ABSTRACT
One of the characteristics of construction projects is that they entail huge capital outlay. These investments have alternatives; in effect it must be assured that the decision to take up a construction work is the best. In carrying out such works cognizance has to be taken about such factors like environmental, social, technical and administrative that affects construction costs. This work therefore is a bold attempt, aim at analyzing these factors to see the various intensities on changes in construction costs. This study analysed factors affecting construction costs in Enugu state. The study was carried out with a view to identify some factors affecting construction costs in building industry. The importance of this research was to benefit the stakeholders in the construction industry in determining the factors which can affect construction costs. To facilitate this study both primary and secondary data collections were used. Furthermore, the population sample was chosen randomly. Fifty questionnaires received from field survey of relevant professionals were analysed using mean scores while four hypotheses were tested using spearman’s rank correlation coefficient and student t-test. The result showed that project resources factors scored 4.46, contract arrangement factors scored 2.80, construction management factors scored 2.41 while environmental factors scored 1.47. The major identified reasons for factors affecting construction costs are project resources, contract arrangement and construction management factors, In conclusion, there is a need for clear allocation of responsibility for monitoring and controlling factors affecting construction to qualified individuals who can handle project effectively. Finally, factors affecting construction costs should be an issue or yardstick for measuring project performance
TABLE OF CONTENTS
CHAPTER ONE
1.0 Introduction - - - - - - - 1
1.1 Background of the Study - - - - - - 1
1.2 Statement of the Problem - - - - - 2
1.3 Aims/Objectives of the Study - - - - - 3
1.4 Research Questions - - - - - - 4
1.5 Research Hypotheses - - - - - - 4
1.6 Significance of Study - - - - - - 5
1.7 Scope and Limitation of the Study - - - - 5
CHAPTER TWO
2.0 Review of Related Literature - - - - - 6
2.1 Introduction - - - - - - - 6
2.2 Construction Industry - - - - - - 6
2.3 Construction Cost - - - - - - - 8
2.4 Procurement Methods in Construction Industry - - 10
2.4.1 Traditional Procurement (Design-Bid-Build) - - - 11
2.4.2 Design and Build - - - - - - - 12
2.4.3 Management Contracting - - - - - 12
2.4.4 Construction Management - - - - - 13
2.4.5 Design and Manage - - - - - - 14
2.4.6 Contract Strategy - - - - - - - 14
2.5 Factors Affecting Construction Cost - - - - 14
2.6 Environmental Factors - - - - - - 20
2.6.1 Effect of Weather - - - - - - - 21
2.6.2 Number of Construction going at the Same Time - - 22
2.6.3 Social and Cultural Impacts - - - - - 22
2.6.4 Project Location and Area Condition - - - - 23
2.6.5 Lack of Productivity Standard - - - - - 25
2.7 Construction Management Problems - - - - 26
2.7.1 Incorrect Planning - - - - - - - 27
2.7.2 Poor Financial Control on Site - - - - - 27
2.7.3 Previous Experience of the Contract - - - - 27
2.7.4 Disputes on Sites - - - - - - 28
2.7.5 Relationship between Management and Labour - - 28
2.7.6 Co-ordination between Designers and Contractors - - 28
2.8 Contract Arrangement - - - - - - 28
2.8.1 Duration of Contract Period - - - - - 29
2.8.2 Additional Work - - - - - - - 29
2.8.3 Contract Procedure - - - - - - 30
2.8.4 Frequent Design Changes - - - - - 30
2.9 Cost Estimating Factors - - - - - - 30
2.9.1 Material Cost - - - - - - - 31
2.9.2 Insurance Cost - - - - - - - 33
2.9.3 Equipment/Maintenance Cost - - - - - 33
2.9.4 Transportation Cost - - - - - - 34
2.9.5 Bureaucracy in Tendering Method - - - - 34
2.9.6 Wrong Estimation Methods - - - - - 34
2.9.6.1 Reality - - - - - - - - 35
2.9.6.2 Level of Detail - - - - - - - 35
2.9.6.3 Documentation - - - - - - - 36
2.9.6.4 Direct and Indirect Costs - - - - - 36
2.9.6.5 Overhead Cost - - - - - - - 37
2.9.6.6 Variable and Fixed Cost - - - - - 37
CHAPTER THREE
3.0 Research Methodology - - - - - - 39
3.1 Design of the Study - - - - - - 39
3.2 Population Sample - - - - - - 39
3.3 Sample Size - - - - - - - 39
3.4 Research Instrument and Data Procedures - - - 40
3.5 Method of Data Analysis - - - - - 41
3.6 Method of Data Collection - - - - - 41
CHAPTER FOUR
4.0 Data Presentation and Analysis - - - - - 42
4.1 Preamble - - - - - - - - 42
4.2 Analysis of Data - - - - - - - 44
4.3 Hypotheses - - - - - - - - 52
4.4 Summary of Hypotheses - - - - - - 60
CHAPTER FIVE
5.0 Findings, Conclusions and Recommendations - - 61
5.1 Findings - - - - - - - - 61
5.2 Conclusions - - - - - - - - 62
5.3 Recommendations - - - - - - - 63
References - - - - - - - - 64
Appendices - - - - - - - - 67
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
It is a fact that the cost of construction, especially that of construction resources (materials and labour), has accelerated rapidly since the introduction of the Structural Adjustment Programme (SAP) in 1986 Onabule, (1991). Continuing, Onabule (1991) maintained that the exchange rate depreciation resulted in an inflationary impact on construction activities because of the short-term import inelasticity of building materials
production. This escalated cost of construction contributes significantly to enlarging the average mortgage loan size demanded with serious implications for repayments and effectively marginalizing most Nigerians in the home ownership market.
