Project – Assessment of Factors Responsible for Cost Overruns in Building Construction Projects: A Case Study of Selected Building Projects in Abuja.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The construction industry plays an important role in national development through the provision of residential buildings, commercial facilities, educational institutions, healthcare centres, offices, and other infrastructure required for economic and social activities. The successful delivery of these projects depends on effective planning, cost estimation, procurement, resource management, supervision, and financial control. One of the major measures of construction project performance is the extent to which the completed project conforms to its original budget. A cost overrun occurs when the final or projected cost of a project exceeds its approved budget or initial contract sum, after accounting for the agreed scope and relevant adjustments. Cost overruns can reduce project profitability, place additional financial pressure on clients, delay the provision of essential facilities, and undermine confidence in construction professionals. Mansfield, Ugwu, and Doran (1994), in their investigation of construction delays and cost overruns in Nigeria, identified inaccurate estimating, price fluctuations, materials shortages, financing arrangements, and poor contract management among the causes of excessive project costs. Their findings established that cost overruns are not simply accounting problems; they are often consequences of weaknesses in project planning, financing, and implementation.

Accurate cost estimation is essential to the financial management of building construction projects because it provides the basis for budgeting, tendering, procurement, resource allocation, and cost control. An estimate prepared without sufficient design information, realistic market prices, accurate quantities, or adequate consideration of project risks may be unreliable from the beginning. During construction, changes in specifications, additional work, variations in quantities, and corrections to incomplete designs can increase expenditure beyond the original budget. A project may also experience overruns when the initial estimate fails to account for site conditions, labour requirements, equipment needs, statutory charges, or the time required to complete the work. In their study of cost overruns in ongoing building projects in Abuja, Saidu and Shakantu (2017) examined project records, including drawings, bills of quantities, progress reports, and specifications. Their findings showed substantial cost overruns among the projects investigated and demonstrated the importance of monitoring actual costs against estimated costs while construction is still in progress. This suggests that effective cost management requires realistic estimates before contract award and continuous review of expenditure throughout project execution.

Fluctuations in the prices of construction materials represent another important factor that can affect project budgets. Materials such as cement, reinforcement bars, sand, aggregates, roofing sheets, timber, electrical components, plumbing materials, and finishing products account for a substantial portion of building construction expenditure. When their prices increase after the preparation of the initial estimate, contractors may face higher procurement costs, particularly where contracts do not adequately address price fluctuations. Exchange-rate movements, transportation expenses, supply shortages, inflation, and changes in market demand can further increase the cost of imported and locally produced materials. Mansfield et al. (1994) identified overall price fluctuations and shortages of materials among the causes of cost overruns in Nigerian construction projects. Similarly, the Nigerian construction industry study by Okpala and Aniekwu (1988) identified direct cost overruns and delays as major contributors to the high cost of construction. These findings indicate that building project budgets are vulnerable to both internal management weaknesses and wider economic conditions, making realistic pricing assumptions, procurement planning, and appropriate contingency provisions essential to cost control.

Financial management and timely payment also influence whether construction projects are completed within their budgets. Building construction requires substantial funding for labour, materials, equipment, subcontractors, transportation, and site operations. Where clients fail to provide funds as planned or delay payment for certified work, contractors may experience cash-flow difficulties that interrupt procurement and slow down construction activities. Such interruptions can increase overhead costs, expose contractors to higher material prices, and create disputes between project participants. In their assessment of constraints to project delivery in Abuja, Dada, Jagboro, and others working on Nigerian construction stakeholders’ challenges identified delayed interim payments, financing problems, escalation in material prices, and variability in material quality as important constraints affecting project delivery. Mansfield et al. (1994) likewise linked cost overruns to financing and payment arrangements and poor contract management. These findings highlight the importance of adequate project financing, realistic cash-flow forecasting, timely certification and payment, and effective communication between clients, consultants, and contractors in limiting unnecessary expenditure.

