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THE IMPACT OF PROCUREMENT SYSTEM ON CONSTRUCTION COST AND DELIVERY: A CASE STUDY, (ETIS-OSA LAGOS STATE. NIGERIA)
ABSTRACT The delay in project execution is a major problem in the Nigerian Construction Industry. This occurs both in small and large projects. Virtually a great percentage of the construction projects executed over the years across the country were faced with problem of delivery. Another noted problem in this industry is an issue of cost overrun, with attendant consequence of completing projects at higher sum than the initial sum. Therefore working with realistic project estimate is necessary at the outset of a project work which would eliminate uncertainty and as well as provide a platform for project success. This study is to examine procurement systems and it impact on cost management and delivery. The study has the objectives of identifying various procurement systems commonly used by quantity surveyors in Eti-Osa Lagos to examine challenges encountered when employing various procurement systems for construction projects and to examine the impact of procurement systems on construction cost and delivery. TABLE OF CONTENTS Title Page - - - - - - - - - i Approval Page - - - - - - - - ii Declaration - - - - - - - - iii Dedication - - - - - - - - - iv Acknowledgement - - - - - - - v Abstract - - - - - - - - - vi Table of Contents - - - - - - - vii Title Page-------- Abstract-------- CHAPTER ONE – INTRODUCTION 1.1Background of the Study----- 1.2Statement of General Problem---- 1.3Objective of the Study----- 1.4Research Questions------ 1.5 Hypothesis - - - - - - - 1.6Significance of the Study----- 1.7Scope of the Study------ 1.8Definition of Terms------ CHAPTER TWO – REVIEW OF RELATED LITERATURE 2.1Introduction------- 2.2 Procurement systems - - - - - - 2.3 Types of procurement systems ----- 2.4 Procurement methods employed in the Nigerian Construction industry - 2.6 Impact of various procurement systems on cost Management and delivery - - - CHAPTER THREE – RESEARCH METHODOLOGY 3.1Introduction------- 3.2Research Design------ 3.3Area of the Study------ 3.4 Population of Study - - - - - - 3.5 Sample size and Sampling Techniques--- 3.6Instrument for Data Collection---- 3.7Validity of the Instrument----- 3.8 Reliability of the Instrument - - - - - 3.9Method of Data Collection----- 3.10 Method of Data Analysis - - - - - CHAPTER FOUR – DATA PRESENTATION AND ANALYSIS 4.0 Introduction - - - - - - - 36 4.1 Data Presentation and Analysis - - - - 36 4.2 Characteristics of the Respondents - - - 36 4.3 Data Analysis - - - - - - - 39 4.4 Testing Hypothesis - - - - - - 46 4.5 Summary of Findings - - - - - - 51 4.6 Discussion of Findings - - - - - 52 CHAPTER FIVE – SUMMARY, CONCLUSION AND RECOMMENDATION 5.0 Introduction - - - - - - - 54 5.1 Summary - - - - - - - - 54 5.2 Conclusion - - - - - - - - 57 5.3 Recommendations - - - - - - 58 References - - - - - - - - 61 Appendix - - - - - - - - 62 I CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via tendering or a competitive bidding process. The Construction Industry has changed in its complexity over time and it also makes procurement system more complex. To compete with the needs of construction, different type of procurement strategies has been used in different type of projects (Ogunsemi, 2006). It is the job of the procurement team to make sure required materials, tools and plants are available to the site on time. To get materials on time and cost effectively, early engagement is required from every stakeholders which is lacking in present time. A procurement team is required to do negotiation on price and quantity after doing market analysis and also setup supply chain management. There are number of risks factors associated with procuring materials; (cash flow, communication, Organization structure) which has to be factored out. In any procurement process, leasing or buying (product or services) play a vital role in the success or failure of a project (Adesanya, 1996). Relation with supplier and identifying the capability of the supplier are important for an organization to grow smoothly. Therefore to get best procurement route, company should establish supply chain management. The construction industry is an important part of the economical backbone in many countries often accounting for between 7-10 percent of the Gross Domestic Product (Olufemi Adedamola, 2002). This process has a large impact on safety, health and environmental aspects (Obanikoro, 2013). Since all human beings in modern societies are directly affected by its processes and/or products, the importance of a well-functioning construction industry is beyond doubt (Aje, 2010). In Nigeria the Construction Industry has however, attracted criticism for inefficiencies in outcomes such as time and cost overruns, low productivity, poor quality and inadequate customer satisfaction (Oyedele, 2014). Practitioners, researchers and society at large have therefore called for a change in attitudes, behavior and procedures in order to increase the chances for construction projects to be successful and result in improved end products (Egolum 2010). Increased complexity, uncertainty, and time pressure in construction projects have increased the need for cooperation among different project actors. Traditionally, relationships are however very competitive and adversarial in the construction industry which to a large extent is due to the customary procurement procedures potentially causing many problems in all stages of the buying process (Al-Hammad, 1993). Therefore, in order to take advantage of collaboration, a combination or single use of the Separated