LIST OF FIGURES
FIGURE PAGES
1. Project cost management overview 25B
2. Decision Grid 46
3. Estimating Techniques Triangle 53
4. Traditional procurement organogram with Architect
as lead consultant 56
5. Construction Project management organogram with
project Manager as lead Consultant 56
6. Cost Analysis Elemental format for cost management
Of engineering infrastructure 63B
vii
LIST OF TABLES
TABLES
PAGES
1. Internal Rate of Return (IRR) Analysis 35
2. Outline of pre-contract cost control duties for
Housing Project 53
3. Distribution of Analysis by Sex 88
4. Distribution of Respondents by Age 89
5. Distribution of Respondent by marital status 90
6. Distribution of Respondent by profession 90
7. Distribution Respondents by professional body
Affiliation 91
8. Distribution of Respondents by Grade of
Membership 91
9. Distribution of Respondents by length of
Post qualification experience 92
10. Distribution of Respondents by academic
Qualification 92
11. Distribution of Respondents by position in the Office 93
12. Distribution of Respondent by sector of Organization 93
13. Distribution of Respondents by the type of
Organization they belong to in the private sector 94
14. Distribution of Respondents by type of
Professional firm 95
15. Distribution of Respondent by Number of
Employees in their respective offices 96
viii
16. Distribution of Respondents by number of
Professionally qualified staff in the offices 97
17. Distribution of Respondents by number
of years their organizations have been operation 98
18. Distribution of Respondents by Average Annual
turnover and their organization 99
19. Distribution of Respondents by type of Capital
Projects they have participated in 100
20. Distribution of Respondent by their responses on
the percentage of failure the capital projects they
have participated in attained 101
21. Distribution of Respondents by their responses on
type of failure the capital project they have
participated in attained 102
22. Distribution of Respondent by their responses on
direct relationship of degree of failure capital projects
to cost management practices 103
23. Distribution of Respondents by their responses on
causes of ineffective cost management practices – 104-105
24. Distribution of Respondents by their responses on
effect of ineffective cost management practices in the
delivery of capital projects in Nigeria 106
25. Distribution of Respondents by their responses on
combating techniques to problems of ineffective
cost management practices in delivery of capital
projects 107-109
ix
TABLE OF CONTENT
CONTENT
PAGE
Certification i
Dedication ii
Acknowledgement iii
List of Figures iv
List of Tables v
Table of Content vi
Abstract vii
CHAPTER ONE
1.1 Background of the Study 1-3
1.2 Problem Analysis 4-6
1.3 Aim and Objective 7
1.4 Relevant Research Questions 7-8
1.5 Definition of terms and Concepts 7B-7C
1.6 Scope and Limitation of the study 7C-7D
1.7 Significance of the Study and Justification for
Investigating it 7D-7E
CHAPTER TWO
2.1 Introduction 8-10
2.2 Models and Theories relevant to the Study 10-24
2.3 Cost Management of Capital Projects Discussed 24-72
2.4 Causes of Ineffectiveness of Cost Management
Practices in the Delivery of Capital Projects 72-74
x
2.5 Effects of Ineffective Cost management
Practices in the Delivery of Capital Project 75-77
2.6 Combating techniques to Cost management Practices 77-79
2.7 Summary of Chapter 79-81
CHAPTER THREE
3.1 Brief Outline 82
3.2 Restatement of the Research Questions 82-83
3.3 Characteristics of the Study Population 83
3.4 Sampling Design and Procedures 83-84
3.5 Data Collection Instruments 84
3.6 Validity and Reliability Test 84-85
3.7 Administration of the Data Collection Instrument 85-86
3.8 Procedures for Processing and Analyzing data 86
CHAPTER FOUR
Presentation, and Analysis of Data
4.1 Introduction 87
4.2 Respondent Characteristics and Classifications 87
4.3 Presentation and Analysis of Data
According to Research Questions 88-109
4.4 Analysis of Other Data 114
4.5 Summary 115
CHAPTER FIVE
Summary, Conclusion and Recommendation
4.6 Summary of the Study Including Comprehensive
Summary of the Findings 116-118
4.7 Conclusions Drawn from the Findings 118
xi
4.8 Recommendations based on the conclusions 119-120
4.9 Suggestion for further studies 121
References and Bibliography
Appendices
xii
ABSTRACT
This study appraises the Cost Management Practices in the Delivery of
Capital Projects in Nigeria with set objectives of (i) Identifying and
assessing the courses of ineffective cost management practices in
delivery of capital projects., (ii) Identifying and assessing the effect of
ineffective cost management practices in the delivery of capital
projects in Nigeria and (iii) proffering of solution to the problems.
Relevant texts, journals, personnal interviews and administered
questionnaires were used to obtain data from the stratified randomly
sampled population. A total of sixty seven questionnaires were
administered to respondents and fifty were returned making a 75%
response rate.
