THE EFFECTS OF PROJECT PLANNING TECHNIQUES ON CONTRACTORS PROFIT
BACKGROUND OF THE
STUDY
Projects are used in all
economic and non-economic fields as mean of
organizing the activity,
aiming the achievement of desired objectives. There is a direct relationship between projects, projects portfolio,
programs and the organizational strategy. Projects, as the main way of creating and dealing with change (Cleland,
Gareis, 2006), are used to implement strategies. Meskendahl (2010) refers to projects as the central building block
used in implementing strategies, therefore business success is determined by the success of the projects. A project is
an individual or collaborative enterprise, possibly involving research or design that is carefully planned, usually by a
project team, to achieve a particular aim New York Time (2009). A project is also temporary because it has a defined
beginning, end time, and defined scope and resources (Cathy, 2009). A project is unique because it is not a routine
operation, but a specific set of operations designed to accomplish a singular goal. Based on these characteristics,
carefully it is imperative to plan to achieve targeted outcome. Thus; Project planning can be defined as a part or
branch of project management, which relates to the use of schedules to plan and subsequently report progress within
the project environment.
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Dubois and Gadde (2002) described the construction industry as decoupled and McKinsey (2017) confirmed that it is
still true. The lack of coupling is present both between the construction project and its subcontractors as well as
between the project and the parent company and other projects. This hampers the possibility to have a successful
coordination of resources on a portfolio level within the contractor, as resources are in many cases utilized from a
common resource pool (Engwall and Jerbrant 2003).The construction industry therefore embraces a wide range of
loosely integrated organizations that collectively construct, alter and repair a wide range of different building and civil
engineering projects. Individuals, organizations and government need to carry out some form of project planning for
building and civil engineering project before embarking on whatever activity they are engaged to do. According to
Lock (2002), the principal identifying characteristics of a project is its novelty, it’s a step unknown fraught with risk and
uncertainty. No two projects are ever exactly alike and even a repeated project will differ from its predecessor in one
or more commercial, administrative and physical aspect.
Construction is also characterized by time and cost intensive production processes which make it prone to project
risks and failure, mainly in terms of time and cost. In practice, this means, that the performance of construction
projects is usually low. In particular, construction projects are very often delayed and over budget. This is not just due
to problems faced during project scheduling, but also during related processes.
Laryea and Hughes (2009) attempted to find how contractors’ in Ghana include financial risk in their bid prices. The
research showed that besides having risk allowances as lump sums or percentage allowances, the method used is
neither scientific nor informed by any empirical evidence. Ojo (2010) found that design changes, financial losses and
inadequate specifications were the risk factors with most impacts on construction sites but the study did not highlight
any Project project planning (PRM) technique used by Contractors to respond to such risks.
Another research carried out in Nigeria on this subject was on the evaluation of key risk factors and the measures to
mitigate their effects on construction projects (Dada, 2010). Though the research found financial, political and
physical risks as the most significant, the use of contingency sum and insurance cover were adjudged to be the most
effective means of mitigating risk.
However, no study has reported on the PRM practices used by Nigerian Contractors in redevelopments projects, with
their attendant problems and challenges in terms of scoping.
1.2 PROBLEM STATEMENT
The general low usage of formal project planning and management techniques by Contractors globally often
culminates into project failures, incessant claims for variations, huge financial losses and sometimes results in
bankruptcy of Contractors (Allan et al, 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 and Uden, 2007). These
problems or uncertainties, among others, increase the project risk and make their management crucial if success is
desired.
For the construction firm, Julius Berger PLC, are back on site in continuation of the re-construction of the N167 billion
Lagos-Ibadan expressways, Grand Towers Mall, Abuja (status – Under Const. Billions of Naira was expended and the
overall aim of the project was not achieved. This huge expenditure and apparent failure in the primary objectives of
the project led to complaints, probe panels and subsequent abandonment of the project.
Research has shown that financial, political and physical risks are the most significant to Nigerian Contractors (Dada,
2010). However, of the different levels of risk (country, market or project), there is shortage of research as to how
Contractors approach project planning at organizational level.
1.3 RESEARCH OBJECTIVES
- To explore project planning practices applied by Julius Berger at various project levels.
- To assess awareness and usage of formal and informal project planning practices by Julius Berger, Abuja office.
- To examine the success or failure of the project planning approach used by Julius Berger Contractors on Grand
Towers Mall, Abuja (status – Under Const project. - To evaluate the impact of the applied project planning approach to the attainment of project profits.
1.4 RESEARCH QUESTIONS
- What project planning guidelines and practices exist in Julius Berger Nigeria Plc, Abuja?
- How do you gather information about newer project planning strategies to be applied in your on-going projects?
- What are the effects of project planning on contractor’s profit
1.5 HYPOTHESIS FORMULATION
Hypothesis for this study include:
- Ho: There is no significant relationship between effective project planning and contractor’s profit.
Hi: There is significant relationship between effective planning and contractor’s profit.
THE EFFECTS OF PROJECT PLANNING TECHNIQUES ON CONTRACTORS PROFIT