System, Integrated system, Management Oriented System and Collaborative System of procurement procedure is one key improvement area and can contribute substantially to project success (Akintoye, 2000). The various procurement system observed to be used in Eti-Osa Lagos State in the case of this study are; Separated systems; Integrated systems; Management oriented systems; and Collaborative systems 1.2 STATEMENT OF THE PROBLEM The Nigeria construction industry is modeled after the British system being our colonial master. Although since independence in 1960, it has incorporated the styles of other European countries such as Italy, Germany and France (Aladegbaiye, 2006). This makes the industry more competitive and therefore forming a paramount tool for employment and economic growth because the Nigerian construction industry forms nearly 70% of the nation’s fixed capital formation (Nnabugwu, 2013). Federal Office of Statistics (FOS, 2004), yet its performance within the economy has been and continues to be very poor due to cost overruns resulting to abandonment of projects. For example, the Nigerian construction industry’s contribution to employment has remained consistently at 1.0% over the last decade against the World Bank’s average observation of about 3.2% in developing countries (Emoh, 2010). The traditional design-bid-build system of procurement is still dominant in the Nigerian construction sector and this may likely continue to be the trend (Egolum, 2016). The delay in project execution is a major problem in the Nigerian construction industry. This occurs both in small and large projects. Virtually, all the projects executed over the years in Nigeria were faced with problem of delay in delivery and cost overrun with attendant consequence of completing projects at sums higher than the initial sum (Olufemi Oyedele, 2010). Therefore, working with realistic project estimate is necessary at the outset of a project work which would eliminate uncertainty and as well provide a platform for project success. that the last decade has however exposed the declining level of clients’ satisfaction from the built facilities as a result of poor quality performance in addition to the perennial problems of time and cost overruns in the Nigerian construction industry. In addition, the Nigerian construction sector comprises the clients, contractors, subcontractors, suppliers, and key professional actors responsible for design and supervision of projects. The professionals includes architects, engineers (structural and services), and Quantity Surveyors. There are professional bodies that regulate the activities of these professionals in order to ensure conformity of the various activities with the local codes and regulations. The Nigerian construction industry continues to occupy an important position in the nation’s economy even though it contributes less than the manufacturing or other service industries. This industry plays an important role in the economy and the products of its activities are so vital to the achievement of national socio-economic development goals of creating job opportunities and social amenities and infrastructures. 1.3 OBJECTIVES OF THE STUDY The main aim of this study is to examine procurement systems and its impact on cost management and delivery. Specific objectives of the study are: To identify various procurement systems commonly used by quantity surveyors in Eti-Osa Lagos. To examine challenges encountered when employing various procurement systems for construction projects. To examine the impact of procurement systems on construction cost and delivery. 1.4 RESEARCH QUESTIONS To guide the study and achieve the objectives of the study, the following research questions were formulated: What various procurement systems are commonly used by quantity surveyors in Eti-Osa Lagos? What are the challenges encountered when employing various procurement systems for construction projects? How do procurement systems affect construction cost? 1.5 RESEARCH HYPOTHESIS Ho: Variations in procurement systems do not affect construction cost. Hi: Variations in procurement systems affect construction cost. Ho: Challenges encountered when using procurement systems contribute do not contribute to construction cost overrun. Hi: Challenges encountered when using procurement systems contribute to construction cost overrun. Ho: There is no significant impact between procurement systems and construction cost management and delivery. Hi: There is a significant impact between procurement systems and construction cost management and delivery. 1.6 SIGNIFICANCE OF THE STUDY This study will be of importance to personnel in the construction industry and the general public because it would not only clarify but also create awareness of the extent to which inadequacies in cost management and procurement systems can adversely affect project performance. The study will also help contractors, clients, consultants and all parties involved in construction projects about ways of improving their current method of cost management and control.The study will also be of great benefit for other student researchers’ who may want to venture into the same subject matter. Having gotten results-both empirically and theoretically, the study will serve as a foundation for future research studies. 1.7 SCOPE OF THE STUDY The study will cover some selected contractors from Eti-Osa Lagos. All findings and recommendations from the study may not reflect the true view of the traditional roles and changing roles of quantity surveyors as the researcher could not cover a wider area due to financial and time constraints.
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