Anda di halaman 1dari 109

AN ASSESSMENT of FINANCIAL CONTROL TOOLS IN THE NIGERIAN CONSTRUCTION INDUSTRY

AKINMOLADUN OLAWALE TOSIN REGISTRATION NUMBER: QTS/2002/013

BEING A PROJECT DISSERTATION SUBMITTED TO THE DEPARTMENT OF QUANTITY SURVEYING, FACULTY OF ENVIRONMENTAL DESIGN AND MANAGEMENT, OBAFEMI AWOLOWO UNIVERSITY, ILE-IFE, OSUN

NOVEMBER, 2008

CERTIFICATION This is to certify that this research work was conducted by Akinmoladun Olawale Tosin according to the standard recommended by the senate of the Obafemi Awolowo University, Ile-Ife, Osun state and supervised by Dr. (Mrs) M.O Babalola.

Dr. (Mrs) M.O Babalola Supervisors Signature: __________________________________ Date: __________________________________ Dr. (Mrs) M.O Babalola Head of Department Signature: __________________________________ Date: __________________________________

DEDICATION This work is dedicated to the Lord almighty, the beginning, who began with me and the end, who saw me through.

ACKNOWLEDGEMENT I thank God Almighty for sparing my life all through the tussle of this aspect of my life. Despite the seemingly unending challenges, He guided me through the path of knowledge without harm. I will also give thanks to my parents who had laboured in diver ways to ensure that I am successful in life. Dad and mum, I will like to say you are the best parent in the world and I will always keep to my promise to make you proud amidst your colleagues. I wish to express my profound gratitude to my dear supervisor, Dr (Mrs) M.O Babalola, who led me through the path of this research work. I will like to thank you ma for you time taken to painstakingly proof read every page in this coursework. To all my lecturers, I give kudos that you have produced one of those that will make the department blossom in due time. I will also to like to say a big thank you to all those who by one way or the other contributed to the success of this work. Such include Mr.Bukola Harrison, a good friend at Lagos, my honourable sweet heart, Akinyemiju oluwafunmike, who painstakingly took upon herself the distribution and collection of my questionnaires and help to browse to get materials relevant to the study. Dear, my love for you shall know no bounds till eternity.

TABLE OF CONTENTS TITLE PAGE CERTIFICATION DEDICATION ACKNOLEGDEMENT TABLE OF CONTENTS LIST OF TABLES ABSTRACT CHAPTER ONE: 1.1 GENERAL INTRODUCTION 1 2 3 4 5 7 9

Introduction 10

1.2

Need for the study 12

1.3

Aim and Objectives of the study 15

1.4

Problem Statement 15

1.5 1.6

Research Methodology Scope and Limitation of the Study LITERATURE REVIEW

15 16

CHAPTER TWO: 2.1

Financial control and nature of construction projects 19

2.2

Financial Control

21

2.3

Relevance of Financial Control in Project Management 22

2.4

Attributes of Financial Control Tools 23

2.5 2.6

Quantity Surveyors and Financial Control Factors necessitating Financial Control Tools 24

24

2.7

Tools of Financial Control 27 2.7.1 Cost Control Tools 27 2.7.2 Quality Control tools 2.7.3 Time Control tools 52 45

2.8

Constraints to the use of Financial Control tools

57

CHAPTER THREE: RESEARCH METHODOLOGY 3.1 Data Collection 3.1.1 Field Investigation 60 3.2 Method of Data Collection 60 3.2.1 The use of Questionnaire 63 3.2.2 Tools for Analysis 61 6 60

3.2.3 Sample Size 61 3.2.4 Constraints in the Administration of Questionnaire 61 CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION 4.1 4.2 Analysis 62

Identification and Assessment of the level of use of Financial Control tools 70

4.3

Assessment of the use of Financial Control tools 75

CHAPTER FIVE: APPENDIX REFERENCES

CONCLUSION, EVALUATION AND RECOMMENDATION 82 86 96

LIST OF TABLES Table 1.1 Percentage participants of construction activities in the Nigerian democracy Table 1.2 16

Percentage break down of construction activities in the south western zone of the nation 17

Table 1.3

Percentage of different type of construction work executed most recently. 18 61 7

Table 3.1

Location of organization contacted

Table 4.1 Table 4.2 Table 4.3 65 Table 4.4 Table 4.5 Table 4.6 67 Table 4.7 Table 4.8 68 Table 4.9

Organization contacted Designation of Respondents Education qualification of respondents

63 64

Professional qualification of respondents Year of Experience of respondents Ages of firms

65 66

Category of clients firms deal with Level of engagement with public, private and corporate firms

67

Construction works firms are focused on

69

Table 4.10 Level of involvement of firms with construction types 70 Table 4.11 Level of cost control tools 71 Table 4.12 Level of Use of Quality Control tools Table 4.13 Level of use of Time Control tools 72 Table 4.14 Level of importance attached to financial control tools 73 Table 4.15 Factors constraining the use of financial control tools 74 72

Table 4.16 Analysis of Effect of Constraints on the use of financial control tools (coefficients) 76 Table 4.17 Analysis of Impart of Time control on project delivery (Coefficient) 77 Table 4.18 Analysis of the Impart of Quality Control on project delivery (Coefficient) 79 Table 4.19 Analysis of the Impart of Cost Control on Project Delivery (Coefficient) 80

ABSTRACT The study is centred on the assessment of the financial control tools in the Nigerian construction industry. It is aimed at evaluating the impact of financial management tools on project delivery in the Nigerian construction industry. In the quest of achieving this aim, I set my objectives to be identifying the financial control tools in the Nigerian construction industry; assessing the level of awareness and use of the tools by the construction personnel; and assessing the impact of the use of the identified tools on project delivery with respect to time, cost and quality. In getting adequate information for use in the research, literature review of previous works on control tools was done. Also, data were collected from practicing contracting and consulting firms at Lagos, Ogun and Oyo states through the use of questionnaires. The data collected were analyzed adequately using the appropriate statistical tools such as descriptive and regression. After proper and adequate analysis, it was found out that the level of use of financial control tools in the Nigeria construction industry is high. This is evident in the regression analysis result that there is positive impact of the financial control tools on project delivery and that the constraints to the use of financial control tools are in existence but they have less significant impact on the use of the financial control tools in the Nigerian construction industry. Based on these result, it is thereby concluded that the use of the financial control tools in the Nigerian construction industry should not decline so that projects would be delivered in time to clients in standard quality and at reasonable cost. It is recommended that new methods for controlling cost, quality and time should be incorporated in the system of the construction industry.

10

CHAPTER ONE GENERAL INTRODUCTION 1.1 INTRODUCTION Finance means control of money, that is, the business art of managing the monetary resources of an organization, country or person. Also, it means the money required or necessary to do something, especially to fund a project (Encarta dictionary, 2008). Finance is a term generally agreed to be the strong room of every transaction, project development and/or relationships. It is the oil that lubricates every business relationship. Finance has become one major component of production of goods and services of individual or corporate relationships, and indeed of the ability to survive. In this regards, finance can be seen to be a transitive component, that is, it only acquires a functional meaning between two parties. Therefore, to ensure transparency and high quality productivity in the delivery of service(s) in which finance is involved, room must be given to control of fund (Jagun, 1981). For cost control on a project, the construction plan and the associated cash flow estimates can provide the baseline reference for subsequent project monitoring and control. For schedules, progress on individual activities and the achievement of milestone completions can be compared with the project schedule to monitor the progress of activities. Contract and job specifications provide the criteria by which to assess and assure the required quality of construction. The final or detailed cost estimate provides a baseline for the assessment of financial performance during the project. If, throughout the project execution, the extents of costs are within the detailed cost estimate, then the project is thought to be under financial control. Hence, overruns in particular cost category signals the possibility of problems and gives an indication of exactly what problems are being encountered in the project. Expense oriented construction planning and control focuses upon the categories included in the final cost estimation (Halphin, 1985).

11

In this vein, financial control is defined by Coombs and Palmer (1977) as overseeing or regulating the financial affairs of a business to ensure maximum satisfaction. Tailoring this into the construction industry, financial control is defined as the extent of work done, in the course of a project execution, to ensure that by the end of the project, the expenditure is within the established cost limit and the quality of work delivered is to the satisfaction of the client (Mueller, 1986). During the execution of a project, procedures for financial control and record keeping become indispensable tools to managers and other participants in the construction process. These tools serve the dual purpose of recording the financial transactions that occur as well as giving managers an indication of the progress and problems associated with a project. The problems of project control are aptly summed up in an old definition of a project as "any collection of vaguely related activities that are ninety percent complete, over budget and late." (ASCE, 1985) The task of project control systems and tools is to give a fair indication of the existence and the extent of such problems and pave way for proper solution to be executed. Beyond reasonable doubts, the extent of growth of a nation is partly a function of the extent of human resources development embarked upon to tap the nations natural resources. The human resources development is determined by the extent of facilities (building, industrial plant and so on) available. Indeed, if the growth of the economy is to be pursued, there is the need for incessant construction. The rate of abandoned project in Nigeria is alarming (Omoniyi, 1994) and lack of use of financial control tools took close to seventy five percent(75%) of the total percentage of the ranked conditions precedent to abandoned project in Nigeria (Akindoyeni, 1988). It will do the economy good if the tools of adequate financial management/control are put to use. To this end, it is important to note that excellent contract performance is sequel to the use of adequate financial management and control measures in the course of the construction no matter whether the projects are undertaken by either the public

12

(Government) or private (Individual/company) sector. While the government invests to provide social services to foster growth and peoples welfare; the private sector invests with an aim of making profit while complementing the governments effort (Jagun, 1981). For both sectors to accomplish their respective aims and objectives and see a dream come true, an adequate financial management in all of the projects to be executed is vital in ensuring a successful performance. Financial control could also be regarded as budgetary control and it has been described by various writers as a managerial function. It has been the main concern of both the client and construction personnel in the construction industry. According to Seeley (1976), budgetary control is an important management function aimed at planning and controlling the use of the available resources in order to achieve the desired result, which is a building construction to the taste of the developer and within the established cost limit. However, it is true to say that financial control of a typical building construction at both pre- and post contract stages has started for quite a long time. The Holy Bible stated that for which of you, intending to build a tower, sitteth not down first, and counted the cost, whether he have sufficient to finish it? (Luke 14:28). The objective of control today is not only the determination of the probable cost of the work at hand but also relating the cost to operations on site to ensure that the clients budget is not exceeded. It often includes the selection of the best constructional methods that ensures optimum utilization of available resources, and that will prevent wastage of material and labour on site; laying down standards and checking estimate against actual cost, cutting out delays during construction. (Randall, 1991) Financial control does not only aim at ensuring that the cost of construction is within the budgetary limit, it also aims at quick delivery of work, enhances competent productivity of work, eliminates disputes and delays. In essence,

13

financial control coordinates the efforts of all the parties concerned in the project and will manage the project on a technical and higher level (Harris, 1995). 1.2 THE NEED FOR THE STUDY

Fredrick et al.,(2001), identified three types of client; the informed client, one which has the resources and the reason for construction and requires the professional just for construction ; the semi-informed client, one which has either the resources or the reason for construction and requires the professional to help provide either the reason or the resources and construct; and the un-informed client, one who neither has the reason nor the resources for construction and thus, requires the professional to help in the provision of the resources and the reason and to construct. Whichever category one is dealing with, they all have the same goal which is the fact that they all want value for the money that they are willing to spend on the project. No matter the magnitude of the project, there calls for proper management of fund and contractual activities to ensure that the satisfaction of the client is met (Mark & Robinson, 2006). Seeley (1993) identified that with the ever increasing challenges in the construction industry which are: 1. Clients needs becoming complicated; 2. Higher expectation of efficiency and expertise in the industry; 3. Introduction of new construction techniques and materials; 4. Rising prices and cost construction materials. There is a need for the Nigerian construction industry, if it is to remain effective in and contributive to the nations economy, to have an adequate understanding and use of various financial control tools. In todays context, the mere establishment of a cost estimate is no more enough. A system of cost monitoring which is the prime task of the quantity surveyor has been developed to provide project management with reliable and vital cost information to make decisions on issues and to control the cost of the project so that the cost limit is not exceeded. Dada (2008), ranked project completion at the least/lowest

14

cost, project completion at the least time and project completion to desired and agreed quality as the first and third respectively in a recent research as the listed priorities in the Nigerian public project implementation. This is a pointer to the fact that both consultants and contractors (as they were the two groups used in getting results for the research) opined to the importance of financial control in project delivery as a way out of project delay, abused quality and cost overrun. The major concern of those responsible for the management of construction projects has been the subject of qualitative productivity, which relies on the techniques of the control of finance and construction activities. The reason being that the productivity level of the construction industry affects the national economy and that the application of better techniques in control has a greater impact on productivity and timely delivery of projects. The question has aroused in the past for years, in the construction industry, an interest in the techniques of financial control, mainly as it affects productivity and competency. The problem is not inherent in the construction industry alone because financial control tools are also paramount to other industriesmanufacturing, processing, and so on. Adewoyin Segun (2002) in his unpublished project dissertation opines that the search for effective solution to scale down the high cost of construction, cost overun, promote qualitative productivity and timely delivery in the construction industry has led to the development of some financial control tools devoted to the control of cost, quality and delivery of a project as the ultimate goal by relying on the advice provided by the various consultants to the project. The rate of abandoned and delayed project is increasing even with increase in the number of practicing professionals (Fredrick et al., 2001). This calls for a proper management of finance and the tools that could be used in achieving financial management of construction works. Also, there is a great concern as to the level of

15

use of these tools in the Nigerian construction industry by respective construction personnel. It came to my notice that despite the work of previous construction personnel on the need for financial control tools, which actually had been developed and put to use, there are still the occurrence of some of the problems highlighted. Some of which include rate of abandonment of building in Nigeria which is put at 55% (Akindoyeni, 1998), delay in project delivery which is put at 65% (Akindoyeni, 1998), cost overun which is still currently experienced in mega projects in Nigeria (Dada, 2008) and several others. There are control tools to address these problems. There is need for a study into the level of use of these tools in relation to addressing these above mentioned problems. 1.3 AIM AND OBJECTIVES

The study aims at evaluating the impact of financial management tools on project delivery in the Nigerian construction industry. The following are the objectives set to achieve the above aim: i. ii. iii. tools. 1.4 PROBLEM STATEMENT Identify the financial control tools available in the Nigerian construction Assess the level of awareness and use of the tools by construction personnel. To develop a model to determine the impact of the identified financial control industry.

From the above stated objectives, we observe that two main items to search and conduct test(s) for are: a) The level of use of the identified financial control tools; b) The impact of the use of financial control tools on project delivery in Nigeria; To successfully assess the level of use of the identified financial control tools, there is the need to identify the benefits of and constraints to use of the tools in the Nigeria construction Industry.

