AN ASSESSMENT OF FACTORS INFLUENCING COST DIFFERENTIAL OF CONTRACT SUM OF BUILDING PROJECT
ABSTRACT
The
research study on “An Assessment of Factors Influencing Cost
Differential of Contract Sum of Building Project”, to achieve the aim of
this research, the following objectives were established: To identify
the factors influencing cost differential of contract sum, to assess the
factors of cost differential of contract sum of building project and to
determine the effects of factors influencing cost differential of
contract sum. The research questions are, what are those factors cause
differential, which are the critical factors and what affect the
differential on contract sum. The scope focus on the cost differential
of contract sum of building contract in Abuja. The instrument used for
data collection was structured questionnaire divided into three section
stated in appendix and respondents are quantity surveyors, architects
and project managers. The procedures for data collection are primary
and secondary source. The method used for data analysis was percentage
and relative important. Index was also adopted with a five prints scale
ranging from 1 (not true) to 5 (completely true). Forty (40) data was
distributed and 30 copies retrieved. From the findings analysis
nominated sub-contractors and nominated suppliers have the highest rank
that cause extension of time due to delay of work and supply of goods or
materials on site. The discrepancies of contract drawing is the second
rank that causes cost overruns due to change of contract drawing of
bill of quantities and specification and also civil commotion due to the
strike that cause delays and affect the high cost to the contract sum.
The following recommendations are; the clients or funding agency should
ensure that adequate funds and other resources of funds are available
before construction work starts and prompt payment should be paid at a
contract agreement. All errors should be corrected during design phase
and clearly scope of work should be defined to avoid any discrepancies
may likely occur in contract documents
CHAPTER ONE
1.0 INTRODUCTION
It is
important to secure project that will satisfy the client’s requirement
with regard to the cost, time functions and quality. According to Ayeni
(1997), said contract sum can be defined as a total figure of a
contract to carry out the work and it is also a price agreed with the
contractor and entered into the contract. Ogunsemi (1997), actual cost
is the total work expenses of work done during execution of work
progress from starting stage to completion stage of a project.
The
contract sum may be subject to adjustment under the terms of the
contract for example; variations, fluctuations, provisional sums, prime
cost sums, payment to nominated sub-contractors or nominated suppliers,
statutory fees/compliance with the new government order, additional
requirement by the employer, substitution of materials, goods and
workmanship specified in the contract, payments relating to opening-up
and testing the works etc which may affect the contract sum.
One major
worry to professionals in the construction industry is the wide gap
deviation between actual cost figure and contract sum. Before a project
is embarked upon, bills of quantities are prepared for which the agreed
sum becomes the contract sum on which tenders are floated for tenderers
to tender. The contract sum in the bill of quantities is expected not
to exceeded after the project but interestingly upon completion when the
actual cost is prepared it is realized that there have been deviations,
either the contract sum exceeds the actual cost or the actual cost
exceeds the contract sum. If the contract sum exceeds the actual cost,
then the general convention is that the remainder is given to the client
and it becomes an advantage to the client or the financiers as well as
the contractors’ team and that of the consultant. This may imply that
the contractor’s outfit may have employed very stringent cost control
mechanisms to keep the construction cost within budget. The client
would have also achieved value for the money committed into the
project. Additionally, the consulting team would have gained the
credibility of being able to supervise and manage a construction project
within its initial established budget.
However, if
the actual cost exceeds the contract sum, additional money will then be
required and this becomes a disadvantage to the client, the project’s
consulting team, and the contractor as well, causing a whole lot of
disappointment on the part of the client. One other occurrence in
Nigeria these days is the abandonment of most funded projects by the
government of Nigeria. The major reason is that, lack of funds to
finance the projects in completion stage as estimates prepared, which
formed the basis for initiating these projects, have been exceeded.
The actual
cost usually stated as the total on the summary of cost is determined
after the adjustment of prime cost and provisional sum items,
re-measurement of provisional quantities, measurement of variations,
valuation of fluctuations, and ascertainment of contract claims. The
express provisions under which the contract sum of a construction
project can be altered are normally stated in the conditions of
contract. The quantifiable factors for the adjustment of the contract
sum to obtain the actual cost include variations, re-measurement of
provisional and prime cost sums, fluctuations, and claims. The bigger
the project the higher the difference between initial and actual cost of
construction. As a project takes longer to be complete, effects of
fluctuation are also more pronounced.
Frimpan, et
al (2003), that the appropriate funding levels should always be
determined at the planning stage of the project so that regular payment
could be paid to contractors for work done, that in order to improve
contractors managerial skills there is the need for continuous work,
training programmes for personnel in industry to update their knowledge
and be familiar with project management techniques and processes, that
effective and efficient materials procurement and management system
should be established within projects, indicating that material
procurement mismanagement has the potential to cause major delays to
construction projects resulting in otherwise unwarranted cost overruns.
Giwa
(1988), allowances made for prime cost in contract bills, cause overruns
in contract sum because the actual costs are in most cases, higher.
