Project – Construction Claims Management and Cost Escalation in Public Building Projects: A Study of Selected Federal Government Projects in Abuja

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Construction projects constitute an important component of national development because they provide the physical infrastructure required for public administration, education, healthcare, security, commerce and other social and economic activities. Public building projects are particularly important because they are financed largely from public resources and are expected to provide value for money while meeting predetermined standards of cost, time and quality. However, the achievement of these objectives is frequently affected by variations, contractual claims, delays, disputes and cost escalation. In Nigeria, studies have consistently identified cost and time overruns as recurring problems in construction project delivery. Mansfield, Ugwu, and Doran (1994) established that Nigerian construction projects experienced substantial cost variations associated with factors such as financing and payment arrangements, material shortages, inaccurate estimating and price fluctuations. Similarly, Okuwoga (1998) found that cost escalation was a major concern in Nigerian public-sector projects, particularly because inadequate budgetary control could contribute to project difficulties and abandonment. These observations demonstrate that effective management of project costs must begin not only with accurate estimating but also with effective management of events that occur during contract execution.

Construction claims are an important aspect of construction contract administration because projects are exposed to uncertainties that may alter the obligations, costs or time requirements originally contemplated by the contracting parties. A construction claim may arise from variations, changes in design, differing site conditions, delays, disruption, extension of time, fluctuations in material and labour prices, payment issues and other events capable of creating an entitlement under the contract. In Nigeria, Akinradewo and Oladinrin (2018) examined 53 completed construction projects involving claims and found that construction administration was affected by excessive claims that attracted additional costs and created adversarial relationships among project participants. Their study identified differing site conditions as the most frequent type of claim among the projects examined. In a related Abuja-specific study, Saidu, Oyewobi, Mohammed, and Suleiman (2018) found that contractual claims significantly affected the cost and time performance of public building projects, reporting an average cost increase of approximately 16.68% and substantial time increases among the projects studied. These findings indicate that claims are not merely administrative issues but can become important drivers of project cost escalation when they are inadequately anticipated, documented, evaluated and resolved.

Claims management therefore involves a systematic process through which potential claims are identified, notified, documented, evaluated, negotiated, resolved and, where necessary, referred to appropriate dispute-resolution mechanisms. Effective claims management requires proper knowledge of contract conditions, timely communication, accurate project records, competent assessment and coordination among clients, consultants and contractors. Ajayi, Babalola, and Mafimidiwo (2019) examined the construction project claim management process in Nigeria and found that more than half of the stakeholders surveyed had limited awareness of the structured claims management process. The study identified inadequate knowledge and interpretation of contract provisions, inadequate information and documentation, lack of effective claims management tools and insufficient time as major barriers to claims management. Importantly, the study reported a significant negative relationship between effective claims management and project cost, suggesting that stronger claims management practices can contribute to controlling project cost growth. Akinradewo (2019) similarly observed that although documentation, identification, evaluation and other elements of claims management were being used by industry stakeholders, the level of adoption and effectiveness varied among clients, contractors and consultants. This suggests that weaknesses in claims administration can create opportunities for avoidable cost increases and disputes.

The relationship between construction claims and cost escalation becomes particularly significant when claims arise from variations, delays and changes that alter the original contract scope or financial obligations. Cost escalation refers to an increase in the actual cost of delivering a project above the original or approved contract cost. While some cost increases may result from legitimate and unavoidable circumstances, others may emerge from poor planning, inadequate documentation, inaccurate estimates, delayed decisions, design deficiencies, weak contract administration or poorly controlled variations. Saidu and Shakantu (2017), in their investigation of ongoing building projects in Abuja, examined 30 large building projects using project documents such as drawings, bills of quantities, progress reports and specifications. Their findings showed considerable variations between estimated and actual costs, with average cost overruns of 44.46% across the projects investigated at the stage of the study. Earlier research by Dlakwa and Culpin (1990) also established that public-sector construction projects in Nigeria were affected by factors such as delayed payment and fluctuations in material, labour and plant costs. More recently, Mahmud, Ahmed, Olanipekun, Aha, and Akoh (2026) demonstrated that cost escalation in Nigerian public-sector projects results from an interconnected set of factors, including inadequate technical competence and interactions among different project stakeholders. Therefore, claims management must be understood as part of a wider cost-control system rather than as a process concerned only with settling disputes after they have emerged.

