Public entities, private firms and individuals continuously engage in acquiring physical assets in different forms such as commercial buildings, residential buildings, schools, hospitals, development infrastructure like roads, water dams, telecommunication and electricity. These projects involve major capital investments driven by market demand or perceived needs.
To remain competitive in either profit or non-profit engagements, you need to focus on procedures that offer competitive advantage and value. You need to understand the needs of the customer and correctly deploy the available resources in meetings the expectations of the client by maintaining a competitive edge over your competitors. For residential houses, a Kenyan family will value the luxury of privacy and safety. They will always look to see if there enough playground for their children, a spacious kitchen for the women and the men will always have a say in the way the garage is designed.
You must make sure that your builder is effective and efficient in resource management through proper use of tools and techniques in asset acquisition which is very critical.
Stakeholders in the construction sector say that customers are continuously demanding for better quality products delivered efficiently on time and at a low cost. It is therefore very important that time, cost and quality of the completed facilities are well managed in the entire life of the project for effective product and service delivery.However, a construction project might face time and cost overruns which in turn affect the capital-output ratio in the sector making potential investors lose confidence in the sector.
There are factors significantly contributing to time and cost overruns. These include:
i. Incompetent Contractor
This is attributed to lack of contractor experience, poor methods of construction and delayed procurement of equipment and materials, contractor’s cash flow problems and unrealistic budget fronted by the client. At the per-qualification stage, contractors' past experience under similar circumstances and on similar assignments are usually parameters used in qualifying contractors tendering for works.
Delays in the procurement of material and equipment are caused by acts of various parties involved. Most contractors are usually responsible for the procurement of materials and equipment. For those responsible for multi-contract projects, where there are subcontractors, many factors usually interplay resulting in time and cost overruns. Some delays might arise from contractors not releasing procurement drawing on time. The contractor might also delay to provide design information from suppliers to designers for preparation of procurement drawings. A contractor may delay payment and placement of letters of credit aggravating further delays in the construction of the project leading to cost overruns. If payment for the supply of materials was to be done at the beginning of the year, the contractor might delay and make such a payment in the middle of the year. With the dynamics in the economy and inflation, the cost of materials would have changed by the time the contractor is releasing the money and as a results the client is forced to make extra payments. Contractors who do not know how to keep their own books show that they are unable to ensure that there are sufficient finances to execute his work on the project. When you see a lot of stalled project when you walk the different parts of our country, you should know why.
ii. Poor Project Preparation
This factor consists of poor specification in the construction contract, bad relations with financiers and poor labour productivity. Poor specifications mean there are various instances where the works are delayed as parties try to reach agreeable interpretation on them and often result in delays in how the work is executed. In some cases, specifications which were prepared several years ago are implemented today after like 10 years.
Many conflicts usually exist between specifications and drawings. A specification on one contract may differ from one in another contract for the same items making it hard to harmonize between them. Sometimes, the supply of items could be duplicated in two contracts and often, it is realized much later when the designer has either been advanced or completed. Other contractors give specifications that are inconsistent with the local requirements for construction projects. Poor labour productivity is another way contractors register losses on productivity. Cases of labour unrest on some contracts may arise because of poor working conditions like poor protective clothing and transport of workers. Poor safety precautions on the construction site make it hard for the workers to be committed on the project resulting in time overruns.
iii. Resource Planning
Included in this factor are delayed payment contractors, lack of professional skill by project team, delayed access to site and poor engagement with subcontractors. The problems of access to the construction site and delayed payments are entirely the doing of the client. Delays in payment may be due to; inadequate funding of the project, client cash flow problems, complicated payment processes and delays in disbursement processed. Delayed access of the construction site may arise from not releasing the work-site on time and right of way problems with the landowners on the transmission of power among others. This usually results in additional costs and more expenditure.
When the work is underway, the contractor is expected to deploy experienced and qualified manpower to complete the project on time, within the budget and to the required quality. Repetitions in reviewing designs and approvals, bad workmanship and poor reworks, delayed procurements and delivery of material due to wrong estimates are usually the issues.
The main contractor remains responsible for the performance of the subcontractors. The agreements between the main contractor and the subcontractors have no contractual relationships between the subcontractors and the client. The main contractor should be able to complete the construction project through allocation of part or parts of specialized works outside his main functions to the subcontractors.
iv. Works Definition
Included in this factor is the increased scope of work and complicated interfaces in different work packages. The increased scope of work usually involved all parties involved in the project. You might find the engineer changing the design, the employer requires improved technology and wrong estimates by the contractor as far as materials are concerned. These are potential causes of delays in the completion of the project and leads to increased cost of the project. The increase in the scope of work is common in most projects and most of the changes that occur in the scope are usually technical. It is evident that the works definition on some projects leaves a lot to be desired in the scope, drawings and specifications. The complications that occur during bidding and delays in awards of contract worsen the problems of cost and time overruns on the projects.
v. Risk Allocation
This factor consists of unexpected ground conditions and lack of proper communication between the parties. The risk of unexpected ground conditions was carried by the owner, designer and builder. The owner is responsible for undertaking the pre-contract exploratory measures and the designer has the responsibility of designing for the expected conditions. The builder carries the larger portion of the risk. The extent to which this risk allocation is not feasible determines the level to which the owner will retain the portion of the risk under the relevant clauses in the contract. Ineffective risk assessment results in changes in contract conditions without allowing for adequate review of the resultant effects and lack of comprehensive risk assessment as limitations leading to overruns.
A lot of research has been done on time and cost overruns in Kenya but there is a problem with documentation. This denies many potential investors or developers a source of information on what factors should be considered for successful implementation of construction projects in Kenya.
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