QS002 - AN APPRAISAL OF COST MANAGEMENT PRACTICES IN THE DELIVERY OF CAPITAL PROJECT IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

Capital project cost management demands urgent attention in both the public and private sector as a result of frequent cost overrun. Procurement of capital projects in Nigeria has become a source of worry to both Government and private sector developers as it is evident from the recent out cries of unfavoured professional group(s) of the construction industry in the inclusion exercises into Nation Council on Public procurement.

According to Onyemi (2008), “The survey conducted by the world Bank on Procurement activities prior to the enactment of the 2007 Act; that bribery and corruption dominated Nigeria’s N775 billion contract award in 2007. In fact, the survey did not tell us anything that we are not aware of. We have always known that system of procurement in this country is fraught with corruption and corrupt practices”.

The above statement in direct terms confirms the belief that there is problem in the cost management practices (if any) adopted in delivery of capital projects in the Nigeria and this projects ranges from mass housing projects through highways and road infrastructures, other civil engineering works and industrial engineering construction works.

It is very disturbing to know that 90% of the road contracts awarded by various levels of government in Nigeria is done through only one professional group “Engineering” who designs, estimates the cost of construction, makes payment and contracts. It is the situation and arrangement that forces former minister of works, senator Agunlewe to verbally attack the engineer in a public hearing on the procurement act. The professional bus practices in the construction industry needs to be better and equitably distributed for improved and specialized handling.

According to Oforeh, (2010). “The Nigeria construction industry contributes at least 60% to the Nations yearly Gross domestic products (GDP)”,

The implication of the statement when married to the other points on cost management discussed above is that any problem in the construction industry is a major problem to the Nigeria economy and the people and this should be taken serious.

1.2       STATEMENT OF PROBLEM

Due to complexity of capital project in Nigeria, urgent attention must be ensured to avoid the ineffectiveness of cost management practices in delivery of capital project. Capital project are known to be capital intensive project in which proper and effective cost management should be ensured.

Fair enough, there is no doubt that much work had been undertaken in recent years to proffer solutions to the menacing problems of ineffective cost management practices of capital project in Nigeria.

Notwithstanding these efforts made so far, much is yet to be desired particularly in area of efficient and effective cost management of these projects, hence the need to identify the problems constraining the efficient cost management of capital project.

i.        Late appointment of quantity surveyors in the delivery of capital projects will certainly lead to ineffective cost management practices.

ii.      Non appointment of quantity surveyor in the delivery of capital projects will certainly lead to ineffective cost management practices.

iii.    Inadequate budgeting at the inception stages of project delivery will lead to ineffective cost management practices.

iv.    Inflation during the period of capital project delivery can lead to ineffective cost management practices

v.      Inadequate funding of capital projects can lead to ineffective cost management practices.

vi.    Corruption will obviously lead to ineffective cost management practices in the delivery of capital projects.

vii.  Political instability will lead to ineffective cost management practices in the delivery of capital projects

1.3       RESEARCH QUESTIONS

i.          What are the causes of ineffective cost management practices in delivery of capital project in Nigeria?

ii.         What are the effects of ineffective cost management in delivery of capital project in Nigeria?

iii.        What are the likely solutions to ineffective cost management practices in delivery of capital project?

1.4       AIM AND OBJECTIVES

Aim

            The aim of this study is to appraise the general cost management practices available in the delivery of capital projects in Nigeria.

Objectives:

            The set of objectives in achieving the above mentioned aim is as stated below:

i.          To identify the causes of ineffective cost management practices in the delivery of capital projects in Nigeria

ii.         To assess the effect of ineffective cost management practices in the delivery of capital project in Nigeria.

iii.        To proffer solutions to the ineffective cost management practices in the delivery of capital project in Nigeria.

1.5       Significance of the Study and Justification For Investigating It

The significance of this thesis is to enlighten the government and prospective private sector clients on the observed associated problems of cost management practices in the delivery of capital projects and solutions of the problems when investigating them.

It will highlight the need for appointment of proper professionals when embarking on capital projects and as well accruing benefits to proper cost management of capital projects.

The result of the research will educate the client on their contractual obligations when embarking on such projects. It will also aid government, their respective agencies and concerned private sector developers in revisiting existing and on-going projects that are presently suffering from the professional and technical denial.

1.6       Scope And Limitations Of The Study

This study focuses on construction industry professional practicing firms, government parastatals (e.g. Ministry of Works, Educational/Health Institutions), selected industrial engineering construction companies.

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