Abstract
One of the characteristics of construction projects is that they entail huge
capital outlay. These investments have alternatives; in effect it must be
assured that the decision to take up a construction work is the best. In
carrying out such works cognizance has to be taken about such factors like
environmental, social, technical and administrative that affects construction
costs. This work therefore is a bold attempt, aim at analyzing these factors
to see the various intensities on changes in construction costs. This study
analysed factors affecting construction costs in Enugu state. The study was
carried out with a view to identify some factors affecting construction costs
in building industry. The importance of this research was to benefit the
stakeholders in the construction industry in determining the factors which
can affect construction costs. To facilitate this study both primary and
secondary data collections were used. Furthermore, the population sample
was chos
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
It is a fact that the cost of construction, especially that of construction
resources (materials and labour), has accelerated rapidly since the
introduction of the Structural Adjustment Programme (SAP) in 1986
Onabule, (1991). Continuing, Onabule (1991) maintained that the exchange
rate depreciation resulted in an inflationary impact on construction activities
because of the short-term import inelasticity of building materials
production. This escalated cost of construction contributes significantly to
enlarging the average mortgage loan size demanded with serious
implications for repayments and effectively marginalizing most Nigerians in
the home ownership market.
The increase in the project cost has led to high level of economic
fluctuation and conflict between parties in the project contract. It is essential
therefore, to identify the main dominating factors leading to high
construction cost so that efforts can be concentrated on those factors in
order to reduce construction cost in Nigeria.
When evaluating the success of any building project, cost is one out
of the three variables that must be considered. The others being time and
quality. However, there are several factors affecting the construction cost of
building projects, both positively and negatively. According to American
Institute of Architects (AIA) (2007), Building costs are influenced by
several factors such as location, design, performance requirements,
construction, and time greatly affect the building cost.
Again, Li (2009) observed that construction cost which is out of
control adds to investment pressure, increase construction cost, reduces
xii
investment profit, affects investment and decision-making, and to a great
extent, wastes the national finance, so it is likely to result in corruption or
offence. If compared with the huge capital outlay involved in building
project coupled with its proportion in the fixed capital formation of every
economy in the world, the cost of building projects requires greater
attention.
Oftentimes, clients are dissatisfied and do not have value for their
money in terms of the type of projects being delivered by the contractors. In
this case, the success of the project is in question. As the effects of cost
overrun is far reaching in any project, Obiegbu (2002) opined that
identifying the factors and causes of cost overruns is a key step towards
helping construction managers to either prevent a cost overrun or apply the
proper corrective actions to the problem. Majid (1998) cited in Obiegbu
(2002) claimed that there must be a systematic approach used by
construction managers for identifying these factors in order to reduce their
impacts.
Also, Obiegbu (2002) noted that factors affecting cost of construction
have different effects on an activity or a project, ranging from an increase in
resource consumption, a stoppage of work, a delay in work, rework, or all of
the above.
It is based on these unprecedented effects of cost on building projects
that the factors affecting construction cost are being analyzed so as to
provide the most appropriate approach for dealing with them.1.2 STATEMENT OF THE PROBLEM
The construction industry in Nigeria has gone through very dramatic
price fluctuations stages since the late 80’s due to both the near completion
xiii
of huge infrastructure projects and to a steep decline in the price of oil.
Moreover, the demand for more construction of all types, coupled with a
tight monetary supply, provide the construction industry with a bigger
challenge to cut costs. The problem of high costs of contracts in all aspects
of construction is becoming obvious. However, little has been done to
minimize the problem. Consequently, substantial increases are observed in
project cost.
Furthermore, due to high level of construction cost increments,
economic fluctuation, conflict between parties, construction demand and
boom period, there is a need for a properly documented study and project
survey on the factors affecting construction costs. It is important to identify
the main dominating factors leading to high construction cost so that efforts
can be concentrated on those factors in order to reduce construction cost in
Nigeria.
Furthermore, the effect of high cost of construction cost may lead to
project abandonment, delaying project which can equally affect the
economic status of that country.
Finally, this is what prompted the researcher to study the nature of the
factors affecting construction costs in Enugu State.1.3 AIMS/OBJECTIVES OF THE STUDY
The broad aim of this research work is to investigate the factors
affecting construction cost. To achieve this, the following specific
objectives are considered.
1. To identify the most significant factors that affect construction costs .
2. To analyse these factors that affect construction costs
3. To find out the effect of these factors (1-4) on construction costs
xiv
4. To examine ways in which these factors (1-4) can be mitigated.1.4 RESEARCH QUESTIONS
The research questions asked in the course of this research are:
1. Does environmental factor affect construction costs?
2. Does construction management factors affect construction costs
3. Does contract arrangement factors affect construction costs
4. Does project resources factors affect construction costs
5. What are the effects of these factors (1-4) on the construction cost?
6. In what ways can these effect be mitigated?
1.5 RESEARCH HYPOTHESES
For the purpose of this study, the following hypotheses are to be
tested:
HYPOTHESIS ONE
H0: Environmental factors do not significantly affect construction costs.
H1: Environmental factors significantly affect construction costs.HYPOTHESIS TWO
H0: Construction management factors do not significantly affect
construction costs.
H1: Construction management factors significantly affect construction
costs.HYPOTHESIS THREE
H0: Contract management factors do not significantly affect construction
costs.
H1: Contract management factors significantly affect construction costs.
xv
HYPOTHESIS FOUR
H0: Project resources do not significantly affect construction costs.
H1: Project resources significantly affect construction costs.1.6 SIGNIFICANCE OF STUDY
The researcher investigates the possible factors affecting construction
costs in Enugu. This research will benefit the stakeholders in the
construction industry in determining the factors which can affect a
construction cost. It will also enable clients to decide the quality and scope
of a proposed project before embarking on the project. Contractors,
however, will be largest beneficiary to this study as it will enable them to
identify those factors which are cost sensitive.1.7 SCOPE AND LIMITATION OF THE STUDY
The research focuses mainly on the essential factors affecting
construction costs. The scope of the study is limited to the projects in
Enugu State.
Non-available of finance and time are also matters that affected the
scope of this work.
Some of the limitations are that the respondents were nonchalant and
even uncompromising. In fact, the nonchalant and uncompromising attitude
demonstrated by some respondents in supplying the researcher with
feedback raised logistic problems. Furthermore, the encounter the
prohibitive cost of questionnaire administration.