16

1.5

RESEARCH METHODOLOGY

The methodology to be employed in attaining the aim and objectives of this research topic shall be in two folds: Literature and Field investigation. In the literature review, a critical review of textbooks, papers, journals and periodicals on financial control measures is carried out with the objective of ascertaining what is supposed to be operating, while the field investigation is a practical approach to the subject matter of the study to ascertain what is actually operating by designing and distributing questionnaires to and or conducting oral interview with construction consultants and contracting firms; practicing professionals in the Nigerian construction industry. The information obtained and data collected using these two methods of study will be processed, analyzed and compared using the frequency distribution descriptive statistics, percentage ranking method and index value method. The differences are then carefully observed to exactly know what is left undone, why and how the problems are to be overcome. Based on these facts, the writer hopes to conclude by achieving the aim and objectives of this study and making recommendations as to the ways of improving efficiency and solving allied problems posed by this dissertation.

1.6

SCOPE AND LIMITATION OF THE STUDY

The financial control tools considered in this project dissertation covers both precontract and post-contract stages of construction works. The study will cover the building team in the Nigerian construction industry which includes Architect, Builder, Quantity Surveyor, civil engineer and structural engineers. This is because project designs are done by the Architects and Structural engineers, which should be to cost; the quantity surveyor is saddled with the responsibility of checking and controlling cost, quality and time; the Builders and the Civil engineers are to convert the drawing on paper on land by construction to the controlled cost, quality and deliver the project on time. 17

According to the professional directory of the Nigerian Institute of Quantity Surveyor and Nigerian Institute of Builders, Council of Registered Engineers of Nigeria and the Nigerian Institute of Architects, 55% of the professionals in the construction team are located at Lagos State, while 17% are located in Oyo States and 10% each in Ondo and Ogun States. Also, according to Robert (2007) in his structural evaluation of the impact of our eight year old democracy on the Nigerian construction industry, a larger percentage of construction activities are predominant in the South Western zone of the country with its larger percentage at Lagos and Ogun state and less percentage at Ondo and Osun States. This is illustrated in the tables 1.1 and 1.2 below. Table 1.1 Geo-political Construction

Zone activities (%) North East 10 North 15 Central South South South West South East Total Percentage Democracy Source: Table 1.2 States in the Construction South Western Zone Lagos (%) Actual (%) 9.6 Activities to Robert (2007) 25 30 20 100 of Construction Activities in the Nigerian

Participatory

converted 100% 32

18

Ondo Ogun Osun Edo Oyo Total

3 4.5 2.4 7.5 6 30

10 22 8 18 20 100

Percentage Breakdown of Construction Activities in the South Western Zone of the Nation Source: Robert (2007) With respect to the above statistical data and in order to have comprehensive information on the level of use of financial control tools in the Nigerian construction industry, the collection of data for this study is limited to Lagos, Oyo and Ogun states which recorded 32%, 22% and 20% respectively. Also, these states are chosen to ensure that a larger percentage of construction personnel are contacted in the South West zone of the country since they recorded the highest percentage of construction activities in the country. But time shall not permit me to get to Edo State where 7.5% (18% in the zone) is recorded because of its distance away from the academic citadel and from the other places where the research work is scheduled to be carried out. According to Dada (2008), out of all the construction works embarked on most recently in Nigeria (1995-2007), 33% are residential, 42% are commercial, 13% are Civil engineering works and 12% are Industrial engineering works. Also, 65% of the above mentioned projects are financed by private clients while 35% are by public clients. Also, 88% of these projects are executed by private professional consultants and just 12% are executed by construction professionals working in the public sectors (Governmental parastatals). In the light of these, this dissertation shall limited to construction works involving residential, commercial building works, civil engineering works and Industrial engineering carried out most recently both by public and private bodies. This is illustrated by Table 1.3 below: TABLE 1.3

19

Work Category

Percentag e Construct ed (%)

Financier

Construction professionals Involvement Private Public (%) (%) 20 35 22 21 88 6 6 12

Private (%) 25 33 7 65

Public (%) 5 5 10 15 35

Residenti al Commerci al Civil Industrial Total

33 42 13 12 100

Table showing the percentage of different types of construction works executed most recently (1995-2008) Source: Dada (2008)

20

CHAPTER TWO LITERATURE REVIEW 2.1 FINANCIAL CONTROL AND THE NATURE OF CONSTRUCTION PROJECTS The baseline reference for subsequent project monitoring and control are the construction plan and the associated cash flow estimates. Progress on individual activities is at the mercy of the available schedules. Contract and job specification provide the criteria by which to assess and assure the required quality of construction. The final or detailed cost estimate provides a baseline for the financial performance during the project. In a construction project, if the costs expended are within the detailed cost estimate, then the project is thought to be under financial control. (Halpin, 1985) In a nut shell, financial control refers to all actions taken to ensure that the cost of construction is within the project budget without depreciation in the function the building is to perform (quality) and within the agreed time frame for the project completion. This implies that controlling the flow of finance in a project should not constitute reduction in the quality of the building to be delivered and unnecessary increase in the construction period. Financial control seeks to achieve best value at the optimum cost and time without compromising function (Uche, 2004). Before we proceed with highlighting all necessary tools required to achieve optimum financial control, it is imperative to examine the nature of construction projects mostly embarked upon in Nigeria because cost control or financial control tools physically will vary depending on the type of projects and clients. It has been seen that ability to successfully conceive and implement construction projects is often an important measure of wealth of nations. According to Dikko (2000) and Omole (2000), construction projects encompass a wide and varied area of human endeavour and could be summarized as follows:

21

A.

BUILDING PROJECTS 1. Public/ mass housing 2. Public building: Office complexes, conference centres, hotels, market stalls, theatres, malls and so on. 3. Integrated buildings: Schools, barracks, hospitals 4. Residential building: mass housing, estates

B.

CIVIL ENGINEERING PROJECTS 1. Roads, bridges, dams, ports, airports, rail lines, hangers, piling, stations, silos and so on.

C.

INDUSTRIAL COMPLEXES 1. Process engineering industries 2. Power plants steel/ aluminium production plants 3. Power production and distribution 4. Telecommunication and so on.

Due to the advent of democracy in Nigeria, the upsurge increment in the requirement of the above enumerated projects by both the private and public sector is alarming. Professionals in the construction industry are consequently standing up to the task of confronting the challenges incurred in construction today. Time wastage and project abandonment are gradually becoming a thing of the past in project execution. Oladapo (2000) opined that construction and engineering projects constitute infrastructure, development and investment which are necessary for social and economic development and these are most critical in a developing countries like Nigeria due to challenges, complexities, environmental factors, problems and issues of which organization and management of resources is perhaps the most important. Nwosu (1995) viewed financial control as an umbrella term embracing all contributory stages such as cost analysis, cost planning, cost study, cost comparisons, cost checking, cost reconciliation at the pre-tender stage; coat

22

monitoring, schedule control, interim valuation, feed back system and so on at the post contract stage. To control finance is to have power over cost or to limit and independent activities or to keep cost within limit and it must be complete and all embracing if it is to have any useful contribution in stimulating confidence in figures that are produced. It could be deduce from the above definitions that the overall aim of financial control is to ensure that resources are utilized to the optimum benefit of the client. Buttressing this, Onyemachi (1990) opines to the fact that design and execution of a project should produce maximum value for money. Given that high cost of building resources (labour, material and plant) and high interest rate of money (giving consideration to the source of finance for the project), it is imperative that cost should be a very strong element in design. Hence controlling finance remains an important task and the bedrock of successful project. Jagboro (1995) further contributes that the objective of todays cost control is not only the determination of probable cost of building/ civil engineering project but also to closely relate the cost to operate on site and to ensure the clients budget is not in any way exceeded. In agreement, Adetola (2000) says there is substitute for financial control either from the clients, consultants and contractors point of view if we are to achieve a worthwhile project where the benefit will cut across all involved in the project delivery. 2.2 FINANCIAL CONTROL

Peterson (2006) brings to our knowledge that the vocabulary of the construction profession is changing with time and tides. Dulcan (2007) opines to this fact and highlighted some few languages common in the construction field today. Some of these include the use of purchaser instead of client, the supplier instead of the contractor, the bidder instead of the tenderer and bidding instead of using tendering. One of the construction new vocabularies is financial control.

23

Dulcan (2007) identified cost control, quality control and time control to be all the previous terms put under the new term, financial control. In other words, financial control is a word used to denote a situation throughout the project execution, the extents of costs are within the detailed cost estimate and it comprises cost monitoring and control, total quality control and time control. Cost control is a term used to describe all possible means in ensuring that the total final cost of construction is within the established budget at the start of the project (at the pre-contract stage). Total quality control is a term used to connote the use of quality materials that are in tune with the specification and within the budgetary limit of the element it emanate from that is capable of serving the purpose for which it is bought and to the purchasers satisfaction. Time control is a term used to describe all possible means of ensuring that the project did not exceed the budgeted time of delivery to the purchaser. All these have a link with financial control as there is a cost implication on each of the items identified (Adesola, 2007) 2.3 RELEVANCE OF FINANCIAL CONTROL IN PROJECT MANAGEMENT

According to Mary (2001), the importance of controlling finances in construction projects as an essential tool was stressed by Thomas Berry (Berry facility development in Durango, Colorado); Dennis Wallace (Hammel Green and Abrahamson in Minneapolis); and Kenneth Bailey (Centrex construction group in Dallas) where each of them practices a different approach to project delivery. There cost control strategies were compared to show how practitioners in the three major project delivery system (design/ build; construction management and traditional approach) tackles the issue of controlling cost. However dissimilar the three delivery methods are in their use of resources, the sequence of planning and estimating, or the delegation of responsibility, they all require effective cost controls to succeed. Berry et al., (2001) agree that to keep a project on budget and on time is only the beginning. Operative cost control help the construction team to:

24

1. Meet all functional objectives; 2. Balance quality with expediency; 3. Reduce risks and prevent claims; 4. Enhance reputation; 5. Stay in business; 6. Analyze the productivity of workers; 7. Analyze the performance and efficiency of equipment; 8. Make proper allocation for overhead. 2.4 ATTRIBUTES OF EFFECTIVE FINANCIAL CONTROL

Hughes (1991) in his definition of cost control highlights the attributes of an effective cost control. He defined financial control as the activity which compares cost performance against cost plan, adjusting one or the other dynamically by reference to the changing circumstances in the projects financial environment. Mary (2001) was of the view that the choice of procurement method depends on variables like funding, time constraints and project objectives but notwithstanding, regardless of the procurement method, effective cost control depends on a commitment to planning, good communication and rigorous monitoring of a project from start to finish. In the same vein, Johnson et al., identified that all tools of a construction cost control system should enable a manager to observe current cost levels, compare them with a standard plan or norm, and institute corrective actions to keep cost within acceptable bounds. In line with the above, the attribute of an effective cost control system is as follows: 1. Dynamic in nature, that is, create room for review; 2. Establish a measure of comparing the costs of alternative designs; 3. It must have corrective measures to keep cost within limit; 4. It must establish good communication among the construction team; 5. It is planning oriented;

25

6. Rigorous monitoring of project from start to finish, that is, it must be observant in nature and have the ability to detect flaws in the entire project.

2.5

QUANTITY SURVEYOR AND FINANCIAL CONTROL

The contributory efforts of all experts in a construction project right from the design stage to the construction stage are, in no doubt, geared towards a successful accomplishment of the project. Some unnecessary emphasis is overstressed at times by the consultants/professional in the construction industry which culminates into ineffective cost control and the final consequence of abandoning the project. Although cost control is viewed from different perspective by experts but the aim is still the same- producing a building to the taste of the client within the three tier variables of time, cost and quality. Onyemachi (1990) is of the opinion that the Quantity Surveyor, being the financial adviser to the construction industry, in order to produce an economically viable project design, must therefore design with the Architect and other specialists in the design team in other to cost plan simultaneously. He went further that the Quantity Surveyor will produce a clear statement of cost implication of the Architects decision and offer alternative but cheaper but equally effective solution to the design problem. To corroborate that, Nwosu (1995) explains that the Quantity Surveyor is now required to be the bank of information on every aspect of building cost control and with the new methods of construction and new materials continuously introduced; he must be fully informed on the theme and be able to give advice on the comparative cost. Agha (1997) also added that the primary role of quantity

26

surveyor is to be, in the first instance, a financial adviser to the client and ever ready to proffer economically viable solutions to varying development problems so that at the end of the project, all invested resources could be adjudged to have been used to the best advantages. 2.6 FACTORS NECESSITATING FINANCIAL CONTROL TOOLS

Jagboro (1995) in agreement with Brandon and Ferry (1992) lists the following as some of the factors bringing about the need for financial control techniques/ tools in the construction industry: i. ii. iii. iv. v. The increase complexity of clients requirement; The innovation in technologies and materials; The rapid upsurge in the pace of development; The expanding size of clients organizations; The effective utilization of loans

The above points can be further expatiated upon as thus: 2.6.1 Increasing Complexity of Clients Requirement Construction projects are becoming complicated than never before, even in this era of democratic rule in Nigeria. Adetola (1995) opined that not only are they required to provide a much greater variety uses; they also involve far greater provision of services and equipment. This increasing complexity of buildings, requires the bringing together of large number of consultants from diverse field, and consequently there are more avenues for the project to get out of hand in terms of cost. Adetola (1995) submits that an effective system for strict control of costs and finances from inception through the design up to the completion of a project is therefore of paramount importance. In the same vein, Jagboro (1995) said that previously, the relationship between the procurer and the producer was simple and straight forward, however, as the requirement become more complex through technological innovations and increased expectations. Some equally technical tools for strict control of costs

27

and finances from inception to completion are required. As far as client will always inquire value for money invested on constructions projects, meeting this demand remains a challenge for the professionals concerned. 2.6.2 Innovation in Technologies and Materials Omole (1990) stated that the introduction of new materials as well as new technological advances in the construction industry had rendered traditional methods of costing less reliable so that final account seldom equals the first estimate. Additionally, it has become more difficult to achieve a balance design and to ensure value for money without control over expenditure (Arah, 2000). Omole (1990) went on that, the above mentioned factor coupled with the effects of inflation on price levels, high exchange rates, the high interest rates charged by financial institutions, as well as restrictions on the use of capital due to other competitive demands, all these make effective estimates, followed by efficient control all the more important. 2.6.3 Rapid Upsurge in the Pace of Development The rapid increase in the pace of development in building due to the devoping society, has led to time having greater value to an increasing number of clients (Adetola, 1995). Agha (1996) opined to the fact that these clients are now less willing to tolerate delay often encountered during redesigning, or cost and/or time over-run brought by insufficient planning (and its antecedent cost control). 2.6.4 Expanding Size of Clients Organization Omole (1990) submitted that, the people commissioning large projects are becoming increasingly cost conscious, being either industrialist concerned with accountability, joint stock companies or even government parastatals. The quest to match professionalism with the clients requirements remains the bone of contention. This factor also necessitates financial control as a system that helps giving significant value for money. 2.6.5 Effective Utilization of Loans

28

Most construction projects are undertaken with developers borrowed savings that attract payments for their use in form of interest charges. The financial institutions are usually hostile in recovering their interest charges. This has tremendous weight to be borne by both the client and contractors. Talking about this, Nwosu (1995) said that it is quite unfortunate to realize the wastage of money, which could have been invested in the hands of the financial institutions. All these increase the quest for effective control system in the procurement of construction projects in Nigeria.

