this covers the cost of labour and materials for carrying out general repairs to the block in which your flat is located.

2. Repairs and maintenance to the Grounds:- this covers the cost of labour and materials for carrying out general repairs to the grounds in which your flats is located, which includes tree and shrub maintenance and fly tipping.

3. Cleaning:- this covers the cleaning of commercial areas windows and refuse contracts where applicable.

4. Energy:- this covers all the electricity used for lightening communal areas and for things such as lifts.

5. Commercial Aerial:- (where applicable) repairs and maintenance of aerials.

6. Lift Maintenance/Repairs:- (where applicable) repair and maintenance of lifts.

7. Door Entry:- (where applicable) repair and maintenance of door entry control systems.

8. Concierge:- this covers the cost of providing the concierge service.

9. Communal heating:- (where applicable) this covers the fuel, repair and maintenance of all parts of the heating systems owned.

11. Management and Administration:- this is cost for managing its leasehold properties it covers the staffing and office cost of our home ownership team and the estate management service that is provide to leaseholder by staff from the housing offices.

12. Ground Rent:- this rent charged to every lease holder. The amount you pay will be in your lease.

13. Major repair and investment work;- this recovers the cost of carrying out major items of repair, replacement and improvement.

14. Fire Extinguishers/Equipment:- maintenance and replacement of safety equipment.

5. How is service charge administered:
Service charges and taxes are time-dependent both have a start date and an end date. Service charge and tax date applicability is based on when the function with which the line item is associated occurred. Because multiple functions can be associated with each order basis, service charge and taxes may be different for different functions on one order.

A service charge specific to a product or service, an administrative is a type of service charge specific to a property.

There are two levels of visibility for service charges as follows:

1. All service charges:- this view is used to manage all service charges for a particular property this would be used by a property revenue manager at a specific property to manage the service charges for the property with which the user is associated.
2. All service charges across properties:- this view is used to manage all service charges for all properties in your organization chain of properties. This view would be used by a corporate property revenue manager to manage service charges for all properties.

 

Recommendations

1. There should be provision for improved and adequate facilities by the property owner and property managers.

2. The management under the direction of its member should investigate any persistent problems with services.

3. The occupants should pay their services charge as at when due to avoid the management company from not running short of money and to facilitate in the up keep of the service in the property.

4. Landlords should be made to repair grounded facilities to avoid breakdown, occupants should be fully enlightened as to what constitute the service charge paid and the benefits of the charge paid.

5. The property managers and occupants should be aware of the different role to play in the service charge administration

6. The landlord should be approached on how to upgraded existing facilities in the property.

CONCLUSION

In conclusion, service charge administration in managing multi-tenanted commercial properties is one aspect of property. Management that should not be overloaded, but should be taken into critical consideration.

References

1. Stapleton, Tim (1906): Estate management practice estate Gazette ltd London.

2. Ratcliff John (1978): an introduction to Urban Land Administration London, the Estate Gazette ltd.

3. Mercy John (1982): Housing management London Estate Gazette Ltd.

Forecasting

Forecasting is the process of making predictions of the future based on past and present data and analysis of trends.

A common place example might be estimation of some variable of interest at some specified future date. Prediction is a similar, but more general term.

Both might refer to formal statistical methods employing time series, cross-sectional or longitudinal data, or alternatively to less formal judgmental methods.

Usage can differ between areas of application: for example, in hydrology, the terms “forecast” and “forecasting” are sometimes reserved for estimates of values at certain specific future times, while the term “prediction” is used for more general estimates, such as the number of times floods will occur over a long period.

A market forecast is a core component of a market analysis. It projects the future numbers, characteristics, and trends in your target market. A standard analysis shows the projected number of potential customers divided into segments.

This example of a simple market forecast defines two target market segments and projects the potential customers in each of those segments by years.

Primary forecasting techniques help organizations plan for the future. Some are based on subjective criteria and often amount to little more than wild guesses or wishful thinking.

Others are based on measurable, historical quantitative data and are given more credence by outside parties, such as analysts and potential investors.

While no forecasting tool can predict the future with complete certainty, they remain essential in estimating an organization’s forward prospects.

Techniques For Forecasting Future Market Trends

Techniques For Forecasting Future Market Trends

Adopting a forecasting techniques, ranges from the subjective forecasting which allows forecasters to predict outcomes based on their subjective thoughts and feelings. Subjective forecasting uses brainstorming sessions to generate ideas and to solve problems casually, free from criticism and peer pressure. They are often used when time constraints prohibit objective forecasts. Subjective forecasts are subject to biases and should be viewed skeptically by decision-makers.

Other sophisticated techniques of forecastings is Time-Series. Time-series forecasting is a quantitative forecastings technique. It measures data gathered over time to identify trends. The data may be taken over any interval: hourly; daily; weekly; monthly; yearly; or longer. Trend, cyclical, seasonal and irregular components make up the time series. The trend component refers to the data’s gradual shifting over time. It is often shown as an upward- or downward-sloping line to represent increasing or decreasing trends, respectively. Cyclical components lie above or below the trend line and repeat for a year or longer. The business cycle illustrates a cyclical component. Seasonal components are similar to cyclicals in their repetitive nature, but they occur in one-year periods. The annual increase in gas prices during the summer driving season and the corresponding decrease during the winter months is an example of a seasonal event. Irregular components happen randomly and cannot be predicted.

