Causes and Effects of Cost Overruns in Public Building Construction Projects Delivery, In Imo State, Nigeria

Abstract

This study examined the causes and effects of cost overruns in public building construction project delivery in Imo State, Nigeria. Specifically, the study examined the profile characteristics of the building construction project workers, examined also the nature of cost overruns in building projects execution in Nigeria, identified the main causes of cost overruns on building construction projects in Nigeria, ascertained the effects of cost overruns on building construction industry and on the economy of Nigeria, in general and determined the factors that can prevent cost overruns in public building construction projects in Nigeria. Multistage sampling technique was used to select a sample of 100 building construction project workers. Data were collected using structured questionnaire and were analysed using mean, frequency counts and percentages. Results showed that 80% of the workers were males, 54% were between the ages of 26 – 35, and 80% were married, 85% had secondary and tertiary education. The result also showed that cost overruns occur when there is an underestimation of actual cost during the budgeting of the building construction project (X = 2.19), when cost escalation occurs due to factors such as inflation (X = 2.28), when construction projects are not completed on time, within budget and with the appropriate technical or quality performance (X = 2.46), and when there is an extra cost incurred beyond the contractual cost agreed during the tender stage of the project (X = 2.23). Further, the results showed that the main causes of cost overruns in building construction projects in Nigeria include difficulty in obtaining construction materials (X = 2.19), deficiencies in prepared cost estimates (X = 2.11), unexpected subsoil conditions (X = 2.08), problems in finance and payment arrangements (X = 2.09), design changes (X = 2.72) and availability of skilled labour (X = 2.24). The results also showed that the effects of cost overruns on the building construction and on the Nigerian economy in general include added cost over and above those initialy agreed upon by the client (X = 2.40), less returns on investment on the part of the contractor (X = 2.39), higher prices to the end user (X = 2.38), tarnishing of the reputations of the professionals (X = 2.15),and loss of profits for the contractor (X = 2.40). The effects on the construction industry is project abandonment and drop in building activities (X = 2.48), and also decrease in property and service production for the nation (X = 2.45); also decrease in the rate of national growth (X = 2.10).The results also showed that the factors that can help reduced or prevent cost overruns in public building construction projects in Nigeria include the application of project management scheduling tools (X = 2.68),working strictly within the scope originally planned for a project (X = 2.60), planning projects properly before the commencement of project execution (X = 2.58), selection of contractors with adequate experience/ the financial ability to handle building construction projects contract ( X = 2.33) and ensuring that communication gaps do not exist between the stakeholders of the building construction projects (X = 2.35). The study therefore, recommends that building construction projects delivery decision makers should endeavour to implement the findings of research in order to encourage project execution success.