2.7

TOOLS OF FINANCIAL CONTROL

According to Adesola (2007), financial control tools are the tools required to curtail construction cost, quality and time such that it is prevented from being abortive. In other words, financial control tools comprise cost control tools, quality control tools and time control tools in the construction industry. 2.7.1 COST CONTROL TOOLS The tools of financial control, according to Nwosu (1999) vary and depend on two major criteria; i. ii. The nature of the client The stage at which the cost limit is determined.

Client, according to Ashworth (1994), can be broadly classified under three headings: i. ii. iii Clients who have a clear intention of their requirements but are generally unaware of the cost implications; Clients who have a maximum amount of money to spend and a project in mind but are unsure of exactly what the amount of money will purchase; Clients who know their building requirements and who also have a fixed sum of money to spend on the project.

29

These three categories of the client is what Fredrick et al., (2001) referred to as uninformed, semi- informed and informed clients. The stage of cost control, according to Willis and Willis (1995), can be broadly classified under two headings: i. ii. Pre-contract cost control Post- contract cost control

In conflict to Williss idea of dividing cost control into two broad stages, Jagboro (1995) opined that cost control system has three stages: 1. Stage one consist of two steps, which are: 1. Establishment of a realistic initial estimate (Approximate estimate) 2. Distribution of the estimate among the various elements of the building as cost targets (cost planning) 2 Stage two involves the checking of cost targets as the work progresses (cost checking) 3 Stage three involves taking remedial action where necessary (cost reconciliation) However, the definitions against each of Jagboros stages and further discussion on them, it is not a fallacy to conclude that Jagboro and Willis are still of the same opinion. Hence, the idea of two stages will be adopted in this dissertation according to Willis and Willis (1995). 2.7.1.1 PRE-CONTRACT COST CONTROL

The pre-contract stage includes all the activities on services rendered before a construction project is awarded to a successful contractor (supplier). Cost control during the design stage is necessary in order to keep the total cost of the project within the clients budget and the task lies in the hand of the design team. Adetola (2000) contributed that effective cost control measures will ensure that the project team controls the circumstances surrounding the project procurement instead of the circumstances controlling them.

30

To effectively control cost, design, quality and time is of essence. To achieve the quality desired of an economic or viable cost, factors such as spatial arrangement, general ambience, aesthetic and flexibility have to be considered, analyzed and reflected. To this effect, Adetola (2000) suggested that strong inter-relationship between the clients need, the Architects form, and the Quantity Surveyors cost must be developed to ensure adequate and sound judgement is made to realize a satisfactory project. In the pursuant of the reality of the inter-relationship among the design team, the following are the pre-contract cost control tools to be put to use: 1. Approximate Estimate 2. Cost Planning 3. Cost Checking 4. Cost Reconciliation A) INITIAL CAPITAL DETERMINATION

Jagboro (1995) explained that approximate estimates are produced by the Quantity Surveyors during the preliminary design stage of a project in order to forecast its likely cost. The relevance of a preliminary estimate is in two phases. First, it creates an opportunity for the client to be aware of his financial commitment as early as possible before embarking on the detailed design drawings. Secondly, preliminary estimate enables the Architect and other engineering consultants to know a specific cost limit by a client and to ascertain cost information which will assist the design team during the various steps of the pre-contract stage. In agreement to this, Nwosu (1995) viewed approximate estimating as computing the probable cost of new construction works at some stages before the preparation of the bill of quantities.

31

According to Jagboro (1995), preliminary estimate essentially involves the following stages: 1. Measurement of quantities 2. Pricing of Items 3. Price adjustments where necessary In summary, preliminary estimation of construction cost is based on recognition that what has been constructed in the recent past can be at large and reasonable extent be replicated, bearing in mind the need for necessary modifications and adjustments. In achieving this, several methods have evolved over the years which are used in the preparations of estimates by the Quantity Surveyors. The methods are considered below: 1. Unit Rate Method

It is a single rate method which expresses the building cost in terms of the functional accommodation it provides. Willis and Willis (1995) explained such estimates are based on price per place, seat, bed, etc. which are the functional units. Such estimates must be very approximate and varying according to the type of construction and standard of finish. Jagboro (1995) cautioned that this method should not be used later than the inception stage. 2. Cubic Method Cube method, according to Jagboro (1995), is a single rate method which is now considered to be obsolete. The rules commonly followed in computing the cubic content of a building are: i. ii. The plan measurements are taken to the external faces of the external wall The height of the building is to be taken from half way up a pitched roof and 600mm above a flat roof. However, Jagboro (1995) also cautioned that the method should not be used later than the proposal stage. 3. Superficial Area Method

32

This is a single rate method which has become the most popularly used of estimating during the early design stage of a construction project, according to Jagboro (1995). This method according to Willis and Willis (1995) emanated from the deduction that the cost of building bears a relation to their floor area which is expressed in square metres, with the qualification that user, site condition, constructions and type of finish must also be considered. Jagboro (1995) explained that the total area of the building is calculated using the superficial dimension for each floor from the inside of the external walls, with no deductions made for internal walls, lift walls and staircases. This method should not be used later than the outline proposal stage. 4. Storey Enclosure Method to overcome the difficulties of adjusting for quantities variations

This is a single rate method which, according to Jagboro (1995), was developed in 1950s encountered with the cubic and superficial methods. Jagboro (1995) pointed out its main advantage to be the understanding that estimate produced includes a firm of judgement for plan, shape, size, vertical positioning of areas with the building storey height and basement.

5.

Elemental Method

According to Jagboro (1995), the elemental method evolved initially from the storey enclosure method where various elements are considered separately for quality and quantity adjustment. This method is not, therefore, a single rate method. Seeley (1996) further explained that the cost data needed to arrive at an estimate could be obtained from the cost analysis of previously executed projects, and such estimate could be produced from the elemental method at any stage of the design process. Jagboro (1995) saw the method as being reliable and quite easy to understand by all the parties involved in the project.

33

6.

Approximate Quantities Method

This method is regarded as the most reliable method of preparing an estimate provided the required detailed information is available and its popularity lies in the use of the traditional taking-off procedures and composite rates obtained from the bills of quantities (Jagboro,1995). Cost data can also be obtained from cost analysis and price books. Willis and Willis (1995), however, lamented that the disadvantage of this system is that it comes too late. This implies that by the time the drawings have reached the required stage, many matters of principle would have been settled, which cannot be altered without a major disturbance of the whole scheme. B) COST PLANNING

Adetola (2000) described cost planning as a system of relating the design of building to their cost so that, while taking full account of quality, utility and appearance, the cost is planned to be within the economic limit of the expenditure. Jagboro further explained that to overcome the shortcoming of approximate for effective control, cost planning evolved as a technique whereby the original estimate can be prepared on the basis of known economic standard of construction and finish. According to Adetola (2000), the type of cost planning technique used in any particular instance will depend on four major factors: 1. The degree of accuracy required; 2. The amount of time available 3. The amount of information available; 4. The project type. Going by these, Jagboro (1995) highlighted two main methods of cost planning which are currently in use in the construction industry. These are: i. ii. 1. Elemental cost planning Comparative cost planning

ELEMENTAL COST PLANNING

34

According to Ashworth (1994), this method is sometimes referred to as target cost planning since a cost limit is fixed for the scheme and the Architect must then prepare a design not to exceed this cost. The cost plan is therefore the Architects design in financial terms. Jagboro (1995) further explained that the elemental cost planning method is based on the proposition that the client is not only able to set a cost limit to the amount of money that he wishes to spend on a particular project, but is also willing to agree to the expenditure of a fixed amount to fixed accommodation. In essence, a target cost is agreed upon for the entire scheme which may then be divided into separated sun-targets for individual elements that make up the works to be executed. Jagboro (1995) opined that the realization of main objective of keeping within the cost limit will depend so much on how the target was established and how the various members of the design team perceive their individual contribution towards the overall control process. It follows from the detailed investigation required that elemental cost planning will automatically give a check at a very early stage, whether the overall figure is viable and ensure that the final cost of the building will not exceed the estimate or clients budget. In conclusion, Ashworth (1994) and Jagboro (1995) opined that the method is more appropriate to the public sector where limits are placed on the clients budget. 2. COMPARATIVE COST PLANNING

In differentiating comparative cost planning from the elemental cost planning, Ashworth (1994) says that whereas elemental cost planning is often referred to as designing to cost, this alternative procedure can be described as costing to design. Jagboro (1995) also shared the same opinion. Comparative cost planning allows various selected schemes to be evaluated, and the Architect and Quantity Surveyor, together with the client, decide on the most appropriate schemes. Such a scheme may of course be the most expensive, but decisions are the taken in the awareness of the cost consequences.

35

Jagboro (1995) further contributed that comparative cost planning method assumes a framework of initial feasibility and cost study to determine the general layout and arrangement of the building in the light of its overall cost target. In this instance, there are usually no targets for individual elements. The breakdowns of the entire scheme for the purpose of the cost study will normally reflect the functional requirements of the building and follow the broad pattern of structure, cladding, finishes, fitting and fixtures and services. Jagboro (1995) opined that within each section, the sub-division would depend upon the type of building, the construction techniques and the various design proposals. Ashworth (1994) and Jagboro (1995) opined that this method is most suitable for the private sector which does not emphasize the same requirement to apply a cost limit to a proposed scheme. In practice, the cost planning process in use today is often a combination of the best parts of the above two methods. C) COST CHECKING Nwosu (1995) explained this as the process of checking the estimated cost of each section or element of the building as the detailed designs are developed against the cost target set against it in the cost plan. Adetola (2000) shedding more light on this says that at working drawing, cost checking is carried out to make sure that the anticipated tender figures will be within the cost limit and the cost plan. This process is not restricted to working drawings stage alone but is carried out throughout the various stages of the project development process. Ashworth (1994), however, opined that cost checking can be a time consuming process, particularly if major discrepancies occur between the cost plan prepared by the Quantity Surveyor and the Architects final design. To this effect, Adetola (2000) suggested that when cost targets are too small or too high (showing inadequate or over finding of a particular element), the following steps could be taken: 1. The Quantity Surveyor must inform the members of the design team in writing (memos)

36

2. The design team will then consider or review and amend the design or specification of the particular element 3. The team may review and subsequently amend the cost target by looking for savings that might have been revealed in other element cost targets 4. They may decide to notify the client. This is unusual step and it is only taken as a lat resort especially where there is no way of getting the additional amount without compromising need. D) COST RECONCILIATION At this juncture, it is useful to undertake some form of reconciliation to highlight any discrepancies between the final cost check and the cost analysis of the accepted tender. Thus comparison, according to Ashworth (1994), will provide some input to the cost planning of the future projects. Error on the part of both the Surveyor and the builders estimators can occur and there will be occasions where the contractor has deliberately distorted some of the prices for possible future gains. Ashworth (1994) referred to the reconciliation carried out at this stage as tender reconciliation because it basically concerns reconciling tenders to the cost plan earlier presented to the client. At times, differences may emerge between the consultant Quantity Surveyors cost limit and the actual cost for an element in the tender being analyzed. Agha (1996) proposed that the Quantity Surveyor must research the reasons for any major discrepancies at this stage so that a realistic adjustment can be made. 2.7.1.2 POST CONTRACT COST CONTROL TOOLS

When the contract had been signed, the design, which is now more likely to have stayed within the budget, is evidenced by an agreeable tender sum. The clients main concern, however is to ensure that the final account also comes within the budgeted figure, according to Ashworth (1994). The major control tool here is cost monitoring, time control and quality control. Agha (1996) said the basis of post contract cost control is to report at regular intervals or occasionally so as to set out the clients likely final cost commitment in some detail and also make apparent the cost consequence of any remaining option and variation. This is to enable the cost

37

effect of any major changes to be whole and thus avoid such actions being taken, if the total cost appears to be escalating unduly especially during the period of inflation. The post contract control tools are categorized into the following: 1. Cost monitoring 2. Cost Models 3. Feedback System 2.7.1.2.1 COST MONITORING

According to Agha (1996), the most vital part of control is monitoring of cost, quality and time. It will be myopic of the Quantity Surveyor to limit his cost control role at this stage to preparing periodic assessments of anticipated final cost and reporting on site alone. He opines that the Quantity Surveyor that intends to have effective control on cost at this stage must to go an extra mile and add the following services to his techniques: A. Cost Monitoring on Finance: Working Capital

This is the requirement of cash to finance the project work from day to day having paid out the cost of production but not received payments for work done. Planning for working capital is very essential to ensure that the project is not interrupted due to lack of working capital. Olabopo (1992) said that at post contract stage when the contract has been awarded, the construction firm will have to seek for fund to finance the execution of the construction project before the project becomes self financing irrespective of payments made on account through the interim certificate issued for work done. Olabopo (1992) identified borrowing or using the companys reserve as relevant sources of finance. As the cost of financing the project is part of the cost of the project, so any means by which this cost element may be reduced must be given serious consideration. According to Ashworth (1994), the following factors are said to be affecting working capital:

38

1) Rate of Output: The faster the rate of construction, the greater the demand for cash and vice versa. Adonoje (1990) further buttressed this when he said where the contract duration is a short, operative may be put on overtime to keep within the programmes or plant may be kept longer on site than envisaged and all these culminate to incurring extra cost. 2) The frequency of interim valuation: The time lag between the execution and payment for the work done increases the working capital with greater delay 3) The contractors retention fee. 4) Advance payment and mobilization fee. B. COST MONITORING BY CASH FLOW

Olabopo (1992) referred to cash flow as the actual movement of money in and out of a business. It is the lifeline of any business. Money flowing in may be termed positive cash flow while the one flowing out may be negative cash flow. Also, he stressed that within the construction organization, positive cash flow is derived mainly from monies received through monthly payment of certificates while negative cash flow relates to monies expended on a contract in paying wages, purchasing materials etc. The net cash flow will require funding by the contractor when there is a cash deficiency. Where cash is surplus, the contract is self financing. Seeley (1996) and Olabopo (1992) opined that cash flow is the life blood of the construction project, many construction firms are always in financial deficit due to retention fund, low percentage profit or turn over. The problem of cash flow can be solved through the following ways. 1. Realistic monthly assessment of preliminaries from fully documented and priced preliminary schedule 2. Increase costs under contracts with fluctuations kept up to date in monthly valuation 3. Variations to contract accurately assessed and included in valuation

39

Onyejeli (1990) maintained that be resolving cash flow problems, it is possible to cut cost of the project and attain good standard of workmanship while the contractor still make reasonable profits. He maintains that the ever increasing importance of quick money flow in the construction industry will be appreciated as a means of not only reducing cost but also for stabilizing costs or at least average off increases.