Basically, there are three (3) methods of forecasting techniques which includes:

1. Qualitative method
2. Quantitative method
3. Judgemental methods

1. Qualitative forecastings techniques are subjective, based on the opinion and judgment of consumers, experts; they are appropriate when past data are not available. They are usually applied to intermediate- or long-range decisions. Examples of qualitative forecasting methods are informed opinion and judgment, the Delphi method, market research, and historical life-cycle analogy.
2. Quantitative forecastings models are used to forecast future data as a function of past data. They are appropriate to use when past numerical data is available and when it is reasonable to assume that some of the patterns in the data are expected to continue into the future. These methods are usually applied to short- or intermediate-range decisions. Examples of quantitative forecasting methods are last period demand, simple and weighted N-Period moving averages, simple exponential smoothing, and multiplicative seasonal indexes.
3. Judgmental forecasting methods incorporate intuitive judgement, opinions and subjective probability estimates. Judgmental forecastings is used in cases where there is lack of historical data or during completely new and unique market conditions

Methods Of Estimating The Market

Methods Of Estimating The Market

INTRODUCTION

Estimating the potential of a market is very important for a company planning to enter a new market. This is a process where an organization estimates the attractiveness of the market for selling its products or services. Before venturing into a market and investing huge sums of money, it is very important to asses it in order to avoid irrecoverable losses.

Besides studying the broad market factors such as the size of the population, GDP and the spending capacity of the market, firms should also analyze market specific factors such as customers’tastes and preferences, the cultural factors prevailing, their willingness to buy the products and so on.

Data regarding customer and market specific factors can be obtained through primary and secondary sources. Estimating the future sales of the company in a given market is called sales forecasting.

Methods Of Estimating The Market

There are many methods to estimate market and sales potential that are complex, expensive, and take a lot of time. They also happen to be unnecessary. What follows are five simple methods that can be effectively employed by any company.

Before we get to those, however, some simple definitions:

Market potential.The total potential sales of a product within a given period of time and for a given geographic area. This is an optimum figure representing the total sales of all prospects that could use the product.

Sales potential.This is the share of market potential allocated to a specific geographic area for a particular product, or the share of the total market potential that a manufacturer can reasonably expect to sell.

Sales projection.Using historical sales to project future sales.

The following are the methods of estimating market:

1. Market potential by number of prospects.Generally, this is determining a macro market size by the total number of prospects. This step requires accessing a database such as the Dun & Bradstreet’s Zap Data to find out how many prospects are in a specific SIC or NAICS code market segment. Say, for instance, the entire food industry has 44,988 plants.
2. Simple sales potential. Sales potential are the prospects as a share of the market potential that might be able to buy your products. The more you can qualify this number, the more accurate the sales potential figure. Let’s say your product is a specific type of machinery for cheese plants, and you’ve identified a total of 801 cheese plants. This number can be narrowed down by the size of the prospect company and a more specific type of cheese product.
3. Simple sales potential using lead to quote ratios. Manufacturers of industrial products that do quotation analysis and keep track of their leads, quotes, and orders in a database can use lead to order ratios to make even more accurate estimates of sales potential.
4. Sales potential using plant purchases. This type of sales potential estimate works best for industrial products that wear out and must be replaced inside a production process on a regular basis. By way of example: industrial cutting blades used in sawmills in a regional market. The first step in using the plant purchases method is to find out the number and size of sawmills in a geographic region. The size or type of mill can be determined by number of employees, number of shifts, or production (measured by an output figure, such as board feet per year). This is an important consideration, because different sizes of plants use different amounts of cutting blades.

The next step is to qualify the plants in terms of their purchases of certain types of blades. Most of the plants are easily qualified because they are customers of the cutting blade manufacturer, and the sales records should show the quantity and models purchased. The rest of the sawmills can be qualified by calling the buyers on the phone.

If your client has a good customer database it is easy to sort yearly sales by size of customer and then calculate a purchase average. The last step is to multiply the number of qualified plants by the average purchases to find the sales potential of the three different sawmill segments of the market.

5. Sales potential using phone qualification and telemarketing.This type of sales potential estimate works best for capital products that must be quoted. Our example is a pallet transfer machine that can shift loads of meat products from one type of pallet to another.

The first step in using this method is to determine the appropriate NAICS or SIC code. The second step is to find the number of prospects. Because production capacity is a factor, the prospect companies must be over 50 employees in size.

Every prospect is called, and if they do not meet all three requirements, they are eliminated. If the prospect is qualified, the respondent is asked the name, phone number, and fax number of the employee who handles capital equipment. That person is faxed a flyer explaining the virtues of the machine. The fax is then followed up by a phone call to the prospective buyer to see if they are interested, want a quotation, or might have a budget for this kind of equipment.

PROCEDURE FOR INCORPORATION OF A COMPANY

CAMA provides under Part A for the procedure of incorporation for limited and unlimited liability companies, and also for companies limited by guarantee. The procedure is as follows:

Step A: Reservation of Name
This is the first step prior to the incorporation of any company in Nigeria.
An investor is required to supply proposed alternative name options for the Company in the prescribed form to the CAC.

The CAC will then determine whether or not any of the proposed names are available for use. Where any are deemed available and approved by the CAC, one of the options will be reserved for that particular investor for a period of sixty days to allow for incorporation.

Step B: Submission of the following documents to the CAC:
• The approved reservation of name form
• Duly Completed Incorporation Forms
• Duly stamped Memorandum and Article of Association (2 copies)
• Certification of proficiency where required.
• Copies of Means of Identification of the Directors
Step C: Payment of the prescribed fees and stamp duties at the Bank Desk at the CAC

Step D: Incorporation and provision of Certificate

OTHER REQUIREMENTS FOR COMPANY REGISTRATION
CAMA requires a minimum of two directors and two shareholders to form a company. The directors and shareholders can be of any nationality, and need not be resident of Nigeria.

CAMA requires every foreign company who intends to do business in Nigeria to register a separate entity in Nigeria for that purpose. Notwithstanding this requirement, the law created instances where a foreign company can be exempted from the requirement of registration.

Please note that foreign investors may own up to 100% of any Nigerian business except in the Maritime sector as provided in the Cabotage Act.

Every company after registration is required to disclose on its letterhead papers, the following;
• Name of the company/Business Name
• Registered Address of the Company/Business Name
• RC Number/BN Number of the Company
• Names of Directors of the Company

PROMOTIONAL POLICY

PROMOTIONAL POLICY

As defined by the American Marketing Association Bulletin (1999) promotion as “a process of communicating with individuals, group or organization’s products”.