Design changes, incomplete drawings, and inadequate project documentation can also contribute to cost overruns. Construction drawings, specifications, and bills of quantities communicate the client’s requirements and establish the basis for estimating and executing the work. Where these documents are incomplete, inconsistent, or insufficiently coordinated, construction teams may encounter errors, omissions, remeasurement, rework, and additional instructions after work has commenced. Changes requested by clients during construction may also require the replacement of materials, alteration of completed work, extension of project duration, or engagement of additional labour and equipment. Aibinu and Jagboro (2002), in their empirical study of 61 building projects in Nigeria, found that construction delays frequently resulted in time and cost overruns and emphasised the importance of improved client project-management procedures and adequate contingency allowances. Research on the modelling of cost overruns in Abuja building projects also identified remeasurement and variations as significant contributors to additional costs, with inadequate project information before contract award identified as a relevant concern (Abubakar, 2014). These findings suggest that thorough design development, coordinated documentation, timely decision-making, and disciplined variation management are necessary to reduce avoidable increases in project expenditure.

The experience and performance of contractors, site managers, consultants, and other construction participants are equally important to project cost control. Contractors are responsible for coordinating labour, materials, machinery, subcontractors, and daily site activities, while consultants provide design, supervision, measurement, and contract-administration services. Weak site supervision, poor material storage, inaccurate measurement, inefficient labour deployment, inadequate equipment planning, and ineffective communication can result in waste, rework, idle resources, and increased project duration. A study by Olawale and Sun (2010) on cost and time control of construction projects identified practical barriers to effective control, including problems associated with project information, management practices, and the implementation of control procedures. In Nigeria, research by Olanrewaju and Anahve (2015) on the challenges of construction cost management also emphasised the need for better professional practice and more effective cost-control processes. Such evidence shows that cost overruns cannot be attributed solely to inflation or material prices; they may also result from decisions and practices within the project team. Assessing these management-related factors is therefore necessary for identifying realistic measures to improve construction cost performance.

Abuja provides a relevant setting for examining the factors responsible for cost overruns because of its continuing demand for residential, commercial, institutional, and public buildings. As Nigeria’s Federal Capital Territory, Abuja accommodates government institutions, private organisations, residential developments, and supporting infrastructure, all of which require substantial construction activity. However, building projects in the city may face difficulties associated with procurement, funding, design coordination, site conditions, changing material prices, and the management of project participants. Saidu and Shakantu (2017) investigated 30 ongoing public and private building projects in Abuja and reported an average cost overrun of 44.46% among the projects examined, although the selected projects were high-value developments and should not be treated as representative of every building project in the territory. Abubakar (2014) also investigated the modelling of cost overruns in Abuja building projects and identified remeasurement and variation as important contributors to additional expenditure. These studies demonstrate the local relevance of the problem while also indicating the need to examine the factors affecting selected building projects across the study’s defined sample. An assessment of these factors can provide evidence to help clients, contractors, consultants, and policymakers improve estimating, planning, procurement, financial control, and project delivery in Abuja.

1.2 Statement of the Problem

Cost overruns remain a major challenge in building construction because they can increase the financial burden on clients, reduce contractors’ profitability, disrupt planned project delivery, and limit the resources available for other development activities. Although construction projects are usually supported by initial estimates, bills of quantities, and contract sums, the final expenditure may exceed the approved budget because of inaccurate estimating, inadequate planning, material price fluctuations, and ineffective cost control. Mansfield et al. (1994) identified inaccurate estimating, material shortages, price fluctuations, financing arrangements, and poor contract management among the causes of cost overruns in Nigerian construction projects. Similarly, Saidu and Shakantu (2017) documented substantial cost overruns among the ongoing building projects they investigated in Abuja. These findings indicate that cost overruns are an important concern in the Nigerian construction industry. The problem requiring investigation is the extent to which different technical, financial, economic, and managerial factors contribute to cost overruns in selected building projects in Abuja.