COST MONITORING BY INTERIM VALUATION

Clause 30 of the JCT condition of contract makes provision for interim certificate so that payment can be accounted. The reasons for this provision, according to Jagboro (1989), are: 1. The duration of the contract may be such that it would be unreasonable to expect the contractor to finance the project in its entirety. 2. The value of contracts prohibit the contractors ability to offer a financing arrangement 3. Current interest rates merely compound the problem. Owing to the nature of buildings with fairly expensive capital investment created over a period of time, the employer may be involved with the funding, more so, when the successful contractor involved has more than one projects to finance (Ramus and Birchall, 1996). Jagboro (1989) said that in most cases the frequency in which the contractor is to be paid on interim certificate is stated in the appendix to the contract and it is usually on monthly basis or at a stage of progress predetermined by the parties. The rules governing the evaluation and payment of interim valuation are defined in clause 30 of the Federal Ministry of Works standard form of condition of contract. The clients Quantity Surveyor and that of the contractor will normally meet to evaluate the work completed and ensure that agreement is reached upon the amount to be paid. Jagboro (1989) says the main aim of preparing valuation is to make a recommendation to the Architect as to the value of work completed, upon

40

which the Architect will base his certificate of the amount the employer, is to pay the contractor. Ramus and Birchall (1996) however cautioned that extreme care should be taken by the Quantity Surveyor to avoid over-valuation of the work and this calls for realistic assessment of the work done. 2.7.1.2.2 COST MONITORING BY FINAL ACCOUNT PREPARATION

Oyebade (1999) opined that the final account shows the final financial commitment of both the client and the contractor arising from their contractual obligations in most explicit and acceptable manner. The work measurement and valuation is expected to be completed within the period for final measurement as stated in clause 30, 5(1), 5(b), and 5(c) respectively of the Federal Ministry of Works standard form of contract for building works. According to Jagboro (1989), immediately after practical completion, the contractor is expected to send to the quantity surveyor all relevant documents necessary for the purpose of the computation required by the conditions including nominated suppliers and nominated sub contractors account.

The following sub-headings may be considered during the preparation of final account: i. ii. The amount paid or payable in respect of the notice fees and charges under clause 4(2); Settlement of accounts paid or payable under the appropriate contracts by the contractor to nominated sub-contractors and nominated suppliers; iii. iv. v. The amount paid or payable in respect of an insurance maintained in compliance with clause 11(2); The tender sum for any work for which a tender is made under clause 27 (9); The value of any work executed by the contractor for which a provisional sum is included in the contract bills shall be set against the

41

relevant prime cost or provisional sum mentioned in the contract bills or arising from under Architects instructions issued under clause 13 of these conditions. The documents required for the preparation of final accounts, according to Ashworth (1994) include contract drawings, contract bills, conditions of contract, Architects instructions, confirmed verbal instructions, correspondences, revised drawings, day works and details of increased costs such as time sheets, materials quotations and invoice, and schedule of plant. The items to be included in the final account as provided by the JCT standard form of contract (2000) are: Summary of account, adjustment of prime cost sums, variation accounts, adjustments of provisional quantities, claims, fluctuations and day works account. 2.7.1.2.3 FEED BACK SYSTEM

The term feedback originates from the field of cybernetics founded in the late fifties by Norbert Wiener. The term quickly entered colloquial speech and was adopted as a term in disciplines as varied as psychology and biology. Feedback, applied to interpersonal communication, carries with it the idea of evaluation or judgement of performance. Communicating information about requirements, expectations, scope, costs, schedules, and technical data is a vital element in achieving quality in construction projects. Feedback is an effective management tool because it serves as an informational function that enhances an individual's work performance and is an important process affecting productivity of construction organizations. Construction projects everywhere are prone to problems of communication and a great deal of effort has gone into ways of improving communication. The construction industry in Nigeria suffers many of the problems common to other developing countries such as delays, cost overruns, accidents, and miscommunication of information within organizations.

42

Therefore, it is imperative to describe how construction organizations incorporate feedback in the management of cost control processes in projects; identify factors influencing feedback control processes in these organizations; develop strategies for improving estimating and cost control by improving feedback mechanisms. The efficient management of construction projects towards continuous cost reduction is a major challenge facing the industry in developing countries. A. Communication and feedback Schermerhorn (1996) defined communication as an interpersonal process of sending and receiving symbols with meanings attached to them. Communicating information such as requirements, expectation, scope, cost, schedule, and technical data is a vital element in producing quality in construction projects. The process of communication involves an interchange of thoughts, information, knowledge, or opinions. Transmitting information to an individual is only part of the total process. Communication has not taken place unless the person receiving the information is in a position to understand what the information means and then to respond to it. The response constitutes feedback and is an essential part of the total communication process. Schermerhorn (1996) described feedback as the process of telling someone else how you feel about something that person did or said. A manager should make sure that any feedback is understandable, acceptable and plausible, all from the recipients point of view. Feedback typically consists of information provided to an individual concerning the outcomes of their performance. It provides information about the correctness, accuracy, and adequacy of work behaviours. Feedback control systems of various kinds at various levels operate continuously throughout the life of a project. Schermerhorn (1996) offered specific guidelines for giving constructive feedback: i. ii. Give feedback directly and with real feeling, based on trust between you and the receiver. Make feedback specific rather than general, using good, clear, and preferably recent examples.

43

iii. iv. v.

Give feedback at a time when the receiver seems most willing or able to accept it. Make sure the feedback is valid, and limit it to things the receiver can be expected to do something about. Give feedback in small doses; never give more than the receiver can handle at any particular time.

Thus, it would seem that timeliness, accuracy, relevance and efficiency are important considerations in order to make feedback effective.

Problems of feedback in the construction industry

Harris and McCaffer (1989) observed that the construction industry is unlike many manufacturing situations because it is concerned mostly with one-off projects. This naturally creates difficulties for effective management control, because each new contract often has a fresh management team; labour is transient and recruited on an ad hoc basis. In addition, sites are dispersed throughout the country and this tends to cause problems in effective communication with other parts of the company; subcontractors and 'lump' labour are common. Added to all these are ever-changing weather conditions. The problems encountered in the provision of feedback are related to conflicting interests, and poor communication. Guevara and Boyer (1981) analyzed the communication problems known as overload, gate keeping and distortion within construction. They observed that when overload exists, there is not enough feedback, face-to-face communication modality, or interaction between employees. When gate keeping occurs, there is not enough feedback or employees are not satisfied with the communication, or both. When distortion exists there is inadequate feedback, or insufficient interaction and under-load. C Feedback and cost control

44

A major objective of construction organizations is to minimize cost, which contributes to profit. As such costs must be monitored and controlled, whether from the point of view of the owner, the designer, or the contractor. Project cost control data are important not only to the project management for decision making, but also to the companys estimating and planning departments because these data provide feedback information essential for effective estimates and bids on new projects (Halpin, 1985). In designing and using a cost control system, it is good to keep in mind the main purposes, which such as system serves. Pilcher (1992) described these purposes in the following terms: 1. to provide immediate warning of uneconomic operations, in the long and short term; 2. to provide the relevant feedback, carefully qualified in detail by all the conditions under which the work has been carried out, to the estimator who is responsible for establishing the standards in the past and future; 3. to provide data to assist in the valuation of those variations that will arise during the course of the work; 4. to promote cost consciousness; and 5. To summarize progress. Having solid project controls in place provides for opportunities to control costs. Generating profits, instead of incurring more losses, is the backbone and main purpose of a working cost control system (Younker, 1993). D Learning

The basic principles of learning curves are that skill and productivity in performing a task improves with experience and practice (Barrie and Paulson, 1992). Ogunlana (1991) describes how design cost estimating accuracy could benefit from promoting learning. A consideration of the underlying reasons for the observations made regarding the practice and accuracy level in estimating suggests that motivation to learn is not high. Thus, the generally held view that estimating performance is good

45

enough

persists

because

estimators

attention

is

not

drawn

to

evidence

contradicting their assumptions. This oversight derives from the absence of a system requiring regular monitoring of estimating performance. He suggested that learning can be improved and estimating performance increased through the collection and use of feedback data. Lowe and Skitmore (1994) investigated experiential learning theory and the current perception of experiential factors in the accuracy of pre-tender cost predictions. They compared the preferred learning styles of a sample of experienced pre-tender cost estimators with those of novice quantity surveyors and investigated how estimators have developed as a result of these experiences. Experiential factors which stimulate personal development in pre-tender estimators are considered and a mechanism to improve the accuracy of pre-tender estimates is proposed linking experiential learning theory with the introduction of feedback and self-monitoring systems. E Information system and cost control

According to Barrie and Paulson (1992), general objectives for an information system designed to aid management in the planning and control of engineering and construction projects may be stated as follows: 1. To provide an organized and efficient means of measuring, collecting, verifying, and quantifying data reflecting the progress and status of operations on the project with respect to schedule, cost, resource, procurement and quality. 2. To provide standards against which to measure or compare progress and status. Examples of standards include CPM schedules, control budgets, procurement schedules, quality control specifications, and construction working drawings. 3. To provide an organized, accurate and efficient means of converting the data from the operation into information. The information system should be realistic and should recognize: (a) The means of processing the information (e.g.; manual versus computer),

46

(b) The skills available, and (c) The value of the information compared with the cost of obtaining it. 4. To report the correct and necessary information in a form which can best be interpreted by management, and at a level of detail most appropriate for the individual managers or supervisor who will be using it. F. METHODS OF IMPROVING FEEDBACK SYSTEM Two systems that are capable of enhancing improved feed back system in the construction industry were identified by Marasini (1996) and Sa-ngaimusk (1999). These are: 1. Site Data Capture System Formulation (SDCS) Marasini (1996) established a procedure for collecting and reporting field data by site data capture system (SDCS). Supervisors are provided with planning and scheduling data, construction drawings and specifications. They have adequate field knowledge about what is going on. They collect site data and send it to site office. The assumption here is that the company is using some planning and controlling software in the site office. All information gathered from the site are grouped into one or more forms of reports and are sent to middle and top management. Relevant information is sent to estimating, accounting, planning and monitoring systems. Management decisions are passed to supervisors via site office. Sometimes, both head office and site office functions are conducted through a single office. SDCS consists of three steps of data reporting: The first step is daily data collection from the site. Actual resources used and work performed is recorded in a palm-top computer together with information on weather conditions, major causes of interruption of work and change orders on a shift basis. Each shift report can be prepared as per requirement and daily reports are prepared regularly. The second step is the production of weekly reports by reading seven days data. This process continues until the activity is completed. The first and the second stage reporting together provide input to the monitoring system of the company.

47

Using such tools, progress reports and other information systems, a company database can be established. When the activity is completed, all information regarding resource use and expenditures are stored as a historic database which is used for estimating and planning future projects. SDCS alone produces productivity databases. This function is included in third stage reporting. With this framework, the site data capture system has been developed. Field data are collected using a palm top computer on a daily basis. This system is called Supervisors Kit as it facilitates field supervisors to carry on their work in an efficient manner. 2. Web-based Construction Documentation system

Sa-ngaimusk (1999) developed a web-based construction documentation system. She explained that the web based construction documentation system is also useful for recording feedback. The web database technology used for this purpose is built around a relational database management system and the World Wide Web (WWW). The WWW provides information throughout web pages in hypertext as electronic documents. Clients can be located in a computer network within a field construction project linked to the head office. The system enables field personnel to assess and use the forms and reports that are tailored to suit the needs of each project. Field engineers generate daily reports and post these documents from their sites via web pages. All documents posted through the web page will be kept in a central database on the server that may be located in the head office. These documents will be generated as on-line reports. No doubt other systems are being developed elsewhere. For instance, Navon and Goldschmidt (1999) reported on an automated labour control system being developed in Israel. However, such automated systems may be too technically advanced for a developing country like Nigeria. Any system introduced needs to consider the condition of the country especially the ease in using it under local conditions and with local personnel. 2.7.1.2.4 COST MODELLING

48

Cost modeling is a means devised by construction professionals to predict future occurrences in the course of the project execution. Granada (2003), said that the Quantity Surveyor will normally produce monthly forecasts of final expenditure, and to predict and monitor cash flow. In this way, the Quantity Surveyor can check on the contractors progress on site and the probable consequences of any delay. Seeley (2003) said that there are several methods that can be used for cost modeling purposes. They are the simple linear regression and the multiple linear regression analyses. Simple linear regression analysis quantifies the relationship between two variables, such as floor area with total cost and can, therefore, be plotted graphically. Multiple linear regression analysis relates three or more variables and because of the complexities involved, requires the use of computers. The latter has a greater application to cost modeling, since cost is unlikely to be confined to a single variable. Various types of cost models have evolved using the above strategy. Some of these models include: 1 The Neurofuzzy Model for predicting Cost and Duration of Construction Projects 2. Activity based concept model for production control in construction companies 2.7.2 QUALITY CONTROL Quality control and safety represent increasingly important concerns for project managers. Defects or failures in constructed facilities can result in very large costs. Even with minor defects, re-construction may be required and facility operations impaired. Increased costs and delays are the result. In the worst case, failures may cause personal injuries or fatalities. Accidents during the construction process can similarly result in personal injuries and large costs. Indirect costs of insurance, inspection and regulation are increasing rapidly due to these increased direct costs.