The association maintains that promotion includes advertising and publicity that stimulates consumers to purchases, and seller’s effectiveness such as displays, exhibition or shows, demonstration and various non-current efforts not in the ordinary.

A major aspect of this policy strategy is to decide how much effect is to be placed on mass media, personal selling, and consumer advertising. In the extreme case, a firm may have no sales.

Pricing policy of a firm depends on the degree to which a firm has control its price are set in the market place; by customer or any means beyond the control of the firm, there is need for the firm to have pricing policy at all except to sell or not to sell out at the given price.

The starting point in establishing a firm’s pricing policy is to specify the degree of control that the firm has over price of its products seem to vary according to product characteristics.

Pricing policies are established with regards to:
i) The degree of variation from consumer to consumer
ii) The degree of adherence to list price versus dependence on negotiating new price for each sale.

PRODUCT LIFE CYCLE

PRODUCT LIFE CYCLE

Just as living organisms have life to exist and die within a given range time of its existence, so also is a product that is being produced and sold out in the market place, been created (produced) at a given time and becomes obsolete at a given time and becomes obsolete at a particular time or when it loses fashion.

Datong C.D et al (2003) describes the product life cycle as “an attempt to identify the stages in the sales history of the product”. He also described how a product sales position and profitability is expected to vary over given period of time.

In each of the stages of product life cycle, there are defined opportunities and problems with respect to profit potential of the product and their possible marketing strategy.

Kotler Philips (1999), in his suggestion; maintained that “better marketing plans can be formulated when the stage that a product is in and/ or the one it may be heading towards is being identified”.

STAGES OF PRODUCT LIFE CYCLE

Five stages of the product life cycle as also identified by others authors such as; Thompson and Noordewier (1992) and schema et al (1995) identified only four stages of the product life cycle.

But for the purpose of giving a more elaborate idea about such life history of a product, that of Kotler Philips has been defined suitable for this research work; other authors excluded the saturation stage.

1) STAGE 1: PRODUCT INDUCTORY DEVELOPMENT STAGE (INFANCY)

Kotler maintained that, this stage begins when the company finds and develops a new product idea.

During this product development and introductory stage, sales level grows slow, profit are non-existent in this stage because of the heavy expenses that is required for introducing more on promotion of the product, this might include selling the product at no cost.

Development of strategy for this stage; may include:

1. Intensify promotional activities due to the product is new in the market and need to invest much funds in advertisement.
2. Maintain/ improve product quality
3. Product packaging must be enhanced
4. Distribution networks need to be explored for sales and distribution of product.

2) STAGE 2: GROWTH STAGE
This is a period of rapid market acceptance and increasing profit. If the new product satisfies the market, sales will start climbing substantially. In this stage new competitors enter the market attracted by the promise of large- scale production and profit.

A firm tries to sustain market growth for as long as possible by undertaking to improve product quality and vigorously searching for new market segment to capture.

Strategy to be developed for the growth stage; includes:

1. Increased in promotional activities
2. Expansion of distribution networks
3. Maintenance of price level
4. Maintenance of product quality due to too many producers in the same line of business/ production.
5. Product segmentation into smaller units.

3) STAGE 3: MATURITY STAGE
This is the stage or a period of continuous sales growth, increased profits due to maintenance of quality and sales, increase in promotional expenses.
Strategies development for the maturity stage; includes:
i) Maintain product quality
ii) Improve quality through research and development
iii) Maintain level/ reduce slight of price level
iv) Slight product modification
v) Maintenance of consumer goodwill.

4) STAGE 4: SATURATION STAGE
A stage in a product’s life cycle in which everyone who might want the product already has it. If a company is in this stage, then it could indicate that the company is not innovative or that competitors have been able to provide superior product offerings.

Typically, the company will cut down on sales and advertising expenditure, if it reaches this stage and may focus on the development of new products.

Strategies development for the saturation stage includes:
i) Heavy promotional activities
ii) Re – branding
iii) Re- packaging
iv) Modification of product
v) Reduced price – depending on the objectives of the organization.
vi) Diversification of the market
vii) Improve product quality

5) STAGE 5 DELINE STAGE
The last stage of the product life cycle; is the decline stage. This stage is clearly demonstrated by the fall in both sales and profits. Despite the obvious challenges of this stage, there may still be opportunities for manufactures to continue making profit from their product. Challenges of the stage include:

i) Market in decline, failing sales and profits, product withdrawal.
Benefits of this stage include; cheaper production and cheaper markets cost.
Strategies development for this stage; include:
i) Diversification of the business
ii) Re –packaging
iii) Re- modification.

THE STAGES OF NEW PRODUCT DEVELOPMENTAL PROCESS

THE STAGES OF NEW PRODUCT DEVELOPMENTAL PROCESS

Kotler Philips (1999) and C.D. Datong et al (2003) maintained that there are basically eight (8) major stages in new product development process which include the following:

i) Idea Generation: This is a systematic search for new product ideas. The new product development process starts with the search of ideas. These ideas which may come from customers, competitors, company’s sales/ marketing representatives (employees) and dealers of the company’s research and development department, top management, miscellaneous sources of ideas for new product.

ii) Idea Screening: This is a preliminary evaluation involving the elimination of ideas not technically feasible or not consistent with the company’s product lines, objectives and resources.

iii) Concept Development and Testing: This involves the following:

a) Product concept: This is all about; product ideas the consumer will patronage (favour) which offers the most quality performance and that the organization should therefore devote its energy (resources) to making continuous products. A detached version of the new product idea started in meaningful consumer terms.

b) Concept Testing: This involves testing the new product concept (idea), determining the stake as in strong appeal to the consumer, to firm; government and other stakeholders.

iv) Marketing Strategy Development: Designing an initial marketing strategy based on product concept.

v) Business Analysis: A review of sales, profit projections and analysis; for a new product to find out whether these factors satisfy the company’s objectives.

vi) Product Development: A strategy for company’s growth by offering modified or new product to current market segments. Developing the product concept into a physical product in order to ensure that the product idea could be turned into a workable product.

vii) Test Marketing: The sale of the product in a small market will provide information on the suitability of distribution channel; price and promotion plans. It will give indications as to the ultimate sales response in the large market, and more than one test area could be used for finding out the potential impact of alternative marketing plans.

viii) Commercialization: This is the formal launching of the product into the market for sales. This stage will normally follow when they have successfully passed through the market –testing stage, commercializing the product into the market; the product manager is to start managing the product life cycle.