Ogunsemi
(2007), because the quantity surveyor usually allowed for arbitrary
figures. In fact the amount allowed for, has often led to high figures
in order to be on the safer side. Ogunsemi opined that, the way and
manner by which provisional sums are allowed for in the contract bill
and later expended has a lot of impact on actual cost of construction
project. The more the provisional sum are inserted into contract bills,
the less precise and realistic will be the initial contract sum with
respect to the actual cost.
Ogunsemi
(2007), an ideal bill of quantities is that, which contain neither prime
cost nor provisional sum. In a study carried out in Nigeria on
building projects by the Akewusola during the prosperity period of
1972-1978 the mean of cost overrun was 46.76% out of this 7.79% was
contributed by adjustments of prime cost sum while 3.23% from adjustment
of provisional sums during the recession period of 1979-1983, mean of
cost overrun was 65.83%, out of this were 28.37% contributed by
adjustments of prime cost and provisional sums respectively, during the
depression period 1984 to date, mean of cost overrun was 22.39% out of
which 1.97% and 0.96% were contributed by prime cost and provisional
sums respectively.
Azhar et al
(2008), cost overrun causes in the construction industry due to some
factors as found were fluctuation in prices of raw materials, unstable
cost of manufactured materials, high cost of machineries, lowest bidding
procurement procedures, poor project site management, poor cost
control, delays between design and procurement phases, incorrect and
inappropriate methods of cost estimation, additional work, improper
planning, unsupportive government policies etc.
Odeyinka et
al (2006), the budgetary reliability of Bills of Quantities (BOQ) in
building project procurement and concluded that the difference between
the budgeted cost and actual cost incurred differed greatly depending on
the project type. The investigation concluded that with housing
projects the percentage deviation from the BOQ was between -3.43% and
+3.85%. With educational project, the percentage deviation was found to
be between -3.69% and +17.05%. The range with regard to commercial
projects is between -19.94% and +19.92%. When refurbishment projects
are looked at the percentage deviation was found to be between -10.72%
and 36.90%. This information shows that there can be a huge difference
between the budgeted cost and actual cost with commercial projects; this
is comparison to housing projects which have a small and acceptable
deviation from budgeted cost. It is therefore important to focus on
commercial projects which includes capital projects, with a view on
identifying the risks which occur within commercial construction and
establishing why the actual cost is so often different from the original
budgeted cost.
Ayodele
(2004), the effect of the adjustment prime cost and provisional sums
are, sub-contractor fully paid for work executed, cost overrun and time
overrun whereby the client and their consultants should not be in a
hurry about contract documentation, but make sure (as much as possible)
that detailed Architectural, Civil, Mechanical and Electrical drawings
are made available to the Quantity Surveyor for detailed bill of
quantities before tender.
1.1 STATEMENT OF PROBLEM
The client
desire is that, the contract sum will be equal to the actual cost if all
necessary precautions were taken into consideration at the time of
preparation, the question here;
– What differential will be acceptable by the client?
– What are the liability factors that cause these differentials?
– What way can be minimized?
1.2 AIM AND OBJECTIVES
AIM
A study on the impact of cost differentials between contract sum of building project.
OBJECTIVES
- To establish contract sum of different building projects.
- To establish the actual cost of the buildings selected in objective .
- To establish the impact of the contract sum on the actual building cost.
1.3 RESEARCH HYPOTHESIS
It has been perceived that actual cost is higher than contract sum.
1.4 SIGNIFICANCE OF THE STUDY
To establish data that could be use in control and future building projects.
1.5 SCOPE AND LIMITATION
SCOPE
The study
is restricted to contract sum and actual cost statement only ten (10)
completed project in Kogi State executed by ten (10) different
contractors using cost plus fluctuating fee contract.
LIMITATION
The
limitation to the accuracy of the research are limited time,
insufficient resource (money), secondly, affection and the hazard nature
in which contract document are kept.
REQUEST FOR PROJECT MATERIAL
Good Day Sir/Ma,
WARNINGS!
PLEASE make
sure your project topic or related topic is found on this website and
that you have preview the abstract or chapter one before making payment.
Thanks for your interest in the research
topic. The complete research work will cost you N2000 and we will send
the material to you within 24hours after confirming your payment.
Make the payment of N2000 into any of the account
number below and we will send the complete material to you within
24hours after confirming your payment.
Account Name: Agada Leonard E
Account No: 2070537235
Bank: UBA
Or
Account Name: Agada Leonard E
Account No: 3049262877
Bank: First Bank
Or
Account Name: Agada Leonard
Account No: 0081241151
Bank: Diamond Bank
After payment, send the following information to us through this email
address: enemsly@gmail.com
Topic paid for:
Amount Paid:
Date of Payment:
Teller No or Transaction ID:
Name of Depositor:
Depositor Phone Number:
Email address:
NOTE: The material will be forwarded to the email address you provided
within 24hrs after confirmation of the payment.
Thanks.
Agada Leonard E.
For: Enems Project.
For more information visit our contact page @ CONTACT US
No comments:
Post a Comment