Another problem concerns the difficulty of preparing reliable initial cost estimates when project information is incomplete or market conditions are uncertain. Inadequate design documentation, inaccurate quantity measurement, unrealistic rates, insufficient site investigation, and failure to provide for foreseeable risks can create a gap between the estimated and actual costs of construction. Furthermore, changes in client requirements and corrections to design errors may introduce additional work after construction has commenced. Abubakar (2014), in research on modelling cost overruns in Abuja building projects, identified remeasurement and variations as significant contributors to additional costs and highlighted the importance of adequate project information before contract award. Aibinu and Jagboro (2002) also found that delays in Nigerian building projects frequently resulted in cost overruns. The problem is that without comprehensive project preparation, accurate estimating, and effective change management, construction teams may struggle to maintain expenditure within the approved budget.

Financial and operational challenges also contribute to the difficulty of controlling construction costs. Delayed payments, insufficient project funding, inflation, increases in the prices of building materials, labour-related difficulties, and poor site management can affect the availability and efficient use of resources. When contractors experience cash-flow shortages, they may be unable to purchase materials at favourable prices, pay workers promptly, or maintain planned construction activities. Interruptions can subsequently increase overhead expenses and extend project duration, leading to additional costs. Mansfield et al. (1994) associated cost overruns with financing and payment arrangements, materials shortages, and poor contract management. In addition, Aibinu and Odeyinka (2006) found that construction delays in Nigeria were associated with numerous interacting factors involving project participants and external conditions. These findings suggest that cost overruns may arise from interconnected problems rather than a single cause. An assessment is therefore required to establish which financial, economic, and operational factors are most relevant to the selected building projects in Abuja.

Although previous studies have examined construction cost overruns in Nigeria and specifically investigated ongoing projects in Abuja, there is still a need to identify and assess the factors responsible for cost overruns within the selected projects covered by this study. Saidu and Shakantu (2017) examined cost overruns in ongoing Abuja building projects, while Mansfield et al. (1994) investigated the causes of delays and cost overruns in Nigerian construction projects more broadly. Abubakar (2014) also considered the modelling of cost overruns in Abuja and highlighted the importance of variations and remeasurement. These studies provide a useful foundation, but the relative importance of cost-estimation weaknesses, material price fluctuations, funding problems, design changes, contractor performance, and site management may differ across projects. Without an assessment of these factors in the selected projects, clients and construction professionals may find it difficult to prioritise effective cost-control measures. This study therefore seeks to assess the factors responsible for cost overruns in selected building construction projects in Abuja, with a view to identifying practical ways of improving budget accuracy and construction cost performance.

1.3 Aim and Objectives of the Study

The aim of this study is to assess the factors responsible for cost overruns in selected building construction projects in Abuja.

The specific objectives are to:

1. Identify the major factors responsible for cost overruns in selected building construction projects in Abuja.

2. Examine the influence of inaccurate cost estimation, design changes, and variations on cost overruns in the selected projects.

3. Assess the effects of material price fluctuations, funding difficulties, and payment delays on construction project costs.

4. Evaluate the influence of contractor performance, site management, and cost-control practices on cost overruns and suggest appropriate control measures.

1.4 Research Questions

The following research questions will guide the study:

1. What are the major factors responsible for cost overruns in selected building construction projects in Abuja?

2. How do inaccurate cost estimation, design changes, and variations influence cost overruns in the selected projects?

3. How do material price fluctuations, funding difficulties, and payment delays affect construction project costs?

4. How do contractor performance, site management, and cost-control practices influence cost overruns, and what measures can reduce them?

1.5 Research Hypothesis

The following null hypothesis will be tested at the 0.05 level of significance:

H₀: There is no statistically significant relationship between the identified project management and financial factors and the occurrence of cost overruns in selected building construction projects in Abuja.

1.6 Significance of the Study

The findings of this study are expected to be beneficial to clients, contractors, consultants, quantity surveyors, project managers, government agencies, construction firms, and future researchers.

Clients and project owners: The study may help clients understand the factors that cause construction expenditure to exceed the approved budget. It may encourage more realistic budgeting, adequate project funding, early completion of design documentation, and prompt payment for certified work.

Contractors: The findings may assist contractors in improving procurement planning, material management, labour deployment, site supervision, cash-flow management, and cost monitoring. They may also help contractors identify practices that contribute to waste, rework, and avoidable expenditure.

