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THE EFFECT OF CONTRACT PLANNING ON CONSTRUCTION PROJECT PERFORMANCE
ABSTRACT
This study examines contract planning on construction projects from clients’ perspective and its effects on performance. The objectives are to determine the contract planning practices applied in the Nigerian construction industry, assess the awareness and usage of contract planning tools and techniques applied by clients on construction projects, evaluate factors affecting contract planning practices on construction projects and determine its effects on performance of construction projects. A questionnaire survey administered to a sample of 120 construction professionals and client representatives selected by stratified random sampling from the population of clients in Owerri construction industry is used and analyzed using inferential and descriptive statistics, and finally spearman ranked correlation test was use to evaluate the results. The findings of this study reveals that only about eight (8) of the evaluated contract planning tools and techniques are mostly used by clients, which are; work breakdown structure, site layout, plan, risk management plan, human resource plan, method statement, cost management plan, plant schedule, material schedule, and labour schedule. However, it also reveals their level of use and the factors affecting contract panning practices, finally the results shows that contract planning from clients’ perspective has a significant effect on construction project performance in terms of cost savings, project delivery time, quality, scope of the project and clients satisfaction. The study recommends contract planning practices as a means for maximizing and improving the performance of construction projects.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Ashworth, Hogg, and Higgs (2013) described the construction industry as one of the most important sectors of the economy, which integrates a wide variety of skilled and unskilled professionals. These professionals engage in the provision of goods and services ranging from construction, alteration, refurbishment to repairs of building and civil engineering structures. All these professionals work together under various types of contractual agreements to actualize the client’s brief and deliver the project. Each construction project is unique and has its main objectives are outlined by the client based on project circumstances. Amongst the most common objectives of any successful project are deliveries at the right time, within authorized cost and meeting the envisaged quality standards (Love 1998). Construction projects, like all others, are not risks free and thereby can result to financial loss. Construction risks are events that generally influence any or all of the project objectives. Risk events could either be positive in terms of opportunities or negative in terms of threats to either or the entire project objectives (Hillson 2002).
Significant proportions of factors impeding project performance in the construction industry are traceable to actions and inaction of principal stakeholders in the sectors. One aspect where stakeholders have failed in its responsibilities relates to contract planning. Contract planning According to Simmons (2007), refers to the process of systematically and efficiently managing contract creation, execution and analysis for maximizing operational and financial performance and minimizing risk. Contract planning processes are the activities/steps taken during contract planning, this is divided into two (2) phases PMT (2006) which are the pre-contract planning and post-contract planning on clients perspective and contractors perspective, but in the cause of this project we will be looking at the clients perspective, The research literatures in construction project management is replete with concerns about poor or ineffective contract planning (Idoro, 2009; Idoro, 2012; & Dalibi, 2016). Most countries in the Middle-East and some part of Africa do not utilize project planning and management techniques in the delivery of construction projects (Sayegh, 2008; Laryea & Hughes, 2009). Ashworth (2007) reported that the use of formal contract planning and management techniques in the UK construction industry is low. The result culminates in project failures, incessant claims for variations, huge financial losses and sometimes results in bankruptcy of Clients and Contractors Ashworth (2007).
Several academic and professional literatures have developed in the field of effective contract planning and management within construction contexts. The degree of application of contract planning and management techniques by contractors especially, was found to differ in various construction industries across the globe (2008). Against this literature gap therefore, this study is conducted to evaluate the effect of construction contract planning on project performance in Imo State.
1.2 Problem Statement
Contract planning in construction projects is bedeviled with chronic inefficiencies that influence the performance of project delivery. These protracted outcomes are a result of two possible concern, low awareness and usage, and exogenous and endogenous factors influencing contract planning. Ashworth (2007) reported that the use of formal contract planning and management techniques in the UK construction industry is low. The result culminates in project failures, incessant claims for variations, huge financial losses and sometimes results in bankruptcy of Contractors Ashworth (2007). This situation is more prevalent in redevelopment projects due to the inevitable problems of unexpected additional work, excessive requirements and scope management issues, project funding not aligned with project plans, delay, structural failure, cost overrun, etc. (Naaranoja & Uden, 2007). These problems or uncertainties, among others, increase the project risk and make their management crucial if success is desired. Several projects in the housing and road sub-sectors across Nigeria have witnessed huge investment of public and private funds without commensurate result expended. This huge expenditure and apparent failure in the primary objectives of the project led to complaints, probe panels and subsequent abandonment of the project. According to Obi (2014), the rate at which project delays, failures, cost overruns and abandonment are experienced on many projects handled by indigenous building contractors and clients in Imo State Nigeria is quite alarming.
A successful project is a project that has been completed on schedule, within budget, scope and satisfied the required quality (Allan 1991, 2004; Hatush & Skitmore 1997; Doloi 2007). Projects that do not deliver the required value they promise and of course do not realize their original objectives are all failed projects, in other words for a project to fail one or all of these component time, cost and quality have failed (Frank 2011).
1.3 Research Questions
1. What are the contract planning practices applied in the construction industry?
2. What is the level of awareness and usage of contract planning practices in the construction industry?
3. What are the factors affecting contract planning practices on construction projects?
4. What are the effects of contract planning practices to construction projects performance?
1.4 Aim and Objectives of the Study
The aim of the study is to investigate the effects of contract planning on construction project performance, and the objectives are:
1. To determine contract planning practices applied in the construction industry.
2. To assess awareness and usage of contract planning practices in the construction industry.
3. To examine the factors affecting contract planning practices
4. To evaluate the effect of contract planning practices to construction project performance.
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