The public-sector environment makes construction claims particularly important because government projects are subject to formal procurement requirements, accountability mechanisms and budgetary controls. The Public Procurement Act 2007 established the Bureau of Public Procurement as the regulatory authority responsible for monitoring and oversight of public procurement in Nigeria, with objectives including transparency, competitiveness, cost-effectiveness and professionalism in public-sector procurement. The Act also provides mechanisms relating to procurement contracts, investigations and variations. The Federal Government’s procurement framework therefore places considerable emphasis on controlling changes to public contracts and ensuring that public expenditure delivers value for money (Public Procurement Act, 2007). In practice, however, construction projects may encounter circumstances requiring changes to scope, quantities, design or contract price. When such changes are inadequately assessed or poorly documented, they can generate claims and contribute to contract-price escalation. The importance of this issue has been reinforced by recent Federal Government efforts to strengthen the review and certification of contract variations and fluctuation claims through the Bureau of Public Procurement (Federal Ministry of Information and National Orientation, 2026). This regulatory development demonstrates that the management of variations and claims remains an important public-sector cost-control concern.

Abuja provides an especially relevant setting for examining the relationship between construction claims management and cost escalation because it is Nigeria’s Federal Capital and contains a large concentration of government ministries, departments, agencies, institutions and other public facilities. Construction activity in Abuja includes administrative buildings, institutional facilities, offices, accommodation and other public infrastructure requiring substantial government expenditure. Evidence from Abuja has already demonstrated the magnitude of cost-performance challenges in building projects. Saidu and Shakantu (2017) reported significant cost overruns in ongoing building projects in Abuja, while Saidu et al. (2018) specifically established that contractual claims affected the cost and time performance of public building projects executed in the Federal Capital. Their study examined government-owned public buildings executed under the Federal Capital Development Authority and found that contractual claims produced significant effects on project performance. Furthermore, Zailani, Mogbo, and Kolo (2024), in a study involving construction professionals in Abuja, identified contractual ambiguities and communication failures among important sources of construction disputes, with consequences including cost overruns, delays and quality problems. These findings make Abuja an appropriate geographical context for investigating how claims are managed and how their management practices relate to cost escalation in federal government building projects.

Despite existing studies on construction claims, cost overruns and project performance in Nigeria, there remains a need for focused research examining the relationship between claims management practices and cost escalation specifically within selected federal government building projects in Abuja. Previous studies have examined claims generally across Nigerian construction projects, while others have investigated cost overruns in Abuja without necessarily placing claims management at the centre of the analysis. Akinradewo and Oladinrin (2018) concentrated on the magnitude and relationship of construction claims with original contract sums, while Ajayi et al. (2019) examined the status, barriers and impact of claims management in the Nigerian building sector. Saidu et al. (2018), on the other hand, directly examined claims and public building project performance in Abuja. However, the continuing occurrence of cost escalation suggests that there is a need to further examine how claims are identified, documented, evaluated and resolved in federal government projects and how weaknesses in these processes may contribute to increasing project costs. The present study therefore seeks to investigate construction claims management and cost escalation in selected federal government building projects in Abuja, with particular attention to the types and causes of claims, the effectiveness of claims management practices, the relationship between claims and project cost escalation, and strategies for improving claims administration.