The questionnaires were structured and administered in the following
order. Architects-5numbers, Builders-9Numbers, Quantity surveyors17Numbers. Mechanical Engineers-4Numbers, Electrical Engineers4Numbers, civil/structural Engineers-17Numbers, others-17Numbers.
The percentile grading and Relative importance index and mean score
statistical techniques were used to analyze the data collected. The
analyzed data formed the bases of the findings (i) Lack of continuity in
government and corruption (causative factors) abandonment of
projects and extra budgetary (effects) and (iii) reduction and
corruption practices by government and accountability in Government
circle (solution) and these further led to the major recommendation
that Government should endeavour to reduce corruption practices as
it is associated with the cost Management and Delivery of capital
projects in Nigeria.
Key words: cost management practices and capital projects.
1
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF THE STUDY
Procurement of Capital projects in Nigeria has become a
source of worry to both Government and Private sector
developers as it is evident from the recent outcries of
unfavoured professional group(s) of the construction
industry in the inclusion exercises into the National Council
on Public Procurement. This Council has had some of these
set cardinal objectives as follows;
i. the establishment of pricing standards and setting
bench mark
ii. enduring the application of fair, competitive,
transparent, value for money standard and
iii. the attainment of transparency, cost effectiveness and
professionalism in the public sector procurement
system.
According to Onyeri (2008):
“The latest survey conducted by the World
Bank on procurement activities prior to the
enactment of the 2007 Act; that bribery and
corruption dominated Nigeria’s N775 billion
contract award in 2007. In fact the survey
did not tell us anything that we are not
aware of. We have always known that the
system of
2
procurement in this country is fraught with
corruption and corrupt practices”
The above statement in direct terms, confirms the belief that
there is problem in the cost management practices (if any)
adopted in delivery of capital projects in the country and this
projects ranges from mass housing projects through highways
and road infrastructures, other civil engineering works and
industrial engineering construction works.
According to (Adetola, 2007):
It is very disturbing to know about 90% of the road
contracts awarded by various levels of government
in Nigeria is done through only one professional
grouping – “Engineering” who designs, estimates
the cost of construction, makes payment and
contracts. It is the situation and arrangement that
forces former Minister ofWorks, Senator Ogunlewe
to verbally attack the engineers in a public hearing
on the Procurement Act.
The professional businesses in the construction industry
needs to be better and equitably distributed for improved
and specialized handling.
According to Ogunlewe (as cited in Adetola, 2007):
We are talking of due process, shouting due
process. What is due process? In the Federal
Ministry of Works where I preside as the minister, I
3
don’t believe there is anything that is due process.
How can there be due process when the engineers
designs the roads, estimates the costs of the roads,
settles the contractor, construct the road,
supervises the construction, recommend payment
for work done, approve the payment certificates and
the quality of work! All these by one person! Haba!
This cannot be due process. Not until roles are
assigned to relevant professionals like the quantity
surveyors to be in charge of cost and cost
management of roads and highways, can there be
any due process in Federal Ministry of Works.
The statement of the Senator does not only depict emotional
attachment towards resolution of the problems, but also it
substantially exposes possible areas and ways of resolving the
problem from his own angle of perception.
According to Oforeh, (1997): “The Nigerian construction
industry contributes at least 60% to the Nations yearly Gross
Domestic Products (GDP)”,
The implication of this statement when married to the other
points on cost management discussed above is that any problem
in the cost management of capital projects within the
construction industry is a major problem to the Nigerian economy
and the people and this should be taken serious.
4
1.2 PROBLEM ANALYSIS
Cost management of capital projects in Nigeria is poor and
demands urgent attention. This is obvious from incessant
abandonment of capital projects (Elephant Projects – Ajaokuta
Steel Rolling Plant to mention a few).
Complaint of cost overrun of capital projects and a host of other
cost related and disturbing issues.
Fair-enough, there is no doubt that mush words have been
undertaken in recent years in at least proffering solution to the
menacing problems of poor cost management of a capital
projects as it is evident form the consistent dramatized effort of
government and the scholarly works of eminent professionals
and educationists in this area. Notably among these works are
those of Mogbo (2000) “The procurement and financing of roads
in Nigeria through new private sector and Government initiatives
and that of Oladapo (2000) “Cost management of engineering
infrastructure”
Notwithstanding these efforts made so far, much is yet to be
desired particularly in area of efficient and effective cost
management of those projects, hence the need to identify the
problems constraining the efficient cost management of capital
projects
i. Late appointment of quantity surveyor in the delivery
of capital projects will certainly lead to ineffective cost
management practices.