NEW PRODUCT

NEW PRODUCT

DEFINITION OF A NEW PRODUCT

The importance of a new product development to a business entity is well organized.

Obote (1992), the survival and growth of companies; largely depend on the ability to maintain a versatile stream of product idea.

At each stage of the new products development process; search; screening; profit analysis, product development and commercialization described as the third stage which is profit analysis.

Charles D. Seleucia (1997); defines new product which indicated certain product characteristics such as:

1. Rapidity of consumption
2. Unit value of product
3. Frequency of purchases
4. Extend of usage number and variety of consumer and ways in which product provide utility (satisfaction)
5. Time and effort spent purchasing by consumers
6. Rate of technological change and fashion.

The significance of individual or group purchase to the consumer ranges from low to high and so on down the list.

 REASONS FOR NEW PRODUCT IN AN ORGANIZATION

The following include reasons for new product in an organization:

1. To replace obsolete (old fashion) products with new ones as a result of changing needs, wants and taste of consumers
2. To create an entirely new products through the introduction of new product into the market.
3. Addition of existing product; new products that Supplements Company’s established product.
4. Repositioning: this is the repositioning existing products that are targeted to new market or market structure.
5. Cost reduction: Introduction of new products that provide similar performance at lower cost.
6. To improve the revisions to existing products that provides performance of great perceived value and replace existing products.
7. To avoid risk of product falling victim to changing consumer needs and taste, new products technologies, shortened product life cycle and increased domestic and foreign competition.

REASONS FOR NEW PRODUCT FAILURE

There are several factors that lead to products failure. Some of these are:

1. Shortage of important new product ideas in certain areas.
2. Fragmented markets, keen competition is leading to increasingly fragmented markets.
3. Social and governmental constraints, new products have to satisfy public criteria such as consumer’s safety and ecological compatibility.
4. Capital shortage, many companies cannot afford to raise enough funds needed to research true innovations. They emphasized new products modifications and imitation instead.

Challenges of Land Title Registration

Challenges of Land Title Registration

The following are the challenges facing land title registration in Nigeria:

(i)      Noticeable discrepancies on the drafted law especially arose, based on non-consultation with stakeholders and are listed here   under. There were emphases on ownership of land, rather than ownership of interest in landed property. This emphasizes on ownership is in conflict with the Land Use Act 1978, which recognizes leasehold interest only in land;

(ii)     The objective of title registration should not only be universal, but should be compulsory and certain deemed grand title and village excision should be accommodated   in the land registry;

(iii)    Non recognition of title registration, indeed emphasis is placed on deed    registration;

(iv)    Reservation of the registrar of title position to legal practitioners only as against professionals   who are knowledgeable in land administration;

(v)    Non anticipation   of technological advancement that makes EDMS less reliable in this modern world;

(vi)    Non-capturing   of all parcels of land in the state through proper and efficient cadastral surveys;

(vii)   Non recognition of land administration experts such as Estate Surveyors and Valuers as Registrars of Titles;

(viii)  Haphazard   storage   of land documents at the registry;

(ix)    Non-cooperation of land owners especially “omooniles” in ensuring proper land titling registration;

(x)     Inadequate funding of the land registry; and

(xi)    Propensity to commit fraud by stakeholders in land registration

Global Land Registration Systems

Global Land Registration Systems

Land registration systems, involve deeds recording, and title registration. A Deed recording is a system of giving publicity to land transactions and helping to prevent concealed dealings.

The act of recording a deed gives notice to the public of a claimed interest in land and establishes priority against other possible claimants to the same interest although there is usually no statutory compulsion for parties to a transaction to record their documents although it is prudent for them to do so while it is risky if they do not.

An unrecorded document is legally ineffective against any subsequent bonafide purchaser or mortgagee who first records an interest in the same land. For example, suppose that a vendor fraudulently sells the same piece of land to two different purchasers at different times.

The purchaser who first records his or her transaction has the better claim to the land, even if that transaction took place later than the first one, provided the purchaser has bought in good faith and is unaware of the first purchase. In such a situation the first purchaser has no claim against the deeds registry and would have to pursue a legal remedy against the vendor, who by that time might be bankrupt or have fled the jurisdiction.

Under a system of deeds recording, a document presented for entry is normally Accepted at face value and not subjected to detailed technical scrutiny by registry staff.

Unless a survey plan accompanies document it may be very difficult to determine the size, shape and location of the land in question. Boundary descriptions that attempt to define parcel limits solely by citing the names of adjoining owners, who may have departed long ago, are among the possible sources of confusion in interpreting deeds, also are the frequent ambiguities in metes and bounds descriptions.

A deeds recording system usually offers insufficient information seek to identify areas and extent of private and public lands. Not only does this deficiency affect the conveyance process; it leads uncertainties of ownership, boundary disputes, unlawful occupancy, and the lack of a national, regional or local land inventory for system.

For an individual proprietor, the imperfection of a land title that is not fully documented may restrict the ability to obtain a mortgage or other credit financing from a lending institution.

The insecurity of a flawed or uncertain title also impairs the marketability of land, inhibits its development, and may lead to its eventual decay or abandonment.

Despite its obvious shortcomings a deeds recording system is sometimes preferred by some parties to land transactions because documents can be recorded more quickly and at a lower cost than under a land titles registration system.