49

Good project managers try to ensure that the job is done right the first time and that no major accidents occur on the project. (Dulcan, 2007) As with cost control, the most important decisions regarding the quality of a completed facility are made during the design and planning stages rather than during construction. It is during these preliminary stages that component configurations, material specifications and functional performance are decided. Quality control during construction consists largely of insuring conformance to these original designs and planning decisions. While conformance to existing design decisions is the primary focus of quality control, there are exceptions to this rule. First, unforeseen circumstances, incorrect design decisions or changes desired by an owner in the facility function may require re-evaluation of design decisions during the course of construction. While these changes may be motivated by the concern for quality, they represent occasions for re-design with all the attendant objectives and constraints. As a second case, some designs rely upon informed and appropriate decision making during the construction process itself. (Hughes, 1991) With the attention to conformance as the measure of quality during the construction process, the specification of quality requirements in the design and contract documentation becomes extremely important. Quality requirements should be clear and verifiable, so that all parties in the project can understand the requirements for conformance. Adetola (2000) explained that quality control is a subset of financial control, in that, the essence of controlling cost is to have a product that is of commensurate quality with the clients taste and within the clients budget. 2.7.2.1 Production QUALITY CONTROL TOOLS environments that utilize modern quality control methods are

dependant upon statistical literacy. Quality control in construction typically involves insuring compliance with minimum standards of material and workmanship in order to insure the performance of the facility according to the design. These minimum standards are contained in the specifications described in the previous section. For 50

the purpose of insuring compliance, random samples and statistical methods are commonly used as the basis for accepting or rejecting work completed and batches of materials. Rejection of a batch is based on non-conformance or violation of the relevant design specifications. An implicit assumption in these traditional quality control practices is the notion of an acceptable quality level which is an allowable fraction of defective items. Materials obtained from suppliers or work performed by an organization is inspected and passed as acceptable if the estimated defective percentage is within the acceptable quality level. Problems with materials or goods are corrected after delivery of the product. (Dulcan, 2007) Hughes (1991) said that in contrast to this traditional approach of quality control is the goal of total quality control. In this system, no defective items are allowed anywhere in the construction process. While the zero defects goal can never be permanently obtained, it provides a goal so that an organization is never satisfied with its quality control program even if defects are reduced by substantial amounts year after year. This concept and approach to quality control was first developed in manufacturing firms in Japan and Europe, but has since spread to many construction companies. The best known formal certification for quality improvement is the International Organization for Standardization's ISO 9000 standard. ISO 9000 emphasizes good documentation, quality goals and a series of cycles of planning, implementation and review. According to Hughes (1991), total quality control is a commitment to quality expressed in all parts of an organization and typically involves many elements. Design reviews to insure safe and effective construction procedures are a major element. Other elements include extensive training for personnel, shifting the responsibility for detecting defects from quality control inspectors to workers, and continually maintaining equipment. Worker involvement in improved quality control is often formalized in quality circles in which groups of workers meet regularly to make suggestions for quality improvement. Material suppliers are also required to

51

insure zero defects in delivered goods. Initially, all materials from a supplier are inspected and batches of goods with any defective items are returned. Suppliers with good records can be certified and not subject to complete inspection subsequently. Of course, total quality control is difficult to apply, particular in construction. The unique nature of each facility, the variability in the workforce, the multitude of subcontractors and the cost of making necessary investments in education and procedures make programs of total quality control in construction difficult (Dulcan, 2007). Nevertheless, a commitment to improved quality even without endorsing the goal of zero defects can pay real dividends to organizations. The tools used therein are called the quality control tools. These include: A. SETTING THE QUALITY ASSURANCE TEAM

A variety of different organizations are possible for quality and safety control during construction. According to Peterson (2006), one common model is to have a group responsible for quality assurance and another group primarily responsible for safety within an organization. In large organizations, departments dedicated to quality assurance and to safety might assign specific individuals to assume responsibility for these functions on particular projects. For smaller projects, the project manager or an assistant might assume these and other responsibilities. In either case, insuring safe and quality construction is a concern of the project manager in overall charge of the project in addition to the concerns of personnel, cost, time and other management issues. Inspectors and quality assurance personnel will be involved in a project to represent a variety of different organizations. Each of the parties directly concerned with the project may have their own quality and safety inspectors, including the owner, the engineer/architect, and the various constructor firms (Dulcan, 2007). These inspectors may be contractors from specialized quality assurance organizations. In addition to on-site inspections, samples of materials will commonly be tested by specialized laboratories to insure compliance. Inspectors to insure 52

compliance with regulatory requirements will also be involved. Common examples are inspectors for the local government's building department, for environmental agencies, and for occupational health and safety agencies. The US Occupational Safety and Health Administration (OSHA) routinely conduct site visits of work places in conjunction with approved state inspection agencies. OSHA inspectors are required by law to issue citations for all standard violations observed. B WORK AND MATERIAL SPECIFICATIONS

Specifications of work quality are an important feature of facility designs. Specifications of required quality and components represent part of the necessary documentation to describe a facility. Typically, this documentation includes any special provisions of the facility design as well as references to generally accepted specifications to be used during construction. General specifications of work quality are available in numerous fields and are issued in publications of organizations such as the American Society for Testing and Materials (ASTM), the American National Standards Institute (ANSI), or the Construction Specifications Institute (CSI). Distinct specifications are formalized for particular types of construction activities, such as welding standards issued by the American Welding Society, or for particular facility types, such as the Standard Specifications for Highway Bridges issued by the American Association of State Highway and Transportation Officials. These general specifications must be modified to reflect local conditions, policies, available materials, local regulations and other special circumstances (Agha, 1996) Construction specifications normally consist of a series of instructions or

prohibitions for specific operations. This set of specifications requires judgment in application since some items are not precisely specified. For example, excavation must extend a "sufficient" distance to permit inspection and other activities.

53

Obviously, the term "sufficient" in this case may be subject to varying interpretations. According to Peterson (2006), in recent years, performance specifications have been developed for many construction operations. Rather than specifying the required construction process, these specifications refer to the required performance or quality of the finished facility. The exact method by which this performance is obtained is left to the construction contractor. For example, traditional specifications for asphalt pavement specified the composition of the asphalt material, the asphalt temperature during paving, and compacting procedures. In contrast, a performance specification for asphalt would detail the desired performance of the pavement with respect to impermeability, strength, etc. How the desired performance level was attained would be up to the paving contractor. In some cases, the payment for asphalt paving might increase with better quality of asphalt beyond some minimum level of performance. C PARETO CHART

Peterson (2006) explained that Pareto charts are extremely useful because they can be used to identify those factors that have the greatest cumulative effect on the system, and thus screen out the less significant factors in an analysis. Ideally, this allows the user to focus attention on a few important factors in a process. They are created by plotting the cumulative frequencies of the relative frequency data (event count data), in descending order. When this is done, the most essential factors for the analysis are graphically apparent, and in an orderly format. D SCATTER DIAGRAM

Scatter diagrams are graphical tools that attempt to depict the influence that one variable has on another. A common diagram of this type usually displays points representing the observed value of one variable corresponding to the value of another variable. (Peterson (2006)

54

CONTROL CHART

The control chart is the fundamental tool of statistical process control, as it indicates the range of variability that is built into a system (known as common cause variation). Thus, it helps determine whether or not a process is operating consistently or if a special cause has occurred to change the process mean or variance. The bounds of the control chart are marked by upper and lower control limits that are calculated by applying statistical formulas to data from the process. Data points that fall outside these bounds represent variations due to special causes, which can typically be found and eliminated. On the other hand, improvements in common cause variation require fundamental changes in the process. According to Peterson (2006), the tools listed above are ideally utilized in a particular methodology, which typically involves either reducing the process variability or identifying specific problems in the process. However, other methodologies may need to be developed to allow for sufficient customization to a certain specific process. In any case, the tools should be utilized to ensure that all attempts at process improvement include:
1 2 3 4 5 6

Discovery Analysis Improvement Monitoring Implementation Verification

Furthermore, it is important to note that the mere use of the quality control tools does not necessarily constitute a quality program. Thus, to achieve lasting improvements in quality, it is essential to establish a system that will continuously promote quality in all aspects of its operation.

55

F.

METHOD STATEMENT

According to Dada (2008), method statement is a document describing how a project or part of the project is to be carried out including the timing, resource and spatial consideration. They are sometimes produced by all parties but reach a greater level of detail when it is a contractor producing them. Dulcan (2007) opined that method statement can be used for a lot of things including communicating with other parties to a contract and developing internal estimates. Detailed method statements are particularly useful for developing a safe method of working in other to achieve a specified quality. As highlighted in Cudley (2003), a method statement may contain a few of many items from the following list:
1 2 3 4

A descriptive and diagram of the project offices, store and stock areas; A plan of work for the project; A list of plant and equipment to be used; Planning diagram showing the proposed status of the project at various levels of construction; Location diagrams showing plans and operation capabilities of major plants; Location diagrams showing plan of temporary works; The safety matters; Environmental considerations; Details concerning major suppliers and sub contractors; Budget calculation

5 6 7 8 9 10

2.7.3 TIME CONTROL The policy environment of the project is the major influence around the timing of the project. Timing is influenced by many environmental factors, but the clients attitude to the timing of the project is an issue of policy. Therefore, when

56

considering time, the policy of the clients need to be ambiguous. Willis (1986) explained that the project schedule is ma plan of work per unit time. By spending up the task, we can make up for the past or future lost time and still makes the predetermined scheduled date. There has been some control tools designed to monitor the project duration vis--vis the construction cost which is to be within the budgetary limit. Some of these tools are: 2.7.3.1 BAR CHART This is a traditional method in which a horizontal scale is used, often divided into weeks and the various operations or activities comprising the projects are listed vertically down the left hand side. The timing and duration of each of the operation are then indicated by a horizontal bar spinning the relevant period of weeks. This is the most widely used tool of communicating a programme in the construction industry, its popularity arising from the fact that it is simple to construct and easy to use in practice. Bar charts are inexpensive to produce and are easily understood by people with a minimum scheduling training. The major disadvantage is that it does not show the inter-relationship of construction activities. 2.7.3.2 NETWORK ANALYSIS TECHNIQUES

A network consists of activities and events. An activity is an operation, and all activities start and finish at an event, which is a point in time and may be the junction of two or more activities. The quest for network techniques for planning, scheduling and allocating resources in construction works, especially in the building sub-sector, took a new dimension at the middle of the 1950s. It was mainly necessitated by the inadequacies of the existing methods of bar and Gantt charts. These models were unable to show the inter-relationship between the various activities, such that if delay occurs in one or more activities, it become difficult to relate them to the overall cost, time and quality performance of the project. Secondly, there was difficulty in determining the order of priorities the project team should consider the various activities and resources to keep the project under control (Andawei 2001). 57

Project network is analyzed by two models which are critical path method (CPM) and program evaluation and review technique (PERT). Their basic difference is whether or not the project activity duration is deterministic, in the case of PERT, or probabilistic in the case of CPM. While PERT estimate activity duration by a stochastic tree-time estimate, the CPM considers activity time and indeed project duration as deterministic. A. CRITICAL PATH METHOD

The CPM believes that in every project network, there are various routes passing through different activity points and there exist the longest path in every project. It also believes that there are activities that are so dear to the timely delivery of the project. The path that passes through the critical activities is referred to as the critical path. The critical activities are those activities that have zero total and free float. This simply means that the duration of critical activities is equal to the difference between the preceding and succeeding event times. Critical activities are known for there prompt start and completion. If for any reason, there is delay in the activity start time or end time, the entire project duration and indeed the cost would be consequently prolonged and altered. Alternatively, all activities that do not have the feel of critical path are called subcritical activities. These activities even though they are touched, the project end date is intact. However, there is an exception to this rule, if the sub-critical activities are extended beyond the permissible total float, then, the project end date will be affected. Mathematically, total float is computed thus: Tf = Lf-Es-D; Where: Tf = Total Float Lf = Latest finish time

58

Es = Earliest start time D = Duration of the activity As stated above, the primary objective of any client is the successful completion of project on schedule, within cost limit and meeting the performance and requirements of the project. Consequently, an extension of the project time will not only increase the cost of material, labour, plant and other direct cost but will also increase delay the period within which the finished product would have been delivered as earlier scheduled. Project delays can therefore be defined as situation where the project could not be completed as planned by the initial project breakdown structure. Three reasons could be responsible for project delays:
1 2 3

Late starting of critical activities Poor resource planning and allocation Delay pf sub-critical activities beyond their total float limits

These inherent project delays have severe social, economic and environmental effects on the economy in which such project are initiated and implemented. These inherent consequences could easily be handled with the aid of the CPM model. BENEFITS OF CPM i. ii. iii. iv. CPM model would enable users to estimate with ease the individual and cumulative effect of activity and the entire project duration and cost It would also enable users to determine in advance the limit of time and likely budgetary slip occasioned by activity delay It will enable contractors and clients to assess claims arising from the contract more accurately It will also offer more viable options in event of either of the parties being caught up by project deadlines. 3.4.1 PERT ANALYSIS

59

PERT is a network model that allows for randomness in activity completion times. PERT uses time estimates in establishing the probability of completing a project within a specified time and take calculated risk before commencing the project. It has the potential of reducing both the time and cost required for the timely completion of the project. PERT is based on the assumption that an activitys duration follows a probability distribution instead of being a single value. The time estimates are required to compute the parameters of an activitys duration distribution: 1) Pessimistic Time (b):The time the activity would take if things did not go well 2) Most likely Time (m): The completion time having the highest probability, that is, the consensus best estimate of the activitys duration (expected case) 3) Optimistic Time (a): The shortest time in which the activity can be completed if things go well. The mean completion time of each activity is then calculated as follows: = (a+4m+b)/6 The standard deviation, which is a good measure of the variability of each activity, is calculated as follows: SD= (b-a)/6 And the variance is the square of the calculated standard deviation.

PROBABILITY COMPUTATION This determines the probability that the project is completed within specified time. Z= (x-)/

60

Where: =project mean time =project standard mean time x= proposed /specified time Probability computation can be made using the normal distribution table.

2.8 CONSTRAINTS TO THE USE OF FINANCIAL CONTROL TOOLS The effective application of the highlighted financial control tools in the procurement and execution of construction projects in Nigeria is being undermined or obstructed by the following factors: 2.8.1 Inadequate Cost Information Construction cost information, which is the bedrock of financial control, influences whether to build or not as every prudent client would like to know the probable cost before embarking on a project. Cost information during project execution helps in monitoring and meeting project time and cost targets. Availability and adequacy of essential cost information is important for effective financial control (Akintoye, Ajewole and Omolaye, 1992). In this regard, Jagboro (1995) opined that in the quest to establish behavioural patterns for cost information, the relevance of Quantity Surveyors, as behavioural scientist, will have to be significantly developed.

2.8.2 Delay in the Appointment of the Quantity Surveyor Onyemachi (1990) said that manner and time of appointing a Quantity Surveyor to a project has rendered financial control either completely absent, or at the best,

61

ineffective. Control infers power and authority and the fact that the Quantity Surveyor is often times, appointed by the Architect cripples the authority of the Quantity Surveyor to control the Architects design, in order to bring down the cost of construction. He therefore suggested that before the quantity surveyor can be effective and creditably perform the function of controlling finances and cost during designing, he needs to be appointed in time, latest at the same time with the Architect. 2.8.3 Poor Working Relationship among Professionals The marginalization of profession(s) or hustle for professional supremacy has created a poor working relationship among the professionals and thus rendered financial control tools watery. Ajator (1990) identified the industry malady as strict compartmentalization into entrenched institution with their professionals erecting protective barriers, each understanding less about the others needs and aspirations than he ought to and each seeking to strengthen his position at the expense of others. To curb this act, he suggested that the industry should evolve cohesive relationship between the design and the construction team to ensure cost effective design. Team coordination which will galvanize the members of the team as one, proper acceptance, interaction and cohesion of the team in order to develop the construction data bank in Nigeria should be inculcated. 2.8.4 Unstable Economic Scenario Despite the nascent democracy in Nigeria, government policies are still blunt and strict as regards some aspects of life. Adetola (2000) said the high level of inflation in this country despite democracy poses threat to the actualization of the designs team objective as regards financial control and the management function of the Quantity Surveyor.