1.2 Statement of the Problem

Construction projects are expected to be delivered within approved budgets, specified timeframes and required quality standards. However, the persistence of contractual claims and cost escalation continues to undermine these objectives in Nigeria. Public building projects are particularly vulnerable because they involve substantial public expenditure and operate within formal procurement and budgetary frameworks. Evidence from Abuja indicates that the problem is significant. Saidu et al. (2018), in their study of public building projects in Abuja, established that contractual claims had significant effects on project cost and time performance, with the projects examined recording an average cost increase of approximately 16.68%. Saidu and Shakantu (2017) similarly found substantial cost overruns among ongoing building projects in Abuja. These findings indicate that claims and cost escalation constitute more than isolated contractual disagreements; they have direct implications for the financial performance and delivery of public infrastructure.

A major problem is that construction claims may increase the final cost of public projects when they are not identified, assessed and resolved promptly. Claims can result in additional payments for variations, delays, disruption, extension of time, fluctuation, differing site conditions and other contractual events. Where project records are incomplete or contractual provisions are poorly interpreted, legitimate claims may be difficult to assess, while exaggerated or avoidable claims may also become difficult to challenge. Ajayi et al. (2019) identified inadequate knowledge of contract provisions, insufficient documentation, lack of effective claims management tools and inadequate time as major barriers to claims management in Nigeria. Akinradewo and Oladinrin (2018) also found that excessive claims attracted additional project costs and could create adversarial relationships among project stakeholders. The problem is therefore not simply the existence of claims but the ability of project participants to manage the claims process effectively enough to distinguish legitimate entitlements from avoidable cost increases.

Another problem concerns weaknesses in communication, documentation, contract interpretation and coordination among clients, consultants and contractors. Construction claims frequently involve information generated at different stages of project implementation, including drawings, instructions, site records, interim valuations, correspondence, programmes, variation orders and evidence of delay. When such information is not properly documented or communicated, disagreements can develop regarding entitlement, responsibility and quantum. Zailani et al. (2024) found that contractual ambiguities and communication failures were major sources of disputes among construction professionals in Abuja and that such disputes could result in cost overruns, delays and quality problems. Similarly, Ajayi et al. (2019) established that inadequate information and documentation constituted major barriers to effective claims management. These weaknesses can make it difficult for federal government project administrators to establish the actual causes and financial consequences of claims, thereby creating conditions in which project costs may continue to increase without adequate control.

The continuing occurrence of cost escalation despite the existence of procurement regulations and established professional procedures creates an important research and management problem. The Public Procurement Act 2007 establishes principles of transparency, cost-effectiveness and professionalism in public procurement, while recent Federal Government reforms have further emphasized stronger control of contract variations and fluctuation claims (Public Procurement Act, 2007; Federal Ministry of Information and National Orientation, 2026). Nevertheless, evidence from Abuja continues to show substantial cost-performance challenges in building projects (Saidu & Shakantu, 2017). There is therefore a need to determine whether the effectiveness of construction claims management is significantly associated with the level of cost escalation in selected federal government building projects in Abuja. Without empirical evidence on this relationship, project clients and other stakeholders may continue to address cost escalation after it has occurred rather than strengthening the claims-management processes capable of preventing or reducing avoidable increases. This study is consequently designed to provide empirical evidence on the management of construction claims and their relationship with cost escalation in selected federal government building projects in Abuja.

1.3 Purpose of the Study

The main purpose of this study is to examine construction claims management and cost escalation in public building projects, with particular reference to selected Federal Government projects in Abuja.

Specifically, the study seeks to:

1. identify the major types of construction claims encountered in selected Federal Government building projects in Abuja;
2. examine the major causes of construction claims in the selected projects;
3. assess the claims management practices adopted by clients, consultants and contractors in the selected projects;
4. determine the major factors responsible for cost escalation in the selected Federal Government building projects;
5. examine the relationship between construction claims management and cost escalation in the selected projects; and
6. identify strategies for improving construction claims management and reducing avoidable cost escalation in Federal Government building projects in Abuja.