Deeds registries may also be favored by some administrations because they are less costly to establish and operate than land title offices.

LAND REGISTRATION

LAND REGISTRATION

Real Estate is the expression most widely used in the USA and in the English Language generally to describe a form of ownership in land. Both words ‘real’ and ‘estate’ have their origins in English law developed in the Middle Ages.

English law has no room for outright individual ownership. This was a privilege reserve to the crown (originally to William the conqueror, who acquires title to the nation in 1066 by Conquest- So often the method of acquisition in human history).

The conquest was an instance for centralization, of control over lands that was by no means unique. Nor is it antiquated. The most populous country in the world, the people’s republic of China is just one present- day example of a state in which outright ownership of urban land by individual Or corporation is not recognize.

State ownership of urban land was made constitutional in 1982 as part of a process of economic reform, although private ownership had virtually ceased in 1953.

Real estate is not therefore ownership, in the sense that goods and personal effects, money, shares and other things (known as personal property in English law) are owned.

Land is inherently different from all other classes of property in that it is given not made, fixed, and Immovable. On the other hand, real property is a term which distinguishes land from personal property; it is land and- all that is permanently attached to it.

English law it includes trees and natural growing things attached, everything under and above it, and improvements in the forms buildings and other construction. Land -registration generally describes systems by which matters concerning ownership, possession or other rights in land can be recorded (usually with a government agency or department) to provide evidence of title, facilitate transactions and to prevent unlawful disposal. The information recorded and the protection will vary by jurisdiction.

FUNCTION OF LAND ADMINISTRATION

INTRODUCTION

Land Administration can be defined as the process whereby the land resources of a community a town, state, region or a country are administered and managed to give the optimum results.

The optimum yield may either be informed of economic use of land resources which may result in the social, traditional or cultural up liftmen.

In terms of economy, land administration may be viewed as the management of land such that the highest financial returns are achieved.

The benefit may either be in terms of high profit, efficiency of labour as well as proper management procedures.

Such as allocation of resources to the various sectors of the community that may be involved in the use of such land in estate development.

FUNCTION OF LAND ADMINISTRATION

Kwarden M. D (1996) further say that apart from functioning in an executing capacity which is the case in Nigeria land Administration as an institution can also function in the following capacities:

1. SUPERVISORY:
Here it functions like Administration. It is concerned mainly with the maintenance of law and order with respect to land. For instance a divisional officer (D. 0. 5) supervised land Administration because it was regarded as part of public administration and consequently land Administration ensures greater productivity.

2. ADVISORY:Land Administration functions in this capacity where right in land have been crystallized, where the level of education of the land owing community is Wiki and wb.ete the institution dealing with land exist. ln this situation either semi dependent statutory bodies or private institution provides this advisory service.

3. CO – ORDINATING;This is where land Administration exists to co — ordinate the activities of other technical executive bodies within the government structures or to co — ordinates the activities of private institutions dealing with land. In conclusion therefore, it is important to state that situations differ significantly from one place to another and only one or all of these methods may apply in one country at any point in time.

DEFINITION OF LAND ADMINISTRATION

DEFINITION OF LAND ADMINISTRATION

According to Kwarden (1996) in his features of land Administration” land Administration as a subject can be defined as the study of the relationship of man to man in relation to land. It is an empirical subject because administration of land varies in details from country to country. As a result of its empirical nature, there is no book that covers all countries and all topics at any point in time.

However, land Administration can be defined as the process whereby the land resources of a community a town, state, region or a country are administered and managed to give the optimum results. The optimum yield may either be informed of economic use of land resources which may result in the social, traditional or cultural up liftmen. In terms of economy, land administration may be viewed as the management of land such that the highest financial returns are achieved. The benefit may either be in terms of high profit, efficiency of labour as well as proper management procedures. Such as allocation of resources to the various sectors of the community that may be involved in the use of such land in estate development.

Generally from the various point of views, land Administration can be referred to as land management. It can be also being seen as that act of supervision, direction and control of various interests in land and its resources so as to achieve optimum returns or maximum utility. For land Administration also includes the formulation and implementation of regulate and control the acquisition allocation and use of land and land resources.

Therefore, land Administration may be seen as one of the goals for the development of an area and as one of the factors that influence the implementation of planned developmental aim.

Historical Background of Garki and Maitama (FCT)

Historical Background of Garki and Maitama (FCT)

Garki and Maitama are located in federal capital territory (FCT) Abuja which is known to be the federal capital city of Nigeria. Abuja is one of the most significant developments which have been undertaken by the federal government.

Lagos used to be the former federal and state capital respectively. But due to the continues increase in population in the city and its antecedent urban problems it was realized that the continued retention of Lagos e.g. federal capital become impracticable, especially with its intractable traffic, poor housing and sanitation problem.

Attempt by various government to solve this problem have been met with little or no success. The only variable but rather expensive option has been the building of a new capital as an alternative to the journey to relocate the capital of the federal republic of Nigeria in august, 1975 during General Murtala Ramat Muhammad regime. As an attempt to solve the problem once and for all the General Murtala Muhammad inaugurated a panel on 9th of august, 1975 and the chairmanship of, retired late honorable Justice AkintalaAguda to examine the desirability or otherwise dual role of Lagos as a state and federal capital.

The panel was also empowered to recommend a suitable alternative should it determine the federal capital territory it Abuja was adopted and accepted. Nigeria has taken to this direction by embarking on the development of Abuja as symbol of unite to meet the aspiration of Nigeria.

In 1976, the (ADS) Abuja Geographical Information System was established and changed the responsibility of planning and envelopment of Abuja following the acceptance of the Justice AkinolaAguda’s report by the then Federal Military Government.

Garki and Maitama districts cannot be discussed without cross- reference to the concept the Abuja Municipal Area Council (AMAC) and Abuja itself in 1984; Abuja municipal Are Council was created.

