THE EFFECT OF DELAY AND DISTRUPTION ON THE COST OF BUILDING CONSTRUCTION PROJECT

THE EFFECT OF DELAY AND DISTRUPTION ON THE COST OF BUILDING CONSTRUCTION PROJECT

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CHAPTER ONE

INTRODUCTION

 Delay as referred in construction is prolonged construction period and disruptions are events that disturb the construction programme. Delays and disruptions are among the challenges faced in the course of executing construction projects. Delays as well as disruptions are sources of potential risks that current studies are looking into ways to manage. Various studies (Cohen and Palmer, 2004; Baloi and Price, 2003; Finnerty, 1996; Miller and Lessard, 2001) have identified sources of and types of construction risks that need to be managed as part of project management process. There are also risks and factors (Zou, Zhang and Wang, 2006; Aiyetan, Smallwood and Shakantu; 2008) that affect construction project delivery time which are also causes of delays.

Causes of delays have been identified in various parts of the world such as Malasyia, Saudi Arabia, Jordan, Kuwait, Hong Kong and Thailand (Sambasivan and Soon, 2007; Al-Kharashi and Skitmore, 2008; Al-Momani, 2000; Kumaraswamyand Chan, 1998; Noulmanee, Wachirathamrojn, Tantichattanont and Sittivijan, 1999). The results reveal that there are differences and similarities as to the causes of delays.

Delays and disruptions have had effects to construction projects. Some of these effects are (Aibinu and Jagboro, 2002; Sambasivan and Soon, 2007): time overrun, cost overrun, dispute, arbitration, total abandonment and litigation. The purpose of this study is to identify causes and effects of delays in Nigeria construction sector.

The Construction industry can be described as a collection of loosely integrated firms involved in the provision of the materials for the construction of structures, designing facilities to be constructed, constructing the facilities, installation of specialized services in the constructed structures, and supervision of the constructions in the areas of building and civil engineering works. Construction projects refer to the projects undertaken by the construction industry to provide the much needed infrastructures for national development. Such infrastructures include roads, bridges, railways, airports, seaports, dams, canals, buildings, etc. The clients promote the construct 2 “Conditions of Contract”. The payment procedures vary with the nature, type and scope of the project. It is not uncommon, however, to observe flagrant disregard to the agreed contract’s terms of payments by the clients, which most often leads to delayed payments to the contractor. Delayed payment has been identified as one of the factors that are responsible for cost-and time-overruns in construction projects, (Muazu, 1982; Okpala and Aneikwu, 1988; Dlakwa and Culpin, 1989; Chan and Kumaraswamy, 1997; Odusami and Olusanya, 2000; Udoh, 2002). Cost overrun is a term used to express situations when actual cost of a project exceeds the budgeted cost. Time overrun is a situation when the actual completion date outpaced the scheduled completion date. The budgeted cost and scheduled completion date most often are not positively achieved by the contractor. More time and money are usually required to complete the construction of a project. Cost-and time-overruns in construction projects negatively impacts on the important role the construction industry plays in any given economy, especially developing economies such as Nigeria’s. The role of the construction industry in the economic advancement of any nation have been discussed by many researchers. Stanley et al (1977) have pointed out that the performance of the construction industry serves as an indicator for the performance of any given economy, since, in their opinion, the construction industry grows at a rate approximately equal to the rate of growth of Gross National Product (GNP). Russel (1976) attached great importance of construction industry to any given 3 society and described construction projects as vehicles for growth and development. Kolawole and Owor (1992) and Owoeye (1992) emphasized that the Nigerian construction industry is very vital to the national economy. For the construction industry to effectively play its vital role in any given economy it must be able to actualize quality projects on schedule and within budget. Far from these expectations, construction projects in Nigeria have been found to be characterised by poor quality projects, and cost-and time-overruns (Muazu, 1982; Kolawole and Owor, 1992; Owoeye, 1992; Bayo, 1993; Omoniyi, 1996; Chan and Kumaraswamy, 1997; Dlakwa and Culpin , 1997; Odusami and Olusanya 2000; Udoh 2002). It should be noted that the major concern of the construction industry to actualize quality facilities on schedules and within budgets is largely left in the hands of the contractor. The contractor is responsible for completing the contract within the specified time period, within the budgeted cost, and of the required quality. Many factors exist that may frustrate the effective discharge of these all important responsibilities of the contractor. Several studies have identified these factors, (Hillebrandt, 1984; NEDC, 1991; Kolawole and Owor, 1992; Russel, 1976; Sirajo, 1995; Wabara and Raheem, 2001; Udeh, 2002; Udoh, 2002). Prominent among the factors often identified as causing cost-and time-overruns is the delay in paying the contractor by the client. Sadi et al (1996), for instance, presented among other comments from the respondents of their study that “owner delay in paying the contractor on time affect contractor’s performance significantly”.

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.

1.3 AIM AND OBJECTIVES

 1.3.1 Aim The aim of the study is to establish a statistical relationship between delayed and disruption as it affect  cost- and time-overruns in construction projects so as to assist in the improvement of the performance of the construction industry in the successful delivery of construction projects.

 1.3.2 Objectives

The objectives of the study are:

i.To compare the scheduled completion time with the final completion time of some selected projects so as to establish whether or not there was time overrun.

ii. To compare the budgeted cost with the final costs of some selected projects so as to establish whether or not there was cost overrun.

 iii.To compare dates payments were due with dates payment were actually made in each of the projects selected so as to establish the extent of delay in payments.

 iv.To compare dates valuations were due to the actual dates valuations were made so as to establish the extent of delay in valuations.

v. To assess the total delay in payments, the cost-overrun, and the time overrun for each of the projects selected.

vi. To perform statistical tests using the values from objective

 (v) to establish the relationship between delayed payments and cost-and time-overruns.

 vii. To determine the significance of the relationship between delayed payments and cost-and time-overruns at 5% level of significance using the results from objective

viii. To proffer suitable recommendation based on the results of the analysis in i-vii

1.4 SCOPE AND LIMITATIONS

 1.4.1 Scope

The study is focused only on how delayed payments impacts on the cost and time-overruns. Building projects completed between 2000- 2016 will be sought for data collection. The period of 2000 – 2016 was chosen to reflect different regimes of governance and economic policies in Nigeria, and to ensure that the time during which the study is undertaken is captured in the collection of data. The study will cover only such projects with contract payments terms based on periodic valuation, or completed stages of work followed by valuation. Only the time periods at which the contractor was actually paid the monies due to him will be of interest; that is, the study does not take interest in the actual amounts of monies paid to the contractor at any given time. The sources of data will be only Architectural, and Quantity Survey consulting firms, Building Contractors, and Clients’ organisations.

1.4.2 Limitations

 The following limitations on the study can be identified:

i.Only building projects are studied

 ii. The study covers only some selected numbers of completed building projects

 iii. The study covers only a 17-year period of 2000 to 2016.


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