FACTORS AFFECTING INDIGENOUS CONSTRUCTION CONTRACTORS IN BUILDING PRODUCTION IN NIGERIA

FACTORS AFFECTING INDIGENOUS CONSTRUCTION CONTRACTORS IN BUILDING PRODUCTION IN NIGERIA

The following are factors affecting indigenous construction contractors in building production in Nigeria:

Monitoring and Control Strategies:

Monitoring and control are two management functions that play a very important role in project success. Planning defines the strategies, tactics and methods for achieving project objectives, while monitoring and control provide the required checks and balances for ensuring that the plans and overall project objectives are achieved. Plans cannot bring about the required end by themselves; they must be complemented with monitoring and control to achieve their goals.

Arditi, (1985), Mauricio & Carlos, (2002) confirmed that the performance of companies in project delivery depends largely on their control structures as well as their production planning. Kharbanda& Pinto, (1996) maintained that most, if not all, major project failures could be traced to inadequate and inaccurate planning or blind adherence to the originally formulated plans regardless of how the environment changed in the interim.

Monitoring and control are regarded as management functions and are processes in the delivery of a project. Enshassi, (1996) describes project monitoring as the process of collecting, recording and reporting information concerning any or all aspects of the performance of a project. Otieno, (2000) describes it as a continuous assessment of a programme or project in relation to the agreed implementation schedule or plan.

Communication

Communication in small firms is often good, although poor communication skills of the manager can be a problem (Fryer, 1985). In developing countries, there is often no means of communication between the workers on site and the contractor’s office. Urgent site problems, therefore, cannot be solved immediately because the site workers cannot talk to their manager or owner.

The ILO (1987) has further noted that the level of supervision by the client can also affect the performance of the contractor if the client supervisor is not qualified, or there is no effective communication between the contractor and the client. Shortage or the lack of client supervision staff in some developing countries also contributes to the contractor’s problem.
This may result in the contractor doing remedial work, which can be very costly for small contractors – reducing profit margins and putting a strain on cash flow.

Ineptitude of Contractors

Most indigenous construction contractors had no knowledge of or experience in contracting business. Many of these contractors live far away from the sites of the projects and probably made occasional visits of the projects only. The made it difficult for the divisional engineers to supervise the projects effectively and since the contractors were actually not interested in the actual work, mobilization fees collected were not used for the purpose for which it was given.]

Occurrence of Reworks

To improve quality it is necessary to understand the root causes of rework, that is, the basic reason for its existence or set of conditions that stimulate its occurrence in a process. A process consists of a number of activities or operations which acting on inputs in a given sequence transforms them into outputs.

A process may consist of both value adding or non-value adding activities. The former are activities that convert materials and/or information towards that which is required by the customer and the latter are activities that take time, resources or require storage and do not add value to the output.

Cultural Impact

Local building contractors employ people from their family, the clan and the village. It has found that, when a contractor employ only relatives, work input is very low when the owner is away from the site (stretton,1984) If the contractor decide otherwise and hire workers from outside the village they are alienated from the village (stretton, 1984)

Corruption

The Longman’s Dictionary of Contemporary English (1995) defines corruption as dishonest, illegal or immoral behaviour especially from someone with power. Corruption, according to Ayodele (2008) implies using one’s power in a dishonest, illegal or immoral way to get an advantage for oneself.

According to Ayodele (2008) from socio political – cum – financial perspective, Boeninger (1991) percieves corruption as “any action taken in socioeconomic, political and financial realms which is morally unacceptable, bad an or illegal. Expanding Boeninger’s conception, Lash (2003) explains that corruption is immoral and dishonest or exploitation of power in economic financial and political spheres for personal gains. According to Ayodele (2008) an examination of these definitions and others not stated here indicates that corruption is a manifestation of one or a combination of:
i) Fraud – a reflection of any instance in which are party deceives or takes advantage of another commonly regarded nowadays as advanced fee fraud (419)
ii) Bribery – an illegal influence on any person in the exercise of public duty
iii) Forgery – a fraudulent alteration of a written document or seal with the intent of injuring the interests of another person.
iv) Embezzlement– a wrongful acquisition of property by a person who has been entrusted with such property.
v) Extortion – a crime of obtaining something such as money from somebody using illegal methods or persuasion.

Political Interference

Omole (1986) reveals that 80 percent of the contractors in Nigeria are indigenous companies. The government agencies, in most cases are teleguided by the political heavy weight to award contract to party stalwarts at very high prices.

The consultants estimates are disregarded in most cases when awarding contracts and where possible manipulated. It is a general knowledge that governments and parastaltals particularly during the last political era give a very short time to consultants to prepare contract document for tender purposes.