It was formed as a result of the merger of the former three (3) (administrative units of Bwari, Karshi and municipal development Area) which are Asokoro, Maitama, Garki, Wuse and Central Area, popular towns and villages in AMAC are often referred to as satellite towns. This include KUJE, Bwari, Karshi, Nyanya, Gwagwalada, Karmo, KadoUshafa, etc which embarking on the development of Abuja as symbol of unit to meet the aspiration of Nigeria.

Federal Capital Development Authority and Abuja Geographic in format system prescribed application form to take over land assessment of land

Administration in FCT Abuja.

 1.8.1 GEOGRAPHY OF GARKI AND MAITAMA (FCT)

The federal capital territory is located in the geographical centre of the nation. It lies between latitude 725°N – 920°N and longitude. 6456-7396. It occupies an area of 8000 square kilometer. It is bounded to the north by Kaduna state to the east and south by Nasarawa state and to the southwest by kogi state and was by Niger state

1.8.2  POPULATION OF GARKI AND MAITAMA (FCT)

As of the 2006 census, the federal capital territory has a population of about 778,567. It is pertinent to point that the population arrived at after the census is fairly the actual figure, since the population has increased due to rapid movement of people from Lagos and other parts of the country to Abuja (FCT).

The people of the federal capital territory can be classified into two: the original inhabitants, which are the Gbagyis, other settlers include Nigerians from across the nation geo -ethnic groups, immigrants from different parts of the country into the territory since 1980 is expected to have positive impact on the culture, occupation, structure and general life style of the people in the years ahead. There are many Hotels and tourist areas within and outside the City Center, such as, Sheraton Hotel, Zuma Rock, IBB international Gulf, course, Abuja Amusement parks, there are also health centers in deferent parts of the territory as well as shopping centers too, at night; the streetlights bring out the beauty and landscaping of the city.

1.8.3 ECONOMY OF GARKI AND MAITAMA (FCT)

The federal capital territory, like most parts of the country is rich in both human and mineral resource. An appreciable variety of solid mineral exist in the territory, most of which are fully exploited. These include marble, in deposit, lead, rock etc.

The agricultural potentials of the territory is considered as an opportunity to invest in the small scale agro — allied industries shopping centers are also provided for the entire inhabitants to meet and patronize their needs, such centers include A real shopping center, UTC and loments store, Wuse shopping center neighborhood center, etc.

 1.8.4 POLITICAL ADMINISTRATION OF GARKI AND MAITAMA (FCT)

For smooth administration and management purpose, there are two agencies in the territory viz: The ministry of federal capital territory (MFCT) and federal capital development authority (FCDA) are both headed by the minister of federal capital territory. These agencies have various departments, each headed by a director for efficient and effective administration. MFCT the departments include education, local government, land administration, corporate affairs and finance department.

While the FCDA is responsible for the planning, design and development of the territory, it has the following department: engineering section, public work, planning and survey, health, social services and facilities.

The federal capital territory FCT has six (6) area councils, each controlled and administered by a chairman. The area councils are:

Abuja municipal are council (AMAC) Gwagwalada area council and Abaji area council, the towns and village wards are headed by traditional rulers as recognized by the government. They include the one of Abaji, Gomo of KUJE, Aguma of GwagwaladaAgabe of ugbuda, Sarkinkwali, Etsu of Gartal etc.

TRADITIONAL PROCUREMENT METHOD

TRADITIONAL PROCUREMENT METHOD

Construction management literature has confirmed the dominancy of the Traditional procurement method for housing delivery. When this method is used by a client who desires a building or a facility he appoints consultants for design and cost control functions. These consultants assist the client to select a contractor who executes the project. The contractor works for a contract price. Importantly, design and construction responsibilities are separated and this results in drawbacks of Traditional procurement for which time and cost overruns and conflicts between parties are predominant. Traditional procurement types in use include sequential and accelerated methods (Ogunsanmi, et al, 2003).

Most projects in Nigeria, Great Britain, and other Commonwealth countries all over the World are procured using Traditional procurement. The main variants of traditional procurement method as identified by (Seeley, I.H., 1997) are:

1. Bills of firm quantities
2. Bills of approximate quantities
3. Drawings and specification
4. Schedule of rates
5. Cost reimbursement and
6. Labour only.

1. Bills Of Firm Quantities: A bill of quantities (BoQ) is a document prepared by a cost consultant that provides project-specific measured quantities of the items of work identified by the drawings and specifications in the tender documentation. The quantities may be measured in number, length, area, volume, weight or time. A bill of quantities is issued to tenderers for them to prepare a price for carrying out the works. The more precisely the work in a bill of quantities can be measured and described (ie the ‘firmer’ it is) the more accurate tenderers’ prices should be, the easier it will be to control costs and the fewer variations will be necessary. The process of identifying elements of construction works that can be measured and priced is known as ‘taking off’ (Seeley, I.H., 1997).

A firm bill of quantities can prepared when the design is complete, a detailed specification has been prepared and quantities can be accurately calculated. If there were no changes to the project requirements following the preparation of a firm bill of quantities, then the tenderer’s priced bill of quantities would be the same as the final cost of the contract. In practice of course there are always changes (Seeley, I.H., 1997).

2. Bills of approximate quantities: Bills of Approximate Quantities are an alternative form of Bills of Quantities and are prepared early in the design process before a firm design is available. The contractor is selected, normally by competition from a pre-selected or pre-qualified list. Contractors prepare their tender bid based on pricing a Bill of Approximate Quantities. This is essentially a traditional Bill of Quantities but with the quantities assessed from professional experience by the Quantity Surveyor or Engineer rather than firmly measured, as would be the case with Bills of Quantities (Seeley, I.H., 1997).

The advantages with the use of Bills of Approximate Quantities are:

1. Enables an earlier start on site to be made than with Traditional Bills of Quantities.
2. Allows early appointment of a contractor and access to experience in terms of his programming and buildability skills

• Can incorporate Design and Build and Performance Specified works if required

The disadvantages with the use of Bills of Approximate Quantities are:

Approximate Bills of Quantities do not establish a firm cost for the work at the time the contractor is appointed, thus there is less price certainty. This is because the actual cost of the works is calculated only when the design is available and detailed re-measurements have been made.