The increase in the project cost has led to high level of economic fluctuation and conflict between parties in the project contract. It is essential therefore, to identify the main dominating factors leading to high construction cost so that efforts can be concentrated on those factors in order to reduce construction cost in Nigeria.
When evaluating the success of any building project, cost is one out of the three variables that must be considered. The others being time and quality. However, there are several factors affecting the construction cost of building projects, both positively and negatively. According to American Institute of Architects (AIA) (2007), Building costs are influenced by several factors such as location, design, performance requirements, construction, and time greatly affect the building cost. Again, Li (2009) observed that construction cost which is out of control adds to investment pressure, increase construction cost, reduces investment profit, affects investment and decision-making, and to a great extent, wastes the national finance, so it is likely to result in corruption or offence. If compared with the huge capital outlay involved in building project coupled with its proportion in the fixed capital formation of every economy in the world, the cost of building projects requires greater attention.
Oftentimes, clients are dissatisfied and do not have value for their money in terms of the type of projects being delivered by the contractors. In this case, the success of the project is in question. As the effects of cost overrun is far reaching in any project, Obiegbu (2002) opined that identifying the factors and causes of cost overruns is a key step towards helping construction managers to either prevent a cost overrun or apply the proper corrective actions to the problem. Majid (1998) cited in Obiegbu
(2002) claimed that there must be a systematic approach used by construction managers for identifying these factors in order to reduce their impacts.
Also, Obiegbu (2002) noted that factors affecting cost of construction have different effects on an activity or a project, ranging from an increase in resource consumption, a stoppage of work, a delay in work, rework, or all of the above.
It is based on these unprecedented effects of cost on building projects that the factors affecting construction cost are being analyzed so as to provide the most appropriate approach for dealing with them.
1.2 STATEMENT OF THE PROBLEM
The construction industry in Nigeria has gone through very dramatic price fluctuations stages since the late 80’s due to both the near completion of huge infrastructure projects and to a steep decline in the price of oil.
Moreover, the demand for more construction of all types, coupled with a tight monetary supply, provide the construction industry with a bigger challenge to cut costs. The problem of high costs of contracts in all aspects of construction is becoming obvious. However, little has been done to minimize the problem. Consequently, substantial increases are observed in project cost.
Furthermore, due to high level of construction cost increments, economic fluctuation, conflict between parties, construction demand and boom period, there is a need for a properly documented study and project survey on the factors affecting construction costs. It is important to identify the main dominating factors leading to high construction cost so that efforts can be concentrated on those factors in order to reduce construction cost in Nigeria.
Furthermore, the effect of high cost of construction cost may lead to project abandonment, delaying project which can equally affect the economic status of that country.
Finally, this is what prompted the researcher to study the nature of the factors affecting construction costs in Enugu State.
1.3 AIMS/OBJECTIVES OF THE STUDY
The broad aim of this research work is to investigate the factors affecting construction cost. To achieve this, the following specific objectives are considered.
1. To identify the most significant factors that affect construction costs .
2. To analyse these factors that affect construction costs
3. To find out the effect of these factors (1-4) on construction costs
4. To examine ways in which these factors (1-4) can be mitigated.
1.4 RESEARCH QUESTIONS
The research questions asked in the course of this research are:
1. Does environmental factor affect construction costs?
2. Does construction management factors affect construction costs
3. Does contract arrangement factors affect construction costs
4. Does project resources factors affect construction costs
5. What are the effects of these factors (1-4) on the construction cost?
6. In what ways can these effect be mitigated?
1.5 RESEARCH HYPOTHESES
For the purpose of this study, the following hypotheses are to be
tested:
HYPOTHESIS ONE
H0: Environmental factors do not significantly affect construction costs.
H1: Environmental factors significantly affect construction costs.
HYPOTHESIS TWO
H0: Construction management factors do not significantly affect
construction costs.
H1: Construction management factors significantly affect construction
costs.
HYPOTHESIS THREE
H0: Contract management factors do not significantly affect construction
costs.
H1: Contract management factors significantly affect construction costs.
HYPOTHESIS FOUR
H0: Project resources do not significantly affect construction costs.
H1: Project resources significantly affect construction costs.
1.6 SIGNIFICANCE OF STUDY
The researcher investigates the possible factors affecting construction costs in Enugu. This research will benefit the stakeholders in the construction industry in determining the factors which can affect a construction cost. It will also enable clients to decide the quality and scope of a proposed project before embarking on the project. Contractors, however, will be largest beneficiary to this study as it will enable them to identify those factors which are cost sensitive.
1.7 SCOPE AND LIMITATION OF THE STUDY
The research focuses mainly on the essential factors affecting construction costs. The scope of the study is limited to the projects in Enugu State.
Non-available of finance and time are also matters that affected the scope of this work.
Some of the limitations are that the respondents were nonchalant and even uncompromising. In fact, the nonchalant and uncompromising attitude demonstrated by some respondents in supplying the researcher with feedback raised logistic problems. Furthermore, the encounter the prohibitive cost of questionnaire administration.
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