1.4 Research Questions

The following research questions will guide the study:

1. What are the major types of construction claims encountered in selected Federal Government building projects in Abuja?
2. What are the major causes of construction claims in the selected Federal Government building projects?
3. What claims management practices are adopted by clients, consultants and contractors in the selected projects?
4. What factors are responsible for cost escalation in selected Federal Government building projects in Abuja?
5. What relationship exists between construction claims management and cost escalation in the selected Federal Government building projects?
6. What strategies can be adopted to improve construction claims management and reduce avoidable cost escalation in Federal Government building projects in Abuja?

1.5 Research Hypothesis

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

H₀: There is no significant relationship between construction claims management practices and cost escalation in selected Federal Government building projects in Abuja.

1.6 Significance of the Study

The study will be significant to Federal Government ministries, departments and agencies involved in the planning, procurement and supervision of public building projects. The findings may provide useful evidence for improving contract administration, claims assessment, documentation, variation control and project cost monitoring.

The study will also be useful to contractors by highlighting the importance of timely notification, proper documentation, accurate evaluation and professional presentation of contractual claims. Better claims management can assist contractors in protecting legitimate contractual entitlements while reducing unnecessary disputes and delays.

For consultants, quantity surveyors, architects, engineers and project managers, the study may provide useful information on the claims-related practices that contribute to cost escalation. The findings can support better record keeping, contract interpretation, project communication, valuation and early identification of potential claims.

The study will further benefit the Bureau of Public Procurement and other regulatory institutions by providing empirical information that may contribute to policies and procedures for managing variations, fluctuation claims and other contractual adjustments in public building projects.

Finally, the study will contribute to academic knowledge by adding to the literature on construction claims management, contract administration and cost escalation in Nigeria. It may also serve as a reference for future researchers investigating construction project performance, public procurement, contractual claims and cost management.

1.7 Scope of the Study

The study will focus on construction claims management and cost escalation in selected Federal Government building projects in Abuja, Federal Capital Territory, Nigeria.

The geographical scope will be limited to Abuja. The study will focus on selected Federal Government building projects and stakeholders directly involved in their planning, procurement, supervision, administration and execution. These stakeholders may include representatives of government client organisations, contractors, consultants, quantity surveyors, architects, engineers and project managers.

The content scope will cover major types of construction claims, causes of claims, claims identification, notification, documentation, evaluation, negotiation and resolution. It will also examine factors contributing to project cost escalation and the relationship between claims management practices and cost escalation. The study will not attempt to cover all construction projects in Nigeria or all categories of infrastructure such as highways, bridges and water projects.

1.8 Operational Definition of Terms

Construction Claims: Formal assertions by a contractor, client or other contracting party seeking an entitlement to additional payment, extension of time, compensation or another contractual remedy arising from an event or circumstance affecting the construction contract.

Claims Management: The systematic process of identifying, notifying, documenting, evaluating, negotiating, resolving and recording construction claims throughout the project life cycle.

Cost Escalation: An increase in the actual or projected cost of a construction project above its original approved estimate or contract sum.

Construction Project: A planned activity involving the construction, alteration or completion of a physical facility within defined requirements of cost, time, scope and quality.

Public Building Project: A building project financed, procured or owned by a government institution for the provision of public services or administrative functions.

Federal Government Project: A construction project initiated, financed, procured or administered by a ministry, department, agency or other institution of the Federal Government of Nigeria.

Contract Variation: A formally authorized change to the original scope, quantity, specification, design or other requirements of a construction contract.

Contract Administration: The management and monitoring of contractual obligations, documentation, payments, variations, claims, communication and other contractual matters during project implementation.

Cost Overrun: The amount by which the final or projected cost of a construction project exceeds its original approved or contracted cost.

Dispute: A disagreement between parties to a construction contract concerning rights, obligations, entitlement, responsibility, payment, time, quality or other contractual matters.

Project – Construction Claims Management and Cost Escalation in Public Building Projects: A Study of Selected Federal Government Projects in Abuja