5
ii. Non appointment of quantity surveyor in the delivery
of capital projects will certainly lead to ineffective cost
management practices.
iii. Inadequate budgeting at the inceptional stages of
project delivery will lead to ineffective cost
management practices.
iv. Inflation during the period of capital project delivery
can lead to ineffective cost management practices.
v. Lack of optimized concurrent professional engineering
environment in the delivery of capital projects
(industrial engineering construction in particular) will
lead to in effective cost management practices.
vi. Inadequate funding of capital projects can lead to
ineffective cost management practices.
vii. Corruption will obviously lead to ineffective cost
management practices in the delivery of capital
projects.
viii. Political instability will lead to ineffective cost
management practices in the delivery of capital
projects.
ix. Lack of continuity in government can lead to
ineffective cost management practices in the delivery
of capital projects.
x. Ignorance on the part of client will cause ineffective
cost management in the delivery of capital projects.
6
xi. Client’s contractual negligence will lead to ineffective
cost management practices in the delivery of capital
projects.
xii. Unanticipated increase in interest rate during the
period of capital project delivery will lead to ineffective
cost management practices.
xiii. Lack of cost risk analysis in delivery of capital projects
(industrial engineering construction works in particular
will lead to ineffective cost management practices.
xiv. Lack of cost control exercises at pre-contract stages of
project delivery will lead to in-effective cost
management practices.
xv. Lack of value analysis will lead to inefficient cost
management practices in the delivery of capital
projects.
xvi. Lack of value engineering will lead to inefficient cost
management practices in the delivery of capital
projects.
xvii. Lack of proper monitoring by cost managers and cost
engineers at construction phase of capital projects’
delivery will lead to ineffective cost management
practices.
xviii. Poor project management will lead to ineffective cost
management in the delivery of capital project.
7
1.3 AIM AND OBJECTIVES
AIM
The aim of this study is to appraise the general cost management
practices available in the delivery of capital projects in Nigeria.
OBJECTIVES:
The set of objectives in achieving the above mentioned aim is as
stated below:
i. To identify and assess the causes of ineffective cost
management practices in the delivery of capital
projects in Nigeria.
ii. To identify and assess the effect of ineffective cost
management practices in the delivery of capital
projects in Nigeria.
iii. To proffer solution to the problems.
1.4 RELEVANT RESEARCH QUESTIONS
i. How can early appointment of quantity surveyor in the
delivery of capital project bring about effective cost
management practices?
ii. How can correction of attitude of Non inclusion of
quantity surveyors and cost engineers in the delivery of
capital projects bring about improved cost management
practices?
iii. How can adequate budgeting for proposed capital
projects bring about improved cost management
practices?
8
iv. Do you consider tackling of inflation as a way of bring
about improved cost management practices in the
delivery of capital projects?
v. How would optimized concurrent professional
engineering environment bring about improved cost
management practices?
1.5 DEFINITION OF TERMS AND CONCEPTS
Optimized concurrent engineering: An environment that
provides opportunity to
substantially reduce the
total cost of a project
through integration of
construction / engineering
product teams, containing
members of various skilled
disciplines, enabling a
simultaneous contribution
to an early product
development and
definition.
Valued Analysis: It involves the analyses of
a product with respect to
product process cost and it
is typically a technique
used on existing
9
items/products in light of a
new processes, materials
or assembly method being
available.
Value Engineering: It is an approach that
vigorously examines the
relationship between a
product function and cost
and can be used during the
concept stage of a product
development.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study focuses on construction industry professional
practicing firms, clients of the industry (public and private),
selected industrial engineering construction companies, and
construction and engineering manufacturing firms.
These were some of the extraneous and constraining
circumstances that created imperfection in the study
Finance was one of the main constraining factors in
this study as there was not enough funds to carryout and supervise the field work as the researcher
would have expected,
The researcher is based in Lagos and had timeproblem to fully follow-up personally and supervise
the administration of the questionnaire to
respondents. The researcher was not available all
10
the time and so friends and colleagues helped out to
the best of their ability.
Some of the respondents did not comply to
instructions and requests as expected.
1.7 SIGNIFICANCE OF THE STUDY AND JUSTIFICATION
FOR INVESTIGATING IT
This thesis examines the causes and impacts of ineffective
cost management practices in the delivery of capital
projects in Nigeria with a view to proffer solution to these
problems.
However, the significance of the study is to enlighten the
government and prospective private sector clients on the
observed associated problems of cost management
practices in the delivery of capital projects and ways out of
the problems when investigating them.
It will equally educate the would-be clients on their
contractual obligations when embarking on such projects. It
will also highlight the need for and appointment of proper
professionals when embarking on such projects.
It will highlight the accruing benefits to proper cost
mismanagement of capital projects.
The result of the research will aid government, their
respective agencies and concerned private sector
developers in revisiting existing and on-going projects that
are presently suffering from these professional/technical
11
denials. The result of the research will equally help the
different professional actors to know about the parts they
are expected to play at strategic periods of capital project
delivery with special regards to cost management practices.
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