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THE IMPACT OF PROCUREMENT SYSTEMS ON CONSTRUCTION COST AND DELIVERY

THE IMPACT OF PROCUREMENT SYSTEMS ON CONSTRUCTION COST AND DELIVERY

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The construction industry is an important part of the economical backbone in many countries (Ngai et al., 2002), often accounting for between 7-10 percent of the Gross Domestic Product (Winch, 1996, Voordijk et al., 2000). Furthermore, construction products and processes have a large impact on safety, health and environmental aspects (Bayliss et al., 2004). Since all human beings in modern societies are directly affected by its processes and/or products, the importance of a well-functioning construction industry is beyond doubt (Cheung et al., 2001, Ngai et al., 2002,Eriksson, 2007).

In many countries the construction industry has, however, attracted criticism for inefficiencies in outcomes such as time and cost overruns, low productivity, poor quality and inadequate customer satisfaction (Latham, 1994, Egan, 1998, Ericsson,2002, Chan et al., 2003). Practitioners, researchers and society at large have,therefore, called for a change in attitudes, behavior and procedures in order to increase the chances for construction projects to be successful and result in improvedend products (Love et al., 2000, Dubois and Gadde, 2002).

Increased complexity, uncertainty, and time pressure in construction projects have increased the need for cooperation among different project actors (Anvuur andKumaraswamy, 2007). Tradition ally, relationships are, however, very competitive and adversarial in the construction industry (Cheung et al., 2003), which to a large extent is due to the customary procurement procedures potentially causing many problems in all stages of the buying process (Eriksson and Laan, 2007). Therefore, in order to take advantage of collaboration, procurement procedures is one key improvement area and can contribute substantially to project success (Cheung et al., 2003, Eriksson, 2007).
A change of procurement procedures is, however, impeded by clients’ habitual behavior (Laedre et al., 2006). Although procurement procedures need to be tailored to enhance the fulfillment  of different project objectives (Cox and Thompson, 1997,
Love et al., 1998, Wardaniet al., 2006), clients tend to choose those procurement procedures they have a habit of using, regardless of any differences between projects(Laedre et al., 2006). In order to enhance change, an increased understanding of how different procurement procedures affect different aspects of project performance is vital. Earlier research efforts in this area have been limited to the investigation of how a single or a few specific procurement alternatives affect one or two project objectives. In order to achieve successful governance of construction projects a holistic and systemic approach to procurement procedures is crucial (Cox and Thompson, 1997, Eriksson and Pesämaa, 2007, Eriksson, 2008b). Since a system perspective on the effect of procurement procedures on different aspects of project performance is lacking in the construction management literature, this research effortaims to fill this theoretical gap that has potential to bring important practical implications.

Different studies have confirmed the use of various types of procurement methods for project  delivery in Nigeria. Studies of Ogunsanmi, Iyagbaand Omirin (2003), Ojo, Adeyemi and Fagbenle
(2006), and Dada (2012) all confirm the use of Traditional, Design and Build, Project Management, Construction Management, Labouronly,Direct Labor and other types such as Alliance, Partnering and Joint Ventures procurement in the Nigerian construction industry. The use of these procurement method scan significantly affect the performance of most projects.