62

2.8.5 Social Constraints Arah (2000) said project procurement costs in Nigeria are comparatively higher than it is in other third world countries, due to several social factors ranging from corruption in the manipulation of the price of the project to incompetence and errors in the management of the procurement process such as favouritisms in the selection of contractors which could lead to abandonment of the project before completion with its attendant consequence on the client. These so called social constraints have been weakening the process of financial control in the industry. However, Arah suggested that proper education of parties involved in the construction through seminars, workshops and symposia to curb bad habit in the profession will surely yield positive results. 2.8.6 Inadequate Budget A reliable estimate and determination of the cost limit are seen as then beginning of financial control system. A Quantity Surveyor who does not produce a reliable estimate or cost limit for his client, according to Agha (1996) will mislead the client into having an inadequate budget. Dikko (2000) suggested that macroeconomic variables such as exchange rates, interest rates, duties and taxes, inflation index, export restrictions and financing should be well considered by the Quantity Surveyor, the Architect and the engineers at the design stage. 2.8.7 Delay in Award of Contract Onyemachi (1990) said often times; the design team would have done a commendable job only to be scuttled by the delay in award of the contract by the employer. Agha (1996) submitted that the time lapse between the completion of the design and the award of contracts means a lot considering the prevailing high level of inflation in Nigeria. If care is not taken, the whole process of redesigning may be the result and this is not helpful in effective financial control in the construction industry.

63

CHAPTER THREE RESEARCH METHODOLOGY 3.1 DATA COLLECTION

The methodology employed in attaining the aim and objectives of this research topic shall be through the use of questionnaire (field investigation). 3.1.1 FIELD INVESTIGATION Field investigation is the practical approach to the subject matter of the study to ascertain what is actually operating in the construction industry using a sample population. The sample population to be used is some cities in Nigeria since the dissertation is concentrated in the Nigerian construction industry. This shall be done through the design and distribution of questionnaires to and or conducting oral interview with construction consultants and contracting firms; practicing professionals in the Nigerian construction industry. This includes Architects, Builders, Quantity Surveyors, civil engineers and structural engineers. Architects and Structural engineers produce the design to be used for construction, which should be to cost; the quantity surveyor is saddled with the responsibility of checking and controlling cost, quality and time; the Builders and the Civil engineers are to convert the drawing on paper on land by actual construction to the controlled cost, quality and deliver the completed project on time. 3.2 METHOD OF DATA COLLECTION

3.2.1 The Use of Questionnaires Questions that are relevant to the salient issues in this dissertation will be drafted, free from ambiguity and in simple language to be distributed to earlier identified professionals in the construction industry. The distribution of the questionnaires shall be done at Lagos, Oyo and Ogun states of Nigeria where constructional activities in the country in the past eight years recorded 32%, 22% and 20% respectively (Robert, 2007).

64

3.2.1 ANALYSIS TOOL USED The information obtained and data collected using these two methods of study were adequately processed, analyzed and compared using the frequency distribution descriptive statistics, percentage ranking method, regression function and index value method. The differences were carefully observed to exactly know what is left undone, why and how the problems are to be overcome. Based on these facts, conclusion shall be drawn to achieve the aim and objectives of this study and make recommendations as to the ways of improving efficiency and solving allied problems posed by this dissertation. 3.2.2 SAMPLE SIZE A total number of 170 questionnaires were distributed. A total of 70 questionnaires were distributed in Lagos state, 50 were distributed Oyo and Ogun states each. A sample size of 137 was obtained due to the discussed constraints encountered. According to Odusami and Olusanya (2000), the result of a survey could be considered as biased and of a little consequence if the return rate was less than 3040 % of the total distributed. However, its worth knowing that the percentage response in this case is about 70%. The sample size considered for this work is one hundred and thirty seven. Table 3.1: Table showing location of Organizations Contacted S/ N 1 2 3 Location Lagos State Oyo State Ogun State Total Frequen cy 58 39 40 137 Percent age 42.3 28.5 29.2 100 Number Distributed 70 50 50 170 Percenta ge 71.4 78 80 80.6

3.2.2 Constraints in the Administration of Questionnaires

65

A number of constraints were encountered in the course of data collection. These consequently reduced the sample size to the number obtained. Some of these constraints include: a) Most of the respondents seemed too busy with the avalanche of work in their various offices and sites. The questionnaires were consequently not completed in time. b) The attitude of respondents to keep vital information in the name of confidentiality, thus not filling any of the vital part of the tool.

66

CHAPTER FOUR DATA ANALYSIS AND RESULT INTERPRETATION 4.1 ANALYSIS

PARTICULARS OF RESPONDENTS Types of Organization Contacted Table 4.1 shows the percentage of respondents organization. It was observed that great response was from consulting and contracting firms which I assumed to stem from the fact that the duo are the major establishments which are directly involved in the application of the financial control tools in the procurement of construction projects. Respondents from consortium constituted 5.8% and others, as indicated includes government ministry of works accounted for 2.9% as shown below: Table 4.1: Organizations Contacted s/n 1 2 3 4 Organization Consulting Firms Contracting Frequency 78 47 8 4 137 Percentage (%) 56.9 34.3 5.8 2.9 100

Firms Consortium Others Total 4.1.2 Designation of Respondents

Table 4.2 explains the designation of the respondents. It was found that the consultant quantity surveyor, Architects, Builders and contractors quantity surveyors accounted for 41.6%, 21.9%, 11.7% and 12% respectively. Being the cost manager or cost expert, the response of the quantity surveyors is worth it. It also explains the curiosity of the architects, as the project manager of most of construction projects, to the use of financial control tools in the industry. Civil Engineers accounted for 9.5% while others which comprises of mechanical and electrical engineers accounted for 6.6% Table 4.2: Designation of Respondents

67

S/N Professionals 1 Architects 2 Builder/ Contractor 3 4 5 6 Contractors Quantity Surveyor Consultants Quantity Surveyor Civil Engineers Others Total

Frequency 30 16 12 57 13 9 137

Percentage 21.9 11.7 8.8 41.6 13 6.6 100

Educational qualifications of the Respondents Table 4.3 shows the educational qualifications of the respondents. It shows that B. Sc qualifications as the highest with 56.9%; followed by M.Sc. holders (25.5%); HND holders (14.6%) while OND holders are at the bottom of the list with 2.9%. This shows that the respondents possess adequate educational qualifications for the construction industry.

68

Table 4.3: Educational Qualifications of the Respondents s/n 1 2 3 4 Educational Qualifications OND HND B Sc M Sc Total Frequen cy 4 20 78 35 137 Percenta ges 2.9 14.6 56.9 25.5 100.00

Professional Qualifications of the Respondents Table 4.4 shows that 36.5% of the respondents are professionally seasoned quantity surveyors, 18.2% are professionally qualified architects, 11.7% are qualified builders while 12.5% are qualified engineers. However, 20.4% of the respondents are either probationers of without qualifications. It could therefore be concluded from the table that the respondents possess adequate professional experience required in the industry. It implies that their response to the effectiveness of financial control tools in the construction industry is not biased. TABLE 4.4: s/n 1 2 3 4 5 Professional Qualifications of Respondents Frequen cy 50 16 25 17 28 136 Percenta ge 36.5 11.7 18.2 12.5 20.4 100

Professional Qualification FNIQS/MNIQS FNIOB/MNIOB FNIA/MNIA FNSE/MNSE OTHERS TOTAL

Years of Professional Experience Table 4.5 shows the years of experience of the experience of the

respondents.22.6% have less than 5 years experience, 46.7% have 5-10 years of experience, 16.1% have 11-15 years of experience, 13.1% of the respondents have

69

15-20 years of constructional experience while just 1.5% have experience spanning over 20 years. Going by the wealth of experience of the respondents spited, there is confidence in the response of the professionals as regards the assessment of the level of use of financial control tools in the industry. The average year of experience of the respondent is 9years. This in accordance to Odusami and Olusanya (2000) that an average year of experience or practice should be between 5-13years

Table 4.5: Years of Professional Experience of Respondents s/ n 1 2 3 4 5 Years of Experience Less than 5 years 5-10 years 11-15 years 16-20 years Above 20 years Total Average 4.2.6 Age of Firms Midpoint 3 years 8years 13 years 17years Frequenc y 31 64 22 18 2 137 Percenta ge 22.6 46.7 16.1 13.1 1.5 100 8.72

Table 4.6 shows the age of the contacted firms. 10.2% falls within 5-10 years, 38% falls within 11-15 years, 33.6% within 16-20 years while 18.2% were established more than 20years ago. To the best of my knowledge, there is confidence in the capabilities of the firms contacted for the assessment. The average year of experience of the respondent is 11years. This in accordance to Odusami and Olusanya (2000) that an average year of experience or practice should be between 5-13years

Table 4.6: Age of firms

70

s/n 1 2 3 4 5 Total

Age of Firms 0-5 years 5-10 years 11-15 years 16-20 years Above 20 years

Midpoin t 3 years 8years 13 years 17years

Frequenc Percenta y 14 52 46 25 137 ge 10.2 38.0 33.6 18.2 100 11.45

Average

4.2.7 Category of Clients Firms deals with Table 4.7 expressly shows that 59.1% of the contacted firms do have business relationship with all of private, public and corporate bodies, 6.6% deals with private and public bodies, 25.5% deals with private and corporate bodies and just 3.6% are engaged with public and corporate bodies. 3.6% deals with public bodies alone, 0.7% of the respondents deal with private and corporate bodies each. Table 4.8, further explains the level of relationship of firms with each of private, public and corporate bodies. 54.7% highly frequently relates with private individuals, 24.1% relates very frequently with public bodies and 34.3% relates very frequently with corporate bodies (Percentages are shown in parenthesis while the frequency are outside the parenthesis). The index value reveals that most of the firms deal with private individuals (4.31) followed in rank by the corporate bodies (3.72) while the public bodies are taking the least position in the rank (3.02)

71

Table 4.7 Types of Client the Firms Engage with in Business s/n 1 2 3 4 5 6 7 Client Category Private Individual Only Public Bodies only Corporate Bodies only All Private and Public only Private and Corporate only Public and Corporate only Total Frequenc Percenta y 1 5 1 81 9 35 5 137 ge 0.7 3.6 0.7 59.1 6.6 25.5 3.6 100

Table 4.8: Table showing Level of Engagement with Public, private and Corporate Bodies Highly Freque Private Bodies Public Bodies Corporate Bodies nt 75(54.7 ) 25(18.5 ) 43(31.4 ) Very Freque rarely Never Index value 1(0.7) 18(13.1) 7(5.1) 7(5.1) 31(22.6 ) 14(10.2 ) 4.31 3.02 3.72

frequent nt 44(32.1) 33(24.1) 47(34.3) 10(7.3) 30(21.9 ) 26(19.0 )

Type of Project Executed by firms and Level of Engagement Table 4.9 shows the category of construction works firms contacted are involved in execution. The table features that most of the firms contacted are engaged in the combination of civil, building and engineering works because it rated 28.5%. Table 4.10 shows the level of engagement with these project types. 89.10% of the contacted firms are highly frequently engaged with building works, 43.10% are highly frequently engaged with civil works and 13.10% are highly frequently

72

engaged with industrial works. According to the RII values in table 4.11, building works, civil engineering works and Industrial works are the most frequently executed project while heavy engineering is rarely ventured into by the firms. This goes a long way to explain that the data gathered for the project work is all encompassing and the level of use of the financial control tools in all these projects and their effect on the projects delivery could be measured. Table 4.9: Construction Works Firms is engaged with in construction S/N Project Types 1 2 3 4 5 6 7 8 9 10 11 Building works only Civil Works only Industrial Works only Heavy Engineering Only All Projects type Civil and Building works only Civil and Industrial works only Building and Industrial works only Civil, Building and Industrial Building, Industrial and Heavy Engr. Civil and Building and Heavy Engr. TOTAL 137 100 Frequen cy 21 1 Nil Nil 21 25 1 27 39 1 1 Percenta ge 15.3 0.7 Nil Nil 15.3 18.2 0.7 19.7 28.5 0.7 0.7

73

Table 4.10: s/n 1 2 3 4 5 6 Level of

level of Involvement of Firms with Construction types Building (%) 89.10 7.30 2.20 Nil 0.70 0.8923 Civil Engr. Industri (%) 43.10 4.40 24.10 14.60 13.90 0.7294 al (%) 13.10 26.30 21.20 7.30 32.10 0.5462 Heavy Engr. (%) Nil 2.20 3.60 14.60 79.60 0.4451

Engagement Highly Frequently Very Frequently Frequent Rarely Never RII

4.2 Identification and Assessment of the level of use of financial Control tools in the Nigerian Construction Industry. This section seeks to identify the financial control techniques that are employed in the procurement of construction projects. It also assesses their level of use in the construction industry. In getting this done perfectly the index value method which is calculated thus: 4.2.1 Level of use of Cost Control Tools Table 4.11 shows the frequency, percentage and index values of the level of use of the cost control tools in the Nigerian construction industry. Cost monitoring, cost checking, cost planning and the feedback system are being frequently used by the Nigerian construction personnel as their index values are 4.5, 4.4, 4.3 and 4.0 respectively. Cost reconciliation and cash forecasting has index value of 3.8 and 3.5 respectively while cost modeling and cost geometry are the least, 2.8 and 2.4. This is a proof that most of the cost control tools are being utilized in the Nigerian construction industry except for cost modeling and cost geometry that is not in frequent use.

74

Table 4.11:

level of use of cost control tools 5 4 70 79 68 52 3 2 6 9 50 2 0 0 0 2 1 0 0 0 0 Index Value 4.5 4.3 4.4 3.8

Cost monitoring Cost Planning Cost Checking Cost Reconciliatio n Cash

65 52 60 33

flow 28 8 4 46

45 32 18 61

46 30 19 23

13

3.5 2.8 2.4 4.0

forecasting Cost modeling Cost geometry Feedback system

58 9 66 15 5 2

4.2.2 Level of Use of Quality control Tools Table 4.12 shows the level of use of the quality control tools in Nigerian construction industry and their index values. The use of work and material specification notes had an index value of 4.6 followed in descending order by the use of method statement (4.4); control chart (3.9), formation of quality assurance team (3.8), Paretto chart and scattered diagram have 2.0 each. This is as a result of the new introduction of the Paretto chart and scattered diagram into the construction system of Nigeria.

75

Table 4.12: industry

level of use of Quality Control Tools in the construction 5 4 3 2 1 Ind ex Val ue

Formation quality assurance team. Method Statement Work/ material

of 3 4 6 9 9 4 52 4 6 59 7 32 9 2 2 0 0 4.3 4.4 4 1 4.5

specification notes Pareto chart Scattered diagram Control Chart 0 0 2 5 8 3 53 43 5 46 55 2 3.8 3.5 2.8

0 17 2 2 77 2 8

4.2.3 The Level of Use of Time Control tools Table 4.13 shows the level of use of time control tools and their index value. The most used tool is the bar chart (4.4), then the critical path method (4.2), PERT (3.7) and line of balance (1.9). Table 4.13: Level of use of Time Control Tools 5 4 3 2 1 Ind ex valu 76

Bar Chart 71 55 Critical Path 49 66 Method PERT Line Balance 31 50 of 17 0

9 19 40 19

2 2 13 38

0 1 3 63

e 4.4 4.2 3.7 1.9

4.2.4 Importance of Financial Control Tools in the Construction Industry Table 4.14 shows the level of importance firms attached to financial control tools. It was shown that much importance was put on all the financial tools as the average index value for the financial control tools (cost control, quality control and time control) is put at 4.5. 4.14: Level of Importance Attached to Financial Control Tools s/n Level of Importance 5 4 3 2 1 Inde x valu 1 2 3 Cost Control Quality Control Time Control 96 33 5 2 82 46 6 3 80 34 14 9 1 0 0 e 4.6 4.5 4.4.