Additional Work

Additional work is related to design changes, which is due to lack of detailed briefing on the functional and technical requirements of the projects by the clients (Mansfield et al, 1994).

Wrong Method of Estimation

This factor could be attributed to the unpredicted inflationary trend, lack of adequate training and experience at the senior management level, and fraudulent practices Mansfield et al (1994)

Cash Flow

Indigenous construction contractors in developing countries are often the ones on the fringe of the construction industry and undertake work unwanted by the large contractors. Most of their work, comprising construction, maintenance and refurbishment work, is from the public sector.

Consequently, they are likely to be greatly affected by the state of the country’s economy because of, for example, changes in the government’s expenditure policy (Ruddock, 1992). As most government agencies experience financial problems, there are delays of payments to contractors – with a consequent adverse effect on the contractor’s cash flow (Ofori, 1991). This then affects the operation of the contractor, ultimately hindering the projects from being delivered as required (Adam, 1997; Jannadi, 1997).
Many small contractors also experience difficulties in obtaining money from financial institutions to finance their business due to the high levels of bankruptcy in the industry, hence the initial capital for the business must come from the contractor (Miles 1979). In addition, most small and medium contractors in developing countries have very limited funds as they are seldom able to offer the necessary fixed assets as collateral (Ofori, 1991).
Indigenous construction contractor’s therefore operate on very tight budgets, and when they make a loss on one project they tend not to have sufficient resources to continue in business (Stretton, 1984). Stretton further noted that the success of indigenous construction contractors is dependent on the type of contract used – lump sum contracts requiring contractors to have sufficient finances for purchasing materials and paying workers.

Waste On Site

It seems that the little waste of construction material on site should have a very minor effect on the total material cost. However, this minor effect can reach up to 50 % of the total material margin of a project. So waste on site has to be considered on tendering any project (Elinwa and Silas, 1993)

Transportation Challenges

As the government increases the price of fuel, transportation companies raise the cost of their services to cover the fuel increase and that obviously translates to an increase in transportation cost and bad road also contribute to this because so many vehicle will refuse to go in to business with these contractors once they know the road to the site is so bad.

Equipment Cost

Equipment cost becomes more expensive as new technology or special equipment is requested. Most heavy equipment run by diesel fuel and the price of diesel fuel has increased significantly.

Mode of Financing Bonds and Payments

Ogunlana et al (1996) reported that financing and payment of completed works is responsible for cost escalation in Nigeria. Generally, contractors are sometimes not paid in accordance with the contract conditions. There are cases where clients fail to honour Architect’s certificate of payment for up to 6 months or more whereas the contact conditions, in most cases stipulates about 28 days .

Most contractors when preparing their tenders make allowance for partial financing of the project. They charge the clients for payments of interests and bank charges on moneys they anticipate to borrow from the banks to finance these projects (Omole, 1986)

The irregular financing of public projects is a major cause of liquidity problem for contractors: however, contractors can be paid in accordance with the contract agreement if clients can generate the availability of adequate funds before the project commences (Mansfield et al, 1994)

Construction Management Skills

Deficiency in planning and management skills is said to be the greatest single problem for small-scale contractors generally (ILO, 1987). In developing countries, the local construction industry lacks the capacity and capability of undertaking large construction projects, resulting in the continual domination of expatriate construction com undertaking all major construction projects (Adam, 1997). Consequently, smaller companies find it hard to acquire experience in their type of project (Jannadi, 1997) leading to contractors with limited management and technical skills (Ofori, 1991).
This affects their ability to acquire building materials, manage their workers, successfully bid for work (Stretton, 1984) and generally contributing to poor performance (Ofori, 1991).

Given the fluctuation in the building industry, employment in the construction industry in third world countries offers less employment security (Stretton, 1984). In addition, small contractors in developing countries experience a shortage in skilled labour due to the salary and the security of employment offered by large construction companies being greater than that offered by the small contractor (ILO, 1987). Furthermore, more young graduates are being assigned to oversee projects and their “lack of skills and experience at both the supervisor and worker level” has been a contributing factor (Lewis, 1984).

Contract Documentation

Inapproriate contract documents has been identified as one of the most common problems affecting the operation of small contractors Ofori (1991). In developing countries, most public sector clients do not use a standard set of contract documents and building plans.

The methods of construction are also different which often confuses the contractors.

Working Relationships

Clients are hard to find and easy to lose and a contractor who finishes a contract on time and with a good reputation will be one step ahead of his competitor when the next invitation to tender comes along (Miles, 1980). However indigenous construction contractors have been known to express disappointment with their working relationship with the client’s representative – mainly because of the unsympathetic attitude to the contractor’s problems regarding shortage of materials and the delay in payments.