The client proceeds to the construction stage at greater risk, despite a check being made at the tender stage by means of bids being submitted by the tendering contractors.

3. Drawings and specification: Construction drawings are the main basis for defining   required   construction   activities   and   for measuring quantities of material. Accurate estimating requires a thorough examination of the drawings and specification.  Dimensions shown on drawings or computed figures shown from those drawings should be used in preference to those obtained by scaling distances.

The estimator must first study the specifications and then use them with the drawings when preparing quantity estimates.  The estimator should become thoroughly familiar with all the requirements stated in the specifications. Most estimators will have to read the specifications more than once to fix these requirements in their minds.

4. Schedule of rates: A schedule of rates in its lesser form in a standard contract can be a list of staff, types of labour and plant hire rates upon which a contractor has listed hourly rates for the purposes of pricing work carried out under cost reimbursable instructed daywork.

However on a much larger scale there is a Schedule of Rates Term Contract. Such a contract is normally used when the nature of work is known but cannot be quantified, or if continuity of programme cannot be determined. In the absence of an estimate, tenderers quote unit rates against a document that is intended to cover all likely activities that might form part of the works. Indicative quantities may or may not be given to tenderers but do not form part of the contract.

General preliminaries such as scaffolding, temporary power, supervision and temporary accommodation will also have its own rates. On projects longer than say 18 months there might be escalation provisions based on annual percentage increases based on a stipulated indices.

The advantages of Schedule of Rates Term Contracts

• Variations are easy to estimate and normally cheaper than on fixed price traditional contracts.
• The client can stop and start work at a pace that might be determined by cash flow or funding.
• A large pool of contractors can be asked to tender as the process is inexpensive and quick.
• It is infinitely flexible in relation to scope and contractual commitment.
• As a fully detailed design is not required the client can obtain tenders at the early stages of a project and begin construction activity before completion of the design. So to this extent it is ‘fast track’.

The disadvantages of Schedule of Rates Term Contracts

• Additional resources are required to measure work and certifying
• The client does not have a final price when committing to starting work.
• It is difficult for contractors to plan long-term resources and so might mean changes to personnel with loss of continuity.
• Contractors may be tempted to load front end costs in case later work does not materialise.
• There is no real incentive for contractors to treat such work with any sense of urgency and its best staff will be placed on the projects where the contractor is carrying more risk.

The tender documents will be a substantial package looking like a Bill of Quantities with numerous options and discount opportunities based on quantity.

5. Cost Reimbursement: a cost reimbursement contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit.^[1] Cost-reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses.

A cost-reimbursement contract is appropriate when it is desirable to shift some risk of successful contract performance from the contractor to the buyer. It is most commonly used when the item purchased cannot be explicitly defined, as in research and development, or in cases where there is not enough data to accurately estimate the final cost.

Advantages of Cost Reimbursement

• A cost-plus contract is often used when long-term quality is a much higher concern than cost, (Ramus, J., 1996) such as in the United States space program.
• Final cost may be less than a fixed price contract because contractors do not have to inflate the price to cover their risk. (Ramus, J., 1996).

Disadvantages of Cost Reimbursement

• There is limited certainty as to what the final cost will be.
• Requires additional oversight and administration to ensure that only permissible costs are paid and that the contractor is exercising adequate overall cost controls.
• Properly designing award or incentive fees also requires additional oversight and administration.
• There is less incentive to be efficient compared to a fixed-price contract.

6. Labour-Only Procurement Method: In Nigeria because of the recent downturn in the economy of the country most practitioners prefer to use Labour-only method for project delivery than Traditional method that has stood the test of time. This method has found more patronage not only in Nigeria but also in some sub-Saharan countries of Uganda, Zimbabwe, Botswana, Kenya and South Africa where the method has been used for delivering several community based projects. Studies of Ogunsanmi, Iyagba and Omirin, (2003); Babatunde, Opawole and Ujaddugbe, (2010); Samatania Consult Limited, (2012); and Dada (2012) all confirm the use of this method in Nigeria.

PROCUREMENT METHODS OR STRATEGIES

PROCUREMENT METHODS OR STRATEGIES

There are various procurement methods in use in construction for project delivery in Nigeria. Such strategies include Traditional, Design and Build, Project Management, Direct Labour and Labour-only.

According to (Ashwort and Hogg, 2007), different variants of procurement are available for meeting different clients’ needs and projects specifics. Researchers, however, often differ in these classifications of procurement methods. (Ramus, J., 1996), showed that classification commonly used, in practice, often combine the characteristics of two or more types.

Nonetheless, studies including (Seeley, I.H., 1997, Turner, A., 1997), classified construction procurement methods into two broad categories as: traditional procurement method, and non-conventional procurement method.

This study focuses on the following procurement methods used in Nigeria construction industry:

TRADITIONAL PROCUREMENT METHOD

Construction management literature has confirmed the dominancy of the Traditional procurement method for housing delivery. When this method is used by a client who desires a building or a facility he appoints consultants for design and cost control functions. These consultants assist the client to select a contractor who executes the project. The contractor works for a contract price. Importantly, design and construction responsibilities are separated and this results in drawbacks of Traditional procurement for which time and cost overruns and conflicts between parties are predominant. Traditional procurement types in use include sequential and accelerated methods (Ogunsanmi, et al, 2003).

Most projects in Nigeria, Great Britain, and other Commonwealth countries all over the World are procured using Traditional procurement. The main variants of traditional procurement method as identified by (Seeley, I.H., 1997) are:

1. Bills of firm quantities
2. Bills of approximate quantities
3. Drawings and specification
4. Schedule of rates
5. Cost reimbursement and
6. Labour only.