4.3 Assessment of the Constraints to the Use of Financial control tools According to tables 4.15, it is evident that the factor that mostly constraint the use of financial control tools is inadequate budget (4.6) followed in descending order by inadequate cost information (3.8), unstable economic scenario (3.7), delay in the appointment of quantity surveyor and lack of awareness by clients and some professional as to the existence of control tools (3.5), delay in the award of contract

77

(3.4), social factor such as favouritism or corruption (3.2) and poor working relationship among professional in a contract (3.1).

78

Table 4.15: tools

Factors constraining the level of use of financial control 5 4 3 2 1 Ind ex Val ue Delay award contract Delay in of in of 2 5 the 2 35 5 7 1 8 1 3.5 35 4 9 2 8 0 3.4

appointment Surveyor Inadequate Budget Inadequate Cost

Quantity 6

3 2 3

51

3 2

1 7 1 1 3 5

4.6

56

3 2

Information 3 Poor working relationship among professional Social factors such favouritism Unstable Economic Scenario Lack awareness 2 0 of 3 2 42 64 as 2 30 1 7 33

3.8

4 4

8 3.1

4 0

3 7

3 3.2

corruption and 2

4 0 2 8

1 3 2 6

3.7

3.5

79

80

4.4 Assessment of the Effects of the Use of Financial Control Tools on Project Delivery 4.4.1 Impact of Constraints on the Level of Financial control tools Table 4.16 shows the regression coefficient with which the variables determine project delivery. Using the table and the regression coefficients we can derive the regression model which is given below: YU= A1C1+A2 C2+A3C3+ A4C4+ A5C5+ A6C6+ A7C7+K Let YU= Use of financial control tools C1 = Delay in award of contract surveyors C3 = Inadequate Budget C6= Unstable economy K= Constant. C4 = Inadequate Cost information C7= Lack of Awareness C5= Poor Relationship among professional C2 = Delay in the appointment of quantity eqn 4.1

81

Table 4.16:

COEFFICIENTS Unstandardized Coefficients

Standardiz ed Coefficient s T Sig

Model B Constant Delay in award of contract Delay in the appointment of q.s Inadequate budget Inadequate cost information Poor relationship among professionals Unstable economy Lack of awareness 7.412E- 0.091 02 0.165 -0.146 0.119 0.085 -0.111 0.123 0.135 0.140 4.686 -0.124 0.113 Std. Error 0.339 0.109 0.108

Beta 13.862 -1.143 1.045 0.000 0.255 0.298

-0.175 0.157

-0.172 0.181

-0.821 0.878

0.413 0.381

0.118 0.198 -0.285

0.813 1.385 -1.720

0.418 0.169 0.088

The level of significant used in the conduct of the research work is at 5%. Therefore the regression model is given below: YC = -0.124C1+0.113 C2 - 0.111C3+0.123C4+0.074C5+0.165C6-0.146C7+4.686 eqn 4.2 With this regression model, it is possible to know the impact of the constraints on the use of the financial control tools. If there were to be no constraint to the use of financial control tools, the use of the tools is 4.686 which are around 47%. A unit increase in the values of C1 to C7 produces an increase of 0.094 (0.9%) which can be said to be insignificant. Computing with the index value of the identified

82

constraints, the use of financial control tools will be put at 4.863 with a difference of 0.177 from 4.686 9the base level. If all the constraint could be in full operation in the industry, the use of financial control tools will be put to 5.156 with a difference of 0.47 from the base 4.686 which could be said not to be significant.

4.4.2 The Impact of Financial control tools on project delivery This seeks to test the impact the use of the identified financial control tools have on project delivery. The method to be adopted for use in this aspect determine the impact time control tools, quality control tools and cost control tools have on project delivery separately using a regression model set up. Table 4.17 shows by regression the effect of the use of time control tools on project delivery via the data collected by the questionnaire. Using the regression function; YT=X1 T1+X2T2+X3T3+X4T4+K Where YT= Project Delivery in terms of time T1= Time control tool 1 (Bar Chart) T2= Time control tool 2 (CPM) T3= Time control tool 3 (PERT) T4= Time control tool 4 (Line of Balance) Table 4.17: Time (Coefficients) Unstandardized Coefficients Model B Std. Error 83 Standardiz ed Coefficient s Beta T Sig eqn 4.3

Constant Bar chart Critical Pert method PERT Line of balance

2.819 -3.69E02 0.225

0.670 0.121 0.138

-0.027 0.187 0.070 -0.018

4.206 -0.305 -1.626 0.617 -0.208

0.000 0.761 0.106 0.538 0.835

6.534E- 0.106 02 -1.60E02 0.077

The level of significance is put at 5%. From the table above, only two tools were observed to be done at the stated level of importance and those are the network analysis tools. Substituting for the coefficients of the variables; we have the model below: YT=-0.037T1+0.225T2+0.065T3-0.016T4+2.819 eqn 4.4

With this regression model, it is possible to know the impact of the time control tools on project delivery. If there were to be no time control tools, project delivery will be put at 2.819. A unit increase in the values of T1 to T7 produces an increase of 0.237 which can be said to be significant. Computing with the index value of the identified time control tools, the project delivery will be put at 3.8113 with a difference of 0.992 away from 2.819 (the base level). It could therefore be concluded that the time control tools have impact on the delivery of project. Table 4.18 shows by regression the effect of the use of quality control tools on project delivery via the data collected by the questionnaire. Using the regression function; YQ=X1 Q1+X2Q2+X3Q3+X4Q4+ X5Q5+X6Q6+K Where YQ= Project Delivery in terms of quality Q1= Quality control tool 1 (Formation of quality assurance team) Q2= Quality control tool 2 (Method Statement) Q3= Quality control tool 3 (Work specification) 84 eqn 4.5

Q4= Quality control tool 4 (Paretto) Q5= Quality control tool 5 (Scattered Diagram) Q6= Quality control tool 6 (Control Chart)

Table 4.18:

Analysis of Quality Control Tools (Coefficients) Unstandardized Coefficients Standardiz ed Coefficient s B Std. Beta 5.715 0.526 0.000 0.600 Error 3.272 0.572 4.852E- 0.092 02 0.423 0.020 0.019 0.001 -0.334 0.331 -0.084 0.212 0.005 -1.880 1.869 -0.789 0.833 0.996 0.062 0.064 0.431 T Sig

Model

Constant Formation of Quality Assurance team Method statement Work Specification Paretto chart Scattered Diagram Control Chart

0.053

6.695E- 0.126 02 -0.295 0.252 -8.22E02 0.157 0.135 0.104

The level of significance is put at 5%. Substituting for the coefficients of the variables; we have the regression models below: YQ=0.049Q1+0. 42 Q2+0.007 Q3-0.295 Q4+0.252 Q5-0.082 Q6+3.272 eqn 4.6

85

With this regression model, it is possible to know the impact of the quality control tools on project delivery. If there were to be no quality control tools, project delivery will be put at 3.272. A unit increase in the values of Q1 to Q7 produces an increase of 0.351 which can be said to be significant. Computing with the index value of the identified time control tools, the project delivery will be put at 4.933 with a difference of 1.66 away from 3.272 (the base level). This implies that with an increase in the use of quality control tool in the construction industry, projects will be delivered to standard. Table 4.19 shows by regression, the effect of the use of quality control tools on project delivery via the data collected by the questionnaire. Using the regression function; YC =X1 C1+X2 C2+X3 C3+X4 C4+ X5 C5+X6 C6+ X7 C7+X8 C8+K eqn 4.7

Where: YC = Project Delivery in terms of cost C1= Cost control tool 1 (Cost Monitoring) C2= Cost control tool 2 (Cost Planning) C3= Cost control tool 3 (Cost Checking) C4= Cost control tool 4 (Cost Reconciliation) C5= Cost control tool 5 (Cash flow forecasting) C6= Cost control tool 6 (Cost Modelling) C7= Cost control tool 7(Cost Geometry) C8= Cost control tool 8 (Feedback System) Table 4.20b: Analysis of Cost Control Tools (Coefficients) Unstandardized Coefficients Model B Std. Standardiz ed Coefficient s Beta 86 T Sig

Constant Cost monitoring Cost Planning Cost Checking Cost reconciliation Cash flow forecasting Cost modelling Cost Geometry Feedback System

2.940 -0.122 -0.247 0.142 4.798E02 0.100

Error 0.800 0.232 0.2o5 0.245 0.142 0.112

-0.074 -0.154 0.098 0.041 0.098 0.009 0.038 0.181

3.676 -0.526 -1.206 0.581 0.338 0.900 0.041 0.174 1.835

0.000 0.600 0.230 0.562 0.736 0.370 0.968 0.862 0.069

7.758E- 0.190 02 3.282E- 0.189 02 0.182 0.099

The level of significance is put at 5%. Substituting for the coefficients of the variables, we have the model below: YC =-0.122C1-0.247 C2+0.142 C3+0.047 C4+0.100 C5+0.078 C6+0.033 C7+0.182 C8+2.940 eqn 4.8 With this regression model, it is possible to know the impact of the cost control tools on project delivery. If there were to be no cost control tools, project delivery will be put at 2.940. A unit increase in the values of C1 to C7 produces an increase of 0.220 which can be said to be significant. Computing with the index value of the identified time control tools, the project delivery will be put at 3.5079 with a difference of 0.57 away from 2.94 (the base level). This implies that with an increase in the use of cost control tool in the construction industry, projects will be delivered to estimated cost. In general, since all the three financial control tools have positive impact on project delivery respectively, it implies that financial control tools have a positive impact on project delivery in general.

87

CHAPTER FIVE CONCLUSION, EVALUATION AND RECOMMENDATION This study has given a comprehensive appraisal of financial control tools in the procurement of the construction project in Nigeria through intensive literature review and concise questionnaire survey and interpretation. At the end of the study, taking into consideration the set objectives of the study, the following succinct evaluations were reached: 1. It was discovered that most consulting and contracting firms placed a very high level of importance on financial control tools 2. It was observed that most firms make use of cost monitoring, cost checking, cost planning and site feedback system as cost control tool; Work and material specification, method statement, control chart and quality assurance team as quality control tools; bar/gantt chart, critical path method and PERT as the time control method. 3. It was discovered that Cost monitoring is the most utilized cost control tool; work/material specification is the most utilized quality control tool and Bar/gantt chart and critical path method are the most utilized time control tool. 4. The most adjudged factor undermining the effective use of financial control tools is inadequate budgeting followed by inadequate cost information which can be tailored to delay in the appointment of quantity surveyor then followed by unstable economic scenario. 5. It was also discovered that the identified constraint to the use of financial control tools does not have impact on the use of the tools. Though, they are constraining the use but they do not stop the effective use of the tools. 6. It was discovered that financial control tools have a positive impact on project delivery; if the time control tools are effectively and efficiently used, projects will be delivered to clients earlier as agreed; if the quality control tools are fully employed in adequate measures, projects will be delivered to clients in required standards and if the cost control tools could be employed, there

88

shall be a reduction in the cost overrun in the Nigerian construction industry. Thus it proved that effective application of the financial control tools would have positive effect on the three-tier variables of time, cost and quality. 7. Nonetheless, it was also established from the study that poorly defined usage of the financial control tools would invariably increase the cost of construction, reduce the standard of quality required and increase the time of project delivery if not abandoned. CONCLUSION From the evaluations made above and from all the results of the study, it could be concluded that the financial control tools are in use in the Nigerian construction industry till date and their impact can be felt on the projects handled. Despite the several constraints to the use of financial control, it was observed and therefore concluded that the constraints to the use of financial control tools cannot hinder the use of the control tools in the construction industry. All construction professional are encouraged to minimize cost and produce the product to acceptable quality in due time by employing appropriate financial control tools and at the appropriate time and stages. RECOMMENDATIONS Subsequent to reasonable evaluations deduced from the findings of the research, it is therefore recommended that: 1. The parties involved in the procurement of a construction project from inception to completion should have a good inclination towards the utilization of financial control in their procurement processes for effective utility and optimum benefit from invested resources. 2. Quantity surveyors should be appointed in time so as to implement control of financial matters of any contract. 3. Government policies should be reviewed and geared towards creating conducive economic environment for applied financial control tools to foster optimum positive yield

89

4. Parties involved in construction procurement processes should guide against favouritism, bribery and corruption so as not to weaken the financial control tools employed. 5. Quantity surveyors should be highly volatile in issues regarding financial control in any project and be more vigilant and committed throughout the duration of the project execution. 6. Also, the quantity surveyor must be involved in the proper examination of the sub contractors quotation; quality specification and monitor the programme chart of progress to ensure proper financial control.