Quantity surveyors and cost consultants: The study may provide useful insights into cost estimation, bills of quantities, risk allowances, cost forecasting, variation assessment, and expenditure monitoring. These insights may support more accurate cost advice and timely identification of potential overruns.

Architects, engineers, and other consultants: The study may highlight the importance of coordinated design documentation, realistic specifications, timely decisions, and effective communication among project participants. It may also encourage professionals to identify potential cost implications before approving design changes.

Government and public-sector agencies: The findings may support improved budgeting, procurement, contract administration, and monitoring of public building projects. They may also help public agencies identify recurrent cost-control problems and develop more effective project oversight procedures.

Construction firms and investors: The study may help construction organisations understand how economic conditions, financial planning, project management, and contractor performance affect project profitability. It may also inform investment decisions and the development of internal cost-control policies.

Researchers and students: The study may contribute to the literature on construction cost management and project performance in Nigeria. It may also provide a foundation for future research comparing different project types, procurement systems, locations, and cost-control techniques.

1.7 Scope of the Study

The study focuses on the assessment of factors responsible for cost overruns in selected building construction projects in Abuja, Federal Capital Territory, Nigeria.

The geographical scope covers selected building projects within Abuja as defined by the study’s sampling procedure. The projects may include residential, commercial, institutional, or other building developments, depending on the final selection criteria.

The content scope covers cost estimation, design changes, variations, material price fluctuations, labour costs, project financing, payment delays, procurement, contractor performance, site management, and cost-control practices. The study will consider the relationship between these factors and the extent to which project expenditure exceeds the original or approved budget.

The study will draw on relevant project records and information from construction professionals, including quantity surveyors, architects, engineers, contractors, project managers, and clients, as appropriate. Its conclusions will relate to the selected projects and will not automatically represent every building project in Abuja or Nigeria.

1.8 Limitations of the Study

The study may encounter difficulties in obtaining complete and accurate cost records because some clients and contractors may regard contract sums, expenditure records, and financial information as confidential. Where final accounts are unavailable, it may also be difficult to establish the precise extent of cost overruns for projects that are still under construction.

Another possible limitation is that selected projects may differ in size, complexity, procurement arrangements, contract duration, and construction stage. These differences may affect the relative importance of the factors being examined. In addition, respondents may have different professional experiences and may not agree on the ranking of the causes of cost overruns.

Time and financial constraints may also limit the number of projects that can be investigated. To minimise these limitations, the researcher will use a consistent data collection procedure, seek supporting documentary evidence where available, and clearly distinguish reported opinions from verified project-cost information. Findings will be interpreted in accordance with the scope and limitations of the data collected.

1.9 Operational Definition of Terms

Building construction project: An organised activity involving the planning, design, procurement, construction, and completion of a building for residential, commercial, institutional, or other purposes.

Cost overrun: The amount by which the actual or forecast final cost of a construction project exceeds its approved budget or baseline cost, subject to the basis of comparison used in the study.

Initial cost estimate: The projected cost of completing a proposed building project based on the information, quantities, specifications, rates, and assumptions available at the estimating stage.

Contract sum: The amount agreed upon in a construction contract for the execution of the specified work, subject to the contract’s terms and approved adjustments.

Cost estimation: The process of predicting the financial resources required to complete a construction project.

Material price fluctuation: A change in the market price of construction materials during the planning or execution of a project.

Design variation: An authorised alteration to the original design, specification, quantity, or scope of construction work that may affect the project’s cost.

Project financing: The provision and management of the funds required to execute and complete a construction project.

Payment delay: A delay in the release of funds or payment for work performed in accordance with the relevant contractual arrangements.

Site management: The planning, coordination, supervision, and control of construction activities, workers, materials, equipment, and other resources at the project site.

Cost-control practices: Procedures used to monitor expenditure, compare actual and projected costs against the approved budget, identify deviations, and take corrective action.

Selected building projects: The building construction projects chosen according to the sampling procedure for investigation in Abuja.

Project – Assessment of Factors Responsible for Cost Overruns in Building Construction Projects: A Case Study of Selected Building Projects in Abuja.