1. Bills Of Firm Quantities: A bill of quantities (BoQ) is a document prepared by a cost consultant that provides project-specific measured quantities of the items of work identified by the drawings and specifications in the tender documentation. The quantities may be measured in number, length, area, volume, weight or time. A bill of quantities is issued to tenderers for them to prepare a price for carrying out the works. The more precisely the work in a bill of quantities can be measured and described (ie the ‘firmer’ it is) the more accurate tenderers’ prices should be, the easier it will be to control costs and the fewer variations will be necessary. The process of identifying elements of construction works that can be measured and priced is known as ‘taking off’ (Seeley, I.H., 1997).

A firm bill of quantities can prepared when the design is complete, a detailed specification has been prepared and quantities can be accurately calculated. If there were no changes to the project requirements following the preparation of a firm bill of quantities, then the tenderer’s priced bill of quantities would be the same as the final cost of the contract. In practice of course there are always changes (Seeley, I.H., 1997).

2. Bills of approximate quantities: Bills of Approximate Quantities are an alternative form of Bills of Quantities and are prepared early in the design process before a firm design is available. The contractor is selected, normally by competition from a pre-selected or pre-qualified list. Contractors prepare their tender bid based on pricing a Bill of Approximate Quantities. This is essentially a traditional Bill of Quantities but with the quantities assessed from professional experience by the Quantity Surveyor or Engineer rather than firmly measured, as would be the case with Bills of Quantities (Seeley, I.H., 1997).

The advantages with the use of Bills of Approximate Quantities are:

1. Enables an earlier start on site to be made than with Traditional Bills of Quantities.
2. Allows early appointment of a contractor and access to experience in terms of his programming and buildability skills

• Can incorporate Design and Build and Performance Specified works if required

The disadvantages with the use of Bills of Approximate Quantities are:

Approximate Bills of Quantities do not establish a firm cost for the work at the time the contractor is appointed, thus there is less price certainty. This is because the actual cost of the works is calculated only when the design is available and detailed re-measurements have been made.

The client proceeds to the construction stage at greater risk, despite a check being made at the tender stage by means of bids being submitted by the tendering contractors.

3. Drawings and specification: Construction drawings are the main basis for defining   required   construction   activities   and   for measuring quantities of material. Accurate estimating requires a thorough examination of the drawings and specification.  Dimensions shown on drawings or computed figures shown from those drawings should be used in preference to those obtained by scaling distances.

The estimator must first study the specifications and then use them with the drawings when preparing quantity estimates.  The estimator should become thoroughly familiar with all the requirements stated in the specifications. Most estimators will have to read the specifications more than once to fix these requirements in their minds.

4. Schedule of rates: A schedule of rates in its lesser form in a standard contract can be a list of staff, types of labour and plant hire rates upon which a contractor has listed hourly rates for the purposes of pricing work carried out under cost reimbursable instructed daywork.

However on a much larger scale there is a Schedule of Rates Term Contract. Such a contract is normally used when the nature of work is known but cannot be quantified, or if continuity of programme cannot be determined. In the absence of an estimate, tenderers quote unit rates against a document that is intended to cover all likely activities that might form part of the works. Indicative quantities may or may not be given to tenderers but do not form part of the contract.

General preliminaries such as scaffolding, temporary power, supervision and temporary accommodation will also have its own rates. On projects longer than say 18 months there might be escalation provisions based on annual percentage increases based on a stipulated indices.

The advantages of Schedule of Rates Term Contracts

• Variations are easy to estimate and normally cheaper than on fixed price traditional contracts.
• The client can stop and start work at a pace that might be determined by cash flow or funding.
• A large pool of contractors can be asked to tender as the process is inexpensive and quick.
• It is infinitely flexible in relation to scope and contractual commitment.
• As a fully detailed design is not required the client can obtain tenders at the early stages of a project and begin construction activity before completion of the design. So to this extent it is ‘fast track’.

The disadvantages of Schedule of Rates Term Contracts

• Additional resources are required to measure work and certifying
• The client does not have a final price when committing to starting work.
• It is difficult for contractors to plan long-term resources and so might mean changes to personnel with loss of continuity.
• Contractors may be tempted to load front end costs in case later work does not materialise.
• There is no real incentive for contractors to treat such work with any sense of urgency and its best staff will be placed on the projects where the contractor is carrying more risk.

The tender documents will be a substantial package looking like a Bill of Quantities with numerous options and discount opportunities based on quantity.

5. Cost Reimbursement: a cost reimbursement contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit.^[1] Cost-reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses.

A cost-reimbursement contract is appropriate when it is desirable to shift some risk of successful contract performance from the contractor to the buyer. It is most commonly used when the item purchased cannot be explicitly defined, as in research and development, or in cases where there is not enough data to accurately estimate the final cost.

Advantages of Cost Reimbursement

• A cost-plus contract is often used when long-term quality is a much higher concern than cost, (Ramus, J., 1996) such as in the United States space program.
• Final cost may be less than a fixed price contract because contractors do not have to inflate the price to cover their risk. (Ramus, J., 1996).

Disadvantages of Cost Reimbursement

• There is limited certainty as to what the final cost will be.
• Requires additional oversight and administration to ensure that only permissible costs are paid and that the contractor is exercising adequate overall cost controls.
• Properly designing award or incentive fees also requires additional oversight and administration.
• There is less incentive to be efficient compared to a fixed-price contract.

6. Labour-Only Procurement Method: In Nigeria because of the recent downturn in the economy of the country most practitioners prefer to use Labour-only method for project delivery than Traditional method that has stood the test of time. This method has found more patronage not only in Nigeria but also in some sub-Saharan countries of Uganda, Zimbabwe, Botswana, Kenya and South Africa where the method has been used for delivering several community based projects. Studies of Ogunsanmi, Iyagba and Omirin, (2003); Babatunde, Opawole and Ujaddugbe, (2010); Samatania Consult Limited, (2012); and Dada (2012) all confirm the use of this method in Nigeria.