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FACTORS AFFECTING COST OF CONSTRUCTION IN NIGERIA
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This research work is on Factors affecting cost of construction in Nigeria. There are more benefits in estimating the cost of a potential construction job than in not estimating before commencement. Cost estimate, to a client, is necessary in cash flow management. To an investor, it is necessary to support evaluation of project feasibility and to assess the scope of work. To a consultant, construction cost estimate can serve as a basis for job performance measurement (Baccarini 2004), in contractor selection, as an exhibit in construction contract disagreement, and in post-work evaluation of completed jobs (work audit), and to a contractor, it is the determinant of job procurement (in bidding for construction jobs) and on cash flow management. It is a guide because cost estimate is different from contract sum and actual cost of construction and may not be equal. Contract sum is the amount of compensation stated in the Contract Agreement for the performance of the work. It is in order to say construction costing is important.
1.0 Background of the study
This research work is on Factors affecting cost of construction in Nigeria. The growing need for construction of all types coupled with a tight monetary supply has provided the construction industry with a big challenge to cut cost.
According to Mendelson and Greenfield (1996) the remaining part of the twentieth century would involve corporations, institutions and government in a race to survive. The attendant dwindling economic fortune of nations economies around the World have geared up the participant in these sectors (the client in particular) to take up the challenge of ensuring efficient use of their resources to obtain value for money in terms of performance.
The total cost of construction in normal circumstances is expected to be the sum of the following cost: Materials, Labour, Site Overheads, Equipment/Plant, Head office Cost and Profit but in many parts of the world particularly in Nigeria, there are other costs to be allowed for.
These costs according to Mbachu and Nkado (2004) have obvious negative implicat ions for the key stakeholders in particular, and the industry in general. To the client, high cost implies added costs over and above those initially agreed upon at the onset, resulting in less returns on investment. To the end user, the added costs are passed on as higher
rental / lease costs or prices. To the consultants, it means inability to deliver value – for – money and could tarnish their reputation and result in loss of confidence reposed in them by clients. To the contractor, it implies loss of profit through penalties for non-completion, and negative word of mouth that could jeopardize his/her chances of winning further jobs, if at fault.
The proposed work will investigate and report the other costs to be allowed for, which are the basic factors affecting construction cost in Nigeria and also proffer solutions to how construction cost can be minimized.
1.1 Statement of the Problem
The demand for more construction of all types, coupled with a tight monetary supply has provided the construction industry with a big challenge to cut costs. The problem of high contract costs of all aspects of construction is becoming obvious. Consequently, substantial increases are being observed in projects.
This substantial increase has brought about loss of client confidence in consultants, added investment risks, inability to deliver value to clients, and disinvestment in the construction industry.
1.2 Aim and Objectives of the study
The aim of the study is to find out the factors affecting construction cost in Nigeria and proffer solutions to how construction cost c an be minimized.
The objectives of the study are as follows:
- To identify the main factors affecting construction cost in Nigeria.
- To determine the severity rank of the factors amongst clients, consultants and contractors.
- To determine the agreement ranking factors between clients, consultants and contractors.
- To proffer solutions on how to minimize construction cost in Nigeria.
1.3 Research Hypotheses
To test the hypothesis:
1 (a). Ho: Contractors and Clients do not generally agree on the severity rank of the factors affecting construction cost in Nigeria
1 (b). H1: Contractors and Clients generally agree on the severity rank of the factors affecting construction cost in Nigeria
2 (a). Ho: Clients and Consultants do not generally agree on the severity rank of the factors affecting construction cost in Nigeria
- (b) H1: Clients and Consultants do not generally agree on the severity rank of the factors affecting construction cost in Nigeria
- (a) Ho: Consultants and Contractors do not generally agree on the severity rank of the factors affecting construction cost in Nigeria
- (b) H1: Consultants and Contractors generally agree on the severity rank of the factors affecting construction cost in Nigeria
1.4 Significance of the study
An assessment of the study would enable Clients, Contractors and Consultants give an economic approach to construction work such that they would be able to identify the dominating factors leading to high construction cost in Nigeria.
The application of the solutions proffered to minimizing construction cost would restore client’s confidence in consultants, reduce investment risks, and generally boost the viability and sustainability of the industry
1.5 Scope and Delimitations
The scope of this research is limited to identification of essential factors affecting construction cost and proffering solutions on how to reduce construction cost in Nigeria. The study is limited to projects in the Lagos metropolis of Nigeria because there is easy access of information in the Lagos metropolis by the researcher.
Target respondents for this study are the principal actors in the construction industry namely: the Client, the Consultant and the Contractor.