ABSTRACT
The cost of a project varies from one place to another and
the effect of this variation is due to the difference in pricing of
construction resource input from one region to the other. The study embark on
an exploratory study on the effect of location on project cost within the
Ghanaian construction industry. In achieving the aim for the study, perception
of construction professionals regarding the effect of location on project cost
in Ghana were gathered. The method selected to collect data for this study is
survey questionnaire. A research population considered 41 quantity-surveying
professionals who directly deal with cost of construction resource input in
various quantity surveying institutions as the targeted group for information.
Frequency tables, percentages, pie charts, and relative important index (RII)
was used to present the results. Results from the study noted that location of
a project has effect on the cost level of Construction resource input. In
addition, Cost of transportation is the most influenced factor affecting cost
of construction resource input. The study recommends that Ghana Institution of
Surveyors (GhIS) and Architectural and Engineering Service Limited (AESL)
should come together to outline the process and method, as well as providing
information for developing this new index.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
The construction industry could be
defined as an integral division of economy, which take care of planning,
designing and constructing of physical infrastructure such as roads, hospitals,
schools, housing and enhanced facilities for other industries. Construction is
a service market, responsible for the obtaining its inputs from various sectors
which are mostly interrelated and interlinked in a complex manner (Ofori,
1980). Construction has its end products to be site related and include
deliverables that go through various process of putting together resources such
as materials, labour and plant over an expected duration (Owusu-Ansah, 2014).
Quartey (2013) asserted to the fact that the industry can be responsible for up
to 20% of the national economic growth and employs up to 12% of the total
labour force.
The total cost of construction
projects is mostly established by summing the cost of materials, construction
plant and equipment, labour, overheads and profits (Seeley, 1995). Normally,
potential clients depend on construction expertise to determine the possibility
and practicability of an intended project. Cost estimation serves as one of the
essential activities performed in order to satisfy clients’ search for project
cost (Rowings, 2003). If the initial cost estimate is expensive, it will
discourage the client from continuing further with the project and if it is too
low, it is perceived that no quality works would be done and most cases it may
end up in dissatisfaction on the part of the client (Kissi et al., 2015). As
soon as project ideas are conceived, cost estimation is used to define the
necessary financial commitment needed to build the facility. Estimates are not
just prepared but reviewed frequently as the project
scope and demands increases, and for most situations, used throughout the
entire construction process.
To answer the most asked question,
“What would be the cost of this project?” estimate must be prepared. Obviously,
the exact cost of project cannot be determined unless the project is completed.
For investors to be aware of the extent of their investment, some form of
approximate expected costs of construction project should be established. The
success of most construction project someway-somehow relies on the accuracy of construction
costs estimation. Conventionally, cost estimates play an important role when it
comes to measuring construction costs before their occurrence and evaluate
their feasibility and profitability.
According to Abdou et al. (2004),
construction cost estimation is an important task in cost management processes
but it is often carried out under settings of uncertainty. The costs
accompanying construction projects of tomorrow around the world are both varied
and unpredictable. The erratic conditions of commodity prices change of
government and currencies fluctuations conspire to make project investment and
development decisions highly complicated and burden with risk (Neal and
Rawlinson, 2016).
The more negligible an estimate’s
variance with respect to the actual cost of the project, the more reliable the
information provided becomes and the better decision-making processes can be
tackled on the project site. The accuracy of cost estimate will rely on
available information and tools used at each phase of the project (Kehinde et.
al, 2006). The performance of every construction project is dependent on its
cost models. Therefore, in order to make good judgement on project design and
cost, it is necessary to use an appropriate cost model (Hakan and Elcin, 2007).
Additionally, the Cost Indices
endeavour to ascertain the mean variance in the project cost incurred by
clients for a fixed resource (Gonglin and Xiangrong, 2010).
Kyeong et al. (2008) asserted that
though construction projects’ do not change in terms measure and use, their
final account is changed by location, client’s specification, economic
condition, time, site, technological advancement and alternative components.
With regard to time, building cost indices may be used to assess the differences
in cost of project at different dates (Gichunge et al., 2010).
1.2 PROBLEM STATEMENT
Rising cost of construction input
resources has been one of the major setback for indigenous contractors in
Ghana. However, it is a well-known fact that instability and uncertainty in the
prices of construction resource input increases the risk of contractors in
fixed-price contracts and may settle at bid inflation as well as price
speculation (Ilbeigi et al., 2014). According to Hakan and Elcin (2007), as the
construction sector matures, projects are getting more sophisticated and their
sizes are getting bigger. Hence, it is becoming more challenging to complete
the projects within estimated cost limits and on time. Construction
professional are faced with risk and uncertainties during the construction
process which have resulted in some difficulties, thus the decisions to be
taken on project may be deferred (Hakan and Elcin, 2007).
The Building and Road Research
Institute (BRRI) a divisional department of Council of Scientific and
Industrial Research (CSIR) which was established 1968 provides updates on relative
price changes of construction input resources. Adorbor (2014) asserted that CSIR-BRRI used to publish monthly
construction cost indices developed with the local price adjustment formula
(LPAF) using four component parameters of the unit rate. These component
parameters are; foreign exchange of all inputs, local raw material input, local
labour input and fuel cost. The Ghana Statistical Service (GSS) on the other
hand published the Prime Building Cost Index (PBCI), used by Consultants in
evaluating fluctuation on abandoned or delayed construction project.
There are indeed several timeline
approaches in adjusting cost of construction. These construction cost
fluctuations adjustment procedures are mostly influence by time but not location.
To gauge the reasonable construction cost adjustment escalation in relation to
variation in major building material, plant and labour prices, it is therefore
essential to investigate into locational factors affecting project cost.
The Researcher strived to find out
if location play a role in project cost variance using data from professionals
within the construction industry with in-depth knowledge regarding construction
resource input that best reflect the actual cost to the stakeholder.
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