90

91

APPENDIX 1 QUESTIONNAIRE DEPARTMENT OF QUANTITY SURVEYING FACULTY OF ENVIRONMENTAL DESIGN AND MANAGEMENT OBAFEMI AWOLOWO UNIVERSITY, ILE-IFE, OSUN STATE DISSERTATION TOPIC: AN ASSESSMENT OF FINANCIAL CONTROL TOOLS IN THE NIGERIAN CONSTRUCTION INDUSTRY Dear respondent, The following questions serve to collect necessary data to complete research work on the above mentioned dissertation topic as part of the requirements for the award of B Sc. in Quantity Surveying. All information collected shall be purely for academic purpose and thus treated with the confidentiality it deserves. Thank you. Akinmoladun Olawale Tosin Dr. (Mrs.) Babalola Supervisor

92

SECTION A: 1. Name 2. Location

PARTICULARS OF RESPONDENT of of (b) Contracting firm Firm: firm: (c)

Please, kindly tick your answers accordingly and as appropriate. ____________________________________________________________________ ___________________________________________________________________ 3. Type of Firm (a) Consulting Firm Consortium Others (please specify) _____________________________________________ 4. Designation of respondent (a) Builder (b) Contractors Quantity Surveyor (c) Architect (d) Consultants Quantity Surveyor (e) Civil Engineers (f) Others (Please specify) _______________________ 5. Educational qualification of the respondent. Sc. FNIA (d) FNSE (g) MNSE (b) 5-10 years (e) MNIOB (e) MNIQS (f) MNIA (h) others (please specify) ________________________ (c) 11-15 years (d) 16-20 years (e) above 20 years (d) M Sc. (a) OND (b) HND (b) FNIOB (c) B (c) (e) others (please specify) ------------------------

6. Professional qualification of the respondent. (a) FNIQS

7. Kindly indicate your year of professional experience. (a) less than 5 years (f) Others (please specify) ________________________________ 8. How long has your firm been in operation? (a) less than 5 years (b) 5-10 years (b) Public bodies (d) (c) 11-15 years (d) 16-20 years (e) above 20 years (a) Private Individuals specify) 9. Kindly indicate the category of client you deal with. (c) Corporate bodies Others (please

__________________________________________________________ ________________________________________________________________________________ ___

93

10. Kindly tick appropriately your level of business association with the above mentioned category of clients. Highly frequent (5) Private Individuals Public Bodies Corporate bodies 11. What are the types of project you have been engaged with? (b) Building (c) Industrial (d) heavy engineering (e) Others (please specify): ______________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ____________ 12. Kindly tick appropriately your level of involvement with the following project types Highly frequent (5) Building Industrial Civil Heavy engineeri ng Others (please specify and rate accordingly): ________________________________________________________________________________ ________________________________________________________________________________ Very Frequent (4) Frequent (3) Rarely (2) Never (1) (a) Civil Very Frequently (4) Frequent (3) Rarely (2) Never (1)

94

________________________________________________________________________________ _____________________________ SECTION B: IDENTIFICATION OF THE LEVEL OF USE OF FINANCIAL CONTROL TOOLS IN THE NIGERIAN CONSTRUCTION INDUSTRY Kindly tick your answers accordingly and as appropriate. 13. What importance does your firm attach to financial control as applied to past projects you executed? (a) Extremely important (c) Important (d.) Rarely important (b) Very Important

(e) Not Important

14. Below are identified cost control tools. Kindly tick/rank, as appropriate, the level of use your firm attaches to each of them in construction works you have handled.

Highly Frequent (5) Cost monitoring Cost Planning Cost Checking Cost Reconciliation Cash flow forecasting Cost modeling Cost geometry Feedback system

Frequen t (4)

Sometim es (3)

Rarely (2)

Neve r (1)

95

Others (please specify and rate accordingly): _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ____________

96

15. Below are identified quality control tools. Kindly tick, as appropriate, the level of use your firm attaches to them in your previously handled construction works. Highly Frequent (5) Formation team Method Statement Work/ material specification notes Pareto chart Scattered diagram Control Chart Others (please specify and rate): _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ____________ 16. Below are identified time control tools. Kindly tick, as appropriate, the level of use your firm attaches to them in construction works handled. Highly Frequent (5) Bar Chart Critical Path Frequent (4) Someti mes (3) Rarely (2) Never (1) of quality assurance Frequent (4) Someti mes (3) Rarely (2) Never (1)

Method PERT Line of Balance

97

Others (please specify and rate accordingly): _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ___________

SECTION C: EFFECT OF THE USE OF FINANCIAL CONTROL TOOLS ON PROJECT DELIVERY 17. Below are some identified problems encountered on construction projects. Kindly rank the level of their occurrence in any of the projects your firm has handled. Extremely High (5) Abandonment Collapse Time Overrun Inflation Poor Performance Client bankruptcy Insolvency Cost Overrun Others (please specify and rank) _________________________________________________________________________________ _________________________________________________________________________________ Very high (4) High (3) Low (2) Very low (1)

98

_________________________________________________________________________________ ____________

18. Justify the effect of level of use of the financial control tools on project delivery (a)Very strong (b) Strong (c) Fairly strong (d) Not strong

99

19. The following are factors constraining the use of financial control tools. Kindly rank their level of severity in relation to projects your firm has handled. Extremel y severe (5) Delay in award of contract Delay in the appointment of Quantity Surveyor Inadequate Budget Inadequate Cost Information Poor working relationship among professional Social factors such corruption favouritism Unstable Economic Scenario Lack awareness Others (please specify and rank accordingly) ____________________________________________________________________________________ __ of as and Very severe (4) Seve re (3) Fairly severe (2) Not severe (1)

100

____________________________________________________________________________________ __ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ______

20. The following are the effects of non-use of financial control tools on project delivery. Kindly rank the impact of these effects on your project delivery. Extremely Strong (5) Abandonme nt Collapse Time overrun Inflation Insolvency Cost overrun Poor performanc e Client Bankruptcy Very strong (4) Strong (3) Fairly strong (2) Not Strong (1)

101

Others (please specify and rank accordingly) ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ ___________

102

21. The following are the effects of the use of financial control tools on project delivery; kindly tick appropriately the level of impact it has on project delivery as experienced by your firm. Extremel y Strong (5) Balance quality with expediency Reduces risks Analyzing the productivity workers Assist meeting functional objectives Enhances professional reputation Prevents unnecessary claims Analyze performance and efficiency of equipment Adequate determination of overhead Prevents unnecessary variations of in with Very strong (4) Strong (3) Fairly strong (2) Not strong (1)

103

Others __________-

(please

specify

and

rank

appropriately):_________________________________________________________________ _________________________________________________________________________ 22. How often do you deliver projects to clients in projects you have handled? (a) Outrageously beyond time [ ] (b) Averagely beyond time [ ] (c) To time [ ] (d) before time [ ] 23. Kindly rank the rate at which you meet up with your answer in (22) above. Highly frequently To time Averagely beyond time Outrageous ly beyond time Before time 24 25 26 Kindly tick the standard of quality delivery of projects to clients? (a) 0 20% [ ] [] [] (b) 20 40% [ ] (c) 40 -60% [ ] (d) 60 80% [ ] (e) 80-100% [ ] (c) Sometimes [ ] (d) rarely [ ] (e) Never [ ] (b) 20 40% [ ] (c) 40 -60% [ ] (d) 60 80% [ ] (e) 80-100% [ ] How often do your projects beat cost overrun? (a) Frequently [ ] (b) Always By what margin do the final accounts exceed the estimated cost? (a) 0 20% Frequent Sometimes rarely never

Thank you for the time spent in diligently answering the questions.

104

REFERENCES Adetola F.O (2000): Budgetary Planning - A tool for construction cost control and management; The Nigerian Quantity Surveyor: a journal of the Nigerian Institute of Quantity Surveyor (NIQS), Lagos Adetola F.O (1999): Factors necessitating Cost Control; The Nigerian Quantity Surveyor: journal of the Nigerian Institute of Quantity Surveyor (NIQS), Lagos Adesola A.A (2007): Construction Cost Auditing- A neglected service of the Quantity Surveyor; Budgetary Planning for Capital Projects and Construction Contract Auditing; Nigerian Institute of Quantity Surveyor; pp108-109 Adonoje E. (1990): Factors which Affect Cost of Buildings in the Nigerian Construction Industry; Quantity Surveying Review- The newsletter of the Nigerian Institute of Quantity Surveyor, Anambra Chapter, Enugu, Vol.1 (1), pp14-15 Agha V.O (1996): Cost Control and Management of Rehabilitation Project; Nigerian Institute of Quantity Surveyors Seminar paper. Ajator U.O (1990): Inter-relation of Professionals in the Construction Industry; Quantity Surveying Review- The newsletter of the Nigerian Institute of Quantity Surveyor, Anambra Chapter, Enugu, Vol.1 (1), pp 10, 13 Akin- Agunbiade A.A (1988): The use of Project Management as a Cost Control Tool; an unpublished dissertation, Obafemi Awolowo University, Ile-Ife. Akintoye A.S; Ajewole A. and Omolaye P.O (1992): Construction Cost Information management in Nigeria; The Quantity Surveyor; Journal of The Nigerian Institute of Quantity Surveyor, vol. 16 December, pp 8-9 American Society of Civil Engineer (1985): Construction Cost Control, ASCE Manuals and Reports of Engineering Practice, Volume 65 (7) Andawei M.M (2003): Critical Path Method: A Tool for Project Delay Control; The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; Vol. 44 (3) July September; pp 2-5

105

Andawei M.M (2001): Application of Network based technique in the Cost Control and management of Construction Works; The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; Vol. 37 (4) October - December; pp 2427 Ashworth A.A (1994): Cost Studies of Buildings; Longman Group Limited, London, pp 197-200 Bathrust P.E and David A.B (1980): Building Cost Control Techniques and Economics; Second edition. Barrie and Paulson (1992): General objectives for an information system designed to aid management in the planning and control of engineering and construction projects Construction Research Journal; 1(1); April pp 13-14 Berry T., Wallace D.K, Bailey K. (2001): Approach to Cost Control; Boston; Harvard Business School Press Brandon T.K and Ferry J. (1992): Aspects of Financial Control; Boston; Harvard Business School Press. Coombs W.E and Palmer W.J (1977): Management; New York; Mc Graw-Hill Dada M.O (2008): Priorities in Nigerian Public Project Implementation: Expectations From Consultants and Contractors; Construction Research Journal; 1(1); April pp 10-14 Dikko, H.A (2000): Budgetary Planning for Capital Projects; Budgetary Planning for Capital Project and Construction Contract Auditing published by Nigerian Institute of Quantity Surveyor; pp 66,69 Dulcan A.D (2007): Vocabularies of Cost Engineers: A publication on website; www.echeat.com Encarta Dictionary (2008) Federal Ministry of Works (1998): Private with Quantities; Standard Form of Building Contract; the Joint Contract Tribunal Limited. Fredrick A.J, Mark D.A, Robert W.T and Drenge T.B (2001): Financial Management in Construction Works; Journals for Young Engineers; 12(73); July pp 11-25 Construction Accounting and Financial

106

Guevara J. and Boyer P. (1981): Communication Problems in Large Project Construction; A publication of Department of Geomatics; Federal University of Rio Grande do Sul, Brazil; pp 3-5 Haphin D.W (1985): Financial and Cost Concept for Construction Management; New York, John Wiley & Sons Harris F. (1995): Modern Construction Management; Fourth edition; New York; Mc Graw-Hill Harris F. and McCaffer (1989): Management and Practice in the Construction Industry; Third edition; New York; Mc Graw-Hill Holy Bible (2002): Luke chapter 14 verse 28; King James Version, Korea. Hughes B.T (1991): Cost Control and Project development; Charted Quantity Surveyor; vol. 150 (35) May, pg 9 Jagboro G.O (1995): Techniques and Procedures for Building Economics; Fancy Publications Limited, Lagos pp1, 5; 40-46; 109-118 Jagboro G.O (1998): Principles and Practice of Quantity Surveying; Fancy Publications Limited, Lagos pp 52 -55; 72-75 Jagun S.K (1981): Function and Implication of Finance in Contract; The Nigerian Quantity Surveyor; volume1 (1); January; pp 7-32 Johnson S., Thomas H, and Robert S. Kaplan, (1987): Relevance lost, the Rise and Fall of Management Accounting; Boston; Harvard Business School Press Lowe and Skitmore (1994): perception Experiential learning theory and the current of experiential factors in the accuracy of pre-tender cost

predictions; Construction Research Journal; 1(1); April pp 15-18 Marasini M. (1996): Feedback Methodology in Construction Industry; Claxtons Publication, Oxford Mark H. and Robinson I., (2006): Pre- Contract Practice and Contract Administration; sixth edition; Sparks (Oxford); Blackwell publishing Mary K. (2001): Financial Control for Construction Projects; Chattered Quantity Surveyor; vol. 150(35); May; pp 10-15 Mueller F.W (1986): Integrated Cost and Schedule Control for Construction Project; Van Nostrand Remhold Company, New York.

107

Mogbo, T.C (2000): Project Cost Control and Management, Imperatives for Nigerians; The Nigerian Institute of Quantity Surveyors; pp 66, 69 Navon and Goldschmidt (1999): Automated Labour Control System; A publication of Science Direct journal at www.findtarget.com. Nwosu, C.S (1995): Project Cost Control- Panacea for Abandonment of Projects; The Quantity Surveyor; Journal of Nigerian Institute of Quantity Surveyor; vol. 20, March pp 36, 38-41. Obi wale K.A (1991): Application of Work Study Techniques to Construction Cost Control in the Nigerian Construction Industry; an unpublished dissertation, Department of Quantity Surveying, Obafemi Awolowo University, Ile-Ife. Odusanmi K.T. and Olusanya O.O (2000): Clients contribution to delays on building project: The Quantity Surveyor-Journal of the Nigerian Institute of Quantity Surveyor January Ogunlana (1991): Design cost estimating accuracy; The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; vol. 11, October pp11-12 Oladapo, M.A (2000): Welcome Address at the Workshop on Budgetary Planning for Capital Project and Construction Contract Auditing published by Nigerian Institute of Quantity Surveyor. Olabopo O.L (1991): Aspects in the Preparation of Final Accounts; The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; vol. 13, November pp11-12 Olabopo O.L (1992): Effects of Delay Payments, Retention and High Interest rate on Contractors Cashflow; The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; vol. 16; December; pg15 Omole A.O (2000): Surveying Input to Engineering Projects: Need for Professionalism: The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; vol.10 January/March pg 10 Onukwube A.N (2000): Project Evaluation Techniques: The Quantity Surveyor; Journal of the Nigerian Institute of Quantity Surveyor; vol.27 (4) pp 19-25

108

Onyemachi I.S (1990): Quantity Surveyor- The Construction Cost Economist: How Effective in Nigeria? Quantity Surveying Review; vol.1 (1): A newsletter of the Nigerian Institute of Quantity Surveyor, Anambra Chapter pp 4-6 Oyemade (1999): Preparation of Final Accounts: Paper presented at the Quarterly General Meetings of the Lagos Chapter of Nigeria Institute of Quantity Surveyor. Peterson P. (2006): New Horizon in Quantity Surveying: A publication of Science Direct journal at www.findtarget.com Pilcher, R. (1996): Principle of Construction Management; Mc Graw Hill, London. Ramus J. and Birchall S. (1996): Contract Practice for Surveyors; Claxtons Publications, Oxford, pg 96 Randall P.E. (1991): Robert W.D. (2007): 24. Sa-ngaimusk (1999); Web based Construction Documentation System; A publication of Department of Geomatics; Federal University of Rio Grande do Sul, Brazil; pg 11. Schermerhora (1996): Feedback System in the Engineering Project: A publication of Journal for Young Engineers Vol. 9 (73); July pp30-37 Seeley I.V (2003): Building Economics; Third edition Seeley I.V. (2003): Building Maintenance; Second edition Uche M.S (2004): Process of Cost Engineering in the 21st Century: The Cost Engineer; Vol. 39 (2); March; pp 19-22 Willis J.A and Willis J.C (1995): Practice and Procedure for Quantity Surveyor, Granada Publishing Limited, London and New York; pp 17-23. Younker (1993): Project Control in Construction Industry; third edition; Oxford; Blackwell publishing. Introduction to Work Study Organization and method; third Structural Evaluation of the Impact of Democracy on the edition; Oxford; Blackwell publishing Construction Industry; maiden edition; Neon Publication Limited; Lagos pp 18-

109