IMPACT OF CONTRACTOR’S RESOURCES MANAGEMENT ON COST AND TIME PERFORMANCE OF CONSTRUCTION PROJECTS IN ONDO STATE

CHAPTER ONE

INTRODUCTION

• Background to the Study

 

Performance of construction projects is very crucial in the growth and development of any economy. They also play a critical role in the economy in terms of wealth creation and provision of employment opportunities. Infrastructure comprises of services such as power, telecommunications, water supply, sanitation and sewerage, solid waste collection and disposal, piped gas, buildings, dams and canal works, railways, urban transport, ports, waterways and airports (World Bank,2012).

Throughout the world, the business environment within which construction firms operate continues to change rapidly. Firms failing to adapt and respond to the complexity of the new environment tend to experience survival problems (Lee, 2009). With increasing users’ requirements, environmental awareness and limited resources and high competition, contractors should continuously strive to improve their performance (Samson &Lema, 2011).

There are several factors that impact on performance of projects. They include: Shortage of skilled manpower, poor supervision and poor site management, unsuitable leadership, politics, corruption and shortage and breakdown of equipment (Faridi& El-Sayegh, 2010).Conflict, poor workmanship andincompetence of contractors had also negative impact on project performance in sub-saharan Africa (Carter, 2012). Carter further noted that project managers should be given full authority to implement the projects. Harries and Reyman(2010) noted that on average 65 percent of building projects constructed by construction firmsin Africa were considered to have failed. These projects were suspended  and later contracted to other firms. Therefore, performance of projects is a subject many scholars have discussed with the objective of ensuring that projects are undertaken within the stipulated cost, time schedule and meet the desired quality. However, little attention has been focused on building projects constructed by construction firms and the above studies have neglected the area of management practices. There is need to understand therefore the effect of management practices on the performance of constructionprojects.

Nigeria’s economic growth rate was on average rate 5.3 percent from 2003 to 2007. However, construction proved to be a drag on the growth (Robert, 2013). Despite of this growth, the country did not meet the 7 percent growth per annum required to attain the Millennium Development Goals. As of 2015, the gap between the amount needed and the amount available was 1.1 billion dollars or 13 percent of GDP. That gap would reduce significantly by adopting appropriate technologies to improve performance of the building sector (Bjarne,2013).

Under the Vision 2030, the Nigerian government aspires for a country firmly interconnected through a network of buildings and other infrastructural facilities. It further proposes intensified application of science, technology and innovation to raise productivity and efficiency in the construction sector. The government indicated that investment in the nation’s construction will be given the highest priority. Through Vision 2030, annual infrastructure investment requirements for building and other infrastructural facilities are likely to average around 3.5 percent of world gross domestic product (OECD, 2012). In fact, infrastructure sector financial requirements in Nigeria were estimated at KES 486 billion in 2014/15 (AfDB, 2013). In developing countries, construction projects are more often not financed adequately. Governments are increasingly seeking financial and technical support from the private sector to aid construction and maintenance of construction (Matindi, 2010).

Evidence from KPMG report (2014) indicated that about 68 percent of the building projects in Africa constructed by construction firms experienced cost and time overruns. In addition, most of the buildings did not meet the expected quality standards and were full of pot holes in less than five years. A number of them were contracted to other firms to construct them again (Elias &Kagwathi, 2012). It was also noted by Harrison (2014) that financial constraints and lack of modern construction equipment to a great extent compromised the quality of infrastructureprojects.

Harrison (2014) indicated that public private partnerships would help to mobilize the resources required to improve performance of infrastructure projects.

KPMG report (2014) noted that the quality of Nigerian building construction projects generally needed to be addressed. It indicated that local construction firms faced more challenges than foreign firms in delivering quality buildings. Furthermore, weaknesses in supervising construction contracts and rampant corruption compromised the quality of the projects constructed. With the establishment of the new Nigeria Buildings Board, it was hoped that the quality of building projects by local construction firms would improve and match the standards of those constructed by most foreign construction firms (Gitenya&Ngugi,2014).

According to Majanja, (2012) financial constraints hinder successful delivery of infrastructure projects in Nigeria. Other factors such as project monitoring and evaluation, project risks management and management of group dynamics also affect the performance of construction projects (Skeggs, 2011; Ugwa&Heupt, 2013). Other factors that affect performance of construction projects are; environmental factors (increase in scope, inflation), client commitment to project financing requirements, project professionals’ ability to generate accurate designs, political interference, corruption and poor cost estimates (Garrish, 2011).

1.1.1          Project Management Practices

 

Project management practices adopted by a firm enabled it to accomplish an activity or a project in an effective and efficient manner (Miller &Lessard, 2011). There are many factors and project management practices that determined the performance of projects. They include user involvement, executive management support, proper planning and mobilization of resources, realistic expectations, competent staff, clear vision and objectives, availability of resources, competence in technology, managing scope, managing issues that arise from project teams, monitoring and evaluating project progress, project risk management among others (Skeggs, 2011). However, based on Relative Importance index (RII), project resource management, project monitoring and evaluation, management of group dynamics and project risk management were identified as critical management practices that determined performance of construction projects (Ugwa&Heupt, 2013;Skeggs, 2011).

Project resource management involved identifying financial, human, physical and technical resources and organizing them in a way that led  tosuccessful completion of projects (Crivelli& Gupta, 2013). Financial resources were required by project contractors to buy the equipment and machinery neededin undertaking the building projects and meet other expenses related to the project such as salaries and wages for the workers and cost of fuelling the vehicles (Miller &Lessard, 2011). These equipment and machinery included tippers, graders, escavators and rollers. However, most of these equipment are very costly.

According to Harrison (2008), project monitoring and evaluation involved routine collection and analysis of information to track the progress of a project. Monitoring and evaluation of infrastructure projects was recognized as an indispensable management function. It helped in tracking the progress of infrastructure projects. It also provided regular reports on the implementation of projects in terms of input delivery, work schedules and targeted outputs. Project evaluation was defined as an objective assessment of on-going or completed projects in terms of their design, implementation and results (Mambo &Chiragu, 2013).

When people are carrying out a given project, they often take certain roles. The effect of these roles in other members and on the group as a whole was described as group dynamics (Prackel, 2014). Lewis (2011) asserted that a group with a positive dynamic had trust in one another; they worked as team during implementation of a project and held one another accountable for the success of the project. Lewis (2011) argued further that when a team lacked a strong leader, members would focus on wrong priorities leading to poor group dynamics.

 

Yankelovick (2014) described a risk as a threat that would cause a project to go wrong or at least not produce the desired results. Project risk management therefore sought to identify, analyze and respond to risks by applying risk management principles and processes Smith &Jagger, 2010). Risk identification involved pinpointing the risks that would affect the project through brainstorming, industry benchmarking, scenario analysis and risk assessment workshops. Risk quantification involved assessment of the risks and how different risks were related to with each other while risk response development included taking preventive measures against the threats posed by the risks. Such measures included avoidance, mitigation or acceptance. Risks that would affect the performance of construction projects were identified and mitigated appropriately. They included legal risks, technological risks, economic risks, financial risks, social risks and political risks (Well- Stam, 2013). Project managers had a responsibility of identifying the risks and managing them effectively.

 

1.1.2          Construction Projects in the Ondo state

 

The state of construction projects in the Ondo state was wanting in terms of quality (Public works, Nyamira, 2014). The region had many underdeveloped buildings. For instance, in Kisumu county, 60 percent of buildings that were constructed by construction firms have been redone (Public works, Kisumu, 2014) while in Royal timburg county 55 percent of the buildings were redone. In Zokamnnig ltd, Smacenig ltd and Nyamira counties the percentages were 58 percent, 66 percent and 64 percent respectively (County Public works, 2015). The contractors also spent almost twice the budgeted cost and construction took two to three years more than the time initially scheduled. However, the Nigerian government had initiated many buildings in the region to bring equitable development (Public Works, County Hqs, 2013).

Eric, Debra and James (2012) noted that involving private sector in planning and monitoring of building projects must be enhanced. For instance, private organizations: SIDA and KFW in Nyanza and Rift Valley constructed building Projects with the support of local communities. The local community was also involved in the identification and prioritization of building projects being constructed.

The Ondo state has unique characteristics in the sense that, it has both rural and urban set up. It has also many underdeveloped buildings. For instance, over 65 percent of the building projects undertaken by construction firmsin Jdbnig ltd county suffered from cost and time overruns and the quality of these projects was poor (Public Works, Jdbnig ltd, 2014). World Bank report (2010) indicated that construction projects of small and medium scope are required to be completed between 3-4 years while those of large scope can take up to 5 or 6 years. However, information obtained from public works records of the counties under study indicated that about 20 percent of the construction projects constructed by construction firms experienced time overruns of 1-2 years while 60 percent of the building projects experienced time overruns of 2-4 years (Public Works, Royal timburg, 2013; Homabay, 2013; Kisumu, 2014; Zokamnnig ltd, 2014). The Ondostate was therefore ideal because many of the construction projects constructed in the region by construction firms suffered from cost and time overruns and the projects were of poorquality.

1.1.3          Organization Structure

 

An organization structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational goals. Organization structure plays a significant role in the allocation of financial, physical and human resource that are required to facilitate the performance of construction projects. The organizational structure also determines how information flows from level to level within the organization (Mohammad, 2017).

There are three main types of organization structure. They are: functional, matrix and projectized (Montana &Chamov, 2013). In functional organization structure, people are grouped by areas of specialization such as marketing department and human resource department. Team members do both project work and departmental work. The functional manager has full control on the allocation of financial, physical, technical and human resource (Schnetler&steyn, 2016). In matrix organization structure, the authority to allocate resources and decision making process is shared between the functional manager and the project manager. In projectized organization structure, the project manager has full control on the allocation of resources and decision making processes (Montana &Chamov, 2013).

1.2  Statement of the Problem

 

Efficient performance of construction projects is essential for economic growth and development. In cognizance of this, the Nigeria government has put several measures to address performance of construction projects. The measures included: enactment of Nigeria Buildings act 2007, establishment of Nigeria National Highways Authority (2007), Nigeria Urban Buildings Authority (2007) and Nigeria Rural Buildings Authority (2007). These measures were meant to provide a legal and institutional framework for construction, rehabilitation and maintenance of buildings.

Despite the measures, construction projects constructed by construction firms in Nigeria continued to face several challenges that led to poor performance of the projects (Meyer & Tim, 2009, Musa, 2013, KPMG Report, 2014). KPMG report (2014) noted that on average only 39.4 percent of the construction projects constructed by construction firms in Nigeria were completed within the budgeted cost and scheduled time. The report also indicated that only 35 percent of the projects undertaken by construction firms met the desired quality standards. Nigeria attained an overall performance rating of only 36.9 percent on performance of building projects done by construction firms during the period 2011 to 2014 as compared to Uganda’s andTanzania’s rating of 40.5 percent and 43.7 percent respectively. Beyond East Africa, Zambia had 45.6 percent, China 70.5 percent, India 65.8 percent and Europe 71.5 percent. This showed that among the countries rated by World Bank, Nigeria scored the least in project performance. Poor performance of the projects had led to slow economic growth, increased poverty levels and unemployment (Mattas&Ashkenas, 2011).

Previous studies focused on performance of other infrastructure projects. They include: power projects, ports and railway projects (Lavasseur 2010; Hodge and Greeve, 2011). Also, most of the studies focused on developed countries and  sinceno two countries are similar, there was need to conduct the study in Nigeria. The study therefore, sought to establish the effect of project management practices on the performance of construction projects constructed by construction firmsin Nigeria with a particular focus on the Ondo state. In addition, the study sought to establish the moderating effect of government policy and mediating effect of organization structure on the performance of construction projects. The study focused on the Ondo state because many of the buildings in the region were constructed by construction firms and they were rated as having poor performance (county public works,2014).

• Research Questions

 

The study sought to:

 

1. What is the effect of project resource management on performance of construction projects by construction companies in ondo state, Nigeria?
2. What are the factors influencing proper management of construction projects by construction companies in ondo state, Nigeria?

• What is the effect of resource planning on time and cost management?

1. What is the impact of resource planning on time and cost management?

1.4  Objectives of the Study

 

1.4.1    General Objective

 

The general objective of the study was to establish the effect of project management practices on performance of construction projects by construction firms in Nigeria with a particular focus on the Ondo state.Specific Objectives project group dynamics management

 

The study sought to:

1. Determine the effect of project resource management on performance of construction projects by construction companies in ondo state, Nigeria.
2. Assess the factors influencing proper management ofconstruction projects by construction companies in ondo state, Nigeria.

• Determine the effect of resource planning on time and cost management.

1. Determine the impact of resource planning on time and cost management.

1.5  Significance of the Study

 

The study was of importance to project managers and contractors to understand the managerial practices that lead to efficient performance of construction projects. The research findings would also enable the government and other stakeholders to put in place policy framework that would promote the performance of construction projects. In particular, the study aimed to help the project contractors to construct the building projects that meet the desired standard. The study was also of significance for academicians and future researchers since it would provide crucial information about the effects of project management practices on building construction projects. The study report would also act as a reference and stimulate interest among academicians and that would encourage further research on the problem.

1.6  Scope of the Study

 This study sought to establish the effects of project management practices on performance of construction projects by construction companies in ondo state, Nigeria. The project management practices that were considered are: project resource management, project monitoring and evaluation, management of project group dynamics and project risks management. The study was carried out in the Ondo state that had a total of 41 construction projects constructed by construction firms with 5 building projects in Nyamira, 8 building projects in Royal timburg, 6 building projects in Smacenig ltd, 7 building projects in Zokamnnig ltd, 10 building projects in Kisumu and 5 building projects in Jdbnig ltd County. The Ondo state was chosen because many of the buildings in the region were constructed by construction firms. Many of those buildings done by construction firms were rated as having poor performance (KPMG, 2014). The study focused on construction projects financed by both the national and county government. Most construction projects took 3-6 years to complete hence the choice of 6 year period between 2011 and2016.

 

1.7  Limitations of the Study

 

Limited access to public works documents at county headquarters prevented the researcher from obtaining some information on cost overruns needed in the study. However, after engaging the relevant authorities the researcher was able to access the required documents after promising the strict confidentiality. Also, someofthe project contractors did not keep up to date records on actual and budgeted cost and time taken to complete the project. The researcher used experts in building construction projects to help in estimating the cost in such circumstances. Other factors that affected performance of the building projects were held constant.

 

IMPACT OF CONTRACTOR’S RESOURCES MANAGEMENT ON COST AND TIME PERFORMANCE OF CONSTRUCTION PROJECTS IN ONDO STATE

 

 

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