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.
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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Item Type: Project Material | Size: 68 pages | Chapters: 1-5
Format: MS Word | Delivery